11/ The contents of these documents form the basis for the
investment company's financial statements as required under
Section 30 of the 1940 Act.
October 16, 1990
TO: ACCOUNTING/TREASURERS COMMITTEE NO. 31-90
RE: SEC PROPOSES AMENDMENT TO RULE 31a-2
__________________________________________________________
The SEC has proposed an amendment to Rule 31a-2 under the
Investment Company Act of 1940 to specify which investment
company books and records must be kept in the United States and
English language. The purpose of the proposed amendment is to
facilitate the SEC's ability to conduct examinations of
investment company books and records, particularly in the case of
the growing number of investment companies that invest in foreign
securities. A copy of the proposing release is attached.
The proposed amendment would add a new subparagraph (g) to
Rule 31a-2. The new provision would require any registered
investment company to (1) keep a set of the books and records
specified in Rule 31a-1(a) and (b)1/1 in the United States, for
the first two years at an office where someone familiar with the
investment company maintains and keeps those books and records
current in the manner in which they are kept in the ordinary
course of business, and (2) preserve in the English language the
books and records specified in Rule 31a-1(a) and (b) that are
created by the investment company. With respect to the first
requirement set forth above, the release notes that "[m]ere
storage of the books and records in an off-site storage facility
would not be enough to satisfy the proposed requirement." On the
other hand, an investment company would not be required to have
its principal office in the United States and could satisfy the
proposed recordkeeping requirement by preserving its books and
records, for example, with a transfer agent or administrator
located in the United States.
According to the proposing release, the proposed amendment
does not require an investment company to keep original books and
records in the United States; duplicates produced by facsimile
machine, computer medium, carbon or photocopy, for example, would
be acceptable for purposes of the proposal.
The release states that most of the documents subject to
the English language requirement are columnar in nature and could
satisfy the requirement either by including subheadings in
English or through use of a template that could be superimposed
over the document. Contemporaneous translations of documents
also would be permitted. The proposing release requests comments
on a number of specific topics, including: (1) whether the
proposed requirements would in any way impede U.S. investment
companies from participating in foreign markets; (2) whether the
rule should specify time frames for different types of records to
satisfy the "keeping current" requirement; (3) whether U.S.
investment companies should be permitted to provide translations
of books and records upon request by the Commission; (4) whether
certain documents should be exempted from the English language
requirement; (5) whether the English language requirement would
impose undue burdens on U.S. investment companies and, if so,
what alternatives are available; and (6) whether the Commission
should reexamine generally its investment company recordkeeping
requirements.
Comments on the proposed amendment must be filed by
December 10. Please contact me by Friday, November 16 with any
suggestions you may have for inclusion in an Institute comment
letter.
Frances M. Stadler
Assistant General Counsel
Attachment