Prior reference paragraph 17 of ET section 101 1240030 Mutual Funds 01 A

Prior reference paragraph 17 of et section 101

This preview shows page 16 - 18 out of 63 pages.

. [Priorreference: paragraph .17 of ET section 101]1.240.030 Mutual Funds.01A covered member who owns shares in a mutual fund has a direct financial interest in the mutualfund. However, whether the underlying investments in the mutual fund are considered to be the coveredmember’s direct financial interests or indirect financial interests depends on the proportion of the mutualfund’s outstanding shares that the covered member owns and whether the mutual fund is diversified..02If a covered member owns 5 percent or less of the outstanding shares of a diversified mutual fund, theunderlying investments would be considered immaterial indirect financial interests. Accordingly, theself- interest threat would be at an acceptable level, and independence would not be impaireddetermine if the mutual fund is diversified, the covered member should consider referring to ( . To a) themutual fund’s prospectus for disclosure regarding fund management’s determination regardingdiversification and (b) Section 5(b)(1) of the Investment Company Act of 1940..03If a covered member owns more than 5 percent of a diversified mutual fund’s outstanding shares, or if acovered member owns a financial interest in a nondiversified mutual fund, the covered member shouldevaluate the mutual fund’s underlying investments to determine whether the covered member holds amaterial indirect financial interest in any of the underlying investments. .04The following example illustrates how to determine if the underlying investments are material to acovered member’s net worth. If
in . . .

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture