©2006 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete.
Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
[19972]
April 28, 2006
TO: CLOSED-END INVESTMENT COMPANY COMMITTEE No. 11-06
INVESTMENT ADVISERS COMMITTEE No. 3-06
SEC RULES COMMITTEE No. 21-06
SMALL FUNDS COMMITTEE No. 12-06
RE: SEC SEMI-ANNUAL REGULATORY AGENDA
The Securities and Exchange Commission has published its semi-annual agenda of rulemaking
actions.* Listed below is a summary of agenda items relating to investment companies and investment
advisers, which may be of interest to Institute members.
Division of Investment Management
“Proposed Rule Stage”:
• Investment Company Disclosure Reform: The Division is considering recommending that
the Commission propose comprehensive reforms of the mutual fund disclosure
requirements on Form N-1A, including streamlining the delivery of fund information
through increased use of the Internet and other electronic means of delivery.
• Books and Records to be Maintained by Investment Advisers: The Division is considering
recommending to the Commission that it update the books and records requirements for
investment advisers.
• Disclosure and Recordkeeping Requirements for Investment Advisers Regarding Brokerage
Allocation and Soft Dollar Practices: The Division is considering recommending to the
* See SEC Release Nos. IA-2490 and IC-27230; 71 Fed. Reg. 23714 (Apr. 24, 2006), available at
http://edocket.access.gpo.gov/ua060424/pdf/ua060459.pdf
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Commission that it propose rules that would require investment advisers to create a report
and maintain records regarding their direction of brokerage transactions and receipt of
research and other services in connection with those transactions.
• Political Contributions by Certain Investment Advisers: The Commission proposed new
Rule 206(4)-5 under the Investment Advisers Act of 1940 to prohibit an investment
adviser from providing advisory services for compensation to a government client for two
years after the adviser or any of its partners, executive officers, or solicitors makes a
contribution to certain elected officials or candidates.
• Amendments to Registration Form and Rules for Registration of Certain Investment Company
Securities: The Division is considering recommending that the Commission amend the
rule under the Investment Company Act of 1940 and Form 24F-2 that prescribe the
method by which certain investment companies calculate and pay registration fees under
the Securities Act of 1933 and Rule 457 under the Securities Act that allows for the offset
of registration fees in cases of overpayment.
• Investment Company Portfolio Transaction Costs: The Commission sought comment on
ways to improve disclosure of portfolio transaction costs. The Division is considering
whether to recommend to the Commission amendments to investment company
registration statements to improve that disclosure.
• Amendments to Investment Company Registration Statements to Protect Certain Private
Information: The Division is considering recommending that the Commission propose
modifications to the disclosure requirements in Forms N-1A, N-2, N-3, and N-CSR to
safeguard the privacy interests of investors qualifying as principal holders of any class of
certain investment companies with regard to identifying information and of portfolio
managers with regard to quantitative information about certain personal accounts.
• Interagency Proposal to Consider Alternative Forms of Privacy Notices under the Gramm-
Leach-Bliley Act: The Commission, together with other governmental agencies, requested
comment on whether the agencies should amend the regulations that implement the GLB
Act to allow or require financial institutions to provide alternative types of privacy notices
that would be easier for consumers to understand.
• Definition of “Issued Ratably” Under Section 18(d) of the Investment Company Act: The
Division is considering recommending that the Commission propose new Rule 18d-1
under the Investment Company Act that would define the term “issued ratably” under
Section 18(d) of the Act to clarify that a fund does not issue ratably to its shareholders
rights to acquire additional shares when, by their terms, the rights do not entitle each owner
to exercise the rights and obtain the additional shares.
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• Frequency of Distribution of Capital Gains: The Division is considering recommending that
the Commission propose amendments to Rule 19b-1 under the Investment Company Act,
which governs the frequency of capital gains distributions by funds.
• Amend Filing Requirements for Form N-SAR, Semi-Annual Report of Registered Investment
Companies: The Division is considering whether to recommend that the Commission
amend the information filed on Form N-SAR to incorporate series and class (contract)
identifiers and to make other software related improvements.
• Amendments to the Cash Solicitation Rule: The Division is considering recommending that
the Commission propose amendments to update and modernize the cash solicitation rule,
Rule 206(4)-3 under the Investment Advisers Act.
