[Federal Register Volume 64, Number 220 (Tuesday, November 16, 1999)]
[Rules and Regulations]
[Pages 62540-62547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29531]
[[Page 62539]]
_______________________________________________________________________
Part III
Securities and Exchange Commission
_______________________________________________________________________
17 CFR Parts 230, 240 and 270
Delivery of Disclosure Documents to Households; Final Rule
17 CFR Parts 230 and 240
Delivery of Proxy and Information Statements to Households; Proposed
Rule
Federal Register / Vol. 64, No. 220 / Tuesday, November 16, 1999 /
Rules and Regulations
[[Page 62540]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 230, 240 and 270
[Release Nos. 33-7766, 34-42101, IC-24123; File No. S7-27-97]
RIN 3235-AG98
Delivery of Disclosure Documents to Households
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Commission is adopting a new rule under the Securities Act
of 1933 to permit issuers and broker-dealers to satisfy the Act's
prospectus delivery requirements, with respect to two or more investors
sharing the same address, by sending a single prospectus, subject to
certain conditions. We are adopting similar amendments to the rules
under the Securities Exchange Act of 1934 and the Investment Company
Act of 1940 that require the delivery of shareholder reports. The rules
will provide greater convenience for investors and cost savings for
issuers by reducing the number of duplicate documents that investors
receive.
EFFECTIVE DATE: The new rule and rule amendments will be effective
December 20, 1999.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
942-0690, Office of Regulatory Policy, Division of Investment
Management, or Elizabeth M. Murphy, Special Counsel, at (202) 942-2900,
Office of Chief Counsel, Division of Corporation Finance, Securities
and Exchange Commission, 450 5th Street, NW, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission today is adopting rule 154
[17 CFR 230.154] under the Securities Act of 1933 [15 U.S.C. 77a] (the
``Securities Act'') \1\ and amendments to rules 14a-3, 14c-3, and 14c-7
[17 CFR 240.14a-3, 240.14c-3, 240.14c-7] under the Securities Exchange
Act of 1934 [15 U.S.C. 78a] (the ``Exchange Act''), and rules 30d-1 and
30d-2 [17 CFR 270.30d-1, 270.30d-2] under the Investment Company Act of
1940 [15 U.S.C. 80a] (the ``Investment Company Act'').
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\1\ Unless otherwise noted, all references to ``rule 154'' are
to 17 CFR 230.154 as adopted in this release.
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I. Background
The federal securities laws generally require the delivery of
prospectuses and shareholder reports to investors.\2\ As a result of
increased ownership of securities by individuals through different
types of accounts, such as brokerage accounts, individual retirement
accounts and custodial accounts for minors, duplicate copies of these
documents often are mailed to a single household.\3\
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\2\ The Securities Act requires the delivery of prospectuses to
investors who buy securities from an issuer or from underwriters or
dealers who participate in a registered distribution of securities.
See Securities Act sections 2(a)(10), 4(1), 4(3), 5(b) [15 U.S.C.
77b(a)(10), 77d(1), 77d(3), 77e(b)]; see also rule 174 under the
Securities Act [17 CFR 230.174] (regarding the prospectus delivery
obligation of dealers); rule 15c2-8 under the Exchange Act [17 CFR
240.15c2-8] (prospectus delivery obligations of brokers and
dealers). The Investment Company Act requires most registered
investment companies (``funds'') to send annual and semiannual
reports to their investors. See section 30(e) [15 U.S.C. 80a-29(e)];
rules 30d-1, 30d-2 under the Investment Company Act [17 CFR 270.30d-
1, 270.30d-2]. Rules under the Exchange Act require other types of
issuers (such as operating companies subject to Exchange Act
reporting requirements) to send annual reports to their investors.
See rules 14a-3, 14c-3 [17 CFR 240.14a-3, 240.14c-3].
\3\ See Delivery of Disclosure Documents to Households,
Securities Act Release No. 7475 (Nov. 13, 1997) [62 FR 61933 (Nov.
20, 1997)] (``Proposing Release''), at nn.1-6 and accompanying text.
The problem of delivery of duplicate documents is particularly
significant in the case of open-end management investment companies
(``mutual funds''), which are required to send their investors
annual and semiannual reports, and which generally send investors
updated prospectuses each year. See id. at nn.1-2 and accompanying
text.
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To reduce the number of duplicate disclosure documents delivered to
investors, the Commission proposed rules in November 1997 to permit,
under certain conditions, delivery of one prospectus or shareholder
report to investors who share an address (``householding'').\4\ We
received 51 comment letters in response to the proposal.\5\ Commenters
generally supported householding, but many suggested changes that would
affect the scope and conditions of the rules. The Commission is
adopting the proposed amendments, with certain modifications that
reflect many of the issues raised by commenters.
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\4\ See Proposing Release, supra note 3.
\5\ The commenters included 29 individual investors or their
representatives, 15 corporate issuers, 11 financial institutions
(investment advisers, mutual fund complexes, broker-dealers and bank
holding companies), 3 trade associations, 1 consultant, and 1 stock
exchange. Two commenters submitted two letters each, and some
comment letters were signed by more than one person. The comment
letters and a summary of the comments are available for public
inspection and copying in the Commission's Public Reference Room,
450 5th Street, NW, Washington, DC (File No. S7-27-97).
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II. Discussion
A. Delivery of Prospectuses to a Household
Under new rule 154, a prospectus is considered delivered to all
investors at a shared address, for purposes of the federal securities
laws, if the person relying on the rule delivers the prospectus to the
shared address and the investors consent to delivery of a single
prospectus.\6\ The rule applies to prospectuses and to prospectus
supplements.
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\6\ Rule 154(a). Some commenters asked us to clarify that if a
single investor holds the same security in two or more accounts with
the same address, the prospectus delivery requirements of section 5
of the Securities Act are satisfied if one copy of the prospectus is
delivered to the investor, without the need to rely on the rule. We
agree that the delivery of a single prospectus in those
circumstances meets the delivery requirements of the Securities Act.
Delivery of a single shareholder report also would meet the delivery
requirements of the federal securities laws for shareholder reports,
in similar circumstances. In addition, we believe that delivery of a
single prospectus or shareholder report is sufficient if the
investor is acting as custodian for securities in one or more
accounts created under a state Uniform Gifts to Minors Act
(``UGMA'') or Uniform Transfers to Minors Act (``UTMA'') statute.
