Title: Where Have All the People Gone
1Where Have All the People Gone?
2Where Have All the People Gone
- Moderator Steve Anderson IBM Global Business
Services - Jim Coppedge AIM Investment Services,
Inc./AMVESCAP PLC - Curtis Fields Franklin Templeton Investments
- Atanas Goranov GE Asset Management, Inc.
3Regulatory Obligations Related to Business
Continuity
- Jim Coppedge
- General Counsel,
- AIM Investment Services and
- Associate General Counsel,
- AMVESCAP PLC
4Agenda
- Introduction
- (How the applicable law is structured.)
- Duties of a Mutual Fund
- (How they drive the duties of the transfer
agent.) - Chronological Development of Regulatory Guidance
- Conclusion
- (Whats the point?)
5Introduction
- The Federal Securities Laws seek to divide our
operations up into the duties of - mutual funds
- investment advisers
- brokers and dealers
- transfer agents
6Duties of a Mutual Fund
- Section 22(e) of the Investment Company Act
prohibits a registered investment company from
suspending the right of redemption for more than
seven days, except - for any period during which the NYSE is closed
(other than customary week-end and holiday
closings) or during which trading on the exchange
is restricted or
7Duties of a Mutual Fund (cont)
- for any period during which an emergency exists
as a result of which (A) disposal by the company
of securities owned by it is not reasonably
practicable or (B) it is not reasonably
practicable for such company fairly to determine
the value of its net assets - The Commission shall by rules and regulations
determine the conditions under which (i) trading
shall be deemed to be restricted and (ii) an
emergency shall be deemed to exist
8Chronological Development of Regulatory Guidance
- November 1963, the SEC adopted a Rule, 22(e)-1,
to declare that an emergency existed as a result
of the assassination of President John F.
Kennedy. The Rule prohibited investment
companies from redeeming or repurchasing shares
until the suspension of the Rule by the
Commission. - March 1970, the SEC provided guidance regarding
the pricing of purchase and redemption orders
held up in the mail as a result of a mail strike.
9Chronological Development of Regulatory Guidance
(cont)
- July 1977, the SEC provided for the pricing of
purchase and redemption orders as-of the
following days NAV, where the NYSE closed due to
a power blackout. - February 1978, the SEC allowed funds located in
areas which had been declared to be in a state of
emergency as a result of a severe snow storm to
suspend redemptions of shares for so long as such
emergency lasts provided that sales of shares
were also suspended.
10Chronological Development of Regulatory Guidance
(cont)
- June 1985, SEC Release IC-14559 adopted an
amendment to Rule 22c-1, adopted new Rule 22e-2,
and provided additional guidance regarding a
mutual funds obligations to price shares and
process redemption orders. In a footnote, the
Commission noted - Where operational problems unrelated to an
emergency closing result in transactions being
processed on an "as of" basis, the adviser,
transfer agent or another responsible party may
be liable to the fund for any resulting dilution.
11Chronological Development of Regulatory Guidance
(cont)
- December 1999, the SEC provided additional
guidance regarding a mutual funds obligations to
price shares and process redemption orders.
Highlights included - Section 22(e) does not permit funds to suspend
redemptions in the absence of a determination
made by the Commission. - The letter introduces the idea that funds should
anticipate and plan for such emergencies.
12Chronological Development of Regulatory Guidance
(cont)
- April 2001, the SEC provided additional guidance
regarding a mutual funds obligations to price
shares and made clear that the SEC staff clearly
expected funds to anticipate and plan for
emergencies. - September 2001, the SEC suspended numerous
requirements within the Federal Securities Laws
in consideration of the closure of the NYSE and
other entities as a result of the attacks on the
World Trade Center.
13Chronological Development of Regulatory Guidance
(cont)
- January 2002, the SEC dusted off the 1970 letter
regarding the pricing of purchase and redemption
orders held up in the mail as a result of a mail
strike. - December 2003, the SEC adopted the mutual fund
and investment adviser CCO Rules. - Which relate to business continuity, how?
14Chronological Development of Regulatory Guidance
(cont)
- Footnote 22 to the Release
- We believe that an adviser's fiduciary
obligation to its clients includes the obligation
to take steps to protect the clients' interests
from being placed at risk as a result of the
adviser's inability to provide advisory services
after, for example, a natural disaster The
clients of an adviser that is engaged in the
active management of their assets would
ordinarily be placed at risk if the adviser
ceased operations.
15Chronological Development of Regulatory Guidance
(cont)
- April 2004, the SEC approved the adoption of NASD
Rule 3510(a) and proposed NYSE Rule 446(a), each
setting forth a basic requirement for NASD and
NYSE members and member organizations to create,
maintain, review, and update written business
continuity plans that identify procedures
relating to an emergency or significant business
disruption.
16Conclusion(Whats the point?)
- There are actually three points
- You or your mutual fund clients and their
distributors are legally required to have
business continuity plans in place. - You only get emergency relief if the SEC says
you get emergency relief. - The SEC now asks to see business continuity plans
as a part of every examination. - Thank you for your time.
17Franklins Approach to Planning for a Pandemic
18Pandemic Agenda
- Goal of this presentation
- Likelihood of a Pandemic
- Basic Business Continuity Strategy
- Why plan
- How will a pandemic differ
- Basic elements of our plan
- Crisis Management
- Business Continuity Planning
- Technology
- General Services
- Human Relations
- Corporate Communications
19Pandemic Background
1. Goal To provide an overview of Franklins
current approach and thinking in regards to
planning for a possible Pandemic. 2. Likelihood
of a pandemic occurring The question is more
like earthquakes in California. It is not a
question of if, but rather when and how bad. Some
data points such as the 1918, 1957 1968
pandemics and SARs. But, no good data on
frequency or severity.
3. Strategy Our basic disaster planning strategy
is to shift our operations to other sites for 3
to 5 days, after which we will then need to start
to shift people to alternate sites. However,
this will not work in a pandemic situation.
20Pandemic Background (Continued)
4. Why plan if civilization is going to collapse
We used a reasonable worst case
scenario. A scenario which we think is likely
to occur. This is not a worst case scenario
which anticipates the general breakdown of
society and services.
- 5. How will a pandemic differ from our normal
incidents - - Many sites are likely to be impacted
- at approximately the same time
- - Will not be able to shift people
- between sites
- Site might be impacted, but not
- incapacitated
- - Sites affected for months not hours
- Affects people directly not facilities or IT.
- Employees may choose not to come to work.
- No clear beginning or end.
21Pandemic Plan Outline
- Our pandemic plan is broken down into
- 1. Crisis Management
- - Framework to address a pandemic
- - Tabletop exercises
- 2. Business Continuity Planning
- - Guidance to business units on how to review
their business continuity strategies and
workflows against a - pandemic type scenario
- 3. Technology
- Steps to reduce the impact of a
- pandemic on our data centers
- - Increased remote work capabilities
- - Reviewing other strategies
22Pandemic Plan Outline (Continued)
- 4. General Services
- Best practices for employee hygiene program and
procedures for facility - managers to follow in the event of a pandemic
- 5. Human Relations
- Global HR policy framework to provide
recommendations to local HR - groups to address issues that are likely to
arise in a pandemic - 6. Corporate Communications
- Integrated communication plan
- 7. Plan Does not currently include
- PPE such as Masks gloves, Etc.
- Antiviral Drugs such as Tamiflu
- Vaccines
23Pandemic Closing
Questions?