[Federal Register Volume 66, Number 53 (Monday, March 19, 2001)]
[Proposed Rules]
[Pages 15369-15373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6662]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 270 and 275

[Release No. IC-24890; 
IA-1932; File No. S7-06-01]
RIN 3235-AI05


Electronic Recordkeeping by Investment Companies and Investment 
Advisers

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission is proposing for public 
comment amendments to revise rules under the Investment Company Act of 
1940 and the Investment Advisers Act of 1940 that permit registered 
investment companies and registered investment advisers to preserve 
required records using electronic storage media such as magnetic disks, 
tape, and other digital storage media. The proposed amendments would 
expand the ability of advisers and funds to use electronic storage 
media to maintain and preserve records. The Commission is proposing 
these rule amendments in response to the enactment of the Electronic 
Signatures in Global and National Commerce Act, which encourages 
federal agencies to accommodate electronic recordkeeping.

DATES: Comments must be received on or before April 19, 2001.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 5th Street, 
NW., Washington, DC 20549-0609. Comments also may be submitted 
electronically at the following E-mail address: [email protected]. 
All comment letters should refer to File No. S7-06-01; this file number 
should be included on the subject line if E-mail is used. Comment 
letters will be available for public inspection and copying in the 
Commission's Public Reference Room, 450 5th Street, NW., Washington, 
DC. Electronically submitted comment letters also will be posted on the 
Commission's Internet web site (http://www.sec.gov).\1\
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    \1\ We do not edit personal, identifying information, such as 
names or E-mail addresses, from electronic submissions. Submit only 
information you wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: William C. Middlebrooks, Jr., 
Attorney, or Martha B. Peterson, Special Counsel, Office of Regulatory 
Policy, (202) 942-0690, Division of Investment Management, Securities 
and Exchange Commission, 450 5th Street, NW., Washington, DC 20549-
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0506.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') today is requesting public comment on proposed 
amendments to rule 31a-2 [17 CFR 270.31a-2] under the Investment 
Company Act of 1940 [15 U.S.C. 80a] (the ``Investment Company Act''), 
and rule 204-2 [17 CFR 275.204-2] under the Investment Advisers Act of 
1940 [15 U.S.C. 80b] (the ``Advisers Act'').\2\
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    \2\ Unless otherwise noted, all references to rule 31a-2 or rule 
204-2, or to any paragraph of those rules, will be to 17 CFR 
270.31a-2 and 17 CFR 275.204-2, respectively.
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Executive Summary

    The federal securities laws require registered investment companies 
(``funds''), registered investment advisers (``advisers''), and others 
to make and keep books and records. The recordkeeping requirements are 
a key part of the Commission's investment company and investment 
adviser regulatory program because they allow us to monitor the 
operations of funds and advisers and to evaluate their compliance with 
the federal securities laws.
    Last year, Congress passed the Electronic Signatures in Global and 
National Commerce Act (``Electronic Signatures Act,'' ``Act,'' or 
``ESIGN'') to

[[Page 15370]]

facilitate the use of electronic records and signatures in interstate 
and foreign commerce.\3\ Consistent with the purpose and goals of the 
Electronic Signatures Act, we are proposing rule amendments to expand 
the circumstances under which funds and advisers may keep their records 
on electronic storage media. We are also proposing amendments to 
clarify and update our recordkeeping rules.
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    \3\ Electronic Signatures in Global and National Commerce Act, 
Pub. L. No. 106-229, 114 Stat. 464 (2000) [15 U.S.C. 7001], 
Preamble.
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I. Discussion

