THE INDEPENDENT TRUSTEES AND DIRECTORS OF
THE GCG TRUST AND THE ING FUNDS
November 19, 2002
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Re: Proposed Rule: Disclosure of Proxy Voting Policies and Proxy
Voting Records by Registered Management Investment Companies
Dear Mr. Katz:
This is a comment letter regarding proposals by the Securities and Exchange Commission ("SEC") relating to disclosures of proxy voting policies and proxy voting records by registered management investment companies as set forth in Investment Company Act Release No. 25739 (September 20, 2002) (the "Release").
This letter is being submitted by the nine members of the Boards of Trustees and Directors of The GCG Trust and the ING Funds who are not "interested persons" of those Funds as that term is defined in the Investment Company Act of 1940, as amended. These funds offer a total of 96 separate series and have total assets as of October 31, 2002, of approximately $26 billion. Many of these funds invest a majority of their assets in equity securities. As a result, we have a strong interest in the SEC's rule proposal.
At the outset, we wish to emphasize our agreement with many of the SEC's statements in the Release and our support for certain portions of the proposals in the Release. For example, we believe that proxies should be voted in the best interests of an investment company's shareholders. In this connection, we recognize that proxy-voting duties typically are delegated to an investment company's investment adviser or subadviser and, in some circumstances, such an adviser or subadviser might have a conflict of interest between its own best interests and the best interests of shareholders.
As a result of the foregoing, we support the SEC's proposal to require investment companies to disclose their proxy-voting policies and procedures in their registration statements. We also support the SEC's proposal to require that those policies and procedures must address how potential conflicts of interests between shareholders and certain affiliated persons will be resolved. Similarly, we support a rule that would require the reasonable maintenance of proxy-voting records so that the SEC staff could review proxy-voting practices to the extent they deem appropriate. These types of rule-making actions are commonly taken by the SEC when attempting to deal with conflicts of interest situations.
However, we strongly disagree with those portions of the SEC's proposals that would require an investment company to disclose publicly information regarding how the investment company voted its proxies relating to portfolio securities and to disclose publicly any specific instances in which an actual vote was inconsistent with the investment company's policies and procedures. This approach is itself inconsistent with the SEC's treatment of other potential conflict situations involving investment companies.1 In addition, this requirement would impose numerous new direct and indirect costs on investment companies that are not justified by any demonstrable pre-existing problem or meaningful investor demand.
The direct and indirect costs include (1) the potentially substantial costs of actually implementing the disclosure requirements, (2) the added burden on management and directors of responding to unaffiliated persons who wish to influence the outcome of various proxy votes, and (3) the potential disadvantage from a portfolio management point of view of making more frequent public disclosures of a fund's portfolio holdings.
These costs are unwarranted in the absence of, among other evidence, a meaningful investor demand for this type of information. We understand that some public interest groups have lobbied for years for this type of data. However, we are advised by management of our funds that very few, if any, actual shareholders or investors have sought this type of information. To the extent that there are material numbers of investors who seek this type of data, market forces voluntarily will generate it. In the meantime, legitimate conflict of interest concerns can be addressed fully by those portions of the SEC's proposal that we do support.
In summary, in our view, the interests of shareholders can best be served by modifying the SEC's rule proposal as set forth above, and we urge the SEC to modify its proposed rule accordingly.
Paul Doherty, Esq.
J. Michael Earley
Dr. R. Barbara Gitenstein
Walter H. May
David W.C. Putnam
Blaine E. Rieke
Roger B. Vincent
Richard A. Wedemeyer
/s/ Walter H. May
Walter H. May, Co-Lead Trustee/Director
/s/ Jock Patton
Jock Patton, Co-Lead Trustee/Director
|1 || For example, the SEC responded effectively to demonstrated circumstances in which investment company "access persons" engaged in personal trading activities that conflicted with the best interests of shareholders. As part of this response, the SEC amended Rule 17j-1 to require that each investment company's code of ethics be filed as part of its registration statement and that certain disclosure regarding these codes be made in the registration statement. The SEC did not require that there be public disclosure of each personal trade by an access person. Similarly, each specific instance of non-compliance with a code of ethics need not be disclosed publicly. Rather, material code violations must be reported to appropriate supervisory personnel, including, as applicable, the investment company's board of directors or trustees. We see no justification for a more onerous approach with respect to proxy voting policies and procedures.