July 30, 1993
TO: DIRECT MARKETING COMMITTEE NO. 40-93
INDUSTRY STATISTICS COMMITTEE NO. 12-93
MARKETING POLICY COMMITTEE NO. 31-93
OPERATIONS COMMITTEE NO. 24-93
PUBLIC INFORMATION COMMITTEE NO. 40-93
SALES FORCE MARKETING COMMITTEE NO. 39-93
SEC RULES COMMITTEE NO. 69-93
SHAREHOLDER COMMUNICATIONS COMMITTEE NO. 32-93
RE: PROPOSED STANDARDIZATION NOMENCLATURE FOR MULTIPLE CLASS
FUNDS
__________________________________________________________
Earlier this year at meetings of the Operations and Sales Force Marketing
Committees, members expressed concern about the absence of industry
standardization in connection with the nomenclature for classes of shares. The
concern is that without some standardization, an increasing diversity of class
designations can be expected to produce confused communications between and among
funds, brokers and shareholders. Accordingly, a joint task force of Sales Force
Marketing and Operations Committee members was formed to consider the
advisability of recommending guidelines for naming new classes of multiple class
funds in the future.
Participants in the task force agreed unanimously that a continued
proliferation of multiple classes of shares in the absence of standardization
will (1) lead to investor uncertainty and confusion, (2) create confusion among
brokers and other intermediaries, (3) lead to corresponding operations problems,
and (4) invite criticism from the financial news media that investors are facing
too many choices.
The attached proposal was developed by the task force as suggested,
voluntary, general guidelines that fund sponsors may consider in structuring
multiple class offerings in the future. The guidelines were developed from the
perspective of the investor. Therefore, for example, for the purposes of the
guidelines, a class would be considered to have no front end load if an investor
pays no front end load, irrespective of whether a salesperson receives
compensation from the distributor at the point of sale.
We recognize the potential for ambiguities between certain class
definitions. The task force believes, however, that a flexible approach would
be more broadly applicable and less likely to result in the inability to include
innovative class structures within the guidelines.
Please review the proposed guidelines for any major problems or objections
and submit any comments you may have in writing to the Institute by September 10,
1993 to Justine Phoenix, Director of Operations/Transfer Agency. The Institute's
Executive Committee will review an analysis of comments and any recommended
changes to the proposal prior to recommending to the Board of Governors whether
final voluntary guidelines should be distributed to the membership.
Thank you for your attention to this matter.
L. Erick Kanter
Vice President - Public
Information and Marketing
Donald J. Boteler
Assistant Vice President -
Operations