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SEC Takes Steps to Reduce Reliance on Credit Ratings

Effective November 12, 2009, the Securities and Exchange Commission (the SEC) has adopted amendments (the Amendments) to certain of its rules and forms to eliminate references to credit ratings issued by nationally recognized statistical rating organizations (NRSROs). The Amendments are intended to reduce reliance on credit ratings in SEC rules under the Securities Exchange Act of 1934 (the Exchange Act) and the Investment Company Act of 1940 (the 1940 Act), and are designed to address concerns that references to credit ratings in SEC rules may have contributed to an undue reliance on these ratings by investors. The Amendments will impact mutual funds, and as discussed below, funds will need to revise their Rule 10f-3 procedures by November 12th in order to comply with these new rules.

The SEC also announced that it is re-opening the comment period for, or proposing for initial comments, certain other proposed rule and form amendments that would eliminate additional references to NRSRO ratings (the Proposals). The SEC has stated that any comments on the Proposals should be submitted no later than December 14, 2009.

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