May 5, 1993
TO: SEC RULES COMMITTEE NO. 44-93
STATE LIAISON COMMITTEE NO. 23-93
RE: INSTITUTE SUBMITS PROPOSED REVISION TO MONEY MARKET
CONDITIONAL EXEMPTION
__________________________________________________________
The Institute recently submitted a comment letter to the
Texas State Securities Board on a proposed amendment to 123.3 of
the Texas Administrative Code, the conditional exemption for
money market funds. As you may recall, the proposed amendment
would allow a money market fund with an asset-based sales charge
of 0.25% or less to qualify for the conditional exemption. In
addition, however, the proposed amendment adds several new
portfolio requirements which are inconsistent with the
requirements of Rule 2a-7 and the limitations on investing in
other investment companies under the Investment Company Act.
(See Memorandum to SEC Rules Committee No. 29-93 and State
Liaison Committee No. 17-93, dated April 1, 1993.)
The Texas State Securities Board held a meeting on April
16th to consider the proposed amendment to 123.3. At this
meeting, the Institute reiterated its concerns with respect to
the proposed amendment. The Institute also recommended that the
proposed amendment be revised to incorporate the "holding out"
language in Rule 2a-7 and that a specific exclusion for certain
two-tier funds (e.g., "hub and spoke funds," "master/feeder
funds," "core/feeder funds") be included in the Texas provision.
In addition, the Institute recommended modification of the
prohibition on charging management or advisory fees by the fund's
manager or investment adviser if an investment is made in another
money market fund.
Based upon the comments received, the staff of the State
Securities Board recommended that no action be taken at this time
pending further discussions with the Institute. Attached is a
copy of the Institute's letter detailing the foregoing
recommendations.
Patricia Louie
Associate Counsel
Attachment