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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 231, 241, 271, and 276

Release No. 33-7288; 34-37182; IC-21945; IA-1562  File No. S7-13-
96

USE OF ELECTRONIC MEDIA BY BROKER-DEALERS, TRANSFER AGENTS, AND
INVESTMENT ADVISERS FOR DELIVERY OF INFORMATION; ADDITIONAL
EXAMPLES UNDER THE SECURITIES ACT OF 1933, SECURITIES EXCHANGE 
ACT OF 1934, AND INVESTMENT COMPANY ACT OF 1940  

AGENCY:   Securities and Exchange Commission.

ACTION:   Interpretation; Solicitation of Comments.

SUMMARY:  The Securities and Exchange Commission ("Commission")
is publishing its views with respect to the use of electronic
media by broker-dealers, transfer agents, and investment advisers
to deliver information as required under the Securities Exchange
Act of 1934 and the Investment Advisers Act of 1940.  This
interpretation is intended to provide guidance in using
electronic media to fulfill broker-dealers' obligations to
deliver information to customers, transfer agents' obligations to
deliver information upon written request, and investment
advisers' disclosure delivery obligations. The Commission also is
supplementing its interpretive release published on October 6,
1995, with seven additional examples illustrating the application
of that earlier release to information delivery under the
Securities Act of 1933, the Securities Exchange Act of 1934, and
the Investment Company Act of 1940.  Finally, the Commission is
seeking comment on the issues discussed in this release.  

DATES: This interpretation is effective on [insert date of
publication in the Federal Register].  

Comments must be received on or before [insert date 45 days after
date of publication in the Federal Register]. 

ADDRESSES:  Comments should be submitted in triplicate to
Jonathan G. Katz, Secretary, Securities and Exchange Commission,
450 Fifth Street, N.W., Mail Stop 6-9, Washington, D.C.  20549. 
Comments also may be submitted electronically at the following
electronic mail address:  rule-comments@sec.gov.  All comment
letters should refer to File Number S7-13-96.  This file number
should be included on the subject line if comments are submitted
using electronic mail.  Comment letters will be available for
public inspection and copying at the Commission's Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Electronically submitted comment letters will be posted on the
Commission's Internet web site (http://www.sec.gov).
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FOR FURTHER INFORMATION CONTACT:  Catherine McGuire, Chief
Counsel, or Elizabeth King, Special Counsel, or Jack Drogin,
Special Counsel (concerning Rules 10b-10, 10b-16, 15c1-5, 15c1-6,
15c2-12, and 15g-2 through 15g-9 under the Securities Exchange
Act of 1934, and the release generally), 202/942-0073, Office of
Chief Counsel, Mail Stop 5-10; Sheila Slevin, Assistant Director
(concerning information about technology generally), 202/942-
0796, Mail Stop 5-1; Michael Walinskas, Special Counsel
(concerning Rule 9b-1 under the Securities Exchange Act of 1934),
202/942-0188, Mail Stop 5-1;  Elizabeth MacGregor, Special
Counsel (concerning Rule 11Ac1-3 under the Securities Exchange
Act of 1934), 202/942-0158, Mail Stop 5-1; Alan Reed, Attorney
(concerning Rules 15c2-8 and 15c2-11 under the Securities
Exchange Act of 1934), 202/942-0772, Mail Stop 5-1; Michael A.
Macchiaroli, Associate Director (concerning Exchange Act Rules
8c-1, 15c2-5, 15c3-2, 15c3-3, and 17a-5), 202/942-0132, Mail Stop
5-1; Jerry Carpenter, Assistant Director (concerning Exchange Act
Rule 17Ad-5), 202/942-4187, Mail Stop 5-1, Division of Market
Regulation; Jack W. Murphy, Chief Counsel or Amy Doberman,
Assistant Chief Counsel (concerning the Investment Advisers Act
of 1940 and the examples illustrating application of electronic
delivery to mutual funds), 202/942-0660, Mail Stop 10-6, Division
of Investment Management; Joseph Babits, Special Counsel
(concerning the examples regarding application of electronic
delivery to issuers other than mutual funds), 202/942-2910, Mail
Stop 3-7, Division of Corporation Finance, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.