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1. Scope of the Rule
As adopted, rule 154 permits the householding of all types of
prospectuses except those required to be delivered for business
combinations, exchange offers, or reclassifications of securities.\7\
Although the Commission did not request comment on the householding of
proxy materials, many commenters suggested that we consider rule
amendments to permit the householding of those materials. Today in a
companion release we are proposing amendments to Exchange Act rules to
permit the householding of proxy and information statements.\8\ The
release also proposes to expand the coverage of rule 154 to include
prospectuses for business combinations, exchange offers, or
reclassifications of securities.
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\7\ See rule 154(e).
\8\ See Delivery of Proxy and Information Statements to
Households, Securities Act Release No. 33-7767 (Nov. 4, 1999)
(``Companion Release'').
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2. Addressing to Investors
Proposed rule 154 would have required the prospectus to be
addressed to one person rather than a group of persons (e.g., ``The
Smith Household''). The Commission expressed concern in the Proposing
Release that mail addressed to a group may be less likely to be opened
and read, because it might be viewed as ``junk mail.'' Several
commenters argued that addressing to a group may actually increase the
chance
[[Page 62541]]
that the envelope containing the prospectus would be opened, and would
be consistent with the idea that the prospectus was intended for all
the investors. The Commission agrees that this form of address should
be acceptable. The rule as adopted therefore permits addressing to
investors as a group, and the group may be designated by reference to
any of the investors who is receiving the prospectus (e.g., ``Jane Doe
and Household'' or ``Household of Jane Doe'').\9\ The rule also permits
addressing to individuals rather than a group if each investor is
included in the address (e.g., ``Jane Doe and Bob Jones'').\10\
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\9\ See rule 154(a)(2).
\10\ See id. This requirement is designed to reduce confusion
about whether an individual is receiving a prospectus on behalf of
other investors in the household.
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The proposed rule also would have permitted householding only if
the prospectus was addressed to a natural person. Some commenters
pointed out that this provision would prohibit addressing a prospectus
to a family business that owns securities and operates out of a
household shared by individual investors. Another commenter added that
it may be difficult in many cases to determine whether the investor is
a natural person. We agree, and the rule as adopted does not include
the natural person requirement.
Proposed rule 154 would have permitted delivery of a prospectus to
any address of an investor who shares an address with other investors
consenting to householding, even if the other investors do not share
the address to which the prospectus is delivered. Some commenters
opposed this provision, either because the investors who do not share
the delivery address might not have access to the prospectus, or
because of the extra recordkeeping involved in sending the prospectus
to an unshared address. Upon further consideration, we agree that
delivery to one investor at an address that is not shared creates a
risk that the other investors will not have access to the prospectus,
and the rule as adopted requires that the prospectus be sent to the
investors' shared address.\11\
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\11\ See rule 154(a)(1).
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The proposed rule also would have permitted delivery of a
prospectus to an electronic address, for example, an electronic mail
account. Several commenters noted the difficulty of permitting
electronic delivery of householded documents. One individual investor
emphasized the risks involved in using electronic delivery, especially
the ease with which electronic messages might be deleted by
accident.\12\ Because of these concerns, we believe that investors who
are householded through electronic delivery should specifically consent
to this type of delivery. The rule as adopted permits the householding
of prospectuses that are delivered to investors electronically only if
delivery is made to a shared electronic address and the investors give
written consent to householding.\13\
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\12\ The commenter also stated that there may be difficulties in
forwarding messages from a discontinued e-mail account with an
Internet service provider.
\13\ See rule 154(b)(4) (limiting householding without written
consent to prospectuses delivered to a post office box or a
residential street address). Consent issues are discussed below.
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3. Investor Consent
a. Written Consent. Rule 154 permits delivery of one prospectus on
behalf of two or more investors at a shared address who have given
written consent to householding.\14\ The investors need not be related,
and the shared address can be a residential, commercial, or electronic
address.\15\
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\14\ Rule 154(a). A signature on a new account application form
would not satisfy the written consent requirement if the account
form merely refers to or incorporates by reference another document,
such as the prospectus, and does not describe the householding of
prospectuses. An investor can be given the option of consenting to
householding for prospectuses relating only to a particular
security, or consenting to delivery of any prospectus a person is
required to deliver to the investor. The rule, however, does not
require that investors be given this option of limiting their
consent to a particular security.
\15\ The Proposing Release noted the general requirements for
electronic delivery of documents to investors. The Commission has
issued two interpretive releases expressing its views on the
electronic delivery of documents, including prospectuses and
investment company semiannual reports. The releases state that
persons using electronic delivery of information should obtain
informed consent from the intended recipient or otherwise have
reason to believe that any electronic means so selected will result
in satisfaction of the delivery requirements. See Proposing Release,
supra note 3, at n.9; Use of Electronic Media for Delivery Purposes,
Securities Act Release No. 7233 (Oct. 6, 1995) [61 FR 53458 (Oct.
13, 1995)]; Use of Electronic Media by Broker-Dealers, Transfer
Agents, and Investment Advisers for Delivery of Information;
Additional Examples Under the Securities Act of 1933, Securities
Exchange Act of 1934, and Investment Company Act of 1940, Securities
Act Release No. 7288 (May 9, 1996) [61 FR 24644 (May 15, 1996)].
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b. Implied Consent. Rule 154 permits delivery of one prospectus on
behalf of two or more investors at a shared address without written
consent, if four conditions are met.\16\ First, the investors must have
the same last name or the person relying on the rule must reasonably
believe that they are members of the same family.\17\ Second, at least
60 days before householding begins each investor must have received
written notice \18\ with an opportunity to respond and opt out of
householding.\19\ The opportunity to respond must be provided by a
toll-free telephone number disclosed in the notice or a reply form that
accompanies the notice.\20\ Third, the investors must not opt out of
householding during the 60-day period. Fourth, the person relying on
the rule must deliver the prospectus to a residential street address or
a post office box.\21\
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\16\ Rule 154(b)(1)--(4).
\17\ Some commenters expressed concern about their ability to
discern whether certain investors at the same address are members of
the same family. We believe that persons relying on the rule may, in
many cases, be able to base their reasonable belief on information
already provided by investors (e.g., on an account application) or
on any information they may have obtained from other sources. For
example, it would be reasonable to infer that two persons residing
at the same address are members of the same family if they have
opened a joint account or have opened an account under an UGMA or
UTMA statute.
