August 20, 1993
TO: OPERATIONS COMMITTEE NO. 27-93
SEC RULES COMMITTEE NO. 74-93
STATE LIAISON COMMITTEE NO. 32-93
TRANSFER AGENT ADVISORY COMMITTEE NO. 43-93
RE: INSTITUTE COMMENTS ON NASAA REVISED TELEPHONE TRANSACTION
GUIDELINES
__________________________________________________________
As we previously advised you, the NASAA Investment Companies Committee
re-issued for public comment revised "Proposed Guidelines for Telephone
Transactions" ("Revised Proposal"). The Revised Proposal provides that if a
mutual fund disclaims liability for losses due to unauthorized or fraudulent
telephone instructions, certain disclosures would have to be included in the
fund's prospectus and application. (See Memorandum to Operations Committee
No. 23-93, SEC Rules Committee No. 61-93, State Liaison Committee No. 26-93
and Transfer Agent Advisory Committee No. 38-93, dated July 9, 1993.)
In its comment letter, the Institute questions the need for the Revised
Proposal, particularly in light of the position taken by the Division of
Investment Management of the Securities and Exchange Commission with respect
to disclaimers of liability for losses resulting from unauthorized telephone
transactions. The letter notes, however, that should a determination be made
by the NASAA Committee that the Revised Proposal is necessary for the
protection of investors, such should be amended to require a "general"
description of the procedures the investment company follows for telephone
transactions. The letter also recommends that the requirements set forth in
the Revised Proposal be applied prospectively and uniformly by the states and
that funds be allowed to include the disclosure in the next regular printing
of the prospectus and application after adoption of the Revised Proposal by
NASAA members.
A copy of the Institute's comment letter is attached. It is our
understanding that members of NASAA will vote on whether to adopt such at the
NASAA Fall Conference in September.
Patricia Louie
Associate Counsel
Attachment