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SEC Amends Forms under Sudan Divestment Act of 2007
Disclosure of Divestment by Registered Companies in Accordance With Sudan Accountability and Divestment Act of 2007
[Release Nos. 34–57711; IC–28254; File No. S7–02–08], 17 CFR Parts 249 and 274, RIN 3235–AK05, 04/30/2008
Basic Information
The Securities and Exchange Commission (SEC) has put into effect amendments, starting April 30, 2008, to its forms under the Securities Exchange Act of 1934 and the Investment Act of 1940. These forms mandate that a registered investment company disclose divestments of securities, pursuant to the Sudan Accountability and Divestment Act of 2007 (“Sudan Divestment Act”), from issuers that the company has determined to have investments or conduct business operations in Sudan. Among other provisions, the Sudan Accountability and Divestment Act of 2007 permits states and localities to adopt and enforce measures requiring divesting from companies having business operations in Sudan that include operations in four sectors (oil, power production, mineral extraction and military equipment) and provides a safe harbor from federal preemption. It allows registered investment companies, such as mutual funds and investment manager pooled investment funds, to divest from such companies and provide them a safe harbor from lawsuits, including lawsuits brought by state and local governments.
The Sudan Divestment Act restricts civil, criminal, and administrative actions that may be brought against a registered investment company that divests itself from such securities, provided that the investment company makes disclosures in accordance with regulations prescribed by the SEC. This limitation on actions does not cover a registered investment company, or any of its employees, officers, directors, or investment advisers, unless the investment company makes disclosures about the divestments in accordance with regulations prescribed by the Commission. To that end, the Sudan Divestment Act requires the SEC to prescribe regulations not later than 120 days after enactment that require disclosure by each registered investment company that divests itself of securities in accordance with the Act. The Sudan Divestment Act states that these rules shall require this disclosure to be included in the next periodic report filed under Section 30 of the Investment Company Act following the divestment.
To implement this Act, the SEC proposed amendments to Form N-CSR and Form N-SAR. Specifically, the SEC has required each registered investment company that divests securities in accordance with the Sudan Divestment Act to disclose the divestment on the new Form N–CSR or Form N–SAR that it files following the divestment. Management investment companies will provide the disclosure on Form N–CSR, and unit investment trusts will provide the disclosure on Form N–SAR. These forms require disclosure of information that will state the securities divested and the magnitude of the divestment. This statement includes the issuer’s name; exchange ticker symbol; Committee on Uniform Securities Identification Procedures (‘‘CUSIP’’) number; total number of shares or, for debt securities, principal amount divested; and dates that the securities were divested.
In addition, the SEC adopted, as proposed, Instructions to Form N–CSR and Form N–SAR to clarify that while a registered investment company is not required to disclose divestments of securities of an issuer that conducts or has direct investments in certain business operations in Sudan, the limitation on actions provided in the Sudan Divestment Act does not apply with respect to a divestment that is not disclosed. The SEC likewise adopts, as proposed, Instructions to Form N–CSR and Form N–SAR stating that, for purposes of determining when a divestment should be reported, if a registered investment company divests its holdings in a particular security in a related series of transactions, the company may deem the divestment to occur at the time of the final transaction in the series.
According to the SEC, the amendments to the forms are effective immediately, in accordance with the Administrative Procedure Act, which permits rules to become effective less than 30 days after publication as ‘‘provided by the agency for good cause found and published with the rule.” The SEC found that good cause exists for immediate effectiveness in light of the statutory requirement that it should prescribe regulations not later than 120 days after the date of the enactment of the Sudan Divestment Act.
View a PDF of the regulation.Service
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