Alert February 19, 2008

SEC Proposes Disclosure Requirements for Divestment by Registered Investment Companies under the Sudan Accountability and Divestment Act of 2007

The SEC proposed amendments to Forms N-CSR and N-SAR that would enable a registered investment company to rely on protections provided under the Sudan Accountability and Divestment Act of 2007 (the “Sudan Divestment Act”) when it divests from securities of issuers that it determines conduct or have direct investments in certain business operations in Sudan (“Sudan-Related Issuers”).  The Sudan Divestment Act limits civil, criminal, and administrative actions that may be brought against a registered investment company that divests itself of securities of Sudan-Related Issuers, provided that the investment company makes disclosures in accordance with SEC rules. 

Under the SEC’s proposal, disclosure of a divestment would have to be included in the next report on Form N-CSR for mutual funds and other management investment companies, and on Form N-SAR for unit investment trusts.  Form N-CSR is used to file shareholder reports and related certifications with the SEC, while semi‑annual Form N-SAR filings provide the SEC with information on specified topics primarily related to a registered investment company’s financial statements; both forms are filed electronically and made publicly available on the SEC’s website. 

A registered investment company would also have to disclose certain information if it continues to hold any securities of an issuer whose securities are reflected in a Form N‑CSR/N-SAR divestment disclosure.  The SEC’s proposal would not require a registered investment company to disclose divestments of securities of Sudan-Related Issuers; however, a registered investment company that did not disclose a divestment would not benefit from the protections of the Sudan Divestment Act.  Comments on the SEC’s proposal must be submitted on or before March 17, 2008.