April 1, 1992
TO: INSTITUTIONAL FUNDS COMMITTEE NO. 4-92
RE: RECENT OCC INTERPRETATIONS
__________________________________________________________
Attached are two recent OCC interpretive letters that may
be of interest to institutional funds.
Investment Securities Letter No. 61 concerned a complaint
made about a mutual fund advertisement alleging that it did not
disclose that the advertised rate of return was subject to change
and did not disclose fees involved with an investment in the
fund. The Letter noted that "[w]hile bank-administered mutual
funds are not per se subject to NASD standards in regard to
advertising, they provide useful guidance for banks advertising
mutual fund products to avoid potential violations of the anti-
fraud provisions of the Federal securities laws." The Letter
concluded that the disclosures concerning fees and the rate of
return being subject to change in the advertisement in question
appeared to be in compliance with applicable federal law;
however, it noted that the advertisement should have disclosed
that the mutual fund investments were not protected by federal
deposit insurance.
Trust Interpretive Letter No. 262 concerned a bank that
proposed to purchase assets of a collective investment fund at a
price in excess of their fair market value in order to assist
with the orderly liquidation of that fund. The OCC staff stated
that property held by a bank as fiduciary cannot be transferred
to the bank unless the bank has incurred liability as fiduciary
and that purchasing the property at above-market prices would
have an adverse effect on the bank and constitute a dissipation
of corporate assets, which may lead the OCC to find the practice
to be unsafe and unsound.
Craig S. Tyle
Deputy General Counsel
Attachment