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Speech by SEC Staff:
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| The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of Mr. Roye and do not necessarily reflect the views of the Commission, the Commissioners, or other members of the Commission's staff. |
Thank you, and good afternoon. It is a pleasure to be here with all of you today at this Annual Institute focused on Investment Management Regulation. I decided to use my time today to review some of the more important developments in the investment management area and initiatives that I expect to emerge from the Commission in the coming weeks and months. Hopefully, in the course of this review, I will provide you some insight as to our thinking on many of the hot issues in the industry today.
As will be discussed in detail at this conference, the financial services industry, and the investment management industry in particular, are in the midst of a technological revolution. Today, change is accelerating at an extraordinary pace, as technology is creating a new internet-driven economy. These changes, of course, bring great challenges for the industry, and also for those of us who are responsible for the legal and regulatory compliance aspects of the business. The regulatory initiatives currently before us today are aimed at promoting the integrity of fund governance, enhancing disclosures made to investors and modernizing the investment management regulatory regime.
One of the most significant of our pending initiatives is in the area of fund governance. Our rule proposal is designed to reaffirm the important role that independent directors play in protecting fund investors, strengthen their hand in dealing with fund management, reinforce their independence, and provide investors with better information to assess the independence of directors. The proposal would amend certain exemptive rules under the Investment Company Act by adding a number of conditions to the exemptive rules that any fund must meet to rely on the rules. These conditions are: (1) independent directors must constitute at least a majority of their board of directors; (2) independent directors must select and nominate other independent directors; and (3) any legal counsel for the independent directors must be an independent legal counsel. We also have proposed rules that would prevent qualified individuals from being unnecessarily disqualified from serving as independent directors, protect independent directors from the costs of legal disputes with fund management, and monitor the independence of directors by requiring funds to keep records of their assessment of director independence.
We also have proposed a number of disclosure requirements that will enhance shareholders’ ability to evaluate whether the independent directors can act as an independent, vigorous, and effective force in overseeing fund operations. These proposals would require funds to provide basic information about directors to shareholders annually so that shareholders will know the identity and experience of all directors. They also would require disclosure of directors’ ownership of fund shares, information about director’s potential conflicts of interest, and would provide information to shareholders on the board’s role in governing the fund. By requiring funds to provide this information, the proposals will give shareholders the tools to determine how effectively the directors serve their interests.
We are close to finalizing our recommendations to the Commission for adoption of the Fund Governance initiatives. This final package will reflect many of the suggestions we received in comment letters. Specifically, we will recommend scaling back the disclosure requirements, especially as they relate to directors’ family members. Many commenters also believed that the proposal regarding independent counsel for directors was too paternalistic or that our definition of independent counsel was too rigid. In the wake of our proposal, an ABA Task Force issued a report that reminded lawyers of their obligations under their existing ethics rules to disclose to independent fund directors, their potential conflicts of interest. We agree with the ABA Task Force that independent directors benefit from the advice of counsel who can render objective and unbiased advice and that independent directors can only effectively assess the independence of their counsel when that counsel has thoroughly disclosed all of the relevant information regarding conflicts and potential conflicts of interest.
Of course, directors who choose to rely on their own counsel have an interest in assuring that their counsel is independent of the Fund’s principal underwriter and adviser. I am confident that the Commission’s final rule, which I expect will be considered soon, will strike an appropriate balance in encouraging independent counsel for fund directors.
In addition to the protections that will be afforded to shareholders as a result of the independent director proposals, the Commission has issued a number of rule proposals, and is considering a number of other proposals, that further our continuing effort to improve the quality of mutual fund disclosure in order to help investors make better-informed decisions.
Let me start with the issue of fund fees. Unfortunately, too many investors today focus on a fund’s past performance and pay too little attention to how fund fees and charges impact their investment over time.
The issue of fund fees has been a focus on Capitol Hill, as well as at the Commission. The Commission has undertaken a number of recent and ongoing initiatives in this area, including changes to disclosure requirements to make fee disclosure easier to understand, and increased focus on investor education about mutual fund fees, including the introduction of an interactive web-based mutual fund cost calculator.
