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Where Have All the People Gone

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Title: Where Have All the People Gone


1
Where Have All the People Gone?
  • Preparing for a Pandemic

2
Where 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.

3
Regulatory Obligations Related to Business
Continuity
  • Jim Coppedge
  • General Counsel,
  • AIM Investment Services and
  • Associate General Counsel,
  • AMVESCAP PLC

4
Agenda
  • 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?)

5
Introduction
  • The Federal Securities Laws seek to divide our
    operations up into the duties of
  • mutual funds
  • investment advisers
  • brokers and dealers
  • transfer agents

6
Duties 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

7
Duties 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

8
Chronological 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.

9
Chronological 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.

10
Chronological 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.

11
Chronological 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.

12
Chronological 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.

13
Chronological 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?

14
Chronological 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.

15
Chronological 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.

16
Conclusion(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.

17
Franklins Approach to Planning for a Pandemic
18
Pandemic 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

19
Pandemic 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.
20
Pandemic 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.

21
Pandemic 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

22
Pandemic 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

23
Pandemic Closing
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