INSTITUTE PROPOSES INVESTMENT COMPANY/ADVISER EXEMPTION FROM PUBLIC UTILITY HOLDING COMPANY ACT

1 See Memorandum to Compliance Committee No. 3-95, Investment Advisers Committee No. 6-95, SEC Rules Committee No. 10-95 and Unit Investment Trust Committee No. 7-95, dated January 23, 1995. February 7, 1995 TO: COMPLIANCE COMMITTEE No. 8-95 INVESTMENT ADVISERS COMMITTEE No. 10-95 SEC RULES COMMITTEE No. 18-95 UNIT INVESTMENT TRUST COMMITTEE No. 15-95 RE: INSTITUTE PROPOSES INVESTMENT COMPANY/ADVISER EXEMPTION FROM PUBLIC UTILITY HOLDING COMPANY ACT ______________________________________________________________________________ Attached is a copy of the Institute’s comment letter filed with the Securities and Exchange Commission proposing an exemption for investment companies and investment advisers from regulation under the Public Utility Holding Company Act of 1935. In contrast to the draft comment letter circulated to you previously,1 the final letter recommends that the Commission adopt an exemptive rule for investment companies and investment advisers modeled on Rule 16a-1 under the Securities Exchange Act of 1934. That rule excludes (for purposes of determining whether a person or entity is a "ten percent holder" under Section 16) certain shares held by registered investment companies and investment advisers in the ordinary course of business and without the purpose or effect of changing or influencing control of the issuer. The Institute’s proposal also would cover certain controlling persons of investment companies and investment advisers. Previously, the Institute had recommended that the Commission adopt exemptive rules for investment companies and investment advisers based on the existing exemptive rules for banks and broker-dealers, respectively, under the 1935 Act (which were adopted in 1941). The attached letter explains that the Institute believes an approach based on 1934 Act Rule 16a-1 is preferable because that rule (which was adopted in its current form in 1991) represents a recent policy determination by the Commission that is based on the same rationale as the Institute’s proposal for exemptive relief from the 1935 Act and specifically applies to investment companies and investment advisers. Frances M. Stadler Associate Counsel Attachment