June 15, 1994
TO: ACCOUNTING/TREASURERS COMMITTEE NO. 31-94
OPERATIONS COMMITTEE NO. 12-94
SEC RULES COMMITTEE NO. 63-94
TAX COMMITTEE NO. 22-94
SUBCOMMITTEE ON PROPOSED RULE 6c-10
RE: INSTITUTE COMMENT LETTER ON PROPOSED RULE 6c-10
__________________________________________________________
The Institute has filed with the Securities and Exchange
Commission the attached letter concerning proposed Rule 6c-10 under
the Investment Company Act of 1940, which would permit mutual funds
to impose contingent and non-contingent deferred sales loads
without obtaining exemptive relief. As we previously advised you,
we understand that the Commission is likely to adopt proposed Rule
6c-10 in some form at the same time it adopts the multiple class
proposal. (See Memorandum to SEC Rules Committee No. 44-94, dated
April 4, 1994 and Memorandum to Accounting/Treasurers Committee No.
19-94, Operations Committee No. 9-94 and Tax Committee No. 16-94,
dated April 27, 1994.) The Institute formed a subcommittee of
members which met on May 12 to consider whether any significant
issues remain under the proposed rule. The attached comment letter
is based on the discussion at that meeting.
The Institute's comment letter makes three recommendations
with respect to contingent deferred sales loads. First, the two
existing methodologies for calculating CDSCs (described in the
letter as the "share lot" method and the "dollar" method) should be
preserved in the final rule. Second, the prohibition on interest
in the proposed rule should be deleted. Third, fund complexes
should be permitted to rely on prior exemptive orders with respect
to existing funds that have CDSCs in place, and also with respect
to new funds organized, or an existing fund that wishes to impose
a CDSC, after the rule is adopted (to the extent consistent with
such prior orders). The letter recommends that this approach to
reliance on prior orders be consistent with that taken under
proposed Rule 18f-3 (concerning multiple class funds), and requests
confirmation that such is the case.
The comment letter further suggests that, to the extent the
portion of proposed Rule 6c-10 concerning non-contingent deferred
2loads, such as installment loads, may require further Commission
consideration before it is adopted, the Commission not delay its
adoption of the proposed rule as it relates to CDSCs.
Frances M. Stadler
Associate Counsel
Attachment