At the request of Congress, the General Accounting Office completed a study this past summer of mutual fund fees and expenses. The study concluded that additional disclosure could help increase investor awareness and understanding of mutual fund fees and, thereby, promote additional competition by funds on the basis of fees. The report recommends that the Commission require that periodic account statements include additional disclosure about the portion of mutual fund expenses that the investor has borne. The Division is also in the process of completing a review of mutual fund fees and expenses. We have considered the GAO’s recommendations, as well as other alternatives that may provide better information to shareholders at less cost. Our recommendations will be to make the actual impact of fees more visible, and to allow investors to quickly and effectively determine the actual dollar amount they have paid in fund expenses during a given period. These measures should help investors make better investment decisions.
In March, the Commission issued a rule proposal to improve disclosure to investors of the effect of taxes on the performance of mutual funds. Taxes are one of the largest costs associated with a mutual fund investment. Our proposal will help investors to understand the magnitude of tax costs and compare the impact of taxes on the performance of different funds. The proposed amendments would require mutual funds to disclose after-tax returns for 1-, 5-, and 10- year periods, based on standardized formulas comparable to the formula currently used to calculate before-tax average annual total returns. The after-tax returns would be required to be disclosed in the risk/return summary of the prospectus and in Management’s Discussion of Fund Performance, which is typically contained in the annual report. The proposal also would require funds that include after-tax returns in advertisements and other sales materials to include standardized after-tax returns in those materials.
The proposal would require funds to disclose after-tax returns on both a "pre-liquidation" and "post-liquidation basis. Pre-liquidation after-tax return assumes that the investor continues to hold fund shares at the end of the measurement period. Post-liquidation after-tax return assumes that the investor sells his or her fund shares at the end of the measurement period. Thus, pre-liquidation after-tax return reflects the tax effects on shareholders of the portfolio manager’s purchases and sales of portfolio securities, while post liquidation after-tax return also reflects the tax effects of a shareholders’ individual decision to sell fund shares. We believe both measures are important for shareholders to gain a better understanding of the tax consequences of investing in mutual funds. Pre-liquidation after-tax return is important because it provides information about the tax-efficiency of portfolio management decisions. Post-liquidation return also is important for shareholders, many of whom hold shares for a relatively brief period, to understand the full impact that taxes have on a mutual fund investment that has been sold.
We are completing our analysis of the comments on the proposal and expect to be making a recommendation to the Commission regarding adoption in the next several months.
At the same time that we are acting to give investors more information relevant for their investing decisions, we also want to improve the rules governing fund advertising. I expect that the Commission will propose amendments to Rule 482, to enhance funds’ ability to provide investors with better and timelier information. The proposal would eliminate the requirement that the substance of the information contained in advertisements be included in the statutory prospectus. The Rule 482 revisions also will serve as an occasion to remind funds that technical compliance with the rule may nevertheless run afoul of antifraud prohibitions of the federal securities laws. We also expect to consider modifications to Rule 156, the antifraud rule that applies to fund sales literature.
We hope to address some of the troubling practices that OCIE has found in a few fund ads. As you may know, if funds use performance numbers in ads, they must show a fund’s 1-, 5- and 10-year total return numbers, current as of the last quarter. OCIE has found some funds using total return numbers updated for odd one-year periods. Upon review of these situations, OCIE found that the dates chosen by some of these funds coincided with days on which the funds’ net asset value reached a new high. They also found that the NAVs of some of these funds were very volatile and the performance numbers varied significantly over relatively short periods of time. There clearly was cherry picking of performance numbers. Other concerns include performance numbers as of the end of the most recent quarter that should be updated. The NASD has reminded its members that use of the most recent quarter numbers alone has the potential to mislead, if the performance suffers prior to updating at the next calendar quarter end.
We also are concerned about the advertising of funds with good performance that are closed and the use of scales or graphs that exaggerate performance. We will seek to promote in the rule, balance and responsibility in fund advertising.
As we act to insure that investors are not misled by advertisements, we also will act soon to insure that they are not misled by a fund’s name. In February 1997, the Commission proposed new rule 35d-1 to address certain investment company names that are likely to mislead an investor about a company's principal investment focus. The proposed rule would require an investment company with a name that suggests a particular investment focus to invest in a manner consistent with its name. The rule, for example, would require an investment company with a name that suggests that the company focuses on a particular type of security (e.g., the Acme Bond Fund) to invest at least 80% of its assets in the type of security indicated by its name.
Our current position is that an investment company with a name suggesting that the company focuses on a particular type of investment generally is required to invest only 65% of its assets in the type of investment suggested by its name.
