July 14, 1994
TO: SEC RULES COMMITTEE NO. 78-94
STATE SECURITIES MEMBERS NO. 39-94
SUBCOMMITTEE ON ADVERTISING NO. 14-94
UNIT INVESTMENT TRUST COMMITTEE NO. 48-94
RE: INSTITUTE URGES VERMONT TO RECONSIDER POLICY STATEMENT ON
PROSPECTUS WRAPPERS
__________________________________________________________
As we previously advised you, the Vermont Securities
Division recently issued Bulletin 94-1-S, which sets forth
certain disclosure requirements for mutual fund prospectus
wrappers that are used in Vermont. In particular, the Bulletin
requires that the wrapper include a specific cover page legend
and disclosure on each page of the wrapper that the wrapper is
not part of the prospectus. (See Memorandum to State Securities
Members No. 35-94, SEC Rules Committee No. 73-94, Unit Investment
Trust Committee No. 47-94, and Subcommittee on Advertising No.
12-94, dated July 7, 1994.)
The Institute wrote to the Securities Division to express
its concerns with the Bulletin's requirements and to urge the
Division to reconsider the necessity of the Bulletin. The
Institute's letter notes that the federal securities laws and
provisions of the Vermont Securities Division already address any
potential confusion that might arise from the use of prospectus
wrappers in a manner that is both flexible and effective. The
letter further notes that the Bulletin overlooks two important
purposes of prospectus wrappers, namely, to make certain that
investors who receive sales literature receive the full
prospectus and to enhance the readability of information
contained in the prospectus. The letter also points out that the
Bulletin leaves unanswered a host of interpretive issues, e.g.,
whether an alternate legend may be used, how the term "enclosed"
will be interpreted, whether sales material must be stickered to
meet the July 15 effective date.
A copy of the Institute's letter is attached. We will keep
you advised of developments.
Patricia Louie
Associate Counsel
Attachment