First, we are conducting an intensive investigation of funds, advisers, broker-dealers, and others. These individuals have harmed the funds, their management organizations, and the confidence of fund investors. 6 These personnel, including in some cases senior executives of fund advisers, have placed their personal interests or the business interests of the fund adviser ahead of the interests of fund shareholders, thus breaching their fiduciary obligations to the funds involved and their shareholders. Fund advisory or distributor personnel have engaged in, or actively assisted others in engaging in, inappropriate market timing, late trading of fund shares, and the misuse of material, nonpublic information about fund portfolios. In recent months, the Commission and state securities authorities have discovered unlawful conduct involving a number of fund advisers, broker-dealers, and other service providers that confirms the need for these rules. The proposed rules were designed to foster, among other things, improved compliance by clarifying the compliance obligations of fund management and to strengthen the hand of fund boards and compliance personnel when dealing with them. 4 We proposed the rules because it is critically important for funds and advisers to have strong systems of controls in place to prevent violations of the federal securities laws and to protect the interests of shareholders and clients. Summary Of Final Regulatory Flexibility AnalysisĮarlier this year the Commission proposed rules that would require investment companies ("funds") 3 and investment advisers to adopt written compliance procedures, review the adequacy of those procedures annually, and designate a chief compliance officer responsible for their administration. Consideration of Promotion of Efficiency, Competition and Capital Formation Adoption and Implementation of Policies and Procedures Supplementary Information: The Securities and Exchange Commission ("SEC" or "Commission") is adopting new rule 38a-1 under the Investment Company Act of 1940 ("Investment Company Act"), new rule 206(4)-7 under the Investment Advisers Act of 1940 ("Investment Advisers Act" or "Advisers Act"), and amendments to rule 204-2 under the Advisers Act, and to Part 1, Schedule A, Item 2(a) of Form ADV. 1įor Further Information Contact: Hester Peirce, Senior Counsel, Office of Regulatory Policy at (202) 942-0690, or Jamey Basham, Special Counsel, Office of Investment Adviser Regulation at (202) 942-0719, Division of Investment Management, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0506. Electronically submitted comment letters will also be posted on the Commission's Internet web site ( ). Comment letters will be available for public inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. S7-03-03 if e-mail is used, this file number should be included on the subject line. Comments in electronic format may be submitted at the following e-mail address: All comment letters should refer to File No. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Comments should not be sent by both methods.Ĭomments in paper format should be submitted in triplicate to Jonathan G. Section III of this release contains more information on the compliance date.Īddresses: To help us process and review your comments more efficiently, comments may be sent to us in either paper or electronic format. These rules are designed to protect investors by ensuring that all funds and advisers have internal programs to enhance compliance with the federal securities laws.Ĭomment Date: Comments requested in section II.F of this release should be received on or before February 5, 2004.Ĭompliance Date: October 5, 2004. In the case of an investment company, the chief compliance officer will report directly to the fund board. Summary: The Securities and Exchange Commission is adopting new rules under the Investment Company Act of 1940 and the Investment Advisers Act of 1940 that require each investment company and investment adviser registered with the Commission to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review those policies and procedures annually for their adequacy and the effectiveness of their implementation, and designate a chief compliance officer to be responsible for administering the policies and procedures. S7-03-03Ĭompliance Programs of Investment Companies and Investment AdvisersĪgency: Securities and Exchange Commission.Īction: Final rule request for comments. Final Rule: Compliance Programs of Investment Companies and Investment Advisers Rel.
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