For no particular reason, other than the difficulties created by the Division’s high attrition, we have failed to move forward with this proposal. However, we are now very close to recommending a final rule to the Commission. I would note in this regard one issue that arose in the comments that we received and that we are thinking about how to address. The proposed rule would require the 80% investment requirement to be a fundamental policy of the investment company (i.e., a policy that may not be changed without shareholder approval). The requirement to adopt the 80% investment requirement as a fundamental policy would prevent a company from changing its name and its investment emphasis without the consent of shareholders. Some commenters felt this requirement restricted management’s ability to make the best investment decisions for its shareholders or would discourage the use of descriptive names. It seems to me that if we eliminate the fundamental policy requirement as the commenters suggested, we should at least require that funds give advance notice to their shareholders of any change in their name and investment emphasis in sufficient time to allow those shareholders to preserve their asset allocation by moving to another fund if they choose to do so.
The Commission also has proposed amendments that would permit funds to "household" proxy and information statements. The proposed amendments would allow funds to satisfy the proxy and information statement delivery requirements of the Securities and Exchange Act of 1934, by sending or forwarding a single proxy or information statement to two or more shareholders sharing the same address. The proposed amendments are designed not only to reduce costs to fund shareholders, but to deliver information to investors in quantities that are manageable and more likely to be actually read. The proposal also would allow, for the first time, intermediaries to household proxy and information statements as well as annual reports, to beneficial shareholders. In a companion release that was issued on the same day as the proposal, the Commission adopted similar amendments to the proxy rules that govern the delivery of prospectuses and annual reports to shareholders, and to the rules under the Investment Company Act that govern the delivery of semi-annual reports to investment company investors. Under the amendments, the rules no longer require companies to get written consent from shareholders for the householding of prospectuses, annual reports and semi-annual reports provided the document is delivered to members of the same family with the same last name sharing a common address, the shareholders receive advance notice, and they do not object to householding.
We are also exploring ways to eliminate the need for funds to annually deliver updated prospectuses to existing shareholders. Most funds deliver updated prospectuses to existing shareholders annually in order to avoid having to keep records of shareholders who have received updated prospectuses and deliver prospectuses throughout the entire year when new investments are made by these shareholders. We are examining whether the profile could serve the purpose of an annual updating document. In other words, funds would be deemed to have delivered a current prospectus to existing shareholders if they deliver to them the profile. This could be a more effective way of communicating updated information to shareholders than delivering an entire new statutory prospectus. Of course, any fund shareholder wanting the full prospectus could request one from the fund. Such an approach could result in significant savings to funds and their shareholders.
In our continuing efforts to improve disclosures to shareholders, we also are working on revisions to the shareholder report and financial statement requirements. Our goal is to make the prospectus and the shareholder reports work together to provide information that investors need, when they need it, and in a format that is useful. In a shareholder report, fund management can tell the story of what it has done for shareholders. Our goal will be to facilitate getting that information from management to the fund’s shareholders.
We are also taking a hard look at disclosure of fund portfolio holdings, with the goal of improving the quality of portfolio schedule information. We are looking at both the format and frequency of portfolio disclosure. Our goal here is to provide information to investors that they desire, when they need it, while avoiding information overload.
We also will continue our efforts to simplify and streamline mutual fund prospectuses, as we expect to proceed with further amendments to Form N-1A to address issues that we have identified in working with the new form over the last year.
Next, let me turn to the subject of affiliated transactions. As the financial services industry undergoes consolidation on a global scale, we are being called on increasingly to provide flexibility in the area of affiliated transactions.
We have been focusing on a variety of projects relating to transactions between fund and their affiliates on a case-by-case basis through interpretative letters and exemptive orders, and through rulemaking.
We are planning on proposing amendments to Rule 10f-3, which allows a fund to buy securities from an affiliated underwriting or selling syndicate. The proposal would permit funds to buy government securities issued by government agencies or government sponsored enterprises such as Fannie Mae. The rule has not permitted purchases of these types of securities, because they typically have not been offered through syndicates. The amendment would respond to the fact that some government sponsored enterprises have begun to issue their securities through syndicates.
Our rulemaking group is undertaking a review of the need for rules that would permit certain other affiliated transactions to proceed without the need for exemptive relief.
One specific initiative relates to proposed amendments that would expand the scope of Rule 17a-8, which involves fund mergers. Any rule amendments in this area would place heavy emphasis on the fund’s board to assure the fairness and appropriateness of the transactions.
