Institute Responds to SEC Denial of Petition on Portfolio Investment Programs

Washington, DC, October 18, 2001 - In August 2001, the Securities and Exchange Commission issued a denial regarding an Institute petition for a rule that would define certain portfolio investment programs (PIPs) as investment companies under the Investment Company Act of 1940, because they do not "at this time appear to raise interpretive issues that warrant the Commission undertaking a rulemaking." In response to the Commission's stated intent to monitor the development of PIPs for investor protection concerns, the Institute recently submitted a letter urging the Commission to focus its review on the extent to which investors in these programs in fact individually manage their holdings.

Specifically, the Institute's letter states that to the extent that investors who purchase pre-packaged portfolios and updates will rely upon the program sponsor to manage their investments, their accounts collectively form an investment company managed by the program's sponsor. The letter notes that it is these accounts and features of PIPs that raise the investor protection concerns discussed in the Institute's petition. Finally, the letter supports the Commission's ongoing scrutiny of PIPs, which will yield key information that the Institute believes will be critical to the Commission in determining how to proceed.