* SEC Release No. 34-38480 (April 7, 1997).
May 16, 1997
TO: COMPLIANCE ADVISORY COMMITTEE No. 18-97
INVESTMENT ADVISER ASSOCIATE MEMBERS No. 16-97
INVESTMENT ADVISER MEMBERS No. 18-97
SEC RULES MEMBERS No. 38-97
UNIT INVESTMENT TRUST COMMITTEE No. 30-97
RE: SEC DETERMINES NO ADDITIONAL RULEMAKING REQUIRED UNDER THE
TELEMARKETING ACT
______________________________________________________________________________
The Securities and Exchange Commission recently published its determination that no
further Commission rulemaking is necessary under the Telemarketing and Consumer Fraud
and Abuse Prevention Act. A copy of the release is attached.*
The Act requires the Commission to promulgate, or to require the securities industry
self-regulatory organizations ("SROs") to promulgate, rules substantially similar to the rules
adopted by the Federal Trade Commission ("FTC") pursuant to the Act. The Act provides that
the Commission may elect not to promulgate such rules only if it determines that existing rules
provide protection against deceptive and abusive practices in securities transactions
substantially similar to that provided by the FTC rules or that additional rules are not necessary
or appropriate in the public interest.
According to the release, the Commission found that the Securities Exchange Act of
1934 and the Investment Advisers Act of 1940, the rules thereunder, and the other rules of the
SROs satisfy the requirements of the Telemarketing Act because the applicable provisions of
these laws and rules are substantially similar to the FTC rules, except for those FTC rules that
either involve areas already extensively regulated by existing securities laws or regulations or
are inapplicable to securities transactions. Accordingly, the Commission determined that no
additional rulemaking is required.
With respect to investment companies and investment advisers, the Commission noted
that most investment companies are sold through registered broker-dealers subject to NASD
rules and that separate rulemaking under the Investment Company Act of 1940 would be
largely duplicative of NASD rules. In addition, those investment companies that are self-
distributed are prohibited from telemarketing under Exchange Act Rule 3a4-1. Furthermore,
investment advisers employ telemarketing only infrequently, and existing rules include
procedural safeguards that deter abusive telemarketing by advisers; however, the Commission
stated that it would monitor the effectiveness of NASD telemarketing rules and consider
whether investment adviser rules might be necessary in the future.
Frances M. Stadler
Associate 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)326-8304, and ask for this memo’s attachment number: 8894.