We have also tried to provide flexibility with regard to affiliated transactions through the no-action and interpretative letter process. The staff issued a no-action letter under Section 17(a) of the Investment Company Act to permit a mutual fund to satisfy a redemption request from an affiliated person by means of an in-kind distribution of portfolio securities. The letter clarifies the staff’s position that while cash redemptions to affiliated shareholders do not trigger Section 17(a) of the Act, that section governs redemptions in kind to affiliated shareholders. The staff recognized however, that there are benefits to redemptions in kind and that redemptions in kind to affiliated persons can be affected fairly without implicating the concerns underlying Section 17(a) under certain circumstances. This letter significantly reduces the need for funds to seek exemptive relief for such transactions.
We also issued a letter to Massachusetts Mutual Life Insurance Company that expanded the position we took in the SMC letter that indicates it is not a violation of Section 17(d) and Rule 17d-1 if an investment company aggregates orders with affiliated persons for the purchase or sale of private placement securities, such as securities issued in reliance on Rule 144A, under certain conditions.
I also want to bring to your attention several important letters we issued that provide interpretive guidance in the areas of fair value pricing, the investment company status area and under Rule 17J-1.
In the investment company status area, we recently issued a no-action to Willkie Farr & Gallagher (available October 23, 2000) indicating that we would not object if an issuer, in calculating the amount of its total assets and its investment securities for purposes of the 40 percent test in Section 3(a)(1) of the Act, and the asset and income test in Rule 3a-1, does not include the shares of a registered investment company that held itself out as a money market fund and seeks to maintain a stable net asset value of $1.00 per share. By allowing operating companies to treat money market funds as cash items and not as investment securities, operating companies will be in a position to potentially generate higher yields on their cash, while avoiding investment company status.
We also issued guidance recently regarding tracking stocks. The letter analyzes when an operating company’s issuance of tracking stock for a business group would be a separate issuer under the Investment Company Act. If the business group were a separate issuer, the group, depending on its operations could be subject to regulation under the Act as an Investment Company. See Comdisco, Inc. (available October 25, 2000).
Under Rule 17J-1, we issued a letter to Mackenzie Investment Management, (available August 8, 2000), granting no-action relief concerning the obligations of independent directors of investment advisers to report their personal investments. The letter allows independent directors of investment advisers to be treated in the same manner as independent directors, exempting them from making certain reports regarding their personal trading and securities holdings when they are not involved with the daily operations of the advisers and do not have immediate access to trading and portfolio management information.
We also expect to be publishing shortly questions and answers on the Rule 17J-1 amendments. These should be useful for funds and advisers as they work through implementation of the amendments.
In the area of fair value pricing, the Division issued a letter to the Investment Company Institute. The letter clarifies that market quotations for portfolio securities are not readily available, when the exchanges or markets on which those securities trade do not open for trading for the entire day. On those days, the fund must price those securities based on their fair value. The letter also provides guidance regarding the process of fair value pricing, and describes certain factors that funds should consider when fair value pricing portfolio securities. It also discusses the obligations of fund boards of directors for fair value pricing of securities, and discusses measure that boards may take when discharging those responsibilities. This is an area where we are considering providing additional guidance.
Another area of timely interest is in the increasing use of electronic media. The Commission in April issued an interpretive release in an effort to clarify the application of the federal securities laws to electronic media. The increased use of the Internet by issuers as a means of widespread information dissemination has resulted in uncertainty about the application of the federal securities laws to these communications. The release builds on previous Commission interpretations and seeks to remove interpretively some of the barriers to the use of electronic media, while preserving important investor protections. The release provides guidance on the use of electronic media to deliver documents under the federal securities laws, addresses an issuer’s liability for website content and hyperlinks and outlines basic legal principles that issuers and market intermediaries should consider in conducting online offerings.
This past summer, President Clinton signed the Electronic Signatures in Global and National Commerce Act into law. The Act is designed to facilitate the use of electronic records and signatures in interstate and foreign commerce. Among other things, the Act provides that, if a statute or regulation requires that information relating to a transaction in interstate commerce be provided to a consumer in writing, the use of an electronic record to provide the information satisfied the "writing" requirement, as long as the consumer consent requirements of the Act are met. Congress directed the Commission to issue, within 30 days after the enactment of the Act, a rule exempting from the consumer consent requirements of the Act, prospectuses of registered investment companies that are provided to permit sales literature to be given to prospective investors.