A. Amendments to Rules 31a-2 and 204-2

    Rules 31a-2 and 204-2 provide that funds and advisers may keep 
records on electronic storage media only if the records were originally 
created or received in an electronic format.\4\ The Commission's staff 
has issued no-action letters that conditionally permit funds and 
advisers to convert records into an electronic format and retain them 
electronically.\5\ We are proposing amendments to the recordkeeping 
rules that would incorporate these no-action letters, but would 
eliminate many of the conditions that apply only to electronic archives 
of non-electronic originals.\6\ As a result, electronic records, 
regardless of how they originated, would be subject to uniform 
requirements.
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    \4\ Section 31(a) of the Investment Company Act authorizes the 
Commission to prescribe by rule the books and records that a fund 
and its adviser, depositor, and principal underwriter must maintain. 
15 U.S.C. 80a-30(a). Rule 31a-1 [17 CFR 270.31a-1] under the 
Investment Company Act specifies the types of records that must be 
kept. Rule 31a-2 specifies where and for how long these records must 
be kept. Section 204 of the Advisers Act authorizes the Commission 
to adopt rules requiring advisers to make and keep records. 15 
U.S.C. 80b-4. Rule 204-2 specifies the records that registered 
advisers must make and keep. Rule 31a-2(f)(2) and rule 204-2(g)(2) 
provide that a fund or adviser may maintain and preserve on magnetic 
tape, disk, or other computer storage medium records that, in the 
ordinary course of the entity's business, are created by the entity 
on electronic media or are received by the entity on electronic 
media or by electronic data transmission. Rule 31a-2(f)(2) also 
provides that records created on electronic media in the ordinary 
course of business on behalf of a fund, or received on behalf of a 
fund on electronic media or by electronic data transmission, may be 
maintained and preserved on a computer storage medium. Both rule 
31a-2 and rule 204-2 permit many records to be reproduced and 
preserved on micrographic or electronic storage media. In general, 
if a fund or adviser uses one of these media, it must: (i) Arrange 
the records and index the storage medium to permit access to the 
records; (ii) be able to provide a facsimile enlargement of the 
micrographic storage medium, or computer printout or copy of the 
electronic storage medium; (iii) separately store a duplicate copy 
of the record; (iv) establish procedures for maintaining, 
preserving, and providing access to records stored on electronic 
storage media in order to safeguard them reasonably from loss, 
alteration, or destruction; and (v) have facilities to project and 
photocopy enlargements of micrographic records. Rule 31a-2(f)(1) and 
rule 204-2(g)(1).
    \5\ See Oppenheimer Management Corporation, SEC No-Action Letter 
(Aug. 28, 1995); DST Systems, Inc., SEC No-Action Letter (Feb. 2, 
1993).
    \6\ Proposed rule 31a-2(f)(3) and proposed rule 204-2(g)(3). 
Funds and advisers would be required to have procedures to assure 
that any electronic reproduction of a non-electronic original is 
complete, accurate, and legible. Proposed rule 31a-2(f)(3)(iii) and 
proposed rule 204-2(g)(3)(iii).
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    The standards for electronic recordkeeping we are proposing for 
advisers and funds are different from rules we have adopted for broker-
dealers, which require brokerage records to be preserved in a non-
rewriteable, non-erasable (``WORM'') format.\7\ We understand that use 
of WORM would require most advisers and funds to invest in new 
electronic recordkeeping technologies. Such costs may not be justified 
in light of the limited problems we have experienced with funds and 
advisers altering stored records. Moreover, most advisory and mutual 
fund arrangements involve multiple parties (e.g., brokers, custodians, 
transfer agents), each with its own, often parallel, recordkeeping 
requirement. As a result, our compliance examiners typically have an 
alternative means to verify the accuracy of adviser and fund records. 
Comment is requested on our assessment of the costs and benefits of 
requiring records to be stored using WORM format.
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    \7\ Rule 17a-4(f)(2)(ii)(A) under the Securities Exchange Act of 
1934 [17 CFR 240.17a-4]. Non-rewriteable, non-erasable formats are 
also known as ``write once, read many'' or ``WORM'' formats.
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    We are also proposing to amend the recordkeeping rules to clarify 
the obligation of funds and advisers to provide copies of their records 
to Commission examiners. Currently the rules require that funds and 
advisers ``promptly provide'' on request any ``facsimile enlargement'' 
of a photographic record or ``computer printout or copy'' of a computer 
storage medium.\8\ The proposed amendments would make clear that (i) 
``provide promptly'' means in no case more than one business day after 
the request;\9\ (ii) printouts or copies of a storage medium include 
legible, true, and complete printouts or copies of the records (or the 
information necessary to generate the records) in the medium and format 
in which they are stored;\10\ and (iii) the adviser or fund must 
provide a means to access, search, view, sort, and print the 
records.\11\ Finally, we are proposing to adopt technical amendments 
that incorporate the terminology used in electronic recordkeeping rules 
under the Securities Exchange Act of 1934 into rules 31a-2 and 204-
2.\12\ Comment is requested on these proposals. Should our rules be 
amended in other ways to accommodate electronic recordkeeping?
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    \8\ Rule 31a-2(f)(1)(ii) and rule 204-2(g)(1)(ii).
    \9\ Proposed rule 31a-2(f)(2)(ii) and proposed rule 204-
2(g)(2)(ii). When rules 31a-2 and 204-2 were amended to permit funds 
and advisers to maintain their records electronically, we made clear 
that it was our expectation that, absent ``unusual circumstances'' 
computer-stored records would be provided within 24 hours of a 
request, and that there would be many circumstances in which funds 
and advisers would be able to, and therefore would be required to, 
provide records immediately or within a few hours of a request. See 
Investment Company Act; Use of Magnetic Tape, Disk, or Other 
Computer Storage Medium, Investment Company Act Rel. No. 15410 
(Nov.13, 1986) [51 FR 42207 (Nov. 24, 1986)]; Amendment to 
Investment Advisers Act Recordkeeping Rule, Investment Advisers Act 
Rel. No. 952 (Jan. 11, 1985) [50 FR 2542 (Jan. 17, 1985)]. We have 
changed this requirement to one business day to take holidays and 
weekends into consideration. This change is not intended to alter 
the general requirement that records be provided within 24 hours of 
a request. Thus, for example, records requested at 2:00 p.m. on one 
business day would have to be provided no later than 2:00 p.m. on 
the next business day.
    \10\ Proposed rule 31a-2(f)(2)(ii)(A) and (B) and proposed rule 
204-2(g)(2)(ii)(A) and (B). These amendments make clear that a fund 
or adviser that stores records electronically must provide 
Commission examiners, on request, an electronic copy of the records. 
An example of information necessary to generate a record would be 
software that is used with a relational database to generate a 
required record.
    \11\ Proposed rule 31a-2(f)(2)(ii)(C) and proposed rule 204-
2(g)(2)(ii)(C). This provision would eliminate the need for the 
current requirement that funds and advisers have facilities for 
immediate, easily readable projection of micrographic storage media 
and for producing easily readable enlargements, and we are proposing 
to eliminate that requirement. See rule 31a-2(f)(1)(v) and rule 204-
2(g)(1)(v).
    \12\ Rules 31a-2(f)(1) and 204-2(g)(1) currently refer to 
records stored on ``computer storage media'' and as ``photographs on 
film.'' Consistent with the terms used in rule 17a-4(f)(1), proposed 
rule 31a-2(f)(1) and proposed rule 204-2(g)(1) would refer to 
records stored on ``micrographic media'' and ``electronic storage 
media.''
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B. Interpretation of Electronic Signatures Act

