02-16346. Technical Amendments to Rules and Forms Due to the National Securities Markets Improvement Act of 1996 and the Gramm-Leach-Bliley Act

AGENCY:

Securities and Exchange Commission.

ACTION:

Final rule.

SUMMARY:

The Commission is adopting technical amendments to rules and forms under the Investment Company Act of 1940 (“Investment Company Act” or “Act”) and the Securities Exchange Act of 1934 (“Securities Exchange Act”). The amendments correct statutory references currently included in the rules and the forms.

EFFECTIVE DATE:

July 8, 2002.

FOR FURTHER INFORMATION CONTACT:

Hugh P. Lutz, Attorney, at [phone], Office of Regulatory Policy, Division of Investment Management, Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 20549-0506.

SUPPLEMENTARY INFORMATION:

The passage of the National Securities Markets Improvement Act of 1996 (“NSMIA”) ^[1] and the Gramm-Leach-Bliley Act (“G-L-B Act”) ^[2] removed and renumbered certain subparagraphs of the Act.^[3] As a result, references to those subparagraphs, contained in our rules, are inaccurate.^[4] We are amending rules 3a-1, 3a-2, 3a-3, 3a-5, 3a-6, 6c-6, 6e-2, 6e-3(T), 20b, and 30f-1 under the Act and rules 16a-2 and 16a-3 under the Securities Exchange Act to correct these references. In addition, we are amending Forms 3, 4, and 5 by replacing outdated references in the forms to section 30(f) of the Act with correct references to section 30(h) of the Act. We are also amending the description of these forms contained in 17 CFR 249.103, 249.104, 249.105, 274.202, and 274.203.

Certain Findings

Under the Administrative Procedure Act (“APA”), notice of proposed rulemaking is not required when an agency, for good cause, finds “that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” ^[5] The amendments to rules 3a-1, 3a-2, 3a-3, 3a-5, 3a-6, 6c-6, 6e-2, 6e-3(T), 16a-2, 16a-3, 20b, and 30f-1, and Forms 3, 4, and 5, are technical changes that conform statutory references that are currently included in the rules and forms to the current paragraph designations contained in the Act. Accordingly, we find that there is no need to publish notice of these amendments.^[6]

The APA also requires publication of a rule at least 30 days before its effective date unless the agency finds otherwise for good cause.^[7] For the same reasons described with respect to opportunity for notice and comment, we find there is good cause for the amendments to take effect immediately.

Statutory Authority

The Commission is adopting amendments to rules 3a-1, 3a-2, 3a-3, 3a-5, 3a-6, 6c-6, 6e-2, 6e-3(T), 20b, and 30f-1 pursuant to authority set forth in sections 6(c) and 38(a) of the Investment Company Act [15 U.S.C. 80a-6(c) and 80a-37(a)]. The Commission is adopting amendments to rules 16a-2 and 16a-3 pursuant to the authority set forth in sections 16(a) and 23(a) of the Securities Exchange Act [15 U.S.C. 78p(a) and 78w(a)]. The Commission is adopting amendments to Forms 3, 4, and 5 pursuant to authority set forth in sections 30(h) and 38 of the Investment Company Act [15 U.S.C. 80a-29(h) and 80a-37] and sections 16(a) and 23(a) of the Securities Exchange Act [15 U.S.C. 78p(a) and 78w(a)].

List of Subjects

17 CFR Part 200

• Administrative practice and procedure

17 CFR Parts 240 and 249

• Reporting and recordkeeping requirements
• Securities

17 CFR Parts 270 and 274

• Investment companies
• Reporting and recordkeeping requirements
• Securities

Text of Final Rules and Forms

For reasons set forth in the preamble, Title 17, Chapter II, of the Code of Federal Regulations is amended as follows:

PART 200—ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND REQUESTS

1. The authority citation for Part 200 continues to read in part as follows:

Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t, 77sss, 80a-37, 89b-11, unless otherwise noted.