SUPPLEMENTARY INFORMATION:  

I.   Introduction

     On October 6, 1995, the Commission published an interpretive
release expressing its views on the electronic delivery of
documents, such as prospectuses, annual reports to shareholders,
and proxy solicitation materials under the Securities Act of 1933
("Securities Act"), the Securities Exchange Act of 1934
("Exchange Act"), and the Investment Company Act of 1940
("October Interpretive Release").-[1]-  In the October

---------FOOTNOTES----------
     -[1]-     Securities Act Release No. 7233 (Oct. 6, 1995), 60
               FR  53458  (Oct. 13,  1995)  (hereinafter "October
               Interpretive Release").   In a  companion release,
               the  Commission  proposed technical  amendments to
               certain  of its rules  that currently are premised
               on   the   distribution   of    paper   documents.
               Securities Act Release No. 7234 (Oct. 6, 1995), 60
               FR 53467 (Oct. 13, 1995).  Today the Commission is
               adopting these  technical amendments substantially
                                                   (continued...)
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Interpretive Release, the Commission directed the Division of
Market Regulation ("Division") to review Rule 10b-10 and other
rules it administers under the Exchange Act to determine if and
under what conditions electronic delivery of information required
by those rules is feasible.-[2]-  Accordingly, the Division
conducted a review of the rules it administers under the Exchange
Act.  Based on that review, the Commission is issuing this
release, which expresses its views with respect to the delivery
of information through electronic media in satisfaction of
broker-dealer and transfer agent requirements to deliver
information under the Exchange Act and the rules thereunder.  In
conjunction with the results of that review, the Commission is
publishing its views on the use of electronic media with respect
to the disclosure delivery obligations of investment advisers and
persons acting on their behalf-[3]- under the Investment
Advisers Act of 1940 ("Advisers Act").

     This release addresses only the procedural aspects under the
federal securities laws of the delivery of information by broker-
dealers, transfer agents, and investment advisers.  It does not
affect the rights and responsibilities of any party under the
federal securities laws.-[4]-  This release also does not

---------FOOTNOTES----------
     -[1]-(...continued)
               as proposed.  Securities Act Release No. 7289 (May
               9, 1996).

     -[2]-     October  Interpretive  Release, supra  note  1, at
               53459, n.12.

     -[3]-     The term investment adviser is used in the rest of
               this release to refer to both  investment advisers
               and persons acting on  their behalf (including any
               solicitor  receiving  cash  compensation  from  an
               adviser  in  accordance  with  Advisers  Act  Rule
               206(4)-3, 17 CFR 275.206(4)-3).

     -[4]-     The   substantive   requirements   and   liability
               provisions  of the  federal securities  laws apply
               equally to electronic and  paper-based media.  For
               example, the antifraud  provisions of the Exchange
               Act and Rule 10b-5  thereunder, as well as section
               206 of the Advisers  Act and the rules thereunder,
               apply to information delivered  and communications
               transmitted electronically, to the same  extent as
               they apply to information delivered in paper form.
               See October Interpretive Release, supra note 1, at
               53459,   n.11.     In   addition,  broker-dealers,
               transfer agents, and investment  advisers continue
               to  be subject  to their  respective recordkeeping
                                                   (continued...)
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---------FOOTNOTES----------
     -[4]-(...continued)
               requirements  under Exchange  Act Rules  17a-3 and
               17a-4,  17 CFR  240.17a-3 and  240.17a-4, Exchange
               Act Rules 17Ad-6 and 16Ad-7, 17 CFR 240.17Ad-6 and
               240.17Ad-7, and  Advisers Act Rule  204-2, 17  CFR
               275.204-2.

          The Commission proposed  for comment amendments to  the
          broker-dealer  record  preservation  rule, which  would
          permit   broker-dealers   to   employ,  under   certain
          conditions,  optical  storage  technology  to  maintain
          required records.   See Exchange Act  Release No. 32609
          (July 9, 1993), 58 FR 38092 (July 15, 1993) ("Proposing
          Release").  At the time these amendments were proposed,
          concerns were expressed that optical  disk images would
          make it  difficult, from  an examination and  discovery
          perspective, to detect alterations made  to handwritten
          records and to records containing handwritten text.  To
          address these concerns, the Proposing Release solicited
          comments on the adequacy  of optical disk technology to
          preserve  handwritten records  or records  that contain
          handwritten text.

          Simultaneous  with  the   issuance  of  the   Proposing
          Release, the  Division of  Market Regulation,  with the
          Commission's  concurrence,  issued  a no-action  letter
          permitting   broker-dealers   to   use   optical   disk
          technology immediately.   See  Letter  from Michael  A.
          Macchiaroli,  Associate  Director,  Division of  Market
          Regulation, SEC  to Mr. Michael D.  Udoff, Chairman, Ad
          Hoc  Record  Retention  Committee, Securities  Industry
          Association,  Inc., (June  18,  1993).   The  no-action
          letter  permits  the  optical  storage  of  all   paper
          records,  including  handwritten records,  except those
          records required to be made under paragraphs (a)(6) and
          (a)(7) of Rule  17a-3 (proprietary  and customer  order
          tickets).

          The Commission's  request for comment in  the Proposing
          Release  regarding handwritten  records  was in  no way
          intended to limit reliance on the no-action letter.  In
          addition,  the  Commission notes  that  paperless order
          tickets (i.e., those generated by computers) may, under
          the no-action letter, be stored  on optical disks.  The
          Commission understands  that  most of  the large  firms
          generate   paperless   order   tickets    rather   than
          handwritten order tickets.

