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November 22, 1991
TO: SEC RULES COMMITTEE NO. 68-91
OPERATIONS COMMITTEE NO. 36-91
TRANSFER AGENT ADVISORY COMMITTEE NO. 56-91
RE: ICI COMMENTS ON SEC PROPOSAL REGARDING ACCEPTANCE OF
SIGNATURE GUARANTEES
__________________________________________________________
As we previously informed you, the SEC proposed a rule that
would require transfer agents to establish written standards and
procedures for the acceptance of signature guarantees from
"eligible guarantor institutions" (as defined in the rule to
generally include banks, brokers, dealers, exchanges, credit
unions and savings associations). The rule would prohibit a
transfer agent's standards and procedures, as written or applied,
from treating different classes of eligible guarantor
institutions inequitably or resulting in the rejection of a
guarantee from an eligible guarantor institution solely because
the institution is of a particular type. (See Memorandum to SEC
Rules Committee No. 57-91, Operations Committee No. 28-91 and
Transfer Agent Advisory Committee No. 43-91.)
The proposed rule would permit a transfer agent to comply
with the written standards and procedures requirements if its
standards and procedures provide for the acceptance of guarantees
from eligible guarantor institutions who are participants in a
"signature guarantee program" (as defined in the rule).
The proposed rule would also require every registered
transfer agent to maintain for three years a record of each
transaction rejected including the reason for the rejection, who
the guarantor was and whether the guarantor failed to meet the
transfer agent's written standards.
In the attached ICI comment letter, the Institute objects
to the proposal on a number of grounds. First, due to the unique
nature of mutual funds compared to other issuers, the proposal
would be extremely burdensome to mutual fund transfer agent
processing staff, would add significantly to processing time and
would create significant delays in the completion of
transactions. Second, because the proposal would have the effect
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of forcing transfer agents to establish and maintain ongoing
creditworthiness review operations, it would add substantial
ongoing costs to the transfer agent function for mutual funds.
Third, the impact of the proposal's costs may be felt
disproportionately adversely by shareholders of funds using
transfer agents that serve a limited client base. Finally, while
a signature guarantee program, as contemplated by the proposal,
has been developed (the "STAMP" program), it is not yet
operational and the Institute's review of preliminary materials
describing STAMP raise a number of significant concerns about its
appropriateness for mutual fund transfer agents.
We will keep you informed of developments.
Donald J. Boteler
Assistant Vice President -
Operations
Attachment