\18\ The notice must be a separate written statement. See rule
154(b)(2). The notice, as well as the envelope containing the
notice, also must contain a prominent statement such as ``Important
Notice Regarding Delivery of Shareholder Documents.'' See rule
154(b)(2)(vi). As an alternative to this requirement, if the notice
is sent in a separate mailing, the prominent statement may appear
either on the envelope or on the notice itself. Id.
\19\ The notice also must state whether the consent will be for
a limited or unlimited period of time, explain how the investor can
revoke consent, and explain that individual delivery will resume no
later than 30 days after the investor revokes consent. See rule
154(b)(2)(iii)--(v). In order to make the notice understandable to
investors, it should be written in plain English. See rule 154(b)(2)
note. Securities Act rule 421(d)(2) [17 CFR 230.421(d)(2)] lists the
following plain English principles: (i) Short sentences; (ii)
definite, concrete, everyday words; (iii) active voice; (iv) tabular
presentation or bullet lists for complex material, whenever
possible; (v) no legal jargon or highly technical terms; and (vi) no
multiple negatives.
\20\ The reply form must be pre-addressed, and returnable by
business reply mail or by another method in which the person relying
on the rule pays the postage. See rule 154(b)(2)(ii). The notice
also may list additional methods of opting out of householding, such
as sending the reply form to a facsimile telephone number or
responding by e-mail.
\21\ Rule 154 clarifies that unless the person relying on the
rule has information that indicates the address is a business
address, that person can assume that the address is a residence. See
rule 154(b)(4). The rule also provides that if the sender has reason
to believe that an address is that of a multi-unit building, the
address must include the unit number. See rule 154(d). This
requirement is designed to prevent the assumption that investors who
live in different apartments in an apartment building are members of
the same household.
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The Commission proposed to limit householding without written
consent to situations in which investors had opened their accounts
before the effective date of the new rule. We understood that persons
relying on the rule would find it difficult to obtain consent from
existing investors, and
[[Page 62542]]
were concerned that the failure of many of those investors to respond
to requests for consent would preclude the benefits of householding
from being realized. In the case of new investors, however, we believed
that consent could be obtained when the investor opened his or her
account.\22\
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\22\ See Proposing Release, supra note 3, at n.20 and
accompanying text.
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Fourteen commenters, representing primarily advisers to registered
investment companies (``funds'') and their trade associations, urged
the Commission to eliminate the written consent requirement.\23\ Some
of these commenters asserted that numerous administrative and
compliance difficulties would be created by distinguishing between
investors who must give written consent and those who need not.\24\ We
also received comments from 25 individual investors who urged the
Commission to adopt the rule as proposed but did not specifically
address the consent requirement.\25\
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\23\ Four commenters recommended that the rule permit
householding without written consent and without implied consent
under the proposed conditions. Instead, they favored permitting
householding if the company were to disclose its householding
policies in its prospectus and provide investors a means to opt out
of householding. One of these commenters suggested that investors be
informed about householding through an article in an investor
newsletter. We do not believe that investor consent can reasonably
be inferred from silence after disclosure in a prospectus or
newsletter. The suggested approach also would not necessarily work
for issuers that do not periodically deliver prospectuses or
newsletters.
\24\ Two of these commenters stated that distinguishing between
accounts that could be householded with notice, and accounts that
could be householded only with written consent, would be costly and
burdensome to administer, and potentially confusing for investors.
\25\ Another individual investor supported requiring written
consent from all investors.
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In consideration of the potential benefits of householding to
investors, the Commission has decided not to require written consent as
a prerequisite to householding with respect to all new investors. The
rule permits householding with implied consent under limited conditions
(discussed above) in which investors could be presumed to need only one
copy of the document delivered to the household. These investors should
have adequate advance notice of householding and will be able to
request individual delivery of prospectuses at any time.\26\ The rule
as adopted also requires that, at least once a year, persons relying on
the rule for the householding of open-end management investment company
prospectuses explain to investors who have provided written or implied
consent how they can revoke their consent.\27\
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\26\ We are adopting as proposed the requirement that, if an
investor requests resumption of individual delivery, the person
relying on the rule must resume individual delivery after 30 days.
See rule 154(c).
\27\ Id. Unlike other issuers, open-end management investment
companies (i.e., mutual funds) typically send investors updated
prospectuses annually. See supra note 3. Persons relying on the rule
can make the explanation required by the rule through any means
reasonably designed to reach these investors, such as in a
prospectus, shareholder report, or investor newsletter. See rule
154(c).
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B. Shareholder Reports
The Commission is adopting amendments to rules 30d-1 and 30d-2
under the Investment Company Act and rules 14a-3, 14c-3 and 14c-7 under
the Exchange Act, to permit householding of annual and semiannual
reports under substantially the same conditions as those in rule 154
with respect to prospectuses.\28\ Commenters supported requiring the
same conditions for householding of these two types of documents.\29\
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\28\ One difference between the conditions for householding
prospectuses and semiannual reports and the conditions for
householding annual reports, is that the implied consent notice
concerning annual reports must be delivered separately from other
communications. See 17 CFR 240.14a-3(e)(1)(ii)(B)(1). This condition
for the householding of annual reports corresponds to the proposed
conditions for the householding of proxy and information statements,
with which annual reports are typically delivered. See Companion
Release, supra note 8, at note 28.
\29\ Some mutual funds already household shareholder reports in
reliance on no-action letters issued by the Commission staff. See
Oppenheimer Funds, SEC No-Action Letter (July 20, 1994); Scudder
Group of Funds, SEC No-Action Letter (June 19, 1990); Allstate
Enterprises Stock Fund, Inc., SEC No-Action Letter (July 22, 1973).
These funds may continue to household shareholder reports of
investors whose reports are already being householded, without
sending notices or obtaining written consent under rules 30d-1 and
30d-2. If the investors revoke consent to householding, however, the
funds should comply with the revocation provisions of the rules. In
addition, if the funds household prospectuses, the funds would need
to comply fully with rule 154.
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III. Cost-Benefit Analysis
The Commission is sensitive to the costs and benefits imposed by
its rules. The rules adopted today permit issuers and broker-dealers to
send fewer copies of disclosure documents than they currently must
send, and therefore should result in savings in printing, postage, and
other delivery costs for issuers and broker-dealers. Investors will
benefit from the decrease in delivery costs paid by issuers and from no
longer being burdened with duplicate documents. The rules require
issuers and broker-dealers who rely on the rules to comply with certain
procedures, including obtaining either written consents from investors
or delivering notices 60 days in advance of householding. Because
exemptions provided by the rules are voluntary, the Commission expects
that issuers and broker-dealers generally will rely on the rules only
if the benefits of householding outweigh the costs.