          Finally,  the Commission  is aware that  questions have
                                                   (continued...)
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address or affect the applicability of any self-regulatory
organization ("SRO") rules,-[5]- or of any state laws. 

---------FOOTNOTES----------
     -[4]-(...continued)
          been raised  regarding the  application of  the optical
          storage no-action letter.  The staff of the Division of
          Market   Regulation   is  prepared   to   discuss  with
          interested persons any  issues in connection  with this
          letter, as well as with the Proposing Release.

     -[5]-     See,  e.g.,  National  Association  of  Securities
               Dealers, Inc.  ("NASD")  Notice to  Members  95-80
               (Sept. 26,  1995), NASD  Rules of Fair  Practice 
               35,  and New  York Stock  Exchange, Inc.  ("NYSE")
               Rule    472,    which    govern     member    firm
               responsibilities  relating to  communications with
               the public, including electronic communications.

     In order to determine whether new  guidelines are needed for
     the use  of electronic communications, on  January 12, 1996,
     the   NYSE  sent  a   survey  to  its   members  and  member
     organizations regarding  the use  of  electronic systems  to
     communicate with customers.   The NYSE asked  its members to
     return  the survey by  February 15, 1996.   NYSE Information
     Memorandum (Jan. 12, 1996).  The Commission understands that
     the NASD intends to send a similar survey to its members.  

     The Commission  strongly encourages the SROs  to continue to
     work with  broker-dealers to  adapt  SRO supervisory  review
     requirements  governing  communications  with  customers  to
     accommodate the  use of electronic communications by broker-
     dealers.  Because electronic delivery systems  allow broker-
     dealers and  their associated persons to  freely contact the
     general  public,  as well  as  their  clients, firms  should
     maintain  effective supervision  and  records of  associated
     persons'  communications to  avoid potential  sales practice
     problems.  The Commission  believes, however, that the SROs'
     rules concerning the supervisory requirements for electronic
     communications should  be based on the  content and audience
     of  the message, and not  merely the electronic  form of the
     communication.    For  example,  the  SROs  should  consider
     whether electronic mail communications, that, as a practical
     matter, replace or  substitute for telephone  conversations,
     in  many cases  would not  require advance  authorization or
     prior supervisory review.  

     The  Commission  also  recognizes  that  broker-dealers  are
     concerned   about  the   costs  of   maintaining  electronic
     communications  as  records on  a  long term  basis,  and it
     intends   to  discuss   these  concerns  further   with  the
     securities industry.
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Broker-dealers, transfer agents, and investment advisers,
therefore, are reminded to consider the applicability of SRO
rules and state laws in connection with delivering information
electronically.-[6]-  The release further does not affect
any rules promulgated under the Exchange Act by agencies other
than the Commission.-[7]-

     Finally, this interpretation does not address the existing
paper filing requirements with the Commission,-[8]- other

---------FOOTNOTES----------
     -[6]-     Article 8 of the  UCC was revised substantially in
               1994, and the revisions  were endorsed by both the
               American Law Institute and the National Conference
               of  Commissioners on  Uniform  State  Laws.   This
               revised version  has been  adopted  by 13  states.
               Under  Revised Article 8 Section 8-102(6), parties
               to a  transaction may "transmit information by any
               mechanism agreed upon by the  persons transmitting
               and receiving the information."  Revised Article 8
               eliminates the current  Section 8-319  requirement
               for  a signed  writing evidencing  the terms  of a
               securities transaction.

     In  states that have not yet codified the 1994 amendments, a
     confirmation  bearing the broker-dealer's letterhead or some
     other   identifying   marking,   generally,  fulfills   that
     requirement.   See  e.g., Kohlmeyer  and Co.  v. Bowen,  192
     S.E.2d 400, 126  Ga. App. 700 (Ga. Ct. App.  1972); See also
     Bains v. Piper, Jaffray & Hopwood, 497 N.W.2d 263 (Minn. Ct.
     App. 1993) (computer generated confirmation  held to satisfy
     the UCC requirement for a writing).

     -[7]-     See, e.g.,  Treas. Reg.   404.4(e)  and 403.5(d)
               (rules  regarding  hold   in  custody   repurchase
               agreements  applicable  to  government  securities
               brokers   and   dealers    that   are    financial
               institutions).

