Regulatory Issues

June 2006

Update on Redemption Fees

The redemption fee rule was adopted by SEC in March 2005 and requires fund firms to collect trading records from broker-dealers, and other intermediaries such as retirement plan administrators that use omnibus recordkeeping. Firms must review to safeguard against market timing. ICMA-RC is using the industry standard put forth by ICI and SPARK as a model and is starting to execute the information sharing agreements with fund companies whose shares we make available.

The Investment Company Institute (ICI) and funds firms are urging the SEC to delay the Oct. 16 compliance deadline for the new rule. Our sense is that the deadline will be postponed but the SEC has not announced a decision to delay.

IRS Announces New Split Tax Refund Initiatives — Includes IRA Option

While the details are still being worked out, the IRS announced that it will create a new program to allow taxpayers who use direct deposit for their income tax refunds to divide the funds in up to three financial accounts, including IRAs. For additional details see the [IRS press release]

SEC Partners with Securities Organization

Chairman Chris Cox announced that the SEC and the North American Securities Administrators Association is launching a joint national initiative to protect senior from investment fraud and the sales of unsuitable securities. The SEC will hold a Seniors Summit later this summer and we understand that it will be a roundtable event designed to explore investor protection issues that are unique to seniors. Some of the focus will be on retirement products, such annuities and IRAs, that are marketed to seniors. The intent is to make sure that seniors have the necessary education and disclosure they need to make informed financial and investment decisions. For more information on the initiative, see the [SEC press release]