SEC Division of Investment Management staff letter: Investment Company Institute

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1401 H Street, NW, Washington, DC 20005-2148, USA 202/326-5800 www.ici.org May 30, 2018 ChiefCounsel Division oflnvestment Management U.S. Securities and Exchange Commission 100 F Street NE Washington, DC 20549-8549 Re: Request for No-Action Relief Under the Redemption Requirements ofSection 22(e) of the Investment Company Act of 1940 Dear Mr. Scheidt:
The Investment Company Institute' seeks assurances from the staff ofthe Division of Investment Management (the "Staff') that it will not recommend enforcement action to the Securities and Exchange Commission ( the "Commission" or "SEC") against a registered open-end investment company (a "mutual fund") or its SEC-registered transfer agent under the redemption requirements of
Section 22(e) ofthe Investment Company Act of 1940 (the "Act") if, in the limited circumstances
described in this letter, the transfer agent, acting on behalfofa mutual fund, temporarily delays for more than seven days the disbursement ofredemption proceeds from the mutual fund account ofa Specified Adult held directly with the transfer agent based on the transfer agent's reasonable belief that financial exploitation ofthe Specified Adult has occurred, is occurring, has been attempted, or will be attempted.2 Providing mutual funds and their transfer agents the relief we request is consistent with 1 The Investment Company Institute is the national association ofU.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds (ETFs), and unit investment trusts (UITs). ICI seeks co encourage adherence to high ethical standards, promote public understanding, and otherwise advance the interests offunds, their shareholders, directors, and advisers. Members ofICI manage total assets of$20.9 trillion and serve over 100 million shareholders. 2 The terms "Specified Adultt "accountt and "financial exploitation" as used in chis letter have substantially the same meaning as chose terms are defined in FINRA Rule 2165, Financial Exploitation ofSpecified Adulcs. A Specified Adult is:

May 30, 2018 the Commission's mission ofprotecting investors, particularly senior investors, and will enable mutual funds and their transfer agents to protect senior and other vulnerable adult investors in a manner consistent with that permitted for broker-dealers under a rule recently adopted by the Financial Industry Regulation Association (FINRA).
I. BACKGROUND
A. Financial Exploitation ofSenior and Other Vulnerable Adult Investors Mutual funds are the investment product ofchoice for senior investors. Approximately 43.9% ofall US households - or about 54.9 million - owned mutual funds in mid-2016. 3 Approximately 48% of households headed by a Baby Boomer (head ofhousehold born between 1946 and 1964) owned mutual funds in mid-2016, accounting for 38% ofmutual fund-owning households and 50% ofhouseholds' mutual fund assets. Approximately 33% ofSilent and GI Generation households (born between 1904 and 1945) owned mutual funds in mid-2016, accounting for 11% ofmutual fund-owning households and 15% ofhouseholds' mutual fund assets. These statistics are not surprising when one considers that 92% ofmutual fund investors invest to save for retirement.4 This being the case, we believe it necessary for the industry and regulators to work together to protect from financial exploitation the mutual fund assets senior and other vulnerable adult investors depend upon for retirement. We commend the Commission and its regulatory counterparts at FINRA and in the states for long recognizing the need to protect senior and other vulnerable adult investors from financial exploitation. 5 (A) a natural person age 65 and older; or (B) a natural person age 18 and older who the transfer agent reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests. The transfer agent's reasonable belief pursuant to part (B) ofthe definition ofSpecified Adult may be based on the facts and circumstances observed in the transfer agent's business relationship with the person; however, the transfer agent may not ignore contrary evidence (e.g., a court order) ofwhich it is aware. Account means an account for which a Specified Adulr has the authority to transact business. Financial exploitation means: (A) the wrongful or unauthorized taking, withholding, appropriation, or use ofa Specified Adulr's funds or securities; or (B) any act or omission by a person, including through the use ofa power of attorney, guardianship, or any other authority regarding a Specified Adult, to (i) obtain control, through deception, intimidation or undue influence, over the Specified Adulr's money, assets or property, or (ii) convert the Specified Adulr's money, assets or property. The definition of"Specified Adulrn covers those invesrors who are particularly susceptible to n nancial exploitation. 3 2017 Investment Company Fact Book, 57'h ed., Investment Company Institute (2017) ("Fact Book") at p. 115. 4 Fact Book at p. 113. 5 See, e.g., Protecting Senior Investors: Compliance, Supervisory, and Other Practices Used by Financial Services Firms in Serving Senior Investors, published jointly by the SEC' s Office ofCompliance Inspections and Examinations, the N orrh American Securities Administrators Association (NASAA), and FINRA (September 22, 2008).