     -[8]-     For example, this interpretation does not apply to
               any  requirements to  file  information  with  the
               Commission  in  connection with  registering under
               sections 15, 15A, 15B, or 15C of  the Exchange Act
               as    a    broker-dealer,   national    securities
               association,   municipal  securities   dealer,  or
               government  securities   broker-dealer.    Broker-
               dealers  currently  register with  the Commission,
               the  SROs,  and  the states  through  the  Central
               Registration Depository ("CRD") system operated by
               the NASD.  A redesign of the CRD system will allow
               broker-dealers to file uniform  registration forms
                                                   (continued...)
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regulatory authorities,-[9]- and other third
parties.-[10]-
II.  Use of Electronic Media

     In the October Interpretive Release, the Commission noted
that the electronic distribution of information provides numerous
benefits and that the use of this type of medium is growing among
all participants in the securities industry.  The Commission
concluded that issuers, third parties (such as persons making
tender offers or soliciting proxies), and persons acting on
behalf of such third parties may use electronic media, in

---------FOOTNOTES----------
     -[8]-(...continued)
               electronically.    In   connection  with  the  CRD
               redesign   the   Commission   intends   to   adopt
               amendments to Form BD, the uniform application for
               broker-dealer registration under the Exchange Act.
               See  Exchange  Act  Release  No.  35224 (Jan.  12,
               1995),  60  FR  4040 (Jan.  19,  1995)  (proposing
               amendments to Form BD).

     Because,  at the present time,  the Commission does not have
     the   technological   capacity    to   receive    electronic
     transmissions of information  from broker-dealers,  transfer
     agents,  or  investment advisers,  this  interpretation also
     does  not apply  to other  requirements to  file information
     with the  Commission under  the Exchange and  Advisers Acts.
     See, e.g., Exchange Act Rule 9b-1,  17 CFR 240.9b-1 (options
     markets'  obligation  to   file  with  the   Commission  any
     revisions to an  options disclosure document); Advisers  Act
     Form  ADV, 17  CFR  279.1 (application  for registration  of
     investment   advisers).     The   Commission,  nevertheless,
     recognizes  the desirability  of  electronic  filing and  is
     examining the feasibility of establishing systems capable of
     receiving information electronically.

     -[9]-     For   example,  the  notice  requirements  to  the
               National Association of  Securities Dealers,  Inc.
               under  Exchange  Act  Rule  10b-17,  also are  not
               within the  scope of this interpretation.   17 CFR
               240.10b-17.

     -[10]-    For example, Rule  15a-6 requires U.S.  registered
               broker-dealers,  under  certain circumstances,  to
               obtain certain foreign persons' consent to service
               of process.  17 CFR 240.15a-6(a)(3)(iii)(D).   The
               Commission has  never taken  a position as  to the
               specific means by which the U.S. broker-dealer may
               meet this obligation, but  believes that a consent
               to service of process  may be obtained through the
               use of a facsimile.
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accordance with the guidance provided in the October Interpretive
Release, to deliver information.  In addition, the Commission
believes that broker-dealers, transfer agents, and investment
advisers may satisfy their delivery obligations under the
Exchange Act and the Advisers Act by using electronic media as an
alternative to paper-based media.-[11]- 

     This interpretation is intended to provide broker-dealers,
transfer agents, and investment advisers with guidance in using
electronic media to satisfy delivery requirements under the
federal securities laws.  This release generally covers those
requirements that obligate broker-dealers to deliver information
to customers, obligate transfer agents to deliver information
upon written request, and obligate investment advisers to deliver
information to their clients or prospective clients.  Broker-
dealers and investment advisers also may rely on this
interpretation in obtaining customers' and clients' consents as
required under certain provisions of the Exchange and Advisers
Acts and the rules thereunder.-[12]-  A discussion of the
information delivery requirements covered by this interpretation
is provided in section III of this release ("Covered Delivery
Requirements").  Unless the Commission indicates otherwise, this
interpretive release also is intended to apply to all rules
promulgated under the Exchange and Advisers Acts, including rules
promulgated subsequent to the issuance of this release, requiring
broker-dealers or investment advisers to deliver information to
customers or clients, and to rules requiring transfer agents to
deliver information in response to written requests.  


---------FOOTNOTES----------
     -[11]-    The  exact nature of the broker-dealer's, transfer
               agent's,   and   investment   adviser's   delivery
               obligations  is defined broadly  and includes such
               terms as "give," "furnish," "send," and "deliver."
               The  Commission believes  that, in  general, these
               terms  are sufficiently  broad to  accommodate the
               contemplated electronic  transmission of documents
               by  or on  behalf of  the  broker-dealer, transfer
               agent, or investment adviser and, when called for,
               from  a  customer  to  a  broker-dealer,  transfer
               agent, or investment adviser.  But see infra notes
               12 and 50.