In the Proposing Release, the Commission requested comment on the
costs and benefits of the rules. Commenters generally supported the
goals of the proposal but advocated certain changes that they believed
would decrease its costs and increase its benefits. In particular, most
commenters who addressed the issue stated that the rule should permit
householding based on implied consent for new investors, and that
obtaining written consent would be too costly in many cases. As
adopted, the rules permit householding based on either implied consent
or written consent for new as well as existing investors.\30\ This
regulatory flexibility should enable issuers and broker-dealers to
minimize compliance costs associated with the rules.
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\30\ The ability to household documents based on implied consent
should help maximize the number of investors householded, because it
is likely that few investors who receive notices will object to
being householded. One large fund complex stated in its comment
letter that when it notified approximately 3 million customers of
its plans to household shareholder reports, only 1,703 (.057%) asked
to continue receiving separate mailings for each account.
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Several commenters estimated the percentage of prospectuses and
annual reports mailed to their investors that could be eliminated
through householding. One large fund complex stated that householding
would yield savings in mailing costs for its funds in the range of 5 to
21 percent, depending on the fund. Another fund and brokerage firm
estimated that householding would reduce prospectus and shareholder
report mailings to investors in its non-proprietary open-end funds
(``mutual funds'') by approximately 9 percent, a reduction of over 2
million mail pieces and a savings of approximately $1 million, assuming
production, printing and mailing costs of $.50 per piece. This firm
also estimated that householding would reduce prospectus mailings to
its proprietary mutual fund customers by almost half (over 1.5 million
mail pieces out of 3.2 million), for a savings of approximately
$750,000. A corporate issuer stated that approximately 10 percent of
its shareholders of record have the same mailing address. These
estimates, although they vary from one issuer to another, show that the
cost savings produced by householding would be considerable. The
commenters' estimates also appear to be consistent with the estimates
made in the Proposing Release.
[[Page 62543]]
Based on information provided by two mutual fund complexes, the
Commission estimates that a prospectus costs approximately $.45 to
print and deliver, and a shareholder report costs approximately $.52 to
print and deliver.\31\ The Commission also estimates that the average
decline in the number of prospectuses and shareholder reports delivered
would be between 10 and 30 percent. As of 1997, there were
approximately 170 million shareholder accounts invested in mutual
funds.\32\ Assuming that 80 percent of mutual fund accounts receive an
updated prospectus each year, resulting in the 170 million shareholder
accounts receiving a total of approximately 136 million prospectuses
each year, the approximate potential benefit in reduced delivery of
mutual fund prospectuses as a result of rule 154 would be between $6.1
and $18.4 million per year. Each shareholder receives two reports per
year, and the approximate potential benefit from adoption of the
amendments to rules 30d-1 and 30d-2 would be between $17.7 and $53.0
million per year. We note, however, that the savings from the adoption
of the amendments to rules 30d-1 and 30d-2 will be reduced somewhat
because many funds already household reports based on Commission staff
no-action positions.\33\ Therefore, it is not possible to precisely
estimate the number of accounts for which householding of shareholder
reports will be initiated based on the amendments to rules 30d-1 and
30d-2.
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\31\ See Proposing Release, supra note 3, at n.29 and
accompanying text.
\32\ See Investment Company Institute, 1998 Mutual Fund Fact
Book 116.
\33\ See Proposing Release, supra note 3, at n.5.
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With respect to the delivery of prospectuses of issuers other than
mutual funds, the benefits of rule 154 would be less than the benefits
discussed above, because these companies do not send prospectuses to
their shareholders on an annual basis. It is likely, however, that some
broker-dealers will rely on rule 154 to deliver prospectuses of issuers
other than mutual funds in cases in which the broker-dealers have
obtained either written or implied consent from their customers to
household documents.
With respect to the delivery of annual reports by issuers other
than mutual funds, these companies probably would not realize
significant savings as a result of the amendments to rules 14a-3 and
14c-3 because rules 14a-3 and 14c-7 already include provisions
permitting householding of the annual report, although those rules did
not permit implied consent to householding. In addition, corporate
commenters on the Proposing Release stated that because they generally
mail the annual report together with the proxy or information
statement, their ability to household the annual report is limited by
their inability under current rules to household the proxy statement.
As discussed above, the Commission is proposing to permit companies to
household proxy and information statements in a companion release.\34\
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\34\ See supra note 8.
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Persons who rely on the rules would incur costs in obtaining
consents from and sending notices to investors. The principal costs
associated with sending the notice should be the printing costs and
postage costs. These printing and postage costs should be less than the
cost of sending reports to investors, and the costs should be non-
recurring because the notice generally will only have to be sent once
to each investor in a household. Costs of the annual explanation
concerning the right to revoke consent should be low, because the
explanation can be included with other matter that is routinely sent
out, such as a client newsletter.
IV. Effects on Competition, Efficiency and Capital Formation
Section 23(a) of the Exchange Act requires the Commission, in
adopting rules under the Exchange Act, to consider the competitive
effects of such rules, if any, and to refrain from adopting a rule that
would impose a burden on competition not necessary or appropriate in
furthering the purposes of the Exchange Act.\35\ In addition, section
3(f) of the Exchange Act and section 2(c) of the Investment Company Act
provide that when the Commission is engaged in rulemaking and is
required to consider whether an action is necessary or appropriate in
the public interest, it must consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.\36\
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\35\ 15 U.S.C. 78w(a).
\36\ 15 U.S.C. 78c(f), 80a-2(c).
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The Commission does not believe the amendments to rules 14a-3, 14c-
3 and 14c-7 will impose any burden on competition. Based on the reasons
stated in the cost-benefit analysis above, as well as the reasons
stated elsewhere in this release, the Commission believes that those
rules, as well as the amendments to rules 30d-1 and 30d-2, will promote
efficiency, competition, and capital formation. The rules will enable
brokers and issuers to decrease printing and mailing costs. These
decreased costs should promote efficiency and capital formation. The
rules may also promote competition in shareholder services.
