ICI Supports FINRA's Proposed Changes Concerning Fund Sales Material Approvals

Washington, DC, January 23, 2008 - ICI supports a proposed change to Rule 2210 that would modify the requirement for approval of investment company sales material by principals at securities firms selling funds.

Background
On December 20, the SEC provided notice of a proposal by FINRA to amend Rule 2210 to create an exception from the requirements for approving certain filed sales material distributed to prospective investors.

Rule 2210, contained in the NASD Manual, requires that a registered principal of a FINRA member firm approve in writing all advertisements, sales literature, and independently prepared reprints (collectively, "sales material") prior to use. Certain types of sales material, such as advertisements and sales literature concerning mutual funds or variable insurance products must be filed with the FINRA Advertising Regulation Department. Based on recommendations from a FINRA task force, and to eliminate redundancy, FINRA is proposing to create an exception to Rule 2210's registered principal approval requirements for intermediary firms that use the sales material of another firm. The exception would apply only to sales material that another firm has filed with the Department, and for which the Department has issued a review letter finding that the material appears to be consistent with applicable standards.

The proposed rule change would also revise certain of the advertising recordkeeping requirements.

ICI Position
In a January 18 comment letter, ICI commended FINRA for examining the costs and benefits of Rule 2210's principal approval requirement and determining to modify it in a way that should alleviate burdens on some intermediary firms without compromising investor protection. If the proposal is adopted, according to ICI's letter, intermediary firms will be able to use investment company sales material absent the delay and costs associated with a secondary layer of principal review.

"[W]e support the proposed exception from principal review because it is a less burdensome alternative for intermediary firms, and importantly, one that should not compromise investor protection," said ICI Senior Association Counsel Dorothy Donohue.

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