June 12, 1996
TO: BOARD OF GOVERNORS No. 28-96
MEMBERS - ONE PER COMPLEX No. 48-96
RE: LETTER FROM CHAIRMAN LEVITT ON PERSONAL INVESTING
______________________________________________________________________________
In his speech at the Institutes General Membership Meeting in May, SEC Chairman
Arthur Levitt emphasized the importance of mutual fund codes of ethics that contain
appropriate safeguards and procedures governing personal investing by portfolio managers.
At that time, I sent a letter to Chairman Levitt that reiterated the mutual fund industrys
commitment to high ethical standards. My letter noted the Institutes 1994 Advisory Group on
Personal Investing, which recommended that funds voluntarily adopt a number of substantive
restrictions and procedural requirements, tailored as necessary to each funds unique
circumstances. (See Board of Governors No. 23-86, Members - One Per Complex No. 40-96, May
24, 1996.)
In his response to my letter, a copy of which is enclosed, Chairman Levitt praises the
Advisory Groups efforts as "a model of aggressive industry response to a potentially serious
problem" and credits the fund industry with taking a leading role in addressing the concerns
presented by personal investing. Chairman Levitt urges each fund group to address the issue
of personal investing "while the sun is still shining" and before the fund is faced with a specific
problem.
The Institute remains committed to personal investing standards that promote the
confidence of fund investors. The Advisory Group recommendations represent the best
practices of the mutual fund industry, and have been adopted by a solid majority of Institute
members. I strongly urge each member that has not already incorporated the
recommendations of the Advisory Group into its funds codes of ethics to do so as soon as
practicable. In this regard, you should note that the SEC is expected to adopt rule amendments
requiring disclosure of funds codes of ethics in the near future. Continued scrutiny of such
codes by the media can be expected.
Please contact Paul Stevens, the Institutes General Counsel (202/326-5810), or Thomas
Selman, Associate Counsel (202/326-5819), if you have any questions regarding the Advisory
Groups recommendations or personal investing generally.
Matthew P. Fink
President
Enclosure