    Under the Electronic Signatures Act, an agency's recordkeeping 
requirements may be met by retaining electronic records that accurately 
reflect the information set forth in the record, and remain accessible 
to all persons who are entitled to access, in a format that can be 
accurately reproduced.\13\ The Act allows us to interpret this 
provision pursuant to our authority under the Investment Company and 
Advisers Acts.\14\ We anticipate that upon adoption of these amendments 
we will interpret the Electronic Signatures Act as requiring funds and 
advisers to comply with rules 31a-2 and 204-2 when they keep electronic 
records. As a result, compliance with rules 31a-2 and 204-2 would be 
the exclusive means by which funds and advisers could comply

[[Page 15371]]

with the Act's standards of accuracy and accessibility.
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    \13\ ESIGN section 101(d)(1).
    \14\ ESIGN section 104(b)(1).
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    Our interpretation of the Electronic Signatures Act must be based 
on findings that (i) our interpreting regulations are substantially 
justified; (ii) the methods selected to carry out our purposes are 
substantially equivalent to the requirements imposed on records that 
are not electronic records and will not impose unreasonable costs on 
the acceptance and use of electronic records; and (iii) the methods 
selected to carry out our purposes do not require, or accord greater 
legal status or effect to, the implementation or application of a 
specific technology or technical specification for performing the 
functions of creating, storing, generating, receiving, communicating, 
or authenticating electronic records or electronic signatures.\15\
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    \15\ ESIGN section 104(b)(2)(C).
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    The Electronic Signatures Act's principles of accuracy and 
accessibility are consistent with the requirements of rules 31a-2 and 
204-2. Our requirements that funds and advisers store separately 
duplicate copies of their records, and maintain procedures to safeguard 
them from loss, alteration, or destruction protect the integrity of the 
records and assure that the records are ``accurate.'' If a fund or 
adviser separately stores a duplicate copy of its records, then if one 
copy is altered or damaged there will still be an accurate backup copy. 
Procedures to safeguard records from loss, alteration, or destruction 
make it possible for funds, advisers, and us to be reasonably confident 
that the records have not been changed in ways that cannot otherwise be 
detected. Our requirements that funds and advisers arrange and index 
records, and that they be ready to provide printouts or copies of the 
records, make those records accessible. Funds and advisers keep many 
records. Those records are not truly accessible unless there is an 
index system that makes it possible to find a particular record. The 
records are also not truly accessible if they cannot be printed out or 
copied for later use.
    We request comment on whether rules 31a-2 and 204-2, as proposed to 
be amended, are consistent with the requirements of the Electronic 
Signatures Act.

