December 20, 1991
TO: SEC RULES COMMITTEE NO. 75-91
RE: INSTITUTE LETTER TO NASD ON MATCHING SERVICE FOR LOAD FUNDS
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As you may know, a San Diego based discount broker has
established a system for matching buy and sell orders for shares
of mutual funds that assess sales loads. Customers that place
orders through the system are not assessed sales loads; purchase
orders carry a flat transaction fee of $200, while customers who
redeem receive the redemption price plus $100. Transactions are
not executed until there are matching buy and sell orders. The
discount broker has applied to list its bid and offer quotations
on the NASD's electronic Bulletin Board.
Attached is a copy of a letter submitted by the Institute
to the NASD concerning the broker's application. The letter
states that the application appears to threaten the scheme for
regulating distribution of mutual fund shares established under
Section 22(d) of the Investment Company Act and may raise other
investor protection issues. The letter recommends that the NASD
refer the application to its Investment Companies Committee to
consider these issues before taking any final action.
We will keep you informed of developments.
Craig S. Tyle
Deputy General Counsel
Attachment