June 10, 2005
Lawrence Martinez, Esq.
Re: Suppression of Monthly Account Statements for Certain Customers
Dear Mr. Martinez:
In your letter, dated June 10, 2005, on behalf D.A. Davidson & Co. ("Davidson"), you request an exemption pursuant to paragraph (f) of Rule 10b-10 under the Securities Exchange Act of 1934 (the "Exchange Act") to permit Davidson to send quarterly account statements (in lieu of monthly statements) to its customers whose only account activity consists of transactions involving the automatic reinvestment of dividends in the shares of pre-selected money market funds.
Based on your letter we understand the facts to be as follows:
Davidson, a registered broker-dealer, offers its customers, by prospectus, shares of money market cash account trusts managed by Deutsch Investment Management Americas Inc. under the names Davidson Cash Equivalent Plus Shares, Davidson Cash Equivalent Shares, Scudder Government Cash Institutional Shares and Scudder Institutional Share (the "Funds"). All of the Funds are no-load, diversified, open-end investment companies registered under the Investment Company Act of 1940 (the "1940 Act") that meet the requirements of Rule 2a-7 under the 1940 Act. The Funds endeavor to maintain a stable net asset value of $1.00 per share.
Customers of Davidson pre-designate the Fund class in which they wish to invest. Thereafter, dividends are paid and automatically reinvested into the selected Fund class once each month (on the same day each month), at the same time for all Fund share classes.
Davidson currently "confirms" Fund dividend reinvestments by monthly account statements in accordance with Rule 10b-10(b). Davidson has requested an exemption to permit it to suppress monthly statements for those customer accounts in which the only activity in a given month is the automatic reinvestment of dividends in the shares of pre-selected Funds. Instead, such accounts will receive a quarterly statement confirming the automatic reinvestments. All other account activity will continue to be confirmed in monthly statements or immediate confirmations in compliance with Rule 10b-10. Specifically, confirmation suppression will not take place where there is any activity in the account (including the deduction of any fee) other than the payment of and the automatic reinvestment of dividends earned on Fund balances in the account.
Customers will receive a minimum of four statements annually (in March, June, September and December). Customers will also be able to obtain current information concerning all Fund investments by either contacting their Financial Consultant or by accessing their account via the Internet, under a free service that allows for electronic viewing of customer balances and transactions.
Davidson will provide a prominently displayed notice to all customers explaining the changes in account statement frequency on a quarterly statement. This notice will be repeated a second time on account statements following the commencing of the account statement suppression. This notice will also appear electronically on the Internet for a period of months. In addition, customers will be encouraged to contact their Financial Consultants with any questions about Fund or cash interest activity.
On the basis of your representations and the facts presented, we find that it is appropriate in the public interest and consistent with the protection of investors to grant, and hereby grant, an exemption from Rule 10b-10 to permit Davidson to confirm automatic dividend reinvestment transactions for dividends in shares of the Funds through the use of quarterly account statements.
This exemption is conditioned on your representations and the facts presented, and particularly on the fact that (1) Davidson will continue to confirm all account activity, except the automatic reinvestment of dividends, as required by Rule 10b-10; (2) customers will be able to obtain current information on automatic dividend reinvestment transactions via the Internet and by contacting their Financial Consultants via telephone; and (3) customers will receive quarterly statements confirming account activity, including automatic dividend reinvestments in the Funds. Moreover, this exemption is strictly limited to the application of Rule 10b-10 to automatic dividend reinvestments. The Division of Market Regulation expresses no view with respect to other questions that Davidson's activities may raise, including the applicability of any other federal or state laws, or self-regulatory organization rules, to such activities.
For the Commission, by the Division of Market Regulation pursuant to delegated authority,1
Brian A. Bussey
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