II. General Request for Comments

    We request comment on the proposed rule amendments that are the 
subject of this release, suggestions for additional provisions or 
changes to the rules, and comments on other matters that might have an 
effect on the proposals contained in this release. We request comment 
whether the proposals, if adopted, would promote efficiency, 
competition, and capital formation.\16\
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    \16\ Section 2(c) of the Investment Company Act requires the 
Commission, when it engages in rulemaking and is required to 
consider whether an action is consistent with the public interest, 
to consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition, and capital formation. 
15 U.S.C. 80a-2(c). Both section 31 of the Investment Company Act 
[15 U.S.C. 80a-30], under which we are proposing to adopt amendments 
to rule 31a-2, and section 204 of the Advisers Act [15 U.S.C. 80b-
4], under which we are proposing to adopt amendments to rule 204-2, 
require us to consider whether the proposed rules are necessary or 
appropriate in the public interest or for the protection of 
investors.
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III. Cost/Benefit Analysis

    We are considering the costs and the benefits of the proposed 
amendments to rules 31a-2 and 204-2. We encourage commenters to discuss 
any costs or benefits of the proposal. The primary benefit of the 
amendments is the improved transparency and flexibility of our 
recordkeeping rules.
    We do not believe the proposals will impose any costs on funds or 
advisers. As described above, the proposals would allow funds and 
advisers to maintain records in compliance with the relevant 
recordkeeping requirements in electronic storage media, regardless of 
whether the record was created or received electronically or otherwise. 
Electronic storage is optional under the proposals. We assume that 
funds and advisers will not opt for the electronic storage option 
provided for in the proposals unless doing so is cheaper (or otherwise 
more efficient and, therefore, supported by business considerations). 
By contrast, we believe that there may be significant benefits to the 
proposals. As stated, because using electronic storage media is 
optional, we do not believe that funds or advisers will employ such 
media unless the benefits conferred by the option outweigh the costs 
and, therefore, electronic storage makes good business sense. It is our 
belief, therefore, that the proposals, if adopted, would allow funds 
and advisers greater flexibility to make (business) decisions about 
recordkeeping and, when appropriate, opt for electronic storage with 
potential cost savings and other benefits.
    We request comment on the costs and benefits of the proposed rule 
amendments and invite commenters to submit their own estimates of costs 
and benefits that would result from the proposal. In order to evaluate 
fully the costs and benefits associated with the proposed amendments, 
we request that commenters' estimates of the costs and benefits of the 
proposed amendments be accompanied by specific empirical data 
supporting their estimates.

IV. Paperwork Reduction Act

    The proposals do not require a new collection of information. They 
affect only the manner in which registrants can store the information 
that must be collected under rules 31a-2 and 204-2. In connection with 
rules 31a-2 and 204-2, the Commission submitted to the Office of 
Management and Budget, pursuant to the Paperwork Reduction Act, a 
request for approval and received OMB control numbers for the rules, 
OMB Control Nos. 3235-0179 (rule 31a-2) and 3235-0278 (rule 204-2).

