Model Privacy Form Proposal Garners ICI Support, Recommendations

Washington, DC, May 29, 2007 - ICI filed a comment letter with the SEC supporting the adoption of a model short-form privacy notice that would simplify and standardize required disclosure that fund investors receive regarding a fund's information gathering and sharing practices. As proposed, use of the form would be optional and fund could continue to use their more detailed and informative privacy notices.

Background
As required by the 1999 Gramm-Leach-Bliley Act (GLB Act), in 2000 the SEC and other federal regulators of financial institutions adopted rules to implement those provisions in the GLB Act that required financial institutions to provide their customers with privacy notices detailing the institution's information gathering and sharing practices. In 2006, Congress passed the Financial Services Regulatory Relief Act, which, in part, required the federal regulators to adopt a uniform short-form privacy notice to help financial services customers better understand an institution's practices and compare practices among various institutions in an easy-to-read and common format. As a result, in March 2007, the SEC and other federal regulators proposed amendments to their rules to accommodate the use of a specified, short-form model privacy notice. The SEC's version of this form is Model Form S-P. Importantly, institutions that elect to use the proposed short-form notice will be given "safe harbor" status under the federal privacy rules, meaning they will be deemed to be in compliance with the rules.

ICI Position
In a comment letter to the SEC, ICI expresses strong support for the model form and extension of safe harbor status to registrants using it so long as the SEC makes clear that its use is voluntary and "institutions could continue to use other types of notices that vary from the model form so long as these notices comply with the privacy rule."

ICI considers this clarification important. By design, a standardized form meant for use by many types of financial institutions limits the ability to tailor its contents to particular circumstances, and some institutions may prefer to continue to use the customized privacy notices that they have developed pursuant to Regulation S-P. For those institutions that elect to use customized privacy notices, the Institute's letter notes that the sample clauses in the current rule continue to serve a useful function by providing guidance to registrants who might choose not to use the model form, and recommends they be retained. Should the Commission determine to eliminate the sample clauses notwithstanding ICI's recommendation, the Institute strongly recommends that the Commission clarify that notices based on the sample clauses will not be deemed per se inadequate or inappropriate.

Other ICI Recommendations
As noted in ICI's letter, developing a standardized form for use by varied institutions limits what information specific to a particular type of institution may be included in the proposed model form. ICI believes minor edits -- omitting irrelevant information inapplicable to SEC registrants and tailoring the form's contents to the securities industry, for example -- should alleviate concerns that the standardized provisions and vocabulary may not be sufficient to communicate effectively with investors. Such edits should enhance an investor's understanding of the form.

Related Links
ICI devotes a section of this site to privacy issues affecting funds and their investors.