December 12, 1991
TO: INVESTMENT ISSUES COMMITTEE NO. 22-91
SEC RULES COMMITTEE NO. 71-91
INVESTMENT ADVISERS COMMITTEE NO. 60-91
UNIT INVESTMENT TRUST COMMITTEE NO. 45-91
RE: INSTITUTE LETTER ON PROPOSED LARGE TRADER REPORTING SYSTEM
__________________________________________________________
As we previously informed you, the SEC proposed Rule 13h-1
under the Securities Exchange Act, which would establish an
activity-based large trader reporting system. (See Memorandum to
SEC Rules Committee No. 52-91 and Investment Issues Committee No.
10-91, dated August 30, 1991; Memorandum to Investment Advisers
Committee No. 44-91, dated September 12, 1991; and, Memorandum to
Unit Investment Trust Committee No. 31-91, dated September 25,
1991). Attached is a copy of the Institute's letter on the
proposal. In its letter, the Institute urged the Commission to
repropose Rule 13h-1 because of the undue administrative burdens
and costs it would impose upon persons subject to the proposal.
The Institute also recommended specific changes to the proposal
to reduce those burdens and costs.
Specifically, the Institute recommended, among other
things, that the aggregation rules under the proposal be amended
to narrow the scope of persons that would be deemed large traders
so that directors, officers and ten percent owners of an
investment adviser or investment company that is a large trader
would not be subject to the proposed Rule merely be virtue of
their relationship with that entity.
In addition, the Institute urged the Commission to revise
the updating requirements of Form 13H, which would be required
under the proposal to be amended within 10 days after any
information therein becomes inaccurate. Instead, the Institute
recommended that the Form be updated 45 days after the end of the
large trader's fiscal year or, at the very least, within 10 days
after the end of the month during which a change occurred which
rendered any material information on the Form to become
inaccurate. This would relieve the burden on investment advisers
with discretionary accounts from having to file an amendment
every time it gained or lost an account. The Institute also
recommended that the schedules to proposed Form 13H be modified
to require only pertinent information to which the large trader
had access.
With respect to other matters, the Institute recommended
that: (1) unit investment trusts be exempt from the proposal, (2)
an exit provision be included on Form 13H for persons that
reasonably believe that they will no longer be within the scope
of the definition of "large trader", (3) a sufficient transition
period be provided to allow large traders to develop internal
policies and procedures for compliance with the Rule, and (4)
voluntary filings be permitted under the Rule so that persons who
are likely to trigger the filing requirement, but have not yet
done so, would not have to monitor their activities.
We will keep you informed of developments.
Amy B.R. Lancellotta
Associate General Counsel
Attachment