May 30, 2018
Notwithstanding this recognition, financial exploitation ofseniors and other vulnerable adults has continued to grow and remains a serious problem. At least $2.9 billion is lost annually to senior financial abuse.6 As recently noted by FINRA:
With the aging of the U.S. population, financial exploitation of seniors and other vulnerable adults is a serious and growing problem. FINRA's experience with the FINRA Securities Helpline for Seniors• has highlighted issues relating to financial exploitation ofseniors and other vulnerable adults. A number ofreports and studies also have explored various aspects of this important topic. Moreover, studies indicate that financial exploitation is the most common form of elder abuse. Financial exploitation can be difficult for any investor, but it can be particularly devastating for seniors and other vulnerable adults, many ofwhom are living on fixed incomes without the ability to offset significant losses over time or through other means. Financial exploitation can occur suddenly, and once funds leave an account they can be difficult, ifnot impossible, to recover, especially when they ultimately are transferred outside ofthe U.S. Members need more effective tools that will allow them to quickly and effectively address suspected financial exploitation ofseniors and other vulnerable adults.7 NASAA, too, has noted the growing exploitation ofsenior investors:
Financial exploitation is the fastest growing category of elder abuse in many states.
According to the 2010 Investor Protection Trust Elder Fraud Survey, one out of every five citizens over the age of65 has been victimized by a financial fraud. These frauds can be perpetrated by strangers, con artists, or even by family members and caregivers in whom the elderly have placed their trust. 8 B. Regulatory Remedies Based upon their concerns, FINRA and NASAA each took action to enable certain financial professionals to protect senior and other vulnerable adult accountholders from financial exploitation by 6 See The MetLife Study ofElder Financial Abuse: Crimes ofOccasion, Desperation, and Predation Against America's Elders, 2 0une-2.011 ),available at hrtps://www.mcdifc.com/assers/cao/mmi/publications/scudies/W 11 /mmi-clder￾financial-abuse.pdf. 7 See Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice ofFiling ofa Proposed Rule Change To Amend Rule 4512 (Customer Account Information) and Adopt FINRA Rule 2165 (Financial Exploitation ofSpecified Adults), SEC Release No. 34-79215; File No. SR-FINRA- 2016-039 (Nov. 1, 2016); 81 Fed. Reg. 215 (Nov. 7, 2016) at p. 78238 (footnotes omitted). 8 See http://serveourseniors.org/abouc/policy-makers/nasaa-model-act/commencai:y/.