V. Paperwork Reduction Act
Certain provisions of rule 154 and the rule amendments contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (``PRA'').\37\ The Commission submitted
the collection of information requirements contained in the rules to
the Office of Management and Budget for review in accordance with 44
U.S.C. 3507(d) and 5 CFR 1320.11.\38\ An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the agency displays a valid OMB control number.\39\
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\37\ 44 U.S.C. 3501-3520.
\38\ The titles for the collections of information are: ``Rule
154 under the Securities Act of 1933, Delivery of prospectuses to
investors at the same address''; ``Regulation 14A, Commission Rules
14a-1 through 14a-14 and Schedule 14A''; ``Regulation 14C,
Commission Rules 14c-1 through 14c-7 and Schedule 14C''; ``Rule 30d-
1 under the Investment Company Act of 1940, Reports to stockholders
of management companies''; and ``Rule 30d-2 under the Investment
Company Act of 1940, Reports to shareholders of unit investment
trusts.'' The OMB control numbers for the rules are as follows: rule
154 (3235-0495, expires 2/28/2001); rule 14a-3, contained in
Regulation 14A (3235-0059, expires 1/31/2002); rules 14c-3 and 14c-
7, contained in Regulation 14C (3235-0057, expires 1/31/2002); rule
30d-1 (3235-0025, expires 2/28/2001); rule 30d-2 (3235-0494, expires
2/28/2001).
\39\ 44 U.S.C. 3506(c)(1)(B)(v).
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The rules permit delivery of a single prospectus or shareholder
report to a household to satisfy the delivery requirements with respect
to two or more investors in the household. A person relying on one of
the rules must obtain either written or implied consent to householding
from each investor. The rules require persons who wish to household
with implied consent to send a notice to each investor stating that the
investors in the household will receive one prospectus or report in the
future unless the investors provide contrary instructions.\40\ The
purpose of this requirement is to give reasonable assurance that all
investors have access to the prospectus or report. Preparing and
sending the initial notice and the annual explanation of the right to
revoke are collections of information. The Commission did not receive
any comments in response to its request for comments on the Paperwork
Reduction Act analysis in the Proposing Release.
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\40\ Under the proposed rules, implied consent could be used
only for investors who had already opened an account as of the
effective date of the rules. The rules as adopted also permit the
use of implied consent for new investors.
---------------------------------------------------------------------------
Because notices will need to be sent to an investor before
householding of
[[Page 62544]]
that investor's documents begins, persons that choose to rely on the
rule will probably send the greatest number of notices in the first
year after the rule is adopted. The Commission expects that most
notices will be short, one-page statements. Accordingly, the average
annual number of burden hours spent preparing and arranging delivery of
the notices is expected to be low. The Commission estimates 20 hours
per respondent. In addition, the Commission estimates 1 hour per
respondent for preparing and delivering the annual explanation of the
right to revoke.
Although rule 154 is not limited to investment companies, the
Commission believes that it will be used mainly by mutual funds and by
broker-dealers that deliver mutual fund prospectuses. The Commission is
unable to estimate the number of issuers other than mutual funds that
will rely on the rule.
The Commission estimates that there are approximately 2,900 mutual
funds, approximately 545 of which engage in direct marketing and
therefore deliver their own prospectuses. The Commission estimates that
each direct marketed mutual fund will spend an average of 20 hours per
year complying with the notice requirement of the rule, for a total of
10,900 hours. The Commission estimates that each direct marketed fund
will spend 1 hour complying with the explanation of the right to revoke
requirement of the rule, for a total of 545 hours. The Commission
estimates that as of year-end 1998 there were approximately 300 broker-
dealers that carry customer accounts and, therefore, may be required to
deliver mutual fund prospectuses. The Commission estimates that each
affected broker-dealer will spend, on average, approximately 20 hours
complying with the notice requirement of the rule, for a total of 6,000
hours. Each broker-dealer would also spend 1 hour complying with the
annual explanation of a right to revoke requirement, for a total of 300
hours. Therefore, the total number of respondents for rule 154 is 845
(545 mutual funds plus 300 broker-dealers), and the estimated total
hour burden is 17,745 hours (11,445 hours for mutual funds plus 6,300
hours for broker-dealers).
With respect to the amendments to rules 30d-1 and 30d-2 under the
Investment Company Act, rule 30d-1 requires management investment
companies to send annual and semiannual reports to their shareholders.
Rule 30d-2 requires unit investment trusts (``UITs'') that invest
substantially all of their assets in shares of a management investment
company to send their unitholders annual and semiannual reports
containing financial information on the underlying company. The
amendments to rules 30d-1 and 30d-2 will permit management investment
companies and UITs to household these shareholder reports under
substantially the same conditions as those in rule 154.
Every registered management investment company is subject to the
reporting requirements of rule 30d-1. We estimate that there are
approximately 3,515 registered management investment companies. The
Commission currently estimates that the hour burden associated with
rule 30d-1 is approximately 181 hours per company. As discussed above,
the Commission estimates that the burden associated with the notice
requirement of the amendments to rules 30d-1 and 30d-2 is approximately
20 hours per company. The Commission estimates that the burden
associated with the explanation of the right to revoke is 1 hour per
company. Therefore, the Commission estimates that the total burden
associated with rule 30d-1 is 202 hours per company, or a total of
710,030 hours. In addition, the Commission estimates that the cost of
contracting for outside services associated with the rule is $63,150
per respondent (421 hours times $150 per hour for independent auditor
services), for a total cost of $221,972,250 ($63,150 times 3,515
respondents).
Rule 30d-2 applies to approximately 637 UITs. The Commission
estimates that the annual burden associated with rule 30d-2 is 121
hours per respondent, including the estimated 20 hours associated with
the notice requirement and the 1 hour associated with the explanation
of a right to revoke requirement. The total hourly burden is therefore
approximately 77,077 hours. The Commission estimates that the annual
financial cost of complying with rule 30d-2 (in addition to the hourly
cost) is $12,000 per respondent (80 hours times $150 per hour for
independent auditor services), or a total of $7,644,000.
