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SEC Extends NASDR Pilot Program for Bond Fund Volatility Ratings
Washington, DC, September 7, 2001 - The Securities and Exchange Commission has granted immediate effectiveness to a proposed rule change by NASD Regulation, Inc. to extend the pilot program permitting NASD members to use bond fund volatility ratings in supplemental sales literature until August 31, 2003. Comments on the extension of the pilot program must be filed with the SEC by September 18, 2001.
The SEC approved NASDR’s proposed rule change to amend Interpretive Material 2210-5—which permits the use of bond fund volatility ratings in supplemental sales literature—and NASD Rule 2210(c)(3)—which sets forth the filing requirements and review procedures for sales literature containing such ratings.
NASDR sought the SEC’s approval of the two-year extension of the pilot program to gain additional experience with the ratings program to better evaluate their "effect on the delivery of accurate and useful information to investors." As of July 2001, NASDR had reported receipt of only six related filings, which NASDR believes is an insufficient quantity to adequately evaluate the program’s effectiveness. The notice of filing states that "low investor demand for bond funds coupled with the strong promotion of equity mutual funds during much of the trial period may have contributed to the low level of filings." The Release also indicates that no changes will be made to the conditions imposed on the use of volatility ratings.