May 30, 2018 delaying the disbursement ofredemption proceeds for up to 25 days ifthe financial professional reasonably believes the disbursement may result in the financial exploitation ofa senior or other vulnerable adult accountholder, provided the financial professional complies with certain conditions designed to protect the accountholder. 9 FINRA's action consisted ofadopting new Rule 2165, Financial Exploitation ofSpecified Adults, which was approved by the SEC in February 2017. 10 FINRA proposed the rule to address the above discussed concerns with financial exploitation of Specified Adults. Pursuant to the rule, when a FINRA member (i.e., a broker-dealer) has a reasonable belief chat financial exploitation ofa Specified Adult has occurred, is occurring, has been attempted, or will be attempted, the member may, but is not required to, place a temporary hold on the disbursement11 offunds or securities from the Specified Adult's account. To do so, however, the FINRA member must comply with each ofthe following conditions set forth in the rule:
(1) The FINRA member must reasonably believe chat financial exploitation ofa Specified Adult has occurred, is occurring, has been attempted, or will be attempted; (2) The FINRA member, not later than two business days after the dace that the member first placed the temporary hold on the disbursement offunds or securities must provide notification orally or in writing, which may be electronic, ofthe temporary hold and the reasons for it to: (i) all parties authorized to transact business on the account, including the customer, and (ii) the Trusted Contact Person(s), unless a party authorized to transact business on the account or Trusted Contact Person is unavailable or the member reasonably believes chat a party authorized to transact business on the account or Trusted 9 NASAA' s action consisted ofthe adoption in February 2016 ofa Model Act to Protect Senior and Vulnerable Investors. See NASAA Adopts Model Act to Protect Senior and Vulnerable Adults, NASAA Press Release (Feb. 1, 2016), which is available at: http://www.nasaa.org/38777/nasaa-members-adopc-model-act-to-protecc-seniors-and-vulnerable-adults/. 10 See Securities Exchange Act Release No. 79964 (Feb. 3, 2017), 82 FR 10059 (Feb. 9, 2017) (Notice ofFiling ofPartial Amendment No. 1 and Order Granting Accelerated Approval ofFile No. SR-FINRA-2016-039) (Approval Order). At the time it approved Rule 2165, the SEC also approved FINRA amendments to FINRA Rule 4512 requiring broker-dealers to make reasonable efforts to obtain the name ofand contact information for a trusted contact person age 18 or older upon the opening ofa non-institutional customer's account or when updating account information for a non-i;stitutional acc-;;unt in existence prior to the effective date ofthe amendments. 11 Rule 2165 does not permit a broker-dealer to delay effecting a transaction requested by a shareholder .. Instead, it only permits a broker-dealer to delay paying out the redemption proceeds ofsuch requested transaction. See Securities Exchange Act Release No. 79964 (Feb. 3, 2017), 82 FR 10059, 10066 (Feb. 9, 2017) (Notice ofFiling ofPartial Amendment No. 1 and Order Granting Accelerated Approval ofFile No.SR-FINRA-2016-039): FINRA Regulatory Notice 17-11, p. 4 (March 2017) (Financial Exploitation ofSeniors).

May 30, 2018
Contact Person(s) has engaged, is engaged, or will engage in the financial exploitation ofthe Specified Adult; 12 and (3) The FINRA member must immediately initiate an internal review ofthe facts and circumstances that caused the member to reasonably believe that the financial exploitation ofthe Specified Adult has occurred, is occurring, has been attempted, or will be attempted. Rule 2165 also requires that each temporary hold expire not later than either (a) 15 business days after it was imposed unless sooner terminated or extended by a state regulator or agency or court of competent jurisdiction; or (b) 25 business days after it was imposed provided the member's internal review ofthe facts and circumstances under (3), above, supports the member's reasonable belief regarding financial exploitation ofthe Specified Adult. Any member relying on the rule is also required to establish and maintain written supervisory procedures that are reasonably designed to achieve compliance with the rule 13 and maintain specified records, 14 which must be available to FINRA upon request. Because all broker-dealers that distribute mutual fund shares are subject to FINRA's rules, this rule provides those FINRA members that distribute mutual funds a new and important tool to protect their senior and other vulnerable adult customers.
C. A Gap in the Protection ofMutual Fund Investors
Some mutual fund shareholder accounts are held directly with the mutual fund and serviced by the fund's transfer agent. Accounts held this way are referred to as "direct-at-fund" accounts. With direct￾at-fund accounts, the mutual fund's transfer agent typically is responsible for opening and servicing the accounts, maintaining account records, and serving as the fund's point ofcontact with shareholders. Given its relationship with the fund's shareholders in direct-at-fund accounts, the fund's transfer agent 12 "Trusted Contact Person" is defined in Subsection (a)(3) ofRule 2165 as che person who may be contacted about the Specified Adult's Account in accordance with Rule 4512. 13 A member's written supervisory procedures under che rule muse include, but are not limited co, procedures related co che identification, escalation, and reporting ofmatters related co che financial e~loication ofSpecified Adults and they muse identify che title ofeach person authorized co place, terminate, or extend a temporary hold on disbursements. Such persons muse be an associated person ofthe member who serves in a supervisory, compliance, or legal capacity for che member. 14 These records muse include: (1) requesc(s) for disbursement chat may constitute financial exploitation ofa Specified Adule and che resulting temporary hold; (2) che finding ofa reasonable belief chat financial exploitation has occurred, is occurring. has been accempced, or will be attempted underlying the decision to place a temporary hold on a disbursement; (3) che name and tide ofthe associated person chat authorized the temporary hold on a disbursement; (4) notification(s) to the relevant parties as required by che rule; and (5) records relating to che internal review ofche faces and circumstances the member is required to conduct to impose a temporary hold.