With respect to the amendments to rules 14a-3, 14c-3 and 14c-7,
those rules are included in Regulations 14A and 14C, which contain
information collection requirements related to proxy and information
statements. Companies that have a class of securities registered under
section 12 of the Exchange Act are subject to these requirements. The
Commission estimates that the time required to prepare and arrange
delivery of the notice will be approximately 20 hours per respondent
per year. The Commission estimates that 9,892 respondents are subject
to Regulation 14A and that approximately 989 of these will deliver the
notice. The Commission estimates that the burden associated with
Regulation 14A as revised per registrant delivering the notice will be
approximately 74 hours, and 54 hours per registrant not delivering the
notice, for a total annual burden of 553,948 hours. An estimated 253
respondents are subject to Regulation 14C and it is estimated that 25
of these will deliver the notice. The estimated burden associated with
Regulation 14C as revised per registrant delivering the notice is 74
hours, and 54 hours for a registrant not delivering the notice, for a
total annual burden of 14,162 hours.
------------------------------------------------------------------------
Hours Cost
------------------------------------------------------------------------
Rule 154...................................... 17,745 NA
Rule 30d-1.................................... 710,030 $221,972,250
Rule 30d-2.................................... 77,077 $7,644,000
Rule 14A...................................... 553,948 NA
Rule 14C...................................... 14,162 NA
------------------------------------------------------------------------
The information collection requirements imposed by the new rule and
rule amendments are required for those issuers or broker-dealers that
decide to rely on the rule to obtain the benefit of sending fewer
documents to each household. Those issuers or broker-dealers that
decide not to obtain that benefit are not required to rely on the rule.
Responses to the collection of information will not be kept
confidential.
VI. Summary of Final Regulatory Flexibility Analysis
The Commission has prepared a Final Regulatory Flexibility Analysis
(``FRFA'') in accordance with 5 U.S.C. 604 relating to the adopted rule
and amendments. A summary of the Initial Regulatory Flexibility
Analysis (``IRFA''), which was prepared in accordance with 5 U.S.C.
603, was published in the Proposing Release. No comments were received
on the IRFA.
The FRFA discusses the need for, and objectives of, new rule 154
and the amendments to rules 14a-3, 14c-3, 14c-7, 30d-1, and 30d-2. The
FRFA states that duplicate copies of prospectuses and shareholder
reports are often mailed to a household if more than one investor in
the household owns the same security. The new rule and amendments are
designed to reduce the number of duplicate documents delivered to
investors by permitting the delivery of one prospectus or shareholder
report to two or more investors who share an address.
The FRFA provides descriptions and estimates of the number of small
entities
[[Page 62545]]
to which the rules will apply. The term ``small business'' or ``small
organization'' (collectively, ``small entity''), when used with
reference to an issuer other than a fund, is defined by rule 157 under
the Securities Act to include an issuer that, on the last day of its
most recent fiscal year, had total assets of $5 million or less and is
engaged or proposing to engage in small business financing.\41\ Most of
these small issuers can conduct their offerings under Regulation A,
which exempts offerings from the registration requirements of the
Securities Act if the sum of all cash and other consideration to be
received for the securities does not exceed $5 million subject to a
number of conditions.\42\ These issuers do not need to deliver
prospectuses. Thus, the Commission estimates that among issuers other
than registered investment companies, very few small issuers, as
defined in rule 157 under the Securities Act, will be affected by rule
154.
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\41\ See 17 CFR 230.157 (1997). An issuer is considered to be
engaged or proposing to engage in ``small business financing'' if it
is conducting or proposing to conduct an offering of securities that
does not exceed the $5 million limitation prescribed by section 3(b)
of the Securities Act. The Commission last year amended certain
definitions under the Securities Act, Exchange Act, and Investment
Company Act for purposes of the Regulatory Flexibility Act. See
Definitions of ``Small Business'' or ``Small Organization'' Under
the Investment Company Act of 1940, the Investment Advisers Act of
1940, the Securities Exchange Act of 1934 and the Securities Act of
1933, Securities Act Release No. 7548 (June 24, 1998) [63 FR 35508
(June 30, 1998)]. Because the IRFA for this proposal relied on the
earlier definitions (which were broader), the FRFA also relies on
the earlier definitions.
\42\ See 17 CFR 230.251-.263.
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As defined in rule 157, a fund generally is a small entity if it
has net assets of $50 million or less as of the end of its most recent
fiscal year.\43\ The Commission staff estimates that there are
approximately (i) 2,900 active open-end funds, of which 475 are small
entities, (ii) 678 active closed-end funds, of which 115 are small
entities, and (iii) 745 active registered UITs, about 81 of which are
small entities. Closed-end funds and UITs will be affected by rule 154
only when they are offering their shares.
---------------------------------------------------------------------------
\43\ See 17 CFR 230.157 (1997).
---------------------------------------------------------------------------
A broker-dealer generally is a small entity if it has total capital
(i.e., net worth plus subordinated liabilities) of less than $500,000
in its prior audited financial statements or, if it is not required to
file such statements, on the last business day of the preceding fiscal
year.\44\ The delivery of prospectuses and shareholder reports is
likely to be handled only by broker-dealers that carry public customer
accounts. The Commission staff estimates that as of year-end 1998,
broker-dealers carrying public customer accounts numbered approximately
300 firms, 40 of which were small businesses.
---------------------------------------------------------------------------
\44\ See 17 CFR 240.0-10(c)(1) (1997).
---------------------------------------------------------------------------
Rule 30d-1 applies to management funds (i.e., open-end and closed-
end funds). The staff estimates that out of approximately 3,515 active
management funds, approximately 587 are considered small entities.\45\
Rule 30d-2 applies to registered UITs, substantially all the assets of
which consist of securities issued by a management investment company.
The staff estimates that out of approximately 637 registered UITs that
are subject to rule 30d-2, approximately 19 are considered small
entities.
---------------------------------------------------------------------------
\45\ See CFR 270.0-10 (1997).
---------------------------------------------------------------------------
Rules 14a-3, 14c-3 and 14c-7 apply to companies that are subject to
the Exchange Act reporting requirements. Rule 0-10 under the Exchange
Act defines the term ``small business'' as a company whose total assets
on the last day of its most recent fiscal year were $5 million or
less.\46\ There are approximately 815 reporting companies that have
assets of $5 million or less.
---------------------------------------------------------------------------
\46\ See CFR 240.0-10 (1997).
---------------------------------------------------------------------------
Persons who rely on the rules would be required to obtain
investors' written or implied consent before householding documents.
Investors householded with implied consent must receive a notice 60
days in advance notifying them that their documents will be householded
unless the person relying on the rule receives contrary instructions.
The rule also requires that if householding is done with investors'
implied consent the investors must have the same last name or be
reasonably believed to be members of the same family, and the address
must be a post office box or a street address reasonably believed to be
a residence.
