periodic reports on their personal securities transactions. Section 17 (b) of the 1940 Act permits a registered investment company to maintain custody of its assets with any bank. If a fund's custodian bank is an affiliated person of the fund, however, the Commission's staff requires that the custody arrangement comply with Rule 17f2 under the 1940 Act, which sets forth the conditions that an investment company must meet if it has custody of its own assets. Among other things, the rule requires that an independent public accountant perform at least three audits per year of the fund's assets held by the custodian, at least two of which must be surprise audits. 59 O Section 15 (a) of the 1940 Act requires an investment adviser to a registered investment company to have a written contract. contract must be approved by a The vote of a majority of the fund's outstanding voting securities. The contract must describe all compensation to be precisely paid thereunder. If the contract continues in effect for more than two years, its continuance must be specifically approved at least annually by the fund's board of directors or shareholders. contract must provide that it may The be terminated by the fund's board of directors or shareholders at any time, and without the payment of any penalty, on not more than sixty days' written notice to the adviser. Finally, the contract must provide for its automatic termination in the event of its assignment. therefore provisions (described investment this chart. regulations, in the column of Comparable banking are discussed, supra, in the sections noted below. G. INVESTMENT ADVISORY CONTRACT · Federal banking law does not require a bank investment adviser to a mutual acting as fund to have an investment advisory contract with the fund. periodic reports on their personal securities transactions. Section 17 (b) of the 1940 Act permits a registered investment company to maintain custody of its assets with any bank. If a fund's custodian bank is an affiliated person of the fund, however, the Commission's staff requires that the custody arrangement comply with Rule 17f2 under the 1940 Act, which sets forth the conditions that an investment company must meet if it has custody of its own assets. Among other things, the rule requires that an independent public accountant perform at least three audits per year of the fund's assets held by the custodian, at least two of which must be surprise audits. 1. RECORDKEEPING REQUIREMENTS Investment advisers to registered investment companies are required to maintain certain books and records. Investment advisers to registered investment companies are subject to the recordkeeping requirements applicable to registered investment advisers under Rule 204-2 of the IAA. (1940 Act Rule 31a-1 (f)) |