1 See Memorandum to SEC Rules Committee No. 9-98, dated February 10, 1998.
2 See Memorandum to Accounting/Treasurers Committee No. 18-95, SEC Rules Committee No. 58-95, and Unit Investment
Trust Committee No. 42-95, dated April 18, 1995.
[9738]
March 5, 1998
TO: SEC RULES COMMITTEE No. 22-98
RE: INSTITUTE LETTER TO SEC STAFF PROPOSING AMENDMENTS TO
EXCHANGE OFFER RULE
______________________________________________________________________________
The Institute has submitted a letter to the Division of Investment Management proposing
amendments to Rule 11a-3 under the Investment Company Act of 1940, the rule that governs mutual
fund exchange offers. The letter is substantially similar to the draft letter we previously circulated to
you, which was discussed at last monthGs SEC Rules Committee meeting.1 It has been revised in certain
minor respects to incorporate membersG comments. The letter reiterates and amplifies
recommendations the Institute made to the SEC in a 1995 comment letter on proposed amendments to
Rule 6c-10.2 A copy of the letter is attached, and it is summarized below.
In its letter, the Institute recommends that funds be allowed the option of imposing a deferred
sales charge on an exchanged security at the time of an exchange, subject to appropriate disclosure and
compliance with the NASDGs sales charge limits.
The letter also recommends that Rule 11a-3 eliminate the provisions concerning the deferred
sales load calculation restrictions for partial exchanges and for shares acquired through reinvestments of
dividends and capital gains distributions. The letter explains that removing these provisions would make
the rule consistent with the 1996 amendments to Rule 6c-10 under the 1940 Act, which eliminated
similar provisions on the theory that appropriate disclosure and the NASDGs limits on sales charges
provide adequate investor protection.
Finally, the letter recommends technical modifications to the rule in order to accommodate
exchanges involving funds that impose installment loads. The letter explains that although the definition
of “deferred sales load” in Rule 11a-3 was amended to cover installment loads (consistent with amended
Rule 6c-10), the additional technical modifications are needed to fully accommodate them.
Barry E. Simmons
Assistant Counsel
Attachment