September 22, 1992
TO: BOARD OF GOVERNORS NO. 69-92
STATE SECURITIES MEMBERS NO. 39-92
UNIT INVESTMENT TRUST MEMBERS NO. 47-92
RE: UNIFORMITY PROPOSAL ADOPTED BY NASAA
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As you know, there is a great divergence among the states
with respect to the information to be filed with, and the forms
to be used for, registration of mutual fund and unit investment
trust securities. For the past several years, the Institute has
been working with the North American Securities Administrators
Association ("NASAA") and the individual states to promote a
uniform method of registration and renewal of mutual fund and
unit trust securities. Most recently, the Institute has been
working closely with the NASAA Investment Company
Registration/Trading Practices Committee to draft a model
registration statute and regulations for investment companies in
order to coordinate state registration filings with those
required by the Securities and Exchange Commission and to promote
procedural uniformity among the states. The impetus for
uniformity on the state level is the development by NASAA of an
electronic filing program, the Securities Registration Depository
("SRD"). NASAA has recognized that uniformity of securities
registration procedures will be a key factor in the development
and success of the SRD.
The Institute is pleased to advise you that members of
NASAA adopted the "Investment Company Uniformity Project - Model
Investment Company Registration and Reporting Procedures" ("model
procedures") on September 15, 1992. The model procedures include
many of the Institute’s recommendations, particularly with
respect to the treatment of oversales. A copy of the model
procedures is attached.
The following is a brief summary of the model procedures:
1. Uniform Method of Registration - The model procedures
recommend that states adopt a uniform procedure for registration
of investment company securities. The model procedures require
the submission of the uniform application, Form U-1, for initial
registrations, amendments and renewals (if a material change has
occurred). Form U-1 will be used by the SRD for purposes of
electronic filing and it is anticipated that the Form U-1 will
also be accepted by the Securities and Exchange Commission’s
EDGAR system. Revisions to Form U-1 to accommodate a fifty-state
filing on a single form are currently being drafted by the NASAA
Technology Committee and will be issued for public comment in the
next few months.
2. Uniform Expiration/Renewal Date. A mutual fund will 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 will be given an expiration date one year
after the date of SEC effectiveness even if the trust goes
effective in a particular state after that date.
3. Uniform Method of Renewing and Reporting. A mutual fund
will be required to renew and report sales within two months of
the expiration of its fiscal year end by filing Form USR-1.
However, if a material change has occurred (e.g., events
triggering a Rule 485(a) filing on the federal level), a mutual
fund would also file an amended Form U-1.
A unit trust will be required to report its sales within
sixty days of the earlier of voluntary termination or expiration
of the registration statement. If necessary, a unit trust will
renew its registration prior to the expiration of the initial
registration (even though reporting of sales may occur after the
renewal date) by filing Form U-1.
It should be noted that the NASAA Committee had originally
proposed for adoption a revised Form USR-1 which would have
required sales and fee information to be included for all states.
Based upon the Institute’s comments and objection, the revised
form was withdrawn from the proposal pending additional study and
input from the investment company industry. The Institute will
be working with the NASAA Committee to revise Form USR-1.
5. Indefinite Registration. The model procedures strongly
recommend that states adopt indefinite registration of investment
company securities as a means of preventing oversales. Two
methods of indefinite registration are recommended. The first, a
"true indefinite registration" would require payment of a
registration fee based upon actual sales in a state. The second,
would provide registration of an indefinite amount of securities
by payment of a maximum fee. However, at the urging of the
Institute, the model procedures also provide that mutual funds
and unit trusts still be allowed the option of registering a
definite amount of securities and paying less than the maximum
registration fee.
If a state elects not to adopt indefinite registration, the
model procedures recommend adoption of the uniform method of
registration and renewal to ensure that the filings and payment
of fees be made on a uniform basis.
6. Oversales. The model procedures encourage 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 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.
7. States with the Blue Chip Exemption. The model
procedures encourage those states which have adopted the blue
chip exemption for qualified investment companies to adopt the
same timetable for filing notices to claim the exemption, i.e.,
renew the exemption within two months of the expiration of the
fund’s fiscal year end. Provision will be made on the revised
Form USR-1 to claim the blue chip exemption.
The model procedures also set forth other recommendations
concerning two-step registration, evaluation of requisite filings
and implementation of the model procedures.
The effective date of the model procedures is November 15,
1992 (sixty days after the date upon which the vote for adoption
occurred). However, some states may exercise their discretion
and adopt portions of the model procedures before the effective
date.
* * *
The Institute will continue to work with NASAA, the
relevant NASAA Committees and the individual states to achieve
uniformity of state registration procedures. In particular, the
Institute will be selecting certain states to encourage adoption
of the "true indefinite registration" provision (e.g., Minnesota,
Texas and Washington).
We will keep you informed of developments.
Patricia Louie
Assistant Counsel
Attachment