1 See Memorandum to SEC Rules Committee No. 119-95, State Securities Members No. 46-95, and Unit Investment Trust Members No. 58-95, dated November 10, 1995.
December 13, 1995
TO: SEC RULES COMMITTEE No. 127-95
STATE SECURITIES MEMBERS No. 52-95
UNIT INVESTMENT TRUST MEMBERS No. 66-95
RE: INSTITUTE COMMENTS ON OHIO’S PROPOSAL ON ILLIQUID
SECURITIES
______________________________________________________________________________
As we previously informed you, in November the Ohio Division of Securities (the
"Division") proposed for comment amendments to Rule 1301:6-3-09(E)(12) that would conform
Ohios treatment of Rule 144A securities to that of federal law.1 The proposed amendments
would also permit certain rated commercial paper that is sold under Section 4(2) of the
Securities Act of 1933 to be considered liquid under specified conditions. Unlike federal law,
however, the Divisions proposal would not consider unrated commercial paper to be liquid.
The Institute recently filed a comment letter on the proposal with the Division. In its
letter, the Institute strongly recommends that the Division (1) adopt the provisions in the
amendment that relate to Rule 144A securities, (2) either repeal the proposed provisions
relating to commercial paper or conform them to federal law, and (3) repeal the several
provisions in Ohios rules that continue to be incongruent with federal law. The provisions we
recommend the Division repeal, which are detailed in the Institutes letter, relate to holdings by
officers and directors, custodial arrangements, fund investments, investment in other
companies, borrowing, load limits, and expense limits. As noted in the Institutes letter, such
unique state provisions adversely impact investors by imposing undue and costly compliance
burdens on mutual funds, stifle investment opportunities and investments permitted under
federal law, divert valuable resources away from activities that provide greater benefit to
investors such as education and enforcement, and frustrate national policies, such as simplified
prospectuses.
A copy of the Institutes comment letter is attached.
Tamara K. Cain
Assistant Counsel
Attachment
Note: Not all recipients of this memo will receive an attachment. If you wish to obtain a copy
of the attachment referred to in this memo, please call the Institute’s Information Resource
Center at (202)326-8305 or (202)326-5903, and ask for this memo’s attachment number: 7479.