V. Summary of Initial Regulatory Flexibility Analysis

    The Commission has prepared an Initial Regulatory Flexibility 
Analysis (``IRFA'') in accordance with 5 U.S.C. 603 regarding 
amendments to rule 31a-2 under the Investment Company Act and rule 204-
2 under the Advisers Act. The following summarizes the IRFA.
    Our rules under the Investment Company Act and Advisers Act require 
registered funds and registered advisers to retain certain books and 
records. Rule 31a-2 and rule 204-2 allow funds and advisers to store 
these records on electronic storage media, provided they were created 
or received in an electronic format. The Electronic Signatures Act 
states that federal recordkeeping requirements may be met by retaining 
electronic records of the information required to be maintained so long 
as the electronic record is accurate and accessible to those entitled 
to access it.\17\ We are proposing to amend rules 31a-2 and 204-2 to 
allow funds and advisers to store non-electronic originals 
electronically.\18\ Electronic storage of required books and records is 
not mandatory, rather it is an option for funds and advisers who find 
it cost-effective.
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    \17\ ESIGN section 101(d)(1)(A), (B). ESIGN allows us to 
interpret this provision.
    \18\ The amendments to rule 31a-2 are proposed by the Commission 
under the authority set forth in sections 31 and 38(a) of the 
Investment Company Act and to amend rule 204-2 under the authority 
set forth in sections 204, 206(4), and 211 of the Advisers Act.
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    The Regulatory Flexibility Act requires us to consider the 
potential effect of our rulemaking on small entities. For purposes of 
the Investment Company Act, a ``small entity'' is ``an investment 
company that, altogether with other investment companies in the same 
group of related investment companies, has net assets of $50 million or 
less as of the end of its most recent

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fiscal year.'' \19\ For purposes of the Advisers Act, an investment 
adviser generally is a small entity if it (i) manages less than $25 
million in assets, (ii) has total assets of less than $5 million on the 
last of its most recent fiscal year, and (iii) does not control, is not 
controlled by, and is not under common control with another investment 
adviser that manages $25 million or more in assets, or any person that 
had total assets of $5 million or more on the last day of the most 
recent fiscal year.\20\
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    \19\ 17 CFR 270.0-10.
    \20\ 17 CFR 275.0-7.
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    We estimate that there are approximately (1) 3,610 active 
registered management investment companies, of which 203 are small 
entities, and (2) 762 unit investment trusts, of which 12 are small 
entities. We further estimate that approximately 1,500 out of 8,100 
investment advisers registered with us are small entities. All 
registered investment companies (including management investment 
companies and unit investment trusts) and all registered advisers are 
subject to the recordkeeping requirements of rule 31a-2 and rule 204-2, 
respectively. They all could be affected by the amendments we are 
proposing.
    The IRFA states that all registered advisers and funds that choose 
to store required records electronically will be subject to the 
proposed rule amendments. There are no rules that duplicate, overlap, 
or conflict with the proposed amendments. We anticipate that small 
entities will benefit from the proposed rule amendments, because 
electronic record maintenance may be more affordable and efficient than 
paper or micrographic storage. Moreover, as electronic storage is not 
mandated, we assume that funds and advisers will choose to store 
records electronically only if it would be cost-effective.
    The Commission encourages comments on the matters discussed in the 
IRFA. Comment is requested on the number of small entities that would 
be affected by the proposed amendments, and the likely impact on those 
small entities. Specifically, commenters are requested to describe the 
nature of the amendments' impact on the small entities and to provide 
empirical data supporting the extent of the impact. We also request 
comment on how many small entities will choose to store their records 
electronically. The comments will be placed in the same public file as 
comments on the proposed rule amendments. A copy of the IRFA may be 
obtained by contacting William C. Middlebrooks, Jr., (202) 942-0690, 
Securities and Exchange Commission, 450 5th Street, NW., Washington, DC 
20549-0506.

Statutory Authority

    The Commission is proposing amendments to rule 31a-2 of the 
Investment Company Act pursuant to authority set forth in sections 31 
and 38(a) of the Investment Company Act [15 U.S.C. 80a-30 and 80a-
37(a)].
    The Commission is proposing amendments to rule 204-2 of the 
Advisers Act pursuant to authority set forth in sections 204, 206(4), 
and 211 of the Advisers Act [15 U.S.C. 80b-4, 80b-6(4), and 80b-11].

List of Subjects

17 CFR Part 270

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

17 CFR Part 275

    Reporting and recordkeeping requirements, Securities.

Text of Proposed Rule Amendments

    For reasons set forth in the preamble, title 17, Chapter II of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

    1. The Authority citation for part 270 continues to read in part as 
follows:

    Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, 
unless otherwise noted;

* * * * *
    2. Section 270.31a-2 is amended by:
    a. Revising paragraphs (f)(1) and (f)(2);
    b. Redesignating paragraph (f)(3) as (f)(4); and
    c. Adding a new paragraph (f)(3) to read as follows:


Sec. 270.31a-2  Records to be preserved by registered investment 
companies, certain majority-owned subsidiaries thereof, and other 
persons having transactions with registered investment companies.

