April 7, 1995
TO: CLOSED-END FUND COMMITTEE No. 18-95
SEC RULES COMMITTEE No. 54-95
RE: ""INVESTMENT COMPANY ACT AMENDMENTS OF 1995""
______________________________________________________________________________
House Telecommunications and Finance Subcommittee Chairman Fields and Ranking Member
Markey have introduced the “Investment Company Act Amendments of 1995”. A copy of the bill,
along with a section-by-section analysis, is attached. Among other provisions, the bill would:
` Modify the definition of “majority vote” under the Act to make it easier for funds to receive
shareholder approval of actions, drop the requirement that shareholders approve the
selection of independent accountants and add a requirement that shareholders approve changes in a
fundGs investment objective.
` Allow the SEC to permit mutual fund advertisements to contain information the “substance
of which” is not included in the fundGs prospectus.
` Establish an exemption under the Act for funds sold only to institutional investors and wealthy
individuals that meet certain thresholds set forth in the bill. Consistent with the InstituteGs position,
the SEC would not have the discretion to lower these standards.
` Require that all mutual funds have a majority of independent directors and that independent
directors be self-nominating, and allow the independent directors to cancel an advisory contract.
` Establish an exemption from the statutory restrictions on “funds of funds” for certain funds that
invest in affiliated funds, and allow the SEC broader authority to exempt other funds from the
restrictions.
` Permit the SEC to require funds to maintain books and records beyond those related to the fundGs
financial statements (similar to the standard now applicable to books and records of registered
invesment advisers) and to specify the format of such records, after taking into account any burdens
that may be imposed on smaller funds.
` Permit the SEC to require more frequent reports to it and to require information to be included in
reports to shareholders.
` Permit the SEC to prohibit misleading fund names by rule or by order.
` Allow the establishment of “unified fee funds”, which would be funds with relatively fixed expense
ratios that would be exempt from certain provisions of the Investment Company Act.
The Institute has issued a press release expressing general support for the bill (a copy of which is
attached). Hearings on the bill are expected in May or June. If you have any comments on the
legislation, please call me at 202-326-5815 or Amy Lancellotta at 202/326-5824 by Friday, April 21,
1995.
Craig S. Tyle
Vice President and Senior Counsel
Attachments