June 11, 1999

Mr. Jonathan G. Katz, Secretary

U.S. Securities and Exchange Commission

450 5th Street, N.W.

Washington, D.C. 20549-0609

Dear Mr. Katz:

The Association for Investment Management and Research ("AIMR") is pleased to respond to the Securities and Exchange Commission’s (the "Commission") request for comments on the Proposed Rules. In general, the Proposed Rules would permit foreign securities to be offered to Canadian/U.S. Participants in certain Canadian tax-deferred retirement accounts ("Canadian Retirement Accounts") and sold to such accounts without being registered under the Securities Act of 1933 (the "Securities Act"), and would permit foreign investment companies to offer securities to those Canadian/U.S. Participants and sell securities to their Canadian retirement accounts without registering under the Investment Company Act of 1940 (the "1940 Act"). The AIMR’s Canadian Advocacy Council (the "CAC") offers its views on this subject below.

General Comments

The CAC strongly supports and encourages the current initiatives of the U.S. and Canadian regulators to facilitate cross-border trading. It believes that such efforts will increase capital market efficiency by providing issuers and dealers with an incentive to conduct their operations in a more competitive manner and by removing costly barriers to trade.

In particular, the Proposed Rules would be a significant step towards achieving the foregoing by addressing the problem that Canadian/U.S. Participants have faced with respect to structuring the securities held in their Canadian Retirement Accounts as their financial needs change. As such, the CAC strongly supports the Proposed Rules and applauds the Commission for its efforts in enabling Canadians living in the U.S. to continue to manage the assets in their Canadian Retirement Accounts by providing relief from the U.S. registration requirements under certain conditions for offers of securities to such individuals and sales to their accounts.

Specific Comments

It is the CAC’s understanding that for the purposes of the Proposed Rules, "Canadian/U.S. Participants" will be defined to include those individuals who have established Canadian Retirement Accounts with Canadian earned income who either reside in the U.S. on a permanent basis or reside in the U.S. during the winter months. As such, an individual’s status as a Canadian/U.S. Participant does not depend on the length of his or her stay in the U.S. The CAC supports the Commission’s efforts to eliminate the distinction between those Canadian individuals who reside in the U.S. on a temporary basis and those who reside on a permanent basis. However, given that the Commission views the length of a Canadian/U.S. Participant’s residency to be irrelevant in relation to the foregoing, the CAC questions why any such duration must fall in the "winter months," and encourages the Commission to clarify the definition of "Canadian/U.S. Participants" in this regard.

It is also the CAC’s understanding that the definition of "Canadian Retirement Account" only includes Canadian Retirement Accounts that are "self-directed" (i.e. in which the individual participant decides how to invest account assets). The CAC believes that such a definition is appropriate because Canadian Retirement Accounts that are not self-directed would be managed almost exclusively in Canada and would thus not likely be subject to U.S. registration requirements.

Notwithstanding the foregoing, the CAC understands that certain employer-sponsored contribution plans (e.g., registered pension plans and deferred profit sharing plans) are excluded from the exemption provided by the Proposed Rules because they might not operate "exclusively to provide retirement benefits." The CAC encourages the Commission to expand the definition of "Canadian Retirement Accounts" to include such contribution plans which operate, if perhaps not exclusively, primarily with the intention of providing retirement benefits.

Notwithstanding the laudable efforts of the Commission with respect to the Proposed Rules, the CAC believes that the full desired effect of the Proposed Rules will not be achieved without the provision by the Commission of certain other complementary exemptions. More specifically, Canadian broker-dealers that effect securities transactions for the Canadian/U.S. Participants with respect to their Canadian Retirement Accounts are still subject to the broker-dealer registration requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). Notwithstanding the fact that Rule 15a-6 of the Exchange Act would provide limited exemptive relief to Canadian broker-dealers for certain unsolicited trades from Canadian/U.S. Participants, additional relief would be required to permit Canadian broker-dealers to provide the necessary services to adequately maintain Canadian Retirement Accounts and give full effect to the Proposed Rules. It is the CAC’s understanding that the Commission is considering providing such exemptive relief. The CAC strongly urges the Commission to adopt such rules to achieve the cross-border trading benefits as discussed above.

The Commission has requested comments with respect to the effects of the Proposed Rules on efficiency, competition and capital formation. As stated above, the CAC strongly supports the current initiatives of the U.S. and Canadian regulators to facilitate cross-border trading and believes that such efforts will increase capital market efficiency by providing issuers and dealers with an incentive to conduct their operations in a more competitive manner and by removing costly regulatory barriers to trade. With respect to the Proposed Rules, it is the view of the CAC that increased competition will lead to reduced transaction costs associated with securities trading. More specifically, issuers of eligible securities under the Rules will have an incentive to lower their management fees and reduce operating costs in order to remain competitive.

Notwithstanding the foregoing, the CAC believes that the increased competition will have a limited impact on U.S. issuers (including U.S. mutual funds) since under Canadian law, Canadian/U.S. Participants are restricted in the amount of additional funds that may be invested in relation to their Canadian Retirement Accounts and are restricted in their ability to invest in non-Canadian securities.

Conclusion

Thank you for the opportunity to comment on the Proposed Rules. If you need additional information or would like to arrange a meeting to discuss the issues that the CAC has raised, please do not hesitate to contact me or the CAC’s co-chairs: Gillian F. Ewing, CFA at (403) 299-3079 or Andrew D. Grasby, CFA at (403) 260-3530.

cc: Advocacy Distribution

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