May30,2018 may be best positioned to detect financial exploitation ofcertain ofthe fund's senior and other vulnerable adult shareholders. Notwithstanding this, under current law, when a fund's transfer agent suspects financial exploitation in a direct-at-fund account, it cannot lawfully delay the disbursement of redemption proceeds while it investigates the situation. This is because the transfer agent is acting as an agent ofthe fund, and Section 22( e) ofthe Act prohibits a mutual fund from delaying the disbursement ofredemption proceeds for more than seven days. 15 For all practical purposes, the fund's transfer agent stands in the shoes ofthe fund in dealing with fund shareholders regarding the shareholders' accounts and it is the transfer agent that ensures a mutual fund's compliance with Section 22(e)'s seven-day redemption period. Mutual fund transfer agents may wish to protect Specified Adult shareholders from financial exploitation to the same extent that broker-dealers may do so under FINRA Rule 2165. 16 The requirements ofSection 22(e) may put certain mutual fund shareholders who own their shares direct-at-fund at a greater risk ofharm from financial abuse than shareholders protected by FINRA's rule. Unless the Commission provides mutual funds and their transfer agents relief from the seven-day period in Section 22( e ), this disparate treatment will continue. To address our concerns with this disparity, the Institute respectfully requests assurance that the Staff would not recommend enforcement action to the Commission against a mutual fund or its SEC-registered transfer agent based upon Section 22(e) ifthe transfer agent delays the disbursement ofredemption proceeds from a Specified Adult's direct-at-fund account for more than seven days under the terms and conditions described below.
II. REQUEST FOR No-ACTION ASSURANCES
As noted above, Section 22( e) ofthe Act prohibits a mutual fund from delaying the payment ofmutual fund redemption proceeds for more than seven days. As a practical matter, the redemption process is administered, and the redemption proceeds are paid, by a mutual fund's transfer agent. Section 22(e) was designed to prevent mutual funds from interfering with the redemption rights ofshareholders for "ulterior motives," such as to retain fund assets for the benefit ofthe management company. 17 While
Section 22(e) provides an important protection to mutual fund shareholders, in light ofFINRA Rule
2165, it results in a disparity between the tools a broker-dealer may use to protect its senior and other vulnerable adult investors and those available to mutual funds and their transfer agents. A transfer agent's temporary hold on a disbursement ofredemption proceeds under the circumstances described 15 Section 22(e) ofche Ace prohibits any mutual fund from postponing che payment ofredemption proceeds from a shareholder account "for more than seven days after che tender ofsuch security co che company or its agent designated for chat purpose for redemption." 16 This request reflects the lnsticuce's consultation with representatives ofour members' mutual fund transfer agents. 17 See Hearings Before a Subcomm. ojthe Comm. On Banking and Currency on S. 3580, 76th Cong., 3d Sess. (1940) ac p. 291 (statement ofDavid Schenker).

Doug Scheide, Esquire
May 30,2018
Page?
in chis letter does not raise the "ulterior motives" concern underlying Section 22(e) because, among meeting ocher conditions, such a hold will be for the sole purpose ofprotecting a Specified Adule from financial exploitation and will be based on a reasonable belief chat such exploitation has occurred, is occurring, has been attempted, or will be attempted. Accordingly, we respectfully request assurance chat the Scaff would not recommend enforcement action co the Commission under Section 22(e) ofthe Ace against a mutual fund or its SEC-registered transfer agent ifa temporary hold is placed on the disbursement18 ofredemption proceeds for the protection of Specified Adults in the case ofdirect-at-fund accounts, provided such transfer agent complies with each ofthe following conditions chat correspond co the conditions imposed on broker-dealers under FINRA Rule 2165:

