December 4, 1990
TO: BOARD OF GOVERNORS NO. 81-90
RE: ICI COMMENT LETTER ON PROPOSED CHANGES TO RULES GOVERNING
INDEX PARTICIPATIONS
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Attached is a copy of a comment letter recently submitted
by the Institute to the Securities and Exchange Commission in
connection with proposed amendments to the rules governing index
participations. The amendments, proposed by the Philadelphia
Stock Exchange, would permit its index participation products
(known as CIPs) to be redeemed daily without payment of any
penalty. Index participations have not been traded since the
U.S. Court of Appeals for the Seventh Circuit ruled that they
constituted futures, rather than securities, and thus could only
be traded on a futures exchange. (See Memorandum to Board of
Governors No. 51-89, dated August 22, 1989.) The proposed
amendments are apparently intended to make the product less like
a futures contract.
The Institute's comment letter states that it does not take
any position on whether CIPs constitute futures or securities.
However, it states that, if CIPs are deemed to be securities,
they would also constitute investment company securities
requiring registration under, and compliance with, the 1940 Act.
We will keep you informed of developments.
Craig S. Tyle
Associate General Counsel
Attachment