* * * * *

2. Section 200.20b is amended by revising paragraph (a) to read as follows:

§ 200.20b

Director of Division of Investment Management.

* * * * *

(a) The administration of all matters arising under the Investment Company Act of 1940 (15 U.S.C. 80a), except those arising under section 30(h) of the Act (15 U.S.C. 80a-29(h)).

* * * * *

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, 77z-3, 77eee, 77ggg, 77nnn, 777sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, and 80b-11, unless otherwise noted.

* * * * *

4. Section 240.16a-2 is amended by revising the first sentence of the introductory text to read as follows:

§ 240.16a-2

Persons and transactions subject to section 16.

Any person who is the beneficial owner, directly or indirectly, of more than ten percent of any class of equity securities (“ten percent beneficial owner”) registered pursuant to section 12 of the Act (15 U.S.C. 78 l), any director or officer of the issuer of such securities, and any person specified in section 17(a) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79q(a)) or section 30(h) of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h)), including any person specified in § 240.16a-8, shall be subject to the provisions of section 16 of the Act (15 U.S.C. 78p). * * *

* * * * *

5. Section 240.16a-3 is amended by revising paragraph (d) to read as follows:

§ 240.16a-3

Reporting transactions and holdings.

* * * * *

(d) Any person required to file a statement with respect to securities of a single issuer under both section 16(a) of the Act (15 U.S.C. 78p(a)) and either section 17(a) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79q(a)) or section 30(h) of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h)) may file a single statement containing the required information, which will be deemed to be filed under both Acts.

* * * * *

PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934

6. The authority citation for Part 249 continues to read in part as follows:

Authority: 15 U.S.C. 78a et seq., unless otherwise noted.

* * * * *

7. Section 249.103 is amended by revising the second sentence to read as follows:

§ 249.103

Form 3, initial statement of beneficial ownership of securities.

* * * The Commission is authorized to solicit the information required by this Form pursuant to sections 16(a) and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a) and 78w(a)); sections 17(a) and 20(a) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79q(a) and 79t(a)); and sections 30(h) and 38 of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h) and 80a-37), and the rules and regulations thereunder. * * *

8. Section 249.104 is amended by revising the second sentence to read as follows:

§ 249.104

Form 4, statement of changes in beneficial ownership of securities.

* * * The Commission is authorized to solicit the information required by this Form pursuant to sections 16(a) and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a) and 78w(a)); sections 17(a) and 20(a) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79q(a) and 79t(a)); and sections 30(h) and 38 of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h) and 80a-37), and the rules and regulations thereunder. * * *

9. Section 249.105 is amended by revising the second sentence to read as follows:

§ 249.105

Form 5, annual statement of beneficial ownership of securities.

* * * The Commission is authorized to solicit the information required by this Form pursuant to sections 16(a) and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a) and 78w(a)); sections 17(a) and 20(a) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79q(a) and 79t(a)); and sections 30(h) and 38 of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h) and 80a-37), and the rules and regulations thereunder. * * *

Note:

The text of Form 5 does not and these amendments will not appear in the Code of Federal Regulations.

10. Form 5 (referenced in § 249.105) is amended by revising the reference “Sections 30(f) and 38 of the Investment Company Act of 1940” to read “Sections 30(h) and 38 of the Investment Company Act of 1940” in the first paragraph of the cover page.

11. Form 5 (referenced in § 249.105) is amended by revising the reference “Section 30(f) of the Investment Company Act of 1940” to read “Section 30(h) of the Investment Company Act” in the following places:

(a) General Instruction 3.(a)(iii) and

(b) Above Item 1 of the Form.

PART 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

12. 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;

* * * * *

13. Section 270.3a-1 is amended by revising the introductory paragraph and paragraph (b) to read as follows:

§ 270.3a-1

Certain prima facie investment companies.