1. Ac the time ofopening a non-institutional direct-at-fund account, the transfer agent holding
   the account:
   A. Will request from the accountholder the name ofand contact information for a trusted contact person age 18 or older who may be contacted about the customer's account ("Trusted Contact Person"). 19 Ifthe accountholder provides the name ofa Trusted Contact Person, the transfer agent muse maintain such person's name and contact information. B. Will disclose in writing, which may be electronic, co the customer chat the transfer agent or an employee ofthe transfer agent is authorized co contact the Trusted Contact Person and disclose information about the customer's account co address possible financial exploitation 18 A temporary hold pursuant to the requested relief may be placed on a particular suspicious disbursement(s) but not on other, non-suspicious disbursements. Where a questionable disbursement involves less than all assets in an account, the transfer agent may not place a blanket hold on the entire account. Each disbursement must be analyzed separately. 19 The Trusted Contact Person is intended to be a resource for the transfer agent in administering the customer's account, protecting assets, and responding to possible financial exploitation. The transfer agent may use its discretion in relying on any information provided by the Trusted Contact Person. The transfer agent may elect to notify an individual that he or she was named as a Trusted Contact Person; however, such notification is not required. The transfer agent and the customer may benefit from the trusted contact information in many different settings. For example, consistent with the disclosure, ifthe transfer agent has been unable to contact the customer after multiple attempts, the transfer agent could contact a Trusted Contact Person to inquire about the customer's current contact information. Or ifthe customer is known to be ill or infirm and the transfer agent has been unable to contact the customer after multiple attempts, the transfer agent could contact a Trusted Contact Person to inquire about the customer's health status. The transfer agent also could reach out to a Trusted Contact Person ifit suspects that the customer may be suffering from Alzheimer's disease, dementia or other forms ofdiminished capacity. The transfer agent could contact a Trusted Contact Person to address possible financial exploitation ofthe customer before placing a temporary hold on a disbursement.

May 30, 2018 or to confirm the specifics ofthe customer's current contact information, health status, or the identity ofany legal guardian, executor, trustee, or holder ofa power ofattorney.20
2. With respect to any direct-at-fund account that was opened prior to the issuance ofthe
requested relief, the transfer agent will comply with conditions l .A. and l .B. above when updating the information for the account either in the course ofthe transfer agent's routine and customary business or as otherwise required by applicable laws or rules.21
3. The absence ofthe name ofor contact information for a Trusted Contact Person will not
prevent reliance on the requested relief in the case ofa direct-at-fund account, provided that the transfer agent makes reasonable efforts to obtain such information from the accountholder as required under conditions 1 or 2, above.22
4. The transfer agent may place a temporary hold23 on a disbursement ofredemption proceeds
from a direct-at-fund mutual fund account provided chat, in addition to satisfying conditions 1 and 2, above, it satisfies each ofthe following conditions:
A. The transfer agent reasonably believes chat financial exploitation ofthe Specified Adult who holds mutual fund shares in a direct-at-fund account has occurred, is occurring, has been attempted, or will be attempted;24 20 The transfer agent will provide this disclosure even ifa customer fails to identify a trusted contact. Among other things, such disclosure may assist a customer in making an informed decision about whether to provide the Trusted Contact Person information 21 In the absence ofapplicable laws or rules, the transfer agent should consider asking the customer to review and update the name ofand contact information for a Trusted Contact Person on a periodic basis or when there is a reason to believe that there has been a change in the customer's situation. The transfer agent should note as well that a customer's request to change his or her Trusted Contact person may be a possible red flag offinancial exploitation. For example, a senior customer instructing the transfer agent to change his Trusted Contact Person from an immediate family member to a previously unknown third party may be a red flag offinancial exploitation. 22 Asking a customer to provide the name ofand contact information for a Trusted Contact Person ordinarily would constitute reasonable efforts to obtain the information. A mailing address, phone number and email address for the Trusted Contact Person may be the most useful contact information to the transfer agent. 23 Unless the transfer agent reasonably believes that doing so would cause further harm to a Specified Adule, the transfer agent is encouraged to attempt to resolve a matter with a customer before placing a temporary hold. 24 This relief will not impact a mutual fund's obligations under Federal law relating to the reporting ofsuspicious financial activity (e.g., anti-money laundering and SAR reporting), the prevention ofidentity theft under the SEC's Red Flags Rules, and activities related to Customer Identification Programs. As a practical matter, as with other transfer agent services noted herein, mutual fund transfer agents provide services to mutual funds in these areas and perform these functions on their behalf