     -[12]-    In connection  with transactions in  penny stocks,
               however, the  Commission believes that in order to
               fulfill the purposes of the Securities Enforcement
               Remedies  and  Penny  Stock Reform  Act  of  1990,
               broker-dealers should continue  to have  customers
               manually  sign  and  return   in  paper  form  any
               documents that  require a customer's  signature or
               written agreement.  See infra note 50.
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     A.   General 

     This discussion is intended to complement the discussion in
the October Interpretive Release and to provide general guidance
concerning issues under the Exchange and Advisers Acts.  The
Commission believes that broker-dealers, transfer agents, and
investment advisers should be able to satisfy their obligations
under the federal securities laws to deliver information required
under the Covered Delivery Requirements by electronic
distribution.  The framework set forth in the October
Interpretive Release is applicable to such electronic
distribution.  

     In the October Interpretive Release, the Commission stated
that it would view information distributed through electronic
means as satisfying the delivery or transmission requirements of
the federal securities laws if such distribution results in the
delivery to the intended recipients of substantially equivalent
information as such recipients would have if the required
information were delivered to them in paper form.-[13]- 
The Commission is not specifying the electronic medium or source
that broker-dealers, transfer agents, and investment advisers may
use.  
     Like paper documents, electronically delivered documents
must be prepared and delivered in a manner consistent with the
federal securities laws.  Regardless of whether information is
delivered in paper form or by electronic means, it should convey
all material and required information.  If a paper document is
required to present information in a certain order, for instance,
then the information delivered electronically should be in
substantially the same order.-[14]-

     Moreover, regardless of whether information is delivered in
paper or electronic form, broker-dealers and investment advisers
must reasonably supervise firm personnel with a view to
preventing violations.-[15]-  Thus, broker-dealers and
investment advisers should consider the need for systems and
procedures to deter or detect misconduct by firm personnel in
connection with the delivery of information, whether by

---------FOOTNOTES----------
     -[13]-    October  Interpretive Release,  supra  note 1,  at
               53460.  See also supra example 7.

     -[14]-    For a discussion  of how  requirements to  present
               information in  a certain order may  be applied to
               documents containing hyperlinks, see example 51 in
               the October Interpretive Release.  Id. at 53466.

     -[15]-    See  Exchange Act   15(b)(4)(E);  Advisers Act  
               203(e)(5).  See also NASD Rules of Fair Practice 
               27; NYSE Rule 342.
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electronic or paper means.-[16]-

      The Commission believes that, as a matter of policy, a
person who has a right to receive a document under the federal
securities laws and chooses to receive it electronically, should
be provided with the information in paper form whenever
specifically requesting paper.-[17]-  
     In the October Interpretive Release, the Commission
discussed issues of notice and access that should be considered
in determining whether the legal requirements pertaining to




---------FOOTNOTES----------
     -[16]-    See,  e.g., In re: Bryant, Securities Exchange Act
               Release  No. 32357  (May  24,  1993),  (Commission
               upheld a  finding of  the National Association  of
               Securities Dealers, Inc. that, among other things,
               the failure  to develop procedures to  supervise a
               registered  representative,  who   sent  a   false
               confirmation  statement on  behalf of  the broker-
               dealer,   and   to  enforce   existing  procedures
               constituted a failure to  supervise on the part of
               the president of the firm).

     -[17]-    For  example  if  a   person  revokes  consent  to
               receiving    information   electronically,    even
               following  delivery  of the  information,  a paper
               copy   should   be    delivered   upon    request.
               Revocation,  however,  is  not  a  prerequisite to
               requesting a paper copy.  

     The  Commission understands that  it can be  very costly for
     broker-dealers to maintain records for long periods of time.
     This is  particularly true with respect  to information that
     is specific  to a  customer's account  or to  a transaction,
     such as the  type of information  defined below as  Personal
     Financial Information.   See infra  section II.B.   For this
     reason,  the Commission  has  limited the  time period  that
     broker-dealers  must preserve  records required  to be  made
     under  Exchange   Act  Rules  17a-3.     17  CFR  240.17a-3.
     Specifically,  Exchange  Act  Rule  17a-4  requires  broker-
     dealers to preserve  records for  a period of  six years  (3
     years in  the case  of certain  types  of information),  the
     first  two  years in  an easily  accessible  place.   17 CFR
     240.17a-4.  For these  same reasons, the Commission believes
     it is reasonable to expect that broker-dealers would provide
     customers  with information in paper form upon request for a
     period  of  two  years.    Transfer  agents  and  investment
     advisers are subject  to similar recordkeeping requirements.
     17 CFR 250.17Ad-6 and 240.17Ad-7; 17 CFR 275.204-2.
==========================================START OF PAGE 11======

delivery or transmission of documents have been
satisfied,-[18]- and stated that persons using electronic
delivery of information should have reason to believe that any
electronic means so selected will result in the satisfaction of
the delivery requirements.-[19]-  The Commission believes
that broker-dealers, transfer agents, and investment advisers
should apply the same considerations in using electronic media to
satisfy their delivery obligations under the Covered Delivery
Requirements.

