October 1, 1993
TO: BOARD OF GOVERNORS NO. 88-93
OPERATIONS MEMBERS NO. 32-93
SEC RULES MEMBERS NO. 77-93
STATE SECURITIES MEMBERS NO. 38-93
TRANSFER AGENT ADVISORY COMMITTEE NO. 51-93
RE: NASAA ADOPTS TELEPHONE TRANSACTION GUIDELINES
__________________________________________________________
The Institute is pleased to advise you that members of the North American
Securities Administrators Association, Inc. ("NASAA") adopted "Guidelines for
Telephone Transactions" ("final guidelines") on September 29, 1993 during the
NASAA Fall Conference. The final guidelines adopted by NASAA incorporate several
of the Institute’s recommendations with respect to the propriety of disclaimers
of liability for telephone transactions. In particular, we are very pleased that
the final guidelines do not set forth certain mandated procedures a fund must
comply with if it disclaims liability for acting upon telephone transactions as
originally proposed (e.g., affirmative election of telephone privileges,
shareholder selection of a PIN).
The final guidelines are very similar to the position taken earlier this
year by the Division of Investment Management of the Securities and Exchange
Commission with respect to disclaimers of liability. The final guidelines
provide that a mutual fund may not disclaim liability for acting upon telephone
instructions it reasonably believes to be genuine unless the fund’s prospectus
and the document in which the investor authorizes telephone transactions includes
certain information (e.g., the fund’s policy with respect to liability, how the
telephone privilege is conferred, that the fund will employ reasonable procedures
to confirm telephone instructions, general description of the procedures). This
information should be included in the prospectus and other document at the next
possible printing of such documents.
A copy of the final guidelines is attached. The effective date of the
final guidelines is November 29, 1993 (sixty days after the date upon which the
vote for adoption occurred).
Patricia Louie
Associate Counsel
Attachment