The FRFA states that in adopting the amendments, the Commission
considered: (i) The establishment of differing compliance requirements
that take into account the resources available to small entities; (ii)
simplification of the rule's requirements for small entities; (iii) the
use of performance rather than design standards; and (iv) an exemption
from the rules for small entities. The FRFA states that we concluded
that different requirements for small entities would be inconsistent
with investor protection.
The FRFA is available for public inspection in File No. S7-27-97,
and a copy may be obtained by contacting Marilyn Mann, Senior Counsel,
at (202) 942-0690, Office of Regulatory Policy, Division of Investment
Management, Securities and Exchange Commission, 450 5th Street, NW,
Washington, DC 20549-0506.
VII. Statutory Authority
The Commission is adopting rule 154 under the authority set forth
in section 19(a) of the Securities Act [15 U.S.C. 77s(a)]. The
Commission is adopting amendments to rules 30d-1 and 30d-2 under the
authority set forth in section 30(e) and 38(a) of the Investment
Company Act [15 U.S.C. 80a-29(e) and 80a-37(a)], and amendments to
rules 14a-3, 14c-3, and 14c-7 under the authority set forth in sections
12, 14 and 23(a) of the Exchange Act [15 U.S.C. 78l, 78n and 78w(a)].
List of Subjects
17 CFR Parts 230 and 270
Investment companies, Reporting and recordkeeping requirements,
Securities.
17 CFR Part 240
Reporting and recordkeeping requirements, Securities.
Text of Rules
For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
1. The authority citation for Part 230 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77r, 77s, 77sss,
78c, 78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-24, 80a-
28, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
* * * * *
2. Section 230.154 is added to read as follows:
Sec. 230.154 Delivery of prospectuses to investors at the same
address.
(a) Delivery of a single prospectus. If you must deliver a
prospectus under the federal securities laws, for purposes of sections
5(b) and 2(a)(10) of the Act (15 U.S.C. 77e(b) and 77b(a)(10)) or
Sec. 240.15c2-8(b) of this chapter, you will be considered to have
delivered a prospectus to investors who share an address if:
(1) You deliver a prospectus to the shared address;
(2) You address the prospectus to the investors as a group (for
example, ``ABC Fund [or Corporation] Shareholders,'' ``Jane Doe and
Household,'' ``The Smith Family'') or to each of the investors
individually (for example, ``John Doe and Richard Jones''); and
[[Page 62546]]
(3) The investors consent in writing to delivery of one prospectus.
(b) Implied consent. You do not need to obtain written consent from
an investor under paragraph (a)(3) of this section if all of the
following conditions are met:
(1) The investor has the same last name as the other investors, or
you reasonably believe that the investors are members of the same
family;
(2) You have sent the investor a notice at least 60 days before you
begin to rely on this section concerning delivery of prospectuses to
that investor. The notice must be a separate written statement and:
(i) State that only one prospectus will be delivered to the shared
address unless you receive contrary instructions;
(ii) Include a toll-free telephone number or be accompanied by a
reply form that is pre-addressed with postage provided, that the
investor can use to notify you that he or she wishes to receive a
separate prospectus;
(iii) State the duration of the consent;
(iv) Explain how an investor can revoke consent;
(v) State that you will begin sending individual copies to an
investor within 30 days after you receive revocation of the investor's
consent; and
(vi) Contain the following prominent statement, or similar clear
and understandable statement, in bold-face type: ``Important Notice
Regarding Delivery of Shareholder Documents.'' This statement also must
appear on the envelope in which the notice is delivered. Alternatively,
if the notice is delivered separately from other communications to
investors, this statement may appear either on the notice or on the
envelope in which the notice is delivered;
Note: to paragraph (b)(2): The notice should be written in plain
English. See Sec. 230.421(d)(2) of this chapter for a discussion of
plain English principles.
(3) You have not received the reply form or other notification
indicating that the investor wishes to continue to receive an
individual copy of the prospectus, within 60 days after you sent the
notice; and
(4) You deliver the prospectus to a post office box or to a
residential street address. You can assume a street address is a
residence unless you have information that indicates it is a business.
(c) Revocation of consent. If an investor, orally or in writing,
revokes consent to delivery of one prospectus to a shared address
(provided under paragraphs (a)(3) or (b) of this section), you must
begin sending individual copies to that investor within 30 days after
you receive the revocation. If the individual's consent concerns
delivery of the prospectus of a registered open-end management
investment company, at least once a year you must explain to investors
who have consented how they can revoke their consent. The explanation
must be reasonably designed to reach these investors.
(d) Definition of address. For purposes of this section, address
means a street address, a post office box number, an electronic mail
address, a facsimile telephone number, or other similar destination to
which paper or electronic documents are delivered, unless otherwise
provided in this section. If you have reason to believe that an address
is the street address of a multi-unit building, the address must
include the unit number.
(e) Exclusion of some prospectuses. This section does not apply to
the delivery of a prospectus filed as part of a registration statement
on Form N-14 (17 CFR 239.23), Form S-4 (17 CFR 239.25) or Form F-4 (17
CFR 239.34), or to the delivery of any other prospectus in connection
with a business combination transaction, exchange offer or
reclassification of securities.
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
3. The authority citation for Part 240 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee,
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k,
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d),
78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and
80b-11, unless otherwise noted.
* * * * *
4. Section 240.14a-3 is amended by revising paragraph (e)(1) and
the introductory text of paragraph (e)(2) to read as follows:
Sec. 240.14a-3 Information to be furnished to security holders.
* * * * *
(e)(1)(i) A registrant will be considered to have delivered an
annual report to security holders of record who share an address if:
(A) The registrant delivers an annual report to the shared address;
(B) The registrant addresses the prospectus to the security holders
a group (for example, ``ABC Fund [or Corporation] Shareholders,''
``Jane Doe and Household,'' ``The Smith Family'') or to each of the
security holders individually (for example, ``John Doe and Richard
Jones''); and
(C) The security holders consent in writing to delivery of one
annual report.
