October 21, 1992
TO: ACCOUNTING/TREASURERS COMMITTEE NO. 41-92
INDEPENDENT ACCOUNTANTS ADVISORY GROUP
RE: SEC HYBRID FUNDS PROPOSALS
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The Securities and Exchange Commission has proposed the
creation of three new types of funds:
a. Closed-end funds which could offer to repurchase no
less than 5% or more than 25% of their outstanding
shares on a periodic basis (e.g., quarterly,
annually),
b. Open-end funds which could offer redemptions at
periodic intervals ("Interval Funds"). These funds
would be able to take up to one month (31 days) to pay
redemption proceeds, and
c. Open-end funds which could extend the payment of
redemption proceeds for up to 31 days after receipt of
the redemption request ("Extended Payment Funds").
These proposals are summarized in the enclosed SEC Rules
Committee Memo No. 52-92, dated August 3, 1992. Attached to the
August 3 memo is SEC Release No. 33-6948 which proposes rules and
rule amendments necessary for the creation of these funds.
The Institute has received extensive input on these
proposals from a legal perspective from an ad hoc group of
representatives of the Institute’s SEC Rules Committee and
Closed-End Fund Committee. This group has voted in favor of both
the closed-end fund proposal and the interval fund proposal and
against the extended payment fund proposal. (See enclosed extract
of memo dated September 24, 1992 for details.)
Additionally, a small ad hoc group consisting of
representatives from the Institute’s Operations Committee and
Rich Silver and Steve Kearsley of the Accounting/Treasurers
Committee met last week to discuss potential operational and
mutual fund accounting issues. It was determined that a more in-
depth review of the proposals’ operational implications should be
performed by the Institute’s Transfer Agent Advisory Committee
members, which is currently underway.
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While it was preliminarily concluded that the creation of
these new fund products does not appear to present any difficult
implementation issues from a fund accounting perspective, we
would like your input regarding any potentially serious
implementation problems. Please provide me with any comments you
may have either by telephone (202/955-3583) or by fax (202/293-
1058) by Monday, November 2, 1992. We will discuss the hybrid
funds proposals and any accounting issues identified at the
Accounting/Treasurers Committee meeting on Wednesday, November 4,
1992. Thank you for your assistance.
Kathleen C. Joaquin
Director - Operations/
Fund Accounting
Enclosures