SEC Division of Investment Management staff letter: American Funds Distributors

AMRICA.N PVNDB DXBTRXVTOB INC 333 SOUTH HOPE STREET LOS ANGELES CALIFORNIA 00071 1LI.CP$40NC 1131 dee .0651 MICMAEOWNER 1989 çj4on Office of Chief Counsel fub1tc Division of Investment Management ve1labi1itY Securities and Exchange Commission 1450 Fifth Street NW Washington D.C 20540 Re Sections 5b and 10a of the Securities Act of 1933 the 1933 Act Rules 13k and 1482 under the 1933 Act Section 214b of the Investment Company Act of 1940 the 1940 Act and Rule 214b-3 under the 1940 Act Gentlemen American Funds Distributors Inc AFD principal underwriter for 22 investment companies collectively known as The American Funds Group the Funds is writing to confirm that the staff of the Division of Investment Management the staff will not recommend to the Securities and Exchange Commission the Commission that the Commission take any enforcement action if AFD uses certain sales literature and advertisements written in languages other than English non-English sales materials as described below AFD believes that this request is consistent with the literal terms of the relevant statutes and rules Facts Persons who use English as second language or do not use English at all rePrfsent significant percentage of the U.S population According1 it rft.en difficult to communicate effectively with such individuals regarding the Funds with According to the 1980 census 23 million U.S residents or roughly 10% of the nations population spoke language other than English in their homes In Los Angeles where AFD has its principal office according to report published in The Wall Street Journal by 1992 two of every three students enrolled in the public school system will come from family where language other than English is spoken The Los Angeles public school student population embraces more than 80 languages and comes from such diverse places as Madagascar Macao and Mexico It would not be economically feasible to reach such disparate groups if it were necessary to translate Fund prospoctuses

Office of Chief Counsel
August 25 1989
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English-language advertisements or sales literature Of course non-English speaking individuals living in the U.S are accustomed to conducting business dealings in English but are naturally more comfortable with their native language and are more likely to respond to material written in their native language Therefore AFD is considering developing non-English sales materials for use in the U.S Non-English sales materials distributed to the public would either be preceded or accompanied by curreAt prospectuses for the Funds being offered pursuant to Sections 5b and 10a of the 1933 Act or qualify as tombstones pursuant to Rule 13k under the 1933 Act or qualify as omitting prospectuses pursuant to Rule 182 under the 1933 Act Only English-language prospectuses would be available in connection with non-English sales materials Each piece of non-English sales material would bear prominent legend to the effect that the prospectuses for .the Funds being offered are available only in the English language and potential investors should not invest or send money without understanding the content of the prospectuses Additionally non-English sales materials would also conform to all applicable requirements including the antifraud provisions of Rule 156 under the 1933 Act Potential investors receiving non-English sales materials who might not understand an English-language prospectus would be further protected by the fact that shares of the Funds are sold through securities dealers who are subject to numerous requirements related to investor protection including Article III
Section of the National Association of Securities Dealers Rules
of Fair Practice which states in pertinent part that recommending to custoier the purchase sale or exthnge of eny security member shall have reasonable grounds for believing that the recommendation is suitable for the customer.. Emphasis supplied Discussion Non-English Sales Materials Accompanied or Preceded by Prospectus AFD requests confirmation that the staff would not recommend that the Commission take action if an English-language prospectus of Fund were delivered to potential investors pursuant to Sections 5b and 10a of the 1933 Act along with non-English sales materials for that Fund

Office of Chief Counsel
August 25 1989
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The staff has confirmed to the Franklin Group of Funds that it would take no-action position under Section 24b of the 19110 Act see below with respect to audio-taped sales material intended for distribution along with written prospectus to blind and visually impaired persons provided the Materials given the audience to whom the Materials are presented provide an accurate representation of the products being offered by Franklin i.e the Materials are not misleading and the Materials with respect to whether their presentation may or may not be misleading are pre ed ac.cc -th tLe ri .LiE sat forth in Rule 156 under the 1933 Act See Franklin Group of Funds SEC No-Action Letter available February 26 1987 the Franklin letter AFD believes that delivering for example Chinese-language sales literature along with an English-language prospectus to native Chinese-language speakers is analogous to delivering audio-taped sales literature along with written prospectus to blind and visually impaired individuals Further the foreign population has daily exposure to written English and must conduct its business in that language even if they do not read it fluently Of course as discussed above eFi inends to adhere to the conditLons contained in the Fra.iklin letter Non-English Sales_Materini.s_Used Pursuant to Rules 1311 and 482 AFD also requests confirmation that the staff would not recommend that the Commission take action if non-English sales materials for Fund were delivered to investors pursuant to either Rule 134 or Rule 482 when only en English-language prospectus for that fund would be availaLle to such investois Although the Franklin letter only dealt with sales material ccni Ly tha tff siios equally to materials used pursuant to Rules 134 and 1182 since materials qualified under those rules are designed to offer the English-language prospectus Non-English Sales Materials Filed Pursuant to Section 214b and Rule 24b-3 AFD requests confirmation that the staff would not recommend that the Commission take action if non-English sales materials used with English-language prospecttses are filed pursuant to Section 24b of the 19110 Act arid Rule 211b-3 thereunder