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B. The transfer agent, not later than two business days after the date that the transfer agent first placed the temporary hold on the disbursement ofredemption proceeds, provides notification orally or in writing, which may be electronic, ofthe temporary hold and the reason for the temporary hold to: (i) all parties authorized to transact business on the account, including the accountholder, unless a party is unavailable or the transfer agent reasonably believes that the party has engaged, is engaged, or will engage in che financial exploitation ofche Specified Adult; and (ii) the Trusted Contact Person(s), unless the Trusted Contact Person is unavailable or the transfer agent reasonably believes that the Trusted Contact Person(s) has engaged, is engaged, or will engage in the financial exploitation ofthe Specified Adult;25
C. The transfer agent will immediately initiate an internal review ofthe facts and
circumstances that caused the transfer agent co reasonably believe that the financial exploitation ofthe Specified Adult has occurred, is occurring, has been attempted, or will be attempted; and D. The transfer agent will hold the delayed redemption proceeds in the transfer agent's Demand Deposit Account ("DDA"). The transfer agent will maintain records for both the DDA and the Specified Adult's account documenting that such proceeds in the DDA are being held for the accountholder pending their disposition pursuant to this relief The amount ofredemption proceeds being held for the Specified Adult's direct-at-fund account will also be accurately reflected on or with the next confirmation or account statement that the transfer agent is required to provide to the accountholder. S. The temporary hold permitted by condition 4 will expire not later than 1S business days after the date that the transfer agent first placed the temporary hold on the disbursement of redemption proceeds, unless otherwise terminated or extended by a state regulator or agency of competent jurisdiction or a court ofcompetent jurisdiction, or extended pursuant co condition 6.26 25 The lack ofan identified Trusted Contact Person, the inability to contact the Trusted Contact Person, or a person's refusal to act as a Trusted Contact Person would be considered to mean that the Trusted Contact Person is not available. Furthermore, the inability to contact a parry authorized to transact business on an account would be considered to mean that the parry was not available. 26 The transfer agent is not precluded from terminating a temporary hold after communicating with either the customer or a Trusted Contact Person. A customer's objection to a temporary hold or information obtained during an exchange with the customer or Trusted Contact Person may be used in determining whether a hold should be placed or lifted. While not dispositive, the transfer agent should weigh a customer's or Trusted Contact Person's objection against other information in determining whether a hold should be placed or lifted.

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6. Provided that the transfer agent's internal review ofthe facts and circumstances supports the
transfer agent's reasonable belief that the financial exploitation ofthe Specified Adult has occurred, is occurring, has been attempted, or will be attempted, the temporary hold may be extended by the transfer agent for no longer than 10 business days following the date authorized by condition 5, unless otherwise terminated or extended by a state regulator or agency ofcompetent jurisdiction or a court ofcompetent jurisdiction.
7. The transfer agent will establish and maintain written procedures reasonably designed to
achieve compliance with the terms and conditions ofthis relief, including, but not limited to, procedures related to the identification, escalation, and reporting ofmatters related to the financial exploitation ofSpecified Adults, as well as procedures on whether to release or reinvest delayed redemption proceeds, taking into account the facts and circumstances ofeach case, should the transfer agent's internal review support the transfer agent's reasonable belief that financial exploitation ofthe Specified Adult has occurred, is occurring, has been attempted, or will be attempted.
8. The transfer agent's written procedures will identify the tide ofeach person authorized to place,
terminate, or extend a temporary hold on behalf ofthe transfer agent pursuant to this relie£ Any such person will be an employee ofthe transfer agent who serves in a supervisory, compliance, or legal capacity for the transfer agent. 27
9. The transfer agent will retain records related to compliance with this relief, which will be
readily available to the SEC upon request. The retained records will include records of: (a) request(s) for disbursement that may constitute financial exploitation ofa Specified Adult and the resulting tern porary hold; (b) the finding ofa reasonable belief that financial exploitation has occurred, is occurring, has been attempted, or will be attempted underlying the decision to place a temporary hold on a disbursement; (c) the name and tide ofthe employee chat authorized the temporary hold on a disbursement; (d) notification(s) co che relevant parties pursuant co condition 4.B. ofchis relief; and ( e) che internal review ofthe faces and circumstances pursuant to condition 4.C. ofchis relie£28 n addition co the transfer agent satisfying each ofche conditions sec forth above, prior to imposing a temporary hold on the disbursement ofredemption proceeds from a direct-at-fund account in reliance 27 This condition is intended to ensure that the transfer agent's decision to place a temporary hold is elevated to an employee with appropriate authoriry. 28 SEC-registered transfer agents are subject to record retention requirements ofRules 17 Ad-6 and 17 Ad-7 under the Securities Exchange Act of 1934. Consistent with the records required by Rule 17 Ad-6( c), the records listed in condition 9 will be maintained for a period ofnot less than six years, the first six months in an easily accessible place.