* * * * *
    (f)(1) Micrographic and electronic storage permitted. The records 
required to be maintained and preserved under Sec. 270.31a-1(a) through 
(d) and paragraphs (a) through (c) of this section may be maintained 
and preserved for the required time by, or on behalf of, an investment 
company on:
    (i) Micrographic media, including microfilm, microfiche, or any 
similar medium; or
    (ii) Electronic storage media, including any digital storage medium 
or system that meets the terms of this section.
    (2) General requirements. The investment company, or person that 
maintains and preserves records on its behalf, must:
    (i) Arrange and index the records in a way that permits easy 
location, access, and retrieval of any particular record;
    (ii) Provide promptly (but in no case more than one business day 
after the request) any of the following that the Commission (by its 
examiners or other representatives) or the directors of the company may 
request:
    (A) A legible, true, and complete copy of the record (or the 
information necessary to generate the record) in the medium and format 
in which it is stored;
    (B) A legible, true, and complete printout of the record; and
    (C) Means to access, search, view, sort, and print the records; and
    (iii) Separately store, for the time required for preservation of 
the original record, a duplicate copy of the record stored on the 
micrographic or electronic storage media or any medium allowed by this 
rule.
    (3) Special requirements for electronic storage media. In the case 
of records on electronic storage media, the investment company, or 
person that maintains and preserves records on its behalf, must 
establish and maintain procedures:
    (i) To maintain and preserve the records, so as to reasonably 
safeguard them from loss, alteration, or destruction;
    (ii) To limit access to the records to properly authorized 
personnel, the directors of the investment company, and the Commission 
(including its examiners and other representatives); and
    (iii) To reasonably ensure that any reproduction of a non-
electronic original record on electronic storage media is complete, 
true, and legible when retrieved.
* * * * *

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

    3. The authority citation for part 275 continues to read in part as 
follows:

    Authority: 15 U.S.C. 80b-2(a)(ii)(F), 80b-2(a)(17), 80b-3, 80b-
4, 80b-6(4), 80b-6a, 80b-11, unless otherwise noted.

* * * * *
    4. The authority citation following Sec. 275.204-2 is removed.
    5. Section 275.204-2 is amended by revising paragraphs (g)(1) and 
(g)(2); and adding paragraph (g)(3), to read as follows:

[[Page 15373]]

Sec. 275.204-2  Books and records to be maintained by investment 
advisers.

* * * * *
    (g)(1) Micrographic and electronic storage permitted. The records 
required to be maintained and preserved pursuant to this section may be 
maintained and preserved for the required time by an investment adviser 
on:
    (i) Micrographic media, including microfilm, microfiche, or any 
similar medium; or
    (ii) Electronic storage media, including any digital storage medium 
or system that meets the terms of this section.
    (2) General requirements. The investment adviser must:
    (i) Arrange and index the records in a way that permits easy 
location, access, and retrieval of any particular record;
    (ii) Provide promptly (but in no case more than one business day 
after the request) any of the following that the Commission (by its 
examiners or other representatives) may request:
    (A) A legible, true, and complete copy of the record (or the 
information necessary to generate the record) in the medium and format 
in which it is stored;
    (B) A legible, true, and complete printout of the record; and
    (C) Means to access, search, view, sort, and print the records; and
    (iii) Separately store, for the time required for preservation of 
the original record, a duplicate copy of the record stored on the 
micrographic or electronic storage media or any medium allowed by this 
rule.
    (3) Special requirements for electronic storage media. In the case 
of records on electronic storage media, the investment adviser must 
establish and maintain procedures:
    (i) To maintain and preserve the records, so as to reasonably 
safeguard them from loss, alteration, or destruction;
    (ii) To limit access to the records to properly authorized 
personnel and the Commission (including its examiners and other 
representatives); and
    (iii) To reasonably ensure that any reproduction of a non-
electronic original record on electronic storage media is complete, 
true, and legible when retrieved.
* * * * *

    Dated: March 13, 2001.

    By the Commission.

Margaret H. McFarland,
 Deputy Secretary.
[FR Doc. 01-6662 Filed 3-16-01; 8:45 am]
BILLING CODE 8010-01-U