Office of Chief Counsel
August 25 1989
Page
The staff in the Franklin letthr took no-action position with respect to the filing of audio-taped material to be used with blind and visually impaired individuals pursuant to Section 24b of the 1940 Act As discussed above we believe the issue presented in this letter is analogous to the issue presented in the Franklin letter We respectfully request based on the facts and representations contained in this letter that the staff provide confirmation that it will not recommend that the Commission take action as requested Please call the undersigned direct at 213/486-9425 if you need further information or have any questions Very truly yours 4htsL tL Michael Downer

OC11E
Our Ref No 89-527-CC
American Funds
RESPONSE OF THE OFFICE OF CHIEF COUNSEL Distributors Inc DIVISION OF INVESTMENT MANAGEMENT File No 13 2-3 Your letter of August 25 1989 requests our assurance that we would not recommend that the Commission take any enforcement action against American Fund Distributors Inc AFD the principal underwriter for The American Funds Group Funds if AFD distributes non-English language sales materials in the U.S that are accompanied or preceded by an English language prospectus in accordance with Sections 5b and 10a of the Securities Act of 1933 1933 Act and under Rule 134 or 482 of the 1933 Act when only an English language prospectus is available You also seek our confirmation that we would not recommend enforcement action if nonEnglish language sales materials used with English language prospectuses are filed under
Section 24b of the Investment Company Act of 1940 1940 Acttt
and Rule 24b-3 thereunder
You state that persons who use English as second language or do not use English at all represent significant percentage of the U.S population and it is therefore difficult to communicate effectively with such individuals regarding the Funds when distributing English language advertisements or sales literature Further you state that non-English speaking individuals living in the U.S are more likely to respond to material written in their native language In order to effectively communicate with these individuals you propose to include legend on each piece of nonEnglish language sales material indicatiig that prospectuses for the Funds are available only in English and potential investors should not invest or send money without understanding the content of the prospectus You believe that your request is analogous to the no-action request made by the Franklin Group of Funds pub avail Feb 26 1987 the Franklin letter in which the staff granted noaction relief However we are unwilling to extend the position taken in the Franklin letter to AFDs distribution of nonEnglish sales literature and advertisements We believe In the Franklin letter the staff stated that it would not recommend any enforcement action to the Commission under
Section 24b of the 1940 Act if the Franklin Group of Funds
filed three copies of transcript of audio taped advertising materials to be used by the funds in connection with the sale of fund shares to blind and visually-impaired persons Franklin stated that it would supply prospectus that would either precede or accompany the sales materials The sales materials were to include statement disclosing the availability of prospectus and statement advising prospective investors to review the prospectus carefully before investing The staff is currently reconsidering its position in the Franklin letter

that if AFD distributes sales literature or advertisements in language other than English prospectus in the same language should be readily available For the reasons stated above we are unable to assure you that we would not recommend that the Commission take any enforcement action if AFD proceeds as described in your letter LQjj Carol Peebles Attorney 21 For example if AFD distributes sales literature in language other than English and an English language prospectus either precedes or accompanies such sales literature the sales literature should state that prospectus in the same language is available upon request and prospective investors should review prospectus carefully before investing We believe our position is not inconsistent with Investment Company Act Rel No 6082 June 23 1970 discussing the applicability of the federal securities laws to the offer and sale of open-end investment company shares outside the U.S in which the Commission stated that prospectus used in any foreign country should be printed in language readily understood by that segment of the foreign public being solicited which may or may not be the native language of the country While AFD is not distributing prospectuses in foreign country it proposes to solicit segment of the public whose native language may not be English