NASAA COMMITTEE ISSUES PROPOSED MODEL INVESTMENT COMPANY REGISTRATION AND REPORTING PROCEDURES FOR COMMENT

July 1, 1992 TO: STATE LIAISON COMMITTEE NO. 23-92 UNIT INVESTMENT TRUST COMMITTEE NO. 35-92 RE: NASAA COMMITTEE ISSUES PROPOSED MODEL INVESTMENT COMPANY REGISTRATION AND REPORTING PROCEDURES FOR COMMENT __________________________________________________________ As we previously advised you, the NASAA Investment Company Registration/Trading Practices Committee has been actively involved in drafting a model registration statute and regulations for investment companies in order to coordinate such filings with those required by the Securities and Exchange Commission and to promote uniformity among the states. Uniformity of securities registration procedures will be a key factor in the development and success of NASAA’s electronic filing program - the Securities Registration Depository ("SRD"). The Institute and certain of its members have been actively involved in working with the NASAA Committee on this project by offering technical advice and support. Moreover, in conjunction with this project, the Institute submitted a memorandum to the NASAA Committee with respect to oversales which included several recommendations, including adoption of an indefinite registration procedure as a solution for oversales. (See Memorandum to State Liaison Committee No. 14-92 and Unit Investment Trust Committee No. 21-92, dated April 13, 1992.) We are pleased to inform you that the NASAA Committee recently published the attached "Investment Company Uniformity Project - Model Investment Company Registration and Reporting Procedures" ("proposed model procedures") for public comment. The proposed model procedures incorporate several of the Institute’s recommendations with respect to oversales. The following is a brief summary of the proposed model procedures: 1. Uniform Method of Registration - NASAA initially recognizes that it is in the public interest and consistent with the goals of investor protection to provide a uniform method of registration and reporting of investment company securities. To accomplish this goal, the NASAA Committee is recommending that states adopt a uniform procedure for registration of investment company securities. The proposed model procedures would require the submission of a revised Form U-1 for initial registrations, amendments and renewals. Revised Form U-1 would be used by the SRD for electronic filings. The revised Form U-1 would allow for registration of multiple classes of securities. 2. Uniform Expiration/Renewal Date - A mutual fund would be assigned an expiration date for the registration or renewal of its securities two months after the fund’s fiscal year end. A unit investment trust would be given an expiration date one year from the date of SEC effectiveness even if the trust goes effective in a state after that date. 3. Uniform Method of Renewing and Reporting - A mutual fund would be required to renew and report sales within two months from the expiration of their fiscal year end. A unit trust would be required to renew one year from the date of SEC effectiveness. However, the proposed model procedures recognize that as a general rule, unit investment trusts do not renew their registrations. Mutual funds and unit trusts (if necessary) would renew by filing the revised Form USR-1 (copy attached). Revised Form USR-1 will also be accepted by the SRD. 4. Indefinite Registration - The proposed model procedures recommend that states adopt indefinite registration of investment company securities. In order to accomplish this, the NASAA Committee strongly encourages states to adopt either a "true indefinite registration" procedure or a maximum fee that permits registration of an indefinite amount of securities. If a state elects not to adopt one of the foregoing, at a minimum the state should adopt the uniform method of registration and renewal. 5. Oversales - The NASAA Committee encourages all states to revise their method of registration to eliminate oversales. States are encouraged not to require rescission in the event of an oversale inasmuch as an oversale is only a technical violation concerning the amount registered and not a fraudulent sales practice. The proposed model procedures recommend that issuers be allowed to register the oversold securities by paying a "reasonable fee" within two months of the expiration, termination, or fiscal year end of the registration. "Excessive penalty fees" should be avoided. 6. Blue Chip Exemption - The proposed model procedures recommend that the states with the blue chip exemption for qualified mutual funds and unit trusts require renewal of the exemption within two months after the fiscal year end in order to coordinate all renewal filings. The proposed model procedures also set forth other recommendations concerning two-step registration, 485(a) filings, excessive filings and evaluation of the state’s current filing system. * * * Comments on the proposed model procedures must be submitted to the NASAA Committee by July 31, 1992. A meeting has been scheduled at the Institute on Wednesday, July 15, 1992 at 10:00 a.m. in order to review and discuss the NASAA Committee’s proposals. Please contact Shirley McCoy at (202) 955-8430 if you will be able to attend this meeting. If you are unable to attend this meeting, please feel free to contact me with any comments you would like incorporated in the Institute’s comment letter. Patricia Louie Assistant Counsel Attachments