SEC Solicits Comments about Extending the Collection of Certain Information from Funds under ICA Rule 10f-3
The SEC issued a notice soliciting comments about the extension of the collection of information under Investment Company Act Rule 10f-3 ("Exemption for the Acquisition of Securities during the Existence of an Underwriting or Selling Syndicate"). The notice was published in the Federal Register.
Section 10(f) of the Investment Company Act prohibits a registered investment company ("fund") from purchasing any security during an underwriting or selling syndicate if the fund has certain relationships with a principal underwriter for the security. Rule 10f-3 permits a fund to engage in a securities transaction that otherwise would violate Section 10(f) if, among other things, the following conditions are met:
- Each transaction effected under the rule is reported on Form N-SAR;
- The fund's directors have approved procedures for purchases made in compliance with the rule, regularly review fund purchases to determine whether they comply with these procedures, and approve necessary changes to the procedures; and
- A written record of each transaction effected under the rule is maintained for six years, the first two of which are kept in an easily accessible place.
Rule 10f-3 also allows conditionally the managed portions of fund portfolios to purchase securities offered in otherwise off-limits primary offerings.
To qualify for this exemption, Rule 10f-3 requires the subadviser that is advising the purchaser to be prohibited contractually from (i) providing investment advice to any other portion of the fund's portfolio, and (ii) consulting with any of the fund's other advisers that are principal underwriters or affiliated persons of a principal underwriter concerning the fund's securities transactions.
According to the SEC, these requirements provide a mechanism that allows fund boards to oversee compliance with the rule, ensure the fund meets the recordkeeping requirement under the rule and facilitate SEC oversight.
Comments and suggestions should be submitted in writing within 60 days of the notice's publication.
See: SEC Notice (80 FR 17526).