April 9, 1996
TO: OPERATIONS COMMITTEE No. 6-96
RE: CHECK AGING STUDY-MAY, 1996
______________________________________________________________________________
At the November 28, 1995 meeting, the Operations Committee agreed to conduct an
aging study of checks presented for mutual fund share purchases during the month of May,
1996. This study is performed in an effort to determine when monies from checks deposited
into mutual fund accounts are clearing through the Federal Reserve System.
Previous check studies conducted by the Institute have aided mutual funds in
establishing appropriate redemption policies regarding hold periods. Due to the increased
level and sophistication of check fraud, some Operations Committee members are reviewing
their current hold policies to ensure there is sufficient time to detect and prevent potential fraud
schemes. The survey has also been useful for the Institute and its members in responding to
inquiries from the SEC and the Federal Reserve regarding check clearing and hold policies.
Each Operations Committee member should complete the attached Check Aging forms
for seven mutual funds; preferably three equity funds, three bond funds, and one money
market fund A separate form for each fund should be completed and returned to the Institute
no later than July 31, 1996. Activity recorded is for the month of May, 1996 only.
Check Aging Survey Forms
Please complete a separate survey form for each fund and be sure to fill out all questions
in the survey. The following information should be provided:
(1.) The total number of all shareholder purchase checks deposited and cleared during the
month of May, 1996.
(2.) Number of returned checks received for purchase.
State the number of checks received for share purchases that were later dishonored or
returned by the bank. List the number of checks returned based upon the number of
days elapsed since the date of deposit and the date of return. For example, if during
May 1996, 5 checks were returned six days after the deposit, put the number 5 in the
box opposite number 6 in the "Elapsed Number of Days" column.
(3.) Reason for Return for Checks Returned After 11 Days
If checks were returned 11 or more days after deposit, please provide a brief description
of why the checks were returned - for example "Insufficient Funds".
(4.) The funds hold policy regarding purchase checks.
Please state the number of calendar days the fund may delay the mailing of
redemption proceeds while waiting for a purchase check to clear. Please state the policy
as set forth in the funds prospectus.
(5.) The number of redemption transactions in which proceeds were delayed because
they were received during the funds hold period.
Completion Date
Please complete this information and return to Natalie Lacireno-Paquet (telephone
number 202/326-5852) at the Investment Company Institute, 1401 H Street, NW, Washington,
DC 20005. All surveys should be returned no later than July 31, 1996.
We appreciate your participation in this years study. If you have any questions
regarding the survey, please contact the undersigned at 202/326-5850.
Justine Phoenix
Director - Operations/
Transfer Agency
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