PROPOSED RULE CHANGE TO MANDATE USE OF ACATS FUND/SERV FOR BROKER TO BROKER TRANSFERS OF MUTUAL FUND ACCOUNT POSITIONS

July 12, 1994 TO: BROKER/DEALER ADVISORY COMMITTEE NO. 13-94 OPERATIONS COMMITTEE NO. 15-94 SALES FORCE MARKETING COMMITTEE NO. 23-94 RE: PROPOSED RULE CHANGE TO MANDATE USE OF ACATS FUND/SERV FOR BROKER TO BROKER TRANSFERS OF MUTUAL FUND ACCOUNT POSITIONS __________________________________________________________ The Securities and Exchange Commission has released for comment the attached proposal to amend the New York Stock Exchange's Rule 412 Customer Account Transfer Contracts, and its related interpretations. The proposed changes are intended to increase the speed and accuracy of broker to broker account transfers by reducing the transfer validation cycle form five days to three days, the account delivery cycle from five days to four days, and, most importantly from the mutual fund perspective, "...mandating the use of an automated system for transferring mutual fund positions where a member organization is a participant in a registered clearing agency which has such a facility." In response, the Investment Company Institute has submitted to the Commission the attached positive comment letter which strongly supports and recommends adoption of the proposed rule change. The letter addresses the portion of the rule change concerning the mandating of an automated system for the transfer of mutual fund positions. Currently, the automated means for facilitating the transfer of such positions is the ACATS (Automated Customer Account Transfer System) Fund/SERV link developed by the National Securities Clearing Corp. (NSCC). The Institute believes strongly that mandating the use of this service would benefit both the broker/dealer and mutual fund communities. ACATS Fund/SERV transfers, by virtue of their automated nature, provide a seamless, expeditious means of delivering and receiving mutual fund account registrations, various account options, and the asset, all in a mode that is totally transparent to the shareholder. In addition, ACATS Fund/SERV transfers offer a complete audit trail, require no administrative work from fund or transfer agency personnel, and virtually preclude the need for corrective maintenance by obviating the need for manual processing. Given as much, the Institute has delivered its recommendation for the mandating of ACATS Fund/SERV to the SEC. Should you wish to submit your own comment letter, it must be received by the SEC no later than July 20th, 1994. Further, if you have any questions or concerns regarding this memo, the Institute's comment letter, broker to broker transfers of customer mutual fund account positions, or the ACATS Fund/SERV link, please do not hesitate to contact the undersigned at (202) 326-5848. Kevin Farragher Director of Operations Distribution & Service Attachment