April 28, 1992
TO: BOARD OF GOVERNORS NO. 27-92
SEC RULES COMMITTEE NO. 23-92
YIELD ENHANCEMENT TASK FORCE NO. 3-92
RE: INSTITUTE LETTER TO NASD ON YIELD QUOTATIONS IN ORAL SALES
COMMUNICATIONS
__________________________________________________________
Attached is a copy of a letter submitted by the Institute
to the NASD, recommending that it issue a Notice to Members
requesting that any quotation of a mutual fund distribution
number in oral sales communications be accompanied by a quote of
the fund's current SEC yield, and that fund underwriters make
available yield information to firms whose employees sell shares
of their funds.
The letter notes that while SEC yield is not the only
proper measure of performance for income funds, use of a
distribution number as the sole measure of a fund's performance
in oral sales communications raises the same concerns addressed
in the SEC's 1988 rule amendments relating to written sales
communications. Under the Institute's proposal, which would
pertain only to sales-related communications, brokers could
continue to quote a fund's distribution rate, but would be
required to accompany any such quote with the fund's SEC yield.
The yield would be required to be no less current than the
distribution rate.
To facilitate compliance, fund underwriters would be
directed to make available updated yield information to sellers
of their funds. This requirement would apply to all such funds
that are sold on the basis of income and with respect to which
distribution rates would normally be quoted.
The letter recommends that the NASD implement this policy
through a general statement in a Notice to Members, as this is
apt to prove more flexible and thus more effective than a formal
rule.
We will keep you informed of developments.
Craig S. Tyle
Deputy General Counsel
Attachment