December 4, 1996
TO: INVESTMENT ADVISERS COMMITTEE No. 27-96
OPERATIONS COMMITTEE No. 32-96
SEC RULES COMMITTEE No. 125-96
TRANSFER AGENT ADVISORY COMMITTEE No. 69-96
RE: INSTITUTE COMMENT LETTER ON PROPOSED RULES CONCERNING LOST
SECURITYHOLDERS
______________________________________________________________________________
The Institute has filed the attached comment letter concerning the SECs proposed rules
that would require transfer agents to search for lost securityholders and authorize the
Commission to collect information on lost securityholders and provide it to information
distributors and others. The letter support the SECs efforts but urges the Commission to make
the proposed search requirements more flexible so as to accommodate current practices in the
mutual fund industry and to avoid unnecessary additional costs.
The Institutes letter recommends that the Commission permit transfer agents to make a
"lost securityholder" designation after the first piece of returned mail is remailed and returned
again as undeliverable rather than wait for a second, separate piece of mail to be returned, as
currently proposed. It also recommends that the Commission permit transfer agents to conduct
lost shareholder database searches every six months for all accounts deemed "lost" since the
prior search rather than within three months of when each individual account is deemed "lost."
The letter also suggests that the Commission eliminate limitations prohibiting transfer agents
from passing a reasonable cost of a search to the lost shareholder.
The letter proposes that the requirement to search for a lost securityholder only apply
where the transfer agent is holding assets over a de minimis amount of $100 per shareholder
account. In response to the Commissions request for comment, the letter also suggests that
transfer agents should not be required to make annual assessments of their lost shareholder
location efforts and that they should not be required to establish and monitor performance
based standards.
With respect to the Commissions request for comment on the development of a public
access database of lost securityholders, the letter states that the Institute is opposed to the
creation of such a database regardless of whether it would be maintained by a private entity or
the Commission, noting serious concerns with respect to the security of shareholder
information.
The letter urges the Commission to exclude mutual fund underwriters from the
definition of "recordkeeper" and to limit the inclusion of investments advisers in the definition
of "recordkeeper" to those advisers with custody of client securities of funds and therefore
subject to the custody rule, Rule 206(4)-2, under the Investment Advisers Act of 1940.
If you have any questions regarding the letter, please contact the undersigned at
202/326-5850. We will keep you informed of developments.
Justine Phoenix
Director - Operations/
Transfer Agency