• • •
  Doug Scheide, Esquire
  May 30, 2018 on the requested relief: (a) the transfer agent will develop and document training policies or programs reasonably designed co ensure chat the transfer agent's employees comply with the terms and conditions ofthe requested relief; and (b) the mutual fund for which che transfer agent aces as the recordkeeper for the direct-at-fund account will disclose in its prospectus or statement ofadditional information chat the fund may place a temporary hold on the disbursement ofredemption proceeds in accordance with the terms and conditions ofthe requested relie£ Further, the fund has established or will establish, as pare ofthe fund's compliance policies and procedures pursuant co Rule 38a-1 under the Act, escalation and periodic reporting protocols between the fund and the transfer agent29 under which the transfer agent will provide the fund or its designee information regarding instances in which the transfer agent relied upon chis relie£ Such information should include, for example, the transfer agent's findings ofa reasonable belief, as documented under condition 9 above, chat financial exploitation ofa Specified Adule holding mutual fund shares in a direct-at-fund account has occurred, is occurring, has been attempted, or will be attempted, and how the matter was resolved consistently with the terms and conditions ofchis relie£ 30 The Institute appreciates the staff's consideration ofour request for relie£ Ifgranted, our relief will permit mutual fund transfer agents to do their pare to protect seniors from financial exploitation and abuse and ensure chat similar protections are afforded co senior and vulnerable mutual fund investors without regard to where or how they hold their mutual fund account. Indeed, a shareholder's protection should not depend on where or how the shareholder elected to purchase her or his mutual 29 As the Commission stated in the adopting release for Rule 38a-l under the Act: "The chief compliance officer, in exercising her responsibilities under the rule, will oversee the fund's service providers, which will have their own compliance officials. A chief compliance officer should diligently administer this oversight responsibility by taking steps to assure herself that each service provider has implemented effective compliance policies and procedures administered by competent personnel. The chiefcompliance officer should be familiar with each service provider's operations and understand those aspects oftheir operations that ex_pose the fund to com__pliance risks. She should maintain an active working relationship with each service provider's compliance personnel. Arrangements with the service provider should provide the fund's chief compliance officer with direct access to these personnel, and should provide the compliance officer with periodic repom and special reports in the event ofcompliance problems." 68 FR 74714, 74722 (Dec. 24, 2003) (the "Rule 38a-l Adopting Release"). We understand that transfer agents
  generally have established fraud prevention processes as well as escalation and reporting protocols with the funds they service. 30 This information could be provided to the mutual fund separately or included with other information already shared with the mutual fund as part ofthe fund's existing oversight ofthe transfer agent. As recognized in the Rule 38a-l Adopting Release, mutual funds already" contractually delegate functions under [ the anti-money laundering program required of them] to a fund's service provider, but must take steps to ensure that the service provider's compliance program is reasonably designed, and to monitor its implementation to ensure its effectiveness." See fn. 91.

May 30, 2018 fund shares. The requested relief is also wholly consistent with both the purposes behind Section 22(e) and with the Commission's authority under Section 22(e)(3) to relax the statutory mandate when necessary to protect investors. Sincerely, q.,c.,4'.A- ~~..--r-=----~._ Tamara K. Salmon Associate General Counsel