September 9, 1991
TO: SEC RULES COMMITTEE NO. 53-91
INVESTMENT ISSUES COMMITTEE NO. 12-91
RE: DRAFT INSTITUTE COMMENT LETTER ON PROXY REFORM
__________________________________________________________
As we previously informed you, the SEC has proposed
amendments to the proxy rules under the Securities Exchange Act.
(See Memorandum to SEC Rules Committee No. 35-91 and Investment
Issues Committee No. 4-91, dated June 19, 1991.) The proposed
amendments would (1) establish an exemption from the proxy rules
for certain solicitations by "disinterested persons", (2)
eliminate the requirement for preliminary filing of proxy
materials with respect to soliciting materials other than proxy
statements and forms of proxy, (3) make all proxy materials filed
with the Commission publicly available upon filing and (4) allow
securityholders access to shareholder lists for purposes of
making solicitations. The proposals would apply both to listed
companies registered under Section 12 of the Securities Exchange
Act and to registered investment companies.
Attached is a draft of the Institute's comment letter on
the proposed rule changes. The principal comments concern the
proposal to allow access to shareholder lists. The draft letter
strongly opposes applying this to open-end investment companies
on the grounds that shareholders of mutual funds are different in
many important respects from shareholders of publicly traded
companies. These include that a fund's shareholders constitute
the customers of the fund's adviser, in which the adviser has a
proprietary interest, and that mutual fund shareholders have
greater privacy interests with respect to their account
information than shareholders of publicly-traded companies. The
letter also states that the protections provided by the
Investment Company Act, including independent directors, actions
that require shareholder approval and daily redemptions,
satisfactorily respond to the policy concerns that underlie the
proposed rule changes. Finally, the letter states that the
alternative suggested in the Commission's release -- allowing
registrants to retain control over their shareholder lists if
they agree to assume the costs of mailing the materials -- is
inadequate since it would expose fund shareholders to open-ended
liability for such costs.
The draft letter also contains a bracketed section opposing
the proposed exemption for solicitations by disinterested
shareholders. Instead, the letter suggests a compromise that
would exempt these solicitations only if they were disseminated
only to institutional investors. Please consider if this section
should be included in the letter and, if so, whether any changes
should be made to it. Do the interests of funds as registrants
in ensuring that solicitations by shareholders be balanced and
subject to Commission review outweigh the interests of funds as
investors in reducing costs and burdens associated with proxy
regulation? Should the Institute remain silent on this proposal?
Should it endorse the proposal? Please also consider whether the
Institute's letter should address the proposals concerning
preliminary filing and confidentiality and, if so, what our
positions should be.
The comment letter is due Monday, September 23. Please
call me at 202/955-3522 or Amy Lancellotta at 202/955-3523 with
any comments on the draft, including those items noted above, no
later than Tuesday, September 17.
Craig S. Tyle
Associate General Counsel
Attachment