1 See Memorandum to SEC Rules Committee No. 21-96, dated March 22, 1996.
June 10, 1996
TO: SEC RULES COMMITTEE No. 55-96
RE: INSTITUTE COMMENT LETTER ON PROPOSED AMENDMENTS TO RULE
10f-3
______________________________________________________________________________
The Institute has filed the attached comment letter concerning the SECs proposed
amendments to Rule 10f-3 under the Investment Company Act.1 The letter strongly supports
the SECs efforts to expand the scope and flexibility of the rule but urges the SEC to further
broaden several of its proposals. The letter is summarized below.
The Institutes letter first recommends that the SEC eliminate the limit in Rule 10f-3 on
the amount of an offering that funds may purchase under the rule (rather than raising it
slightly, as the SEC had proposed). The letter then suggests that the SEC adopt a limit of 50%
of the total principal amount an offering if it determines that such a limit remains necessary.
The Institutes letter supports the SECs proposal to permit purchases of foreign
securities under Rule 10f-3, but recommends that such purchases not be limited to publicly
offered securities. The letter suggests that in the case of non-publicly offered foreign securities
(other than certain Rule 144A securities, as noted below), the rule apply a quantitative limit to
the amount of the offering that funds may purchase.
The letter also supports the SECs proposal to expand Rule 10f-3 to cover Rule 144A
securities of foreign issuers where there is a concurrent public offering of securities of the same
class. It suggests, however, further expansion of the rule to cover both domestic Rule 144A
offerings and foreign issuer Rule 144A offerings that do not involve a concurrent public
offering of securities of the same class. The letter recommends that a quantitative limit apply in
the latter two cases.
The Institutes letter proposes that the SEC broaden its proposal regarding municipal
securities purchases to allow funds to place either "group orders" (pursuant to which an
affiliated underwriter receives credit for its pro rata share of the order) or "designated orders,"
provided that in the case of a designated order naming an affiliated underwriter, the affiliated
underwriter may not receive a commission on more than its underwriting share of the order
(i.e., the same amount it would receive on a group order).
Frances M. Stadler
Associate Counsel