          1.   Notice

     Broker-dealers, transfer agents, and investment advisers 
providing information electronically should consider the extent
to which electronic communication provides timely and adequate
notice that such information is available
electronically.-[20]-  When information is delivered on
paper through the postal mail, recipients most likely will be
made aware that they have received information that they may wish
to review and, therefore, separate notice is not necessary. 
Information transmitted through electronic media, however, may
not always provide a similar likelihood of notice that
information has been sent that the recipient may wish to
review.-[21]-  Broker-dealers, transfer agents, and
investment advisers, therefore, should consider whether it is
necessary to supplement the electronic communication with another
communication that would provide notice similar to that provided

---------FOOTNOTES----------
     -[18]-    October  Interpretive Release,  supra  note 1,  at
               53460-61.

     -[19]-    Id. at 53461.

     -[20]-    See id. at 53460.  See also infra section  II.B.2.
               regarding  additional  requirements  when  broker-
               dealers, transfer agents, and  investment advisers
               send  certain types  of  information  (defined  as
               Personal Financial Information) to customers.

     -[21]-    For  example,  if   information  is  provided   by
               physically delivered material  (such as a computer
               diskette or  CD-ROM) or  by electronic  mail, that
               communication    itself   generally    should   be
               sufficient  notice.     If  information   is  made
               available   electronically   through   a   passive
               delivery system,  such  as an  Internet Web  Site,
               however,  separate notice  would  be necessary  to
               satisfy  the  delivery  requirements   unless  the
               broker-dealer,   transfer  agent,   or  investment
               adviser  can otherwise  evidence that  delivery to
               the customer or client has been satisfied. 
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by delivery in paper through the postal mail.

          2.   Access

     The Commission believes that customers, securities holders,
and clients who are provided information through electronic
delivery from broker-dealers, transfer agents, and investment
advisers should have access to that information comparable to
that which would be provided if the information were delivered in
paper form.  Thus, the use of a particular medium should not be
so burdensome that intended recipients cannot effectively access
the information provided.  Also, persons to whom information is
sent electronically should have an opportunity to retain the
information through the selected medium or have ongoing access
equivalent to personal retention.-[22]- 

          3.   Evidence to Show Delivery

     Providing information through postal mail provides
reasonable assurance that the delivery requirements of the
federal securities laws have been satisfied.  The Commission
believes that broker-dealers, transfer agents, and investment
advisers similarly should have reason to believe that
electronically delivered information will result in the
satisfaction of the delivery requirements under the federal
securities laws.  Thus, whether using paper or electronic media,
broker-dealers, transfer agents, and investment advisers should
consider the need to establish procedures to ensure that
applicable delivery obligations are met.

     Broker-dealers, transfer agents, and investment advisers may
be able to evidence satisfaction of delivery obligations, for
example, by:  (1) obtaining the intended recipient's informed
consent-[23]- to delivery through a specified electronic

---------FOOTNOTES----------
     -[22]-    For  example, the intended  recipient's ability to
               download    or    print   information    delivered
               electronically would enable  a recipient to retain
               a  permanent  record.    See  October Interpretive
               Release, supra note 1, at 53460.

     -[23]-    See  id.  at 53460.   If  a  consent is  used, the
               consent   should  be  an  informed  consent.    An
               informed  consent  should  specify the  electronic
               medium or  source  through which  the  information
               will be delivered and  the period during which the
               consent will be effective, and should describe the
               information  that  will  be  delivered  using such
               means.   The  broker-dealer,  transfer  agent,  or
               investment adviser also should inform the customer
                                                   (continued...)
==========================================START OF PAGE 13======

medium, and ensuring that the recipient has appropriate notice
and access, as discussed above; (2) obtaining evidence that the
intended recipient actually received the information, such as by
an electronic mail return-receipt or by confirmation that the
information was accessed, downloaded, or printed;-[24]- or
(3) disseminating information through certain facsimile methods. 
In order to ensure that information is delivered as intended,
broker-dealers, transfer agents, and investment advisers
delivering information using either electronic or paper-media
should take reasonable precautions to ensure the integrity and
security of that information.-[25]- 

     B.   Personal Financial Information

     Certain information that broker-dealers, transfer agents,
and investment advisers deliver is specific to a particular
person's personal financial matters ("Personal Financial
Information").  For example, the information reported to
customers under Exchange Act Rule 10b-10 relates to specific
securities transactions and includes the identity and number of
shares bought or sold and the net dollar price for the shares. 
Under Exchange Act Rule 10b-16, a broker-dealer that imposes
finance charges on a customer's account during a quarterly period
must deliver a quarterly statement disclosing, among other

---------FOOTNOTES----------
     -[23]-(...continued)
               that there may be potential costs associated  with
               electronic  delivery,  such  as  on-line  charges.
               Except  where a manual signature is required under
               the penny stock rules,  see infra note 50, broker-
               dealers  may  obtain consents  either  manually or
               electronically.  In most  cases in which a request
               for  information  is  made  through  an electronic
               medium,   consent   to   receive   the   requested
               information by means of electronic delivery may be
               presumed.  