(ii) Implied consent. The registrant need not obtain written
consent from a security holder under paragraph (e)(1)(i)(C) of this
section if all of the following conditions are met:
(A) The security holder has the same last name as the other
security holders, or the registrant reasonably believes that the
security holders are members of the same family;
(B) The registrant has sent the security holder a notice at least
60 days before the registrant begins to rely on this section concerning
delivery of annual reports to that security holder. The notice must:
(1) Be a separate written statement that is delivered separately
from other communications;
(2) State that only one annual report will be delivered to the
shared address unless the registrant receives contrary instructions;
(3) Include a toll-free telephone number or be accompanied by a
reply form that is pre-addressed with postage provided, that the
security holder can use to notify the registrant that he or she wishes
to receive a separate annual report;
(4) State the duration of the consent;
(5) Explain how a security holder can revoke consent;
(6) State that the registrant will begin sending individual copies
to a security holder within 30 days after receipt of revocation of the
security holder's consent; and
(7) Contain the following prominent statement, or similar clear and
understandable statement, in bold-face type: ``Important Notice
Regarding Delivery of Shareholder Documents.'' Alternatively, this
statement may appear on the envelope containing the notice;
Note: to paragraph (e)(1)(ii)(B): The notice should be written
in plain English. See Sec. 230.421(d)(2) of this chapter for a
discussion of plain English principles.
(C) The registrant has not received the reply form or other
notification indicating that the security holder wishes to continue to
receive an individual copy of the annual report, within 60 days after
the registrant sent the notice; and
(D) The registrant delivers the report to a post office box or to a
residential street address. The registrant can assume a street address
is a residence unless it has information that indicates it is a
business.
(iii) Revocation of consent. If a security holder, orally or in
writing, revokes consent to delivery of one report to a shared address,
the registrant
[[Page 62547]]
must begin sending individual copies to that security holder within 30
days after the registrant receives the revocation.
(iv) Definition of address. For purposes of this section, address
means a street address, a post office box number, an electronic mail
address, a facsimile telephone number, or other similar destination to
which paper or electronic documents are delivered, unless otherwise
provided in this section. If the registrant has reason to believe that
the address is a street address of a multi-unit building, the address
must include the unit number.
(2) Notwithstanding paragraphs (a) and (b) of this section, unless
state law requires otherwise, a registrant is not required to send an
annual report or proxy statement to a security holder if:
* * * * *
5. In Sec. 240.14c-3, paragraph (c) is added to read as follows:
Sec. 240.14c-3 Annual report to be furnished security holders.
* * * * *
(c) A registrant will be considered to have delivered an annual
report to all security holders of record who share an address if the
requirements set forth in Sec. 240.14a-3(e)(1) are satisfied.
6. In Sec. 240.14c-7, Note 2 is removed and Note 3 and Note 4 are
redesignated as Note 2 and Note 3.
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
7. The authority citation for Part 270 continues to read, in part,
as follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39
unless otherwise noted:
* * * * *
8. Section 270.30d-1 is amended by adding paragraph (f) to read as
follows:
Sec. 270.30d-1 Reports to stockholders of management companies.
* * * * *
(f)(1) A company will be considered to have transmitted a report to
shareholders who share an address if:
(i) The company transmits a report to the shared address;
(ii) The company addresses the report to the shareholders as a
group (for example, ``ABC Fund [or Corporation] Shareholders,'' ``Jane
Doe and Household,'' ``The Smith Family'') or to each of the
shareholders individually (for example, ``John Doe and Richard
Jones''); and
(iii) The shareholders consent in writing to delivery of one
report.
(2) The company need not obtain written consent from a shareholder
under paragraph (f)(1)(iii) of this section if all of the following
conditions are met:
(i) The shareholder has the same last name as the other
shareholders, or the company reasonably believes that the shareholders
are members of the same family;
(ii) The company has transmitted a notice to the shareholder at
least 60 days before the company begins to rely on this section
concerning transmission of reports to that shareholder. The notice must
be a separate written statement and:
(A) State that only one report will be delivered to the shared
address unless the company receives contrary instructions;
(B) Include a toll-free telephone number or be accompanied by a
reply form that is pre-addressed with postage provided, that the
shareholder can use to notify the company that he or she wishes to
receive a separate report;
(C) State the duration of the consent;
(D) Explain how a shareholder can revoke consent;
(E) State that the company will begin sending individual copies to
a shareholder within 30 days after the company receives revocation of
the shareholder's consent; and
(F) Contain the following prominent statement, or similar clear and
understandable statement, in bold-face type: ``Important Notice
Regarding Delivery of Shareholder Documents.'' This statement also must
appear on the envelope in which the notice is delivered. Alternatively,
if the notice is delivered separately from other communications to
investors, this statement may appear either on the notice or on the
envelope in which the notice is delivered;
Note: to paragraph (f)(2)(ii): The notice should be written in
plain English. See Sec. 230.421(d)(2) of this chapter for a
discussion of plain English principles.
(iii) The company has not received the reply form or other
notification indicating that the shareholder wishes to continue to
receive an individual copy of the report, within 60 days after the
company sent the notice; and
(iv) The company transmits the report to a post office box or to a
residential street address. The company can assume a street address is
a residence unless it has information that indicates it is a business.
(3) At least once a year, the company must explain to shareholders
who have consented under paragraph (f)(1)(iii) or paragraph (f)(2) of
this section how they can revoke their consent. The explanation must be
reasonably designed to reach these investors. If a shareholder, orally
or in writing, revokes consent to delivery of one report to a shared
address, the company must begin sending individual copies to that
shareholder within 30 days after the company receives the revocation.
(4) For purposes of this section, address means a street address, a
post office box number, an electronic mail address, a facsimile
telephone number, or other similar destination to which paper or
electronic documents are transmitted, unless otherwise provided in this
section. If the company has reason to believe that the address is a
street address of a multi-unit building, the address must include the
unit number.
9. Section 270.30d-2 is revised to read as follows:
Sec. 270.30d-2 Reports to shareholders of unit investment trusts.
(a) At least semiannually every registered unit investment trust
substantially all the assets of which consist of securities issued by a
management company must transmit to each shareholder of record
(including record holders of periodic payment plan certificates), a
report containing all the applicable information and financial
statements or their equivalent, required by Sec. 270.30d-1 to be
included in reports of the management company for the same fiscal
period. Each of these reports must be transmitted within the period
allowed the management company by Sec. 270.30d-1 for transmitting
reports to its shareholders.
(b) Any report required by this section will be considered
transmitted to a shareholder of record if the unit investment trust
satisfies the conditions set forth in Sec. 270.30d-1(f) with respect to
that shareholder.
Dated: November 4, 1999.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-29531 Filed 11-15-99; 8:45 am]
BILLING CODE 8010-01-P
