(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

SEC to Consider Market Timing, Portfolio Disclosure Rules

The SEC will consider whether to adopt amendments to Forms N-1A, N-3, N-4, and N-6 concerning market timing and selective portfolio holding disclosures. In addition, the SEC will consider whether to propose rules to define a shell company in Form S-8 and Form 8-K and whether to adopt rules to exempt qualified foreign banks from the Sarbanes-Oxley Act insider lending prohibition. The open meeting is scheduled for April 13, 2004.

Fund Disclosure Amendments

The form amendments would 1) require open-end management investment companies and variable insurance products to disclose in their prospectuses information about the risks of, and policies and procedures with respect to, the frequent purchase and redemption of investment company shares, 2) clarify that open-end management investment companies and insurance company managed separate accounts that offer variable annuities are required to explain both the circumstances under which they will use fair value pricing and the effects of using fair value pricing and 3) require open end management investment companies and insurance company managed separate accounts that offer variable annuities to disclose their policies and procedures with respect to disclosure of portfolio holdings information.

The Commission stated that the disclosures would enable investors to assess a mutual fund's practices regarding frequent purchases and redemptions of fund shares to determine if they are in line with their expectations. The SEC also noted that fair valuation of a fund's portfolio securities, required under certain circumstances, may serve to foreclose arbitrage opportunities available to market timers. With regard to disclosures concerning portfolio holdings, the Commission noted that some mutual fund managers may have selectively disclosed their portfolios to reward large investors. Specifically, the SEC stated that certain funds gave frequent updates of their portfolio holdings to favored shareholders, enabling these shareholders to use a fund's portfolio information to short the fund's holdings in the same or similar proportions to the fund's established positions.

Shell Company Use of Form S-8, Form 8-K

The SEC will also consider whether to propose amendments to Form S-8 and Form 8-K, and to define the term "shell company." The proposed amendments would address the use of Form S-8 by shell companies and the information required to be disclosed in a report on Form 8-K filed when such a company ceases to be a shell. According to the SEC, the proposals are designed to assure that investors in shell companies that acquire operations or assets have access on a timely basis to the same kind of information as is available to investors in public companies with continuing operations. The Commission stated that " these proposals are intended to protect investors by deterring fraud and abuse in our public securities markets through the use of shell companies."

Foreign Bank Insider Lending Exemption

The SEC will consider whether to adopt a rule to exempt qualified foreign banks from the insider lending prohibition of the Sarbanes-Oxley Act. The rule would exempt foreign banks that meet specified criteria similar to those that qualify domestic banks for the exemption under Exchange Act Section 13(k). The rule also would exempt foreign governments that register securities offerings under the Securities Act on Schedule B registration statements from the insider lending prohibition. The Commission will also consider whether to adopt an amendment to Form 20-F that would require foreign bank issuers to provide the same disclosure regarding certain loans to insiders as that required for domestic banks under Regulation S-K.