     In  addition,  if  the  broker-dealer,  transfer  agent,  or
     investment  adviser  is relying  on  the  consent to  ensure
     effective delivery  and the  intended recipient  revokes the
     consent, future documents should be delivered in paper.

     -[24]-    For  example, depending  on the  circumstances and
               the  procedures  used,  customers'   and  clients'
               written  consent  or acknowledgement,  as required
               under certain Exchange and Advisers Acts rules and
               discussed infra notes 28-29 and accompanying text,
               may serve as sufficient evidence to show delivery.

     -[25]-    October  Interpretive Release,  supra  note 1,  at
               53460, n.22.
==========================================START OF PAGE 14======

things, the account's beginning and closing balances, debits and
credits entered during the period, the interest charged, and the
rate or rates of interest.  Similarly, under Advisers Act Rule
206(3)-2, investment advisers engaging in agency cross
transactions involving clients are required to send the clients
disclosure about those transactions.-[26]- 

          1.   Confidentiality and Security

     Broker-dealers, transfer agents, and investment advisers
sending Personal Financial Information should take reasonable
precautions to ensure the integrity, confidentiality, and
security of that information, regardless of whether it is
delivered through electronic means or in paper form.  The
Commission believes that broker-dealers, transfer agents, and
investment advisers transmitting Personal Financial Information
electronically must tailor those precautions to the medium used
in order to ensure that the information is reasonably secure from
tampering or alteration.

          2.   Consent

     Because of the need to maintain the confidentiality and
security of Personal Financial Information, it is important that
the intended recipient is willing to accept the delivery of such
information through electronic media and has actual notice that
the Personal Financial Information will be delivered
electronically.  Therefore, in order to ensure that Personal
Financial Information can be delivered in a manner that maintains
the information's confidentiality, unless a broker-dealer,
transfer agent, or investment adviser is responding to a request
for information that is made through electronic media or the
person making the request specifies delivery through a particular
electronic medium, the broker-dealer, transfer agent, or
investment adviser should obtain the intended recipient's
informed consent prior to delivering Personal Financial
Information electronically.-[27]-  This consent will ensure
that the intended recipient is willing to accept the delivery of

---------FOOTNOTES----------
     -[26]-    17 CFR 275.206(3)-2(a)(2) (written confirmation of
               each transaction  "at or before  the completion of
               each such transaction"); 17 CFR 275.206(3)-2(a)(3)
               (annual  written disclosure  statement identifying
               transactions).  In  addition, investment  advisers
               having custody  of client  assets are required  to
               send an itemized statement to each client at least
               quarterly  showing   assets  in  custody   of  the
               adviser.  17 CFR 275.206(4)-2(a)(4).

     -[27]-    See  discussion supra  note 23  regarding informed
               consent.  
==========================================START OF PAGE 15======

Personal Financial Information through electronic media and has
actual notice that the Personal Financial Information will be
delivered electronically.  The Commission believes that such
consent by the customer or client to the delivery of Personal
Financial Information may be made either by a manual signature or
by electronic means.

     C.   Communications From Broker-Dealers' Customers and 
          Investment Advisers' Clients

     In addition to requirements to deliver information, the
Exchange Act and the Advisers Act provide for broker-dealers and
investment advisers to "receive" or "obtain" responses from their
customers or clients.  For example, Exchange Act Rules 8c-1 and
15c2-1 require, under certain circumstances, broker-dealers to
obtain a customer's written consent in order to hypothecate
securities.  Similarly, under the Advisers Act, certain
provisions call for clients to consent to a transaction or
acknowledge receipt of certain disclosures.-[28]-  The
Commission generally views an electronic communication from a
customer to a broker-dealer or from a client to an investment
adviser as satisfying the requirements for such written consent
or acknowledgement.-[29]-

     D.   Electronic Transmission of Non-Required Disclosure

     The guidance provided above is intended to permit broker-
dealers, transfer agents, and investment advisers to comply with
their delivery obligations under the federal securities laws when
using electronic media.  This interpretation does not apply to
the electronic delivery of non-required information that in some
cases is being provided voluntarily to customers, securities


---------FOOTNOTES----------
     -[28]-    See, e.g. Advisers Act  205(a)(2) and 206(3); 17
               CFR        275.206(3)-2(a)(1);       17        CFR
               275.206(4)-3(a)(2)(iii).

