February 7, 1989
TO: SEC RULES MEMBERS NO. 8-89
RE: 17j-1 CODES OF ETHICS FOR FUNDS THAT INVEST IN EXEMPT
SECURITIES
__________________________________________________________
Attached is a copy of the response of the Division of
Investment Management to a request for interpretive guidance by
the Institute (a copy of which is also attached) concerning
whether investment companies that invest only in instruments
that do not fall within the definition of "security" in Rule
17j-1 are required to adopt codes of ethics if they do not
already have codes of ethics. Previously, the staff had declined
to grant no-action relief to an investment company that limited
its investments to exempt instruments and sought to rescind an
existing code of ethics. (Trust for Credit Unions, pub. avail.
October 31, 1988). In subsequent conversations the staff
indicated that the fund had been denied no-action relief because
the staff does not consider it appropriate to grant such relief
with respect to recissions. The Institute filed the attached
letter to seek clarification with respect to the initial adoption
of a code of ethics under similar circumstances. In its response
to the Institute's request, the staff expressed the view that an
investment company that invested only in exempt instruments and
that did not have a code of ethics would not be required to adopt
a code of ethics under Rule 17j-1. This also would apply to the
fund's investment adviser and principal underwriter, if they were
not otherwise required to adopt codes of ethics.
Craig S. Tyle
Assistant General Counsel
Attachment