March 23, 1992
TO: SEC RULES MEMBERS NO. 13-92
RE: SEC INCREASES THE AMOUNT OF ILLIQUID ASSETS THAT MUTUAL
FUNDS MAY HOLD
__________________________________________________________
The Securities and Exchange Commission issued a policy
statement revising the Guidelines to Form N-1A (the registration
statement for open-end management investment companies) to permit
mutual funds to increase from 10% to 15% the amount of illiquid
assets they may hold. This change became effective on March 20.
The increase in the limit on mutual fund holdings of
illiquid securities was made in connection with the Commission's
efforts to remove unnecessary barriers to capital formation by
small businesses. The Commission notes in the release that
mutual funds represent a significant potential source of capital
for small businesses. However, since the securities of small
businesses are generally illiquid, funds are constrained in the
amount of such securities that they may purchase. The Commission
concluded that increasing the limit from 10% to 15% could make a
significant amount of capital available to small business without
significantly increasing the risk that a fund will not be able to
make timely payment for redeemed shares.
A copy of the Commission's release is attached.
Amy B.R. Lancellotta
Associate General Counsel
Attachment