Institute Comments on U.S. Mutual Fund Sales in Australia

Washington, DC, June 17, 1999 - The Institute recently submitted a comment letter to the Australia Securities & Investment Commission (ASIC) with respect to the eligibility of U.S. mutual funds for sale in Australia under ASIC Policy Statement 65: Foreign Collective Investment Schemes (PS 65).

PS 65 authorizes ASIC to grant conditional relief from certain procedural and disclosure aspects of Australian securities laws to foreign funds that meet the standards set forth in the policy. ASIC clarified that it intends to continue to grant relief to U.S. mutual fund and unit investment trust applicants in accordance with PS 65, but requested comment on that approach.

In its comment letter, the Institute argued that registered U.S. mutual funds and unit investment trusts meet the standards set forth in PS 65 and thus should continue to be included within the class of funds eligible for relief under PS 65. These funds meet the key regulatory requirements set forth in PS 65 as a result of requirements imposed on them by US law, including strict requirements with respect to disclosure, safekeeping of fund assets, conflicts of interest, portfolio valuation and liquidity, and the redemption of fund shares. The Institute also pointed out that the clarification that ASIC would grant conditional relief from the securities laws to US funds under PS 65 is appropriate in light of the proposed amendments to the Australian "foreign investment fund" or "FIF" tax rules. It is anticipated that the Australian Parliament will act favorably on these amendments in the near future, thus removing a significant tax disincentive to Australian investment in US funds.

In light of the FIF rule changes, ASIC also is undertaking a comprehensive review of PS 65 and has requested comments on specific issues raised by the policy statement. In the comment letter, the Institute noted that there are several specific conditions for relief under PS 65 that should be revised or clarified to ensure that they will have no unintended tax or securities law effects on the fund or its adviser relating to the offer and sale of U.S. fund shares in Australia.