INSTITUTE SUBMITS COMMENTS ON OHIO PROPOSAL TO INCREASE HOLDINGS IN RESTRICTED SECURITIES

July 2, 1992 TO: STATE LIAISON COMMITTEE NO. 24-92 RE: INSTITUTE SUBMITS COMMENTS ON OHIO PROPOSAL TO INCREASE HOLDINGS IN RESTRICTED SECURITIES __________________________________________________________ The Ohio Securities Division recently proposed an amendment to Rule 1301:6-3-09(E)(12) which currently prohibits the investment in restricted securities or securities of unseasoned issuers to ten percent of an investment company’s total assets. The proposed amendment would increase from ten to fifteen percent the amount of these securities an investment company may hold. (Please note that the proposed amendment corrects a printing error in the final rules adopted on January 17, 1992 whereby the language "or securities of issuers which are restricted as to disposition" was inadvertently deleted. See Memorandum to State Securities Members No. 5-92, dated January 23, 1992.) A copy of the proposed amendment is attached. The Institute submitted the attached comment letter in support of the proposed amendment and encouraged the adoption of such by the Division, particularly in light of the SEC’s recent amendment to Form N-1A to allow a mutual fund to invest up to fifteen percent of its net assets in illiquid securities. In addition to supporting the adoption of the proposed amendment, the Institute again requested that the Division exclude Rule 144A securities from the definition of "securities of issuers which are restricted as to disposition" in order to permit investment companies to fully participate in the Rule 144A market. However, according to the staff of the Division, Rule 144A securities will still be considered restricted securities for purposes of the fifteen percent limitation. A public hearing on the proposed amendment was held on June 30th and it is anticipated that the proposed amendment will be adopted by the Division in the near future. We will keep you advised of developments. Patricia Louie Assistant Counsel Attachments