DRAFT COMMENT LETTER PROPOSING INVESTMENT COMPANY/ADVISER EXEMPTIONS FROM PUBLIC UTILITY HOLDING COMPANY ACT

1 See Memorandum to Compliance Committee No. 21-94, Investment Advisers Committee No. 56-94 and SEC Rules Committee No. 121-94, dated November 17, 1994. January 23, 1995 TO: COMPLIANCE COMMITTEE No. 3-95 INVESTMENT ADVISERS COMMITTEE No. 6-95 SEC RULES COMMITTEE No. 10-95 UNIT INVESTMENT TRUST COMMITTEE No. 7-95 RE: DRAFT COMMENT LETTER PROPOSING INVESTMENT COMPANY/ADVISER EXEMPTIONS FROM PUBLIC UTILITY HOLDING COMPANY ACT ______________________________________________________________________________ As we previously advised you, the Securities and Exchange Commission recently issued a concept release seeking comment on modernization of the regulation of public utility holding companies under the Public Utility Holding Company Act of 1935.1 The Institute had recommended twice in the past that the Commission exempt investment companies and investment advisers from regulation under the Act, but no such action has been taken to date. In light of the fact that the concept release specifically requested comments on application of the Act to investment companies and investment advisers, however, it appears the Commission now may have occasion to consider the merits of our proposal. Attached for your review is a draft comment letter to the Commission reiterating the Institute’s proposal for exemptive relief for investment companies and investment advisers. It is largely identical to the letter previously submitted to the Commission (a copy of which was circulated to you with the concept release). One difference, as noted in the attached letter, is that one of the conditions that had been included in the proposed exemptive rule for investment companies (i.e., that the company have a stated policy adopted by its board of directors that it does not invest for the purpose of exercising control) has been deleted. This change was made because the condition seems unnecessary and it would inappropriately exclude unit investment trusts from qualifying for the exemption. The comment letter must be filed with the Commission by February 6th. Therefore, please contact me at (202) 326-5822 by Thursday, February 2nd with any comments on the attached draft letter. Frances M. Stadler Associate Counsel Attachment