August 22, 1994
TO: BANK INVESTMENT MANAGEMENT MEMBERS NO. 27-94
INSTITUTIONAL FUNDS COMMITTEE NO. 13-94
SEC RULES COMMITTEE NO. 97-94
RE: SEC NO-ACTION LETTER CONCERNING COMMON TRUST FUND
CONVERSION
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The Division of Investment Management recently issued the
attached no-action letter under Section 17(a) of the Investment
Company Act permitting a bank, acting as fiduciary of common trust
funds and collective investment funds (together, "Common Trusts"),
to engage in certain securities transactions with mutual funds for
which it serves as investment adviser.
The funds requested no-action assurance with respect to the
sale of the assets of the Common Trusts to the mutual funds in
exchange for fund shares. The funds stated that (a) except for the
requirement that the transaction be a purchase or sale for cash,
each transaction would comply with Rule 17a-7 under the Investment
Company Act, (b) no fund affiliate (and no affiliate of an
affiliate) would have a beneficial interest in the Common Trust
involved in the transaction with the fund, (c) the transactions
would be consistent with the funds' investment objectives and
policies, and (d) the transactions generally would not involve
payment of any brokerage commission or other remuneration.
Unlike a previous no-action letter, the staff's position was
not conditioned upon a representation that the bank would pass
through voting powers with respect to shares held by a fiduciary
account (or vote those shares in the same proportion as shares held
by all other fund shareholders). (See Memorandum to Bank
Investment Management Members No. 9-92; Institutional Funds
Committee No. 28-92; SEC Rules Committee No. 86-92, dated November
9, 1992.) In this regard, the staff stated, "While we remain
concerned about potential conflicts of interest when an adviser can
control the voting of fund shares, we have reconsidered our
position. Because the proposed transaction itself does not require
the adviser to vote fund shares, we have not conditioned . . . no-
action relief on this type of undertaking, and will not do so in
response to future requests for substantially similar relief."
Thomas M. Selman
Assistant Counsel
Attachment