In July, the Commission adopted Rule 160 to provide this exemption from the consumer consent requirements of the Act. Consistent with Commission interpretations of existing law, the rule permits a registered investment company to provide its prospectus and supplemental sales literature on its web site or by other electronic means without first obtaining an investor’s consent to the electronic format of the prospectus.
Let me also point out that the April 2000 release noted that for purposes of the antifraud provisions of the federal securities laws, an issuer should always be deemed to have adopted information hyperlinked to a document required to be filed or delivered under the federal securities laws. However, in the release adopting Rule 160, the Commission clarified that this position does not extend to a mutual fund’s responsibility for hyperlinks to third party web sites from fund advertisements or sales literature.
This is an area where you can expect further activity from the Commission as technology continues to evolve and as we all work with the new scheme adopted by Congress. Some of the issues we have wrestled with in the past – such as the possibility of all-electronic offerings – remain at the center of our attention. Our goal will be to adapt our regulations to technological advances, provided investor protection can be maintained.
The industry has responded to competitive pressures and rapid technological changes by creating and marketing new types of funds. We need to ensure that the rush to develop attractive products does not come at the expense of products and services that offer investors real financial benefits and value. An area that presents a unique regulatory challenge is the evolution of exchange-traded funds. Assets in exchange traded funds listed on the American Stock Exchange, where almost all of these funds are traded, have increased significantly. These funds, with names like SPDRs, WEBs, Diamonds, and Cubes, have obtained exemptive relief from the Commission to facilitate secondary market trading in their shares. They are bought and sold throughout the day and are priced continuously, rather than once a day at 4 p.m., which is the pattern for conventional funds. Unlike mutual funds, they can be sold short. Their expense ratios are a fraction of those charged by an actively managed mutual fund.
There are many issues to consider as these products evolve. For example, we must consider whether the development of these products would encourage investors to view mutual funds as something other than long-term investments and encourage short-term trading of mutual funds. The Commission is currently considering an application that would allow an exchange-traded class of an existing index fund. So far, relief has been extended only to index funds but not to managed funds. Is there even a framework pursuant to which a managed exchange traded fund can work? And what impact, if any, would an exchange-traded class of a managed fund have on an existing non-exchange traded class?
We are currently engaged in revisiting our regulatory approach on many issues under the Advisers Act, in a comprehensive effort to modernize our regulations to respond to change affecting the investment advisory industry.
There are several important investment adviser initiatives on our priority list to hopefully finalize before the end of the year or very early next year. The most pressing of these is completion of the IARD project and revisions to Form ADV. The IARD, an electronic filing system for investment advisers operated by NASDR represents the first major update of the form since the ADV form was updated in 1985. As you know, we bifurcated the process for revising Form ADV. Amendments to the first part of the Form were adopted earlier this year, along with the establishment of the IARD. Just last month, the IARD began accepting filings from pilot volunteers.
Mandatory electronic filing begins in January 2001. We adopted a transition schedule that requires all advisers to amend their Form ADVs during one of the first four months of 2001. The exact deadline for a particular adviser depends on their registration number and when their fiscal year ends. A packet containing IARD forms for setting up an IARD Account has been mailed to all SEC-registered investment advisers. The first step for setting up an IARD Account is to complete the IARD forms and return them to the NASDR. Any SEC-registered adviser that has not received a packet by now should contact us.
The next step for us is to put before the Commission a final rule on Part 2 of Form ADV.
Also on our priority list for investment adviser regulation is a recommendation to the Commission to adopt a final rule that would exempt certain broker-dealers from the definition of "investment adviser" under the Advisers Act. Our proposal seeks, through a functional approach, to identify characteristics that can be appropriately used to distinguish the services advisers provide, from the advice inherent in the provision of brokerage services. The proposed rule creates a distinction between brokerage accounts and advisory accounts based on the nature of the services provided, rather than the form of compensation. Specifically, it provides that if the broker does not have discretionary authority to trade securities in an account, the Advisers Act generally would not apply to that account. If the broker does have discretionary authority and charges an asset-based fee, the account would not qualify for the exemption from the Advisers Act.
The proposed rule would also require that all advertisements for the accounts and all agreements and contracts governing the operation of the accounts contain a prominent statement that the accounts are brokerage accounts. Our recommendation to the Commission for a final rule will include more specific disclosure regarding the nature of the accounts.
