August 20, 1991
TO: STATE SECURITIES MEMBERS NO. 35-91
RE: INSTITUTE SUBMITS FOLLOW-UP COMMENT LETTER TO OHIO
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As you know, for the past few years the Institute has been
working with the Ohio Securities Division on amendments to
certain of its administrative rules, particularly with respect to
the provisions specifically relating to the investment
restrictions on mutual funds and retroactive registration of
investment company securities.
On June 12, 1991, the Ohio Securities Division published
for public comment amendments to certain of its administrative
rules and a public hearing was held on July 30, 1991 to elicit
comment regarding the proposed amendments. The Institute
testified at the hearing in support of the proposed amendment to
permit a mutual fund or unit trust to retroactively qualify
securities sold by the fund or trust in excess of the amount it
had previously registered. Currently, a fund or trust must
conduct a rescission offer in the event of an oversale. The
Institute noted that this proposal recognizes that a rescission
offer is inappropriate in the event of an oversale since
investors are not harmed due to the oversale, particularly since
shares have been registered with the Ohio Securities Division and
the Securities and Exchange Commission and the only failure that
has occurred is the failure to accurately predict the number of
shares that will be sold in Ohio.
The Institute also urged the Division to amend Rule 1301:6-
3-09(E)(1)(l) which prohibits the investment of more than ten
percent of a mutual fund's total assets in restricted securities,
particularly in light of the SEC's adoption of Rule 144A. (It
appeared from a reading of the proposed amendments that this
limitation would no longer apply to mutual funds; however,
immediately prior to the hearing, the Institute was informed that
the language removing the investment limitation on restricted
securities was inadvertantly deleted and would still apply to
mutual funds.)
In addition to the oral testimony at the hearing, the
Institute submitted the attached follow-up comment letter urging
the Division to delete the investment restriction with respect to
restricted securities, or in the alternative, to provide mutual
funds the ability to invest in Rule 144A securities. The
Institute noted that elimination of this investment restriction
would be consistent with a resolution adopted by NASAA in support
of the policy considerations set forth in the release adopting
Rule 144A and actions taken by the states of Wisconsin and Texas.
* * *
The Securities Division will be issuing amendments to the
proposed rules in the near future. We will keep you advised of
further developments.
Patricia Louie
Assistant General Counsel
Attachment