“Final Rule Stage”:
• Mutual Fund Redemption Fees: The Commission requested comment on proposed
amendments to Rule 22c-2 under the Investment Company Act that would (i) exclude
certain persons from the definition of “financial intermediary;” (ii) address the rule’s
application to “chain of intermediary” situations; and (iii) clarify the effect of a financial
intermediary not executing the required agreement with the fund.
• Amendments to Form ADV: The Division is considering recommending that the
Commission seek further public comment regarding amendments to Form ADV, Part II.
• Fund of Funds Investments: The Commission proposed new rules that would (i) allow
funds to purchase securities issued by money market funds in excess of limits on those
investments under the Investment Company Act, and (ii) alleviate certain investment and
other restrictions on funds that invest in other funds. The Commission also proposed
amendments to fund registration forms that would require funds to disclose the aggregate
costs of investing in other funds.
• Exemption From Shareholder Approval for Certain Sub-advisory Contracts: The
Commission proposed a new rule to allow certain types of funds or their investment
advisers to enter into sub-advisory agreements for investment management services without
obtaining shareholder approval.
• Amendments to Rules Governing Pricing of Mutual Fund Shares: The Commission
proposed amendments to Rule 22c-1 that would provide that an order to purchase or
redeem mutual fund shares would receive the current day’s price only if the fund,
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designated transfer agents, or a registered securities clearing agency receives the order by the
time the fund establishes for calculating its net asset value.
• Certain Thrift Institutions Deemed Not to be Investment Advisers: The Commission
proposed excepting from the definition of investment adviser, thrift institutions providing
investment advice to certain clients.
• Disposal of Consumer Report Information: The Fair and Accurate Credit Transactions Act
of 2003 required the Commission to promulgate rules related to (i) limitations on affiliate
marketing, and (ii) the disposal of consumer report information. The Commission
adopted amendments to Regulation S-P to implement the disposal rule, and proposed
Regulation S-AM to implement the affiliate marketing provisions. The Division is
considering recommending that the Commission adopt proposed Regulation S-AM.
• Definition of Eligible Portfolio Company Under the Investment Company Act: The
Commission proposed two new rules under the Investment Company Act to modernize
the definition of “eligible portfolio company” by creating a new standard for delineating
those companies that do not have ready access to the public capital markets.
Division of Market Regulation
“Proposed Rule Stage”:
• Concept Release Concerning Self-Regulation: The Commission issued a concept release on
SRO structure to solicit comment on a wide range of issues related to the efficacy of the
SRO system.
“Final Rule Stage”:
• Rule 15c2-2 and Rule 15c2-3: Confirmation of Transactions and Point-of-Sale Disclosure of
Purchases in Open-End Management Investment Company Shares, Unit Investment Trust
Interests, and Municipal Fund Securities Used for Education Savings: The Commission
proposed new Rules 15c2-2 and 15c2-3 under the Securities Exchange Act of 1934,
together with accompanying Schedules 15C and 15D, that would provide for improved
confirmation and pre-transaction “point-of-sale” disclosure of distribution costs and
conflicts of interest associated with transactions in mutual funds, municipal fund securities,
and UITs. The Commission also proposed related amendments to Rule 10b-10 under the
Exchange Act that, in part, would reflect the new rules and would provide improved
confirmation disclosure about certain callable securities.
• Fair Administration and Governance of Self-Regulatory Organizations: The Commission
proposed new rules and amendments to existing rules and forms under the Exchange Act
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pertaining to the oversight and operation of SROs that are national securities exchanges or
national securities associations.
• Definition of Nationally Recognized Statistical Rating Organization: The Commission
published for comment a proposed new rule under the Exchange Act that would define the
term “nationally recognized statistical rating organization.”
Division of Corporation Finance
“Proposed Rule Stage”:
• Proxy Disclosure Regarding Executive Compensation and Related Party Transactions: The
Commission proposed rule amendments to enhance disclosure regarding executive
compensation, the independence of a registrant’s board of directors, related party
transactions between executive officers and directors, and related party transactions with an
issuer.
“Final Rule Stage”:
• Internet Availability of Proxy Materials: The Commission proposed amendments that
would relax existing requirements regarding the Internet availability of proxy materials.
Jane G. Heinrichs
Associate Counsel