One thorny issue that the rule proposal raised related to the regulatory treatment of commission-based, discretionary brokerage accounts. Currently full-service brokerage firms may charge commissions for their discretionary brokerage accounts, and not be subject to the Advisers Act. The proposed rule does not alter that fact. But because the rule proposes using discretion as the indicia for determining whether asset-based accounts are subject to the Advisers Act, the proposal creates an anomaly: a broker can exercise discretion over an account and not be subject to the Advisers Act if it charges commissions, but not if it charges an asset-based fee. This does not make sense to me and we are considering ways to eliminate this anomaly.
We are very close to finishing a rule proposal to present to the Commission that would allow certain types of principal transactions. Greater liquidity in certain types of securities and transparency in certain types of transactions minimize the dangers that principal transactions presented when the Advisers Act was written. In addition, the rapid pace of today’s market transactions often renders the written consent provisions a de facto prohibition on such transactions. Crafting relief in this area is one of our top priorities.
Eliminating pay-to-play abuses in the securities industry remains a priority of Chairman Levitt and the Commission, so we hope to present to the Commission in the near future our recommendations for a final rule governing advisers. We are trying to develop a recommendation that aggressively addresses the practice, but also responds to many of the thoughtful comments that we received.
The current rule governing adviser advertising – Rule 206(4)-1, which was adopted in 1962, contains a specific "laundry list" of practices that are defined to be per se fraudulent and therefore are prohibited. This list includes testimonials and partial lists of recommendations. Rather than making certain practices per se fraudulent, I would like to see the rule revised to mirror a general antifraud standard like that set forth in Rule 156 under the Securities Act of 1933, governing investment company advertising. The revised rule could prohibit advisers from using advertising that is materially false or misleading and provide general guidance on factors and kinds of information and statements that may make an advertisement false or misleading, depending on the context in which it is used and how it is presented.
I believe such an approach could improve communications between advisers and clients. Such an approach also would eliminate inconsistent regulatory treatment of advertising practices by investment advisers as compared to other providers of financial services, such as investment companies and broker-dealers.
We also want to explore the issue of performance reporting. We know that many firms use the voluntary guidelines adopted by the Association for Investment Management and Research ("AIMR") in computing and presenting performance, but we want to determine if there is a need for additional guidance regarding advisers’ advertising of performance information and a need to establishing baseline standards for adviser performance reporting.
Like the registration system and Form ADV, our rules regarding advisers’ maintenance of books and records are in need of modernization to reflect an electronic environment. Updating these rules must be a priority for us.
Rule 206(4)-2, the Custody Rule under the Advisers Act, needs to be substantially revised. Quite frankly, one cannot easily determine when one has custody from reading the language of the rule. We want to explore ways to simplify the rule, clearly define when an adviser is deemed to have custody and to set forth workable standards that provide meaningful protections for advisory clients.
We are also giving active consideration to the following under the Investment Advisers Act:
We will examine these and other issues as we seek to modernize and improve the investment adviser regulatory regime.
I also want to remind you that all investment advisers and investment companies should be thinking about their privacy policies based on new Regulation S-P promulgated under the Graham-Leach-Bliley Act. Regulation S-P generally requires every investment adviser and investment company to:
A privacy notice, among other points, must state:
The release states that privacy notices may be incorporated into other documents, such as a prospectus, as long as the privacy disclosure is presented in a "clear and conspicuous" manner and may be delivered in accordance with the SEC’s householding rules.
The new rules also establish appropriate standards to protect customer information. Compliance with Regulation S-P becomes mandatory by July 1, 2001 and I know OCIE already is thinking about the issue.
I want to conclude by noting that the SEC recently adopted new Regulation FD (Fair Disclosure) to promote full and fair disclosure of information by public reporting companies (IC-24599); August 16, 2000). The rule covers closed-end funds but excludes open-end funds and foreign issuers.
Under Regulation FD, a company that discloses material nonpublic information to persons outside the firm must make public disclosure of that information, simultaneously for intentional or promptly for non-intentional disclosures.
In response to comments, the SEC narrowed the rule’s scope in several ways, including:
I hope this discussion of current developments has been useful for you. I have discussed what I believe are the Commission’s major regulatory priorities for the weeks and months ahead in the investment management area. The Commission is working diligently to modernize the regulatory structure governing funds and advisers in preparation for the challenges that lie ahead. As we move forward on these important proposals, we look forward to your input and ideas.
Thank you.
http://www.sec.gov/news/speech/spch422.htm
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