Federal Court Of Appeals For 7th Circuit Reverses District Court Injunction Requiring Consumer Products And Munitions Company To Register As Investment Company

Contents:

Developments of Note

Staff of SEC's Division of Investment Management Issues Q&A Regarding Disclosure of Expenses of Investing in Other Funds in Prospectus Fee Tables

FRB Proposes Regulation Z Amendments

Federal Court of Appeals for 7th Circuit Reverses District Court Injunction Requiring Consumer Products and Munitions Company to Register as Investment Company

Other Item of Note

SEC Announces Roundtable Discussion Regarding Rule 12b-1 under the Investment Company Act

Developments of Note

Staff of SEC's Division of Investment Management Issues Q&A Regarding Disclosure of Expenses of Investing in Other Funds in Prospectus Fee Tables

The staff of the SEC's Division of Investment Management provided guidance in a question and answer format (the "Q&A") regarding issues raised regarding the new prospectus fee table disclosure requirements under which certain registered funds must disclose as a separate line item in their fee tables the expenses of investing in other funds. The new disclosure requirements, which were adopted as part of rule amendments addressing cash sweeps by registered funds and the conditions applicable to registered affiliated and unaffiliated funds-of-funds (see the June 27, 2006 Alert), apply to the prospectus fee tables for open-end investment companies, closed-end investment companies, and separate accounts organized as management investment companies. (The new fee table disclosure applies to filings on or after January 2, 2007 that are either (a) new registration statements or (b) post-effective amendments that are annual updates.) The Q&A covers a range of questions from technical expense calculation issues to the types of underlying fund investments that fall within the disclosure requirement. In the latter category, the Q&A notes that fees and expenses associated with investing cash collateral from securities lending activity in a money market fund or other cash sweep vehicle would not trigger the new disclosure requirements.

FRB Proposes Regulation Z Amendments

The FRB announced a long-awaited proposal to amend Regulation Z's open-end credit provisions. Focusing mainly on credit card transactions, the proposal is aimed at making disclosures more understandable to consumers. The lengthy proposal, which does not apply to home equity lines of credit, contains recommendations to address formatting, timing, and content for a wide variety of required disclosures, including expanded Schumer boxes to enhance clarity and to summarize key terms, and modified periodic statements to group like charges together, itemize interest charges for different types of transactions, and provide dollar amounts of fees along with percentages. For example, under the proposal, the Schumer box (which is currently a table of statements describing the account) may be modified by using numeric figures instead of text in some instances in order to make the disclosure easier to understand. The proposal requests input on modified terminology requirements to make the "effective APR" more understandable to consumers, and asks for comment on whether this disclosure should be eliminated altogether. Additionally, the proposal would require 45 days advance noticereplacing today's 15 day requirementbefore a creditor can impose certain changes in terms or rate increases due to delinquency or default...