January 13, 1992
TO: BOARD OF GOVERNORS NO. 3-92
STATE SECURITIES MEMBERS NO. 3-92
CONTRACTUAL PLANS COMMITTEE NO. 1-92
RE: NASAA UPDATE
__________________________________________________________
In the past month, we have notified you twice about recent
actions taken by the North American Securities Administrators
Association, Inc. ("NASAA") which are sources of serious concern
to the investment company industry. (See Memoranda to Board of
Governors Nos. 82-91 and 87-91, State Securities Members Nos. 49-
91 and 53-91 and Contractual Plans Committee Nos. 18-91 and 19-
91, dated October 29, 1991 and December 10, 1991.) We would
like to update you regarding several favorable developments
flowing from discussions by the Institute with NASAA in the past
month.
The first memorandum reported passage of a resolution in
opposition to the blue chip exemption from registration for
qualified mutual funds and unit trusts by members of NASAA. As
well as opposing adoption of the blue chip exemption by
additional states, the resolution also encouraged the states that
have adopted it to re-examine the need for the exemption. The
Institute contacted the President of NASAA to express its concern
not only with the rationale to justify the exemption but also the
manner with which the resolution was introduced and passed by
NASAA. The Institute also met with the President of NASAA to
discuss the resolution, the Institute's current efforts in
obtaining the blue chip exemption in additional states and other
topics involving state regulation of the investment company
industry.
Most significantly, the Institute has also contacted and/or
met with several of the states that have adopted the blue chip
exemption. We are pleased to report that, at the present time,
none of the states that have adopted the exemption plan to amend
it as a result of the NASAA resolution.
The second action taken by NASAA was publication of an
Investor Alert on mutual funds. While the Alert included useful
information on investing in mutual funds, it also contained
numerous misleading statements with respect to mutual funds. The
Institute immediately contacted the Executive Director of NASAA
to object to the Alert's misleading characterization of the fund
industry and was subsequently informed that NASAA would inform
its members to stop circulation of the Alert. In addition, the
Institute submitted a letter to the President of NASAA strongly
objecting to the overall tone and several of the specific
allegations contained in the Alert. In a response letter dated
December 12, 1991, the President of NASAA informed the Institute
that he had instructed the NASAA Corporate Office to distribute
the Institute's letter to all NASAA administrators ("NASAA
letter"). According to the NASAA letter, the Alert was not
intended to cast "unfounded aspersions on investment companies as
a group." Rather, it was intended to provide general information
on mutual funds. However, in retrospect, NASAA acknowledged it
may have been appropriate to consult with the Institute on the
Alert prior to its publication. (A copy of the NASAA letter is
attached.) The Institute will be working with NASAA and the
appropriate NASAA Committee to amend the Investor Alert for
future publication.
In addition to meeting with NASAA on these two particular
issues, both the Institute and NASAA have agreed to increase
communications in order to prevent any future unexpected
initiatives. The President of NASAA has designated Steve
Diamond, the Securities Commissioner from Maine and member of the
NASAA Board of Directors, to act as special state liaison to
specifically work with the Institute and its members on
investment company issues. The Institute has also scheduled
additional meetings with the appropriate NASAA representatives to
discuss other topics of mutual interest, i.e., adoption by NASAA
members of the 1984-85 NASAA investment company resolutions,
uniformity of state registration and renewal procedures and
development of the one-stop electronic filing system.
If you have any questions or comments regarding the above,
please feel free to contact me at (202) 955-3517 or Lawrence
Rogers at (202) 955-8431. We will keep you advised of
developments.
Patricia Louie
Assistant General Counsel
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