Notwithstanding section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(c)), an issuer will be deemed not to be an investment company under the Act; Provided, That:

* * * * *

(b) The issuer is not an investment company as defined in section 3(a)(1)(A) or 3(a)(1)(B) of the Act (15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(B)) and is not a special situation investment company; and

* * * * *

14. Section 270.3a-2 is amended by revising the introductory text of paragraph (a) to read as follows:

§ 270.3a-2

Transient investment companies.

(a) For purposes of sections 3(a)(1)(A) and 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(A) and 80a-3(a)(1)(C)), an issuer is deemed not to be engaged in the business of investing, reinvesting, owning, holding or trading in securities during a period of time not to exceed one year; Provided, That the issuer has a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such period of time), in a business other than that of investing, reinvesting, owning, holding or trading in securities, such intent to be evidenced by:

* * * * *

15. Section 270.3a-3 is amended by revising the introductory text and paragraph (b) to read as follows:

§ 270.3a-3

Certain investment companies owned by companies which are not investment companies.

Notwithstanding section 3(a)(1)(A) or section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(C)), an issuer will be deemed not to be an investment company for purposes of the Act; Provided, That all of the outstanding securities of the issuer (other than short-term paper, directors' qualifying shares, and debt securities owned by the Small Business Administration) are directly or indirectly owned by a company which satisfies the conditions of § 270.3a-1(a) and which is:

* * * * *

(b) A company that is an investment company as defined in section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(C)), but which is excluded from the definition of the term “investment company” by section 3(b)(1) or 3(b)(2) of the Act (15 U.S.C. 80a-3(b)(1) or 80a-3(b)(2)); or

* * * * *

16. Section 270.3a-5 is amended by revising the introductory text of paragraph (a) to read as follows:

§ 270.3a-5

Exemption for subsidiaries organized to finance the operations of domestic or foreign companies.

(a) A finance subsidiary will not be considered an investment company under section 3(a) of the Act (15 U.S.C. 80a-3(a)) and securities of a finance subsidiary held by the parent company or a company controlled by the parent company will not be considered “investment securities” under section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(C)); Provided, That:

* * * * *

17. Section 270.3a-6 is amended by revising paragraph (a) to read as follows:

§ 270.3a-6

Foreign banks and foreign insurance companies.

(a) Notwithstanding section 3(a)(1)(A) or section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(C)), a foreign bank or foreign insurance company shall not be considered an investment company for purposes of the Act.

* * * * *

18. Section 270.6c-6 is amended by revising the introductory text of paragraph (h) to read as follows:

§ 270.6c-6

Exemption for certain registered separate accounts and other persons.

* * * * *

(h) The depositor or trustee of an existing separate account shall be exempt from section 26(c) of the Act (15 U.S.C. 80a-26(c)) to the extent necessary to permit the substitution of securities of the new portfolio company for securities of the existing portfolio company; Provided; That, within thirty days of such substitution:

* * * * *

19. Section 270.6e-2 is amended by revising paragraph (b)(15)(iv) to read as follows:

§ 270.6e-2

Exemptions for certain variable life insurance separate accounts.

* * * * *

(b) * * *

(15) * * *

(iv) Any action taken in accordance with paragraph (b)(15)(iii)(A) or (B) of this section and the reasons therefor shall be disclosed in the next report to contractholders made pursuant to section 30(e) (15 U.S.C. 80a-29(e)) and § 270.30e-2;

* * * * *

20. Section 270.6e-3(T) is amended by revising paragraph (b)(15)(iii)(B) to read as follows:

§ 270.6e-3(T)

Temporary exemptions for flexible premium variable life insurance separate accounts.

* * * * *

(b) * * *

(15) * * *

(iii) * * *

(B) Any action taken in accordance with paragraph (b)(15)(iii)(A)(1) or (2) of this section and the reasons therefor shall be disclosed in the next report contractholders made under section 30(e) (15 U.S.C. 80a-29(e)) and § 270.30e-2;

* * * * *

21. Section 270.30f-1 is redesignated as § 270.30h-1 and revised to read as follows:

§ 270.30h-1

Applicability of section 16 of the Exchange Act to section 30(h).

