February 18, 1992
TO: SEC RULES COMMITTEE NO. 8-92
STATE LIAISON COMMITTEE NO. 4-92
RE: NASAA COMMITTEE ISSUES "HUB AND SPOKE" DISCLOSURE LANGUAGE
__________________________________________________________
The NASAA Investment Company Registration/Trading Practices
Committee recently issued cover page and prospectus disclosure
language for states to use in reviewing applications for
registration of "hub and spoke" funds. The NASAA Committee
disclosure is identical to disclosure required by the Wisconsin
Securities Commission and is an effort by NASAA to require
uniform disclosure for these types of funds. A copy of the NASAA
Committee disclosure as well as Wisconsin disclosure is attached.
The NASAA Committee recommends that all states require the
disclosure to be included in a fund's prospectus (both new
applications as well as effective registrations). In addition,
the NASAA Committee recommends that if a prospectus has been
printed, registrants sticker the prospectus until it can be
incorporated into the next printing. Undertakings to include the
NASAA language in the next reprinting is not recommended.
It should be noted that the NASAA Committee fee table
disclosure differs from that required by the Securities and
Exchange Commission. The NASAA disclosure requires separate
disclosure for all fees and expenses charged by the hub as well
as those charged by the spoke. In contrast, the SEC requires
disclosure of the aggregate fees and expenses charged by both the
hub and spoke.
Prior to receipt of the NASAA Committee language, the
Institute submitted a memorandum to the NASAA Committee outlining
the organizational structure of hub and spoke funds and the basic
tax issues involved in such fund structures. A copy of the
Institute's memorandum is attached.
The Institute will be contacting the NASAA Committee to
discuss its concerns with the NASAA Committee disclosure in the
near future. Please contact me at (202) 955-3517 if you have any
comments regarding the disclosure language. We will keep you
advised of developments.
Patricia Louie
Assistant General Counsel
Attachments