(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 Proposes Rules for Certifying Fund Reports

Under proposed rule amendments, registered management investment companies would be required to file certified shareholder reports with the Commission. These reports would be designated as reports required under Exchange Act Sections 13(a) and 15(d), and as such, each registered management investment company's principal executive and financial officers would be required to certify the information contained in these reports in the manner required by Section 302 of the Sarbanes-Oxley Act of 2002.

The Commission also proposed an amendment to Form N-SAR, the semi-annual reporting form for registered investment companies, that would uniformly apply to all registered investment companies the requirement to include in Form N-SAR the certification required by Section 302 of the Sarbanes-Oxley Act. Finally, the SEC proposed a new rule to require every registered investment company to maintain disclosure controls and procedures designed to ensure that the information required in its disclosure documents is recorded, processed, summarized, and reported on a timely basis.

The SEC stated that although Form N-SAR is currently the form designated for registered investment companies to comply with their reporting requirements under Exchange Act Sections 13(a) and 15(d), "we believe that certification of Form N-SAR alone is not sufficient to fully implement the intent of the certification requirement of Section 302 of the Sarbanes-Oxley Act for registered management investment companies." According to the Commission, this certification requirement was intended to improve the quality of the disclosure that a company provides about its financial condition in its periodic reports to investors, and for registered management investment companies, the required reports to shareholders, rather than Form N-SAR, is the primary vehicle for providing financial statements to investors. Accordingly, the agency stated that it believes that the information in these reports to shareholders should be certified. Comments on the proposals must be received on or before October 16, 2002.