(a) The filing of any statement prescribed under section 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) shall satisfy the corresponding requirements of section 30(h) of the Act (15 U.S.C. 80a-29(h)).

(b) The rules under section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) shall apply to any duty, liability or prohibition imposed with respect to a transaction involving any security of a registered closed-end company under section 30(h) of the Act (15 U.S.C. 80a-29(h)).

(c) No statements need be filed pursuant to section 30(h) of the Act (15 U.S.C. 80a-29(h)) by an affiliated person of an investment adviser in his or her capacity as such if such person is solely an employee, other than an officer, of such investment adviser.

PART 274—FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

22. The authority citation for Part 274 continues to read as follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78 l, 78m, 78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise noted.

23. Section 274.202 is revised to read as follows:

§ 274.202

Form 3, initial statement of beneficial ownership of securities.

This form shall be filed pursuant to § 270.30h-1 for initial statements of beneficial ownership of securities required to be filed pursuant to section 30(h) of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h)). (Same as § 249.103 of this chapter.)

Note:

The text of Form 3 does not and these amendments will not appear in the Code of Federal Regulations.

24. Form 3 (referenced in §§ 249.103 and 274.202) is amended by revising the reference “Sections 30(f) and 38 of the Investment Company Act of 1940” to read “Sections 30(h) and 38 of the Investment Company Act of 1940” in the first paragraph of the cover page.

25. Form 3 (referenced in §§ 249.103 and 274.202) is amended by revising the reference “Section 30(f) of the Investment Company Act of 1940” to read “Section 30(h) of the Investment Company Act” in the following places:

(a) General Instructions 1.(a)(iv) and 4.(a)(iii) and

(b) Above Item 1 of the Form.

26. Section 274.203 is revised to read as follows:

§ 274.203

Form 4, statement of changes in beneficial ownership of securities.

This form shall be filed pursuant to § 270.30h-1 for statements of changes in beneficial ownership of securities required to be filed pursuant to section 30(h) of the Investment Company Act of 1940 (15 U.S.C. 80a-29(h)). (Same as § 249.104 of this chapter.)

Note:

The text of Form 4 does not and these amendments will not appear in the Code of Federal Regulations.

27. Form 4 (referenced in §§ 249.104 and 274.203) is amended by revising the reference “Sections 30(f) and 38 of the Investment Company Act of 1940” to read “Sections 30(h) and 38 of the Investment Company Act of 1940” in the first paragraph of the cover page.

28. Form 4 (referenced in §§ 249.104 and 274.203) is amended by revising the reference “Section 30(f) of the Investment Company Act of 1940” to read “Section 30(h) of the Investment Company Act” in the following places:

(a) General Instruction 3.(a)(iii) and

(b) Above Item 1 of the Form.

Dated: June 24, 2002.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  Pub. L. 104-290, 110 Stat. 3416 (1996).

2.  Pub. L. 106-102, 113 Stat. 1338 (1999).

3.  See, e.g., section 209(c) of NSMIA.

4.  See rules 3a-1 [17 CFR 270.3a-1], 3a-2 [17 CFR 270.3a-2], 3a-3 [17 CFR 270.3a-3], 3a-5 [17 CFR 270.3a-5], 3a-6 [17 CFR 270.3a-6], 6c-6 [17 CFR 270.6c-6], 6e-2 [17 CFR 270.6e-2], 6e-3(T) [17 CFR 270.6e-3(T)], 16a-2 [17 CFR 240.16a-2], 16a-3 [17 CFR 240.16a-3], 20b [17 CFR 200.20b], and 30f-1 [17 CFR 270.30f-1].

5.  5 U.S.C. 553(b)(3)(B).

6.  For similar reasons, the amendments do not require analysis under the Regulatory Flexibility Act. See 5 U.S.C. 601(2) (for purposes of Regulatory Flexibility Act analyses, the term “rule” means any rule for which the agency publishes a general notice of proposed rulemaking).

7.  See 5 U.S.C. 553(d)(3).