     -[29]-    Of course, broker-dealers and  investment advisers
               should be cognizant  of their responsibilities  to
               prevent,  and  the potential  liability associated
               with, unauthorized transactions.  See, e.g., supra
               note 16.  In  this regard, the Commission believes
               that broker-dealers and investment advisers should
               have  reasonable  assurance   that  the   response
               received from a customer or client is authentic.

     In  addition, for policy reason discussed infra note 50, the
     Commission will continue to require broker-dealers to obtain
     the  manual  signature of  customers  on certain  disclosure
     documents required under Exchange Act Rules 15g-2 and 15g-9.
==========================================START OF PAGE 16======

holders, and clients-[30]- in that it is not necessary
(although it is, of course, permitted) to conform the electronic
delivery of such information to the guidance in this release. 
Nevertheless, the Commission urges broker-dealers, transfer
agents, and investment advisers to take into consideration the
need to implement security measures when using electronic media
to provide personal financial information.  

     The staff also has received inquiries about the
permissibility of using various electronic media to disseminate
advertisements for an investment adviser's services or other
information that is not subject to a delivery requirement.  Such
communications are permissible, subject to the same requirements
and restrictions that apply to such communications in paper.  For
example, electronically disseminated advertisements are subject
to the same prohibitions against misleading disclosure as
advertisements in paper.-[31]-  Materials concerning an
adviser that are potentially available to ten or more persons
through an electronic system would be considered subject to the
recordkeeping requirements applicable to such
communications.-[32]-  Similarly, if an adviser uses a
publicly available electronic medium such as a World Wide Web
site to provide information about its services, the adviser would
not qualify for the exemption from registration in section
203(b)(3) of the Advisers Act.  That exemption is available only
if, among other things, an adviser does not hold itself out
generally to the public as an investment adviser.

III. Covered Delivery Requirements

     For clarity, below is a list of current rules under the

---------FOOTNOTES----------
     -[30]-    See, e.g., Kimberly Weisul, Calvert  Becomes First
               Fund to  Offer Info On-Line;  Mutual Fund  Company
               Dodges  the  Security  Issue, Investment  Dealers'
               Digest,   Jan.  22,   1996,  at  9;   Jon  Birger,
               Prudential  Web  Site to  Let Clients  Track Their
               Accounts Daily, Bond Buyer, Oct. 18, 1995, at 10.

     -[31]-    See   17   CFR   275.206(4)-1.     Broker-dealers'
               advertisements and sales literature are subject to
               NASD rules, which have  been recently been amended
               specifically to include electronic communications.
               NASD, Notice to Members 95-74  (Sept. 1995); NASD,
               Notice to Members 95-80 (Sept. 26, 1995).

     -[32]-    17 CFR 275.204-2(a)(11).   Broker-dealers also are
               subject to recordkeeping  requirements that  would
               be  applicable  to  all electronic  communications
               received  and sent  by  the firm  relating to  its
               business.  17 CFR 17a-4(a)(4).
==========================================START OF PAGE 17======

Exchange Act and requirements under the Advisers Act to which
broker-dealers, transfer agents, and investment advisers may
apply the guidance provided in this interpretation.  The
Commission believes that the list sets forth all of the rules
that require or permit communications between broker-dealers,
transfer agents, investment advisers and customers, securities
holders, and clients under the Exchange and Advisers
Acts.-[33]-  The interpretation in this release is intended
to cover all optional and required communications under the
Exchange and Advisers Acts between broker-dealers, transfer
agents, and investment advisers, and customers, securities
holders, and clients.-[34]-

     A.   Exchange Act

     Subject to the guidelines in this release, broker-dealers
and transfer agents may fulfill their requirements to deliver
information to customers and securities holders under the
following Exchange Act rules:-[35]-

         Rule 8c-1, which requires broker-dealers to obtain
          customers' written consent in order to hypothecate
          securities under circumstances that would permit the
          commingling of customers' securities and to give

---------FOOTNOTES----------
     -[33]-    The summary  provided of the  delivery obligations
               under   the   Covered  Delivery   Requirements  is
               intended for ease  of reference only.   It is  not
               intended to be a statement of all the requirements
               under the rules and  provisions listed, and has no
               legal force  or effect.  Reference  should be made
               to the full text of  the rules, which is published
               in the Code of Federal Regulations, as  well as to
               relevant releases,  interpretations, and no-action
               letters, and  to the full text of the Exchange and
               Advisers Acts, 15 U.S.C.  77 and 78, et seq.

     -[34]-    But see  supra notes  4-10 and accompanying  text.
               See also infra notes 35 and 50.

     -[35]-    This  release  does  not  address  the  prospectus
               delivery  requirements  under  Exchange  Act  Rule
               15c2-8.    17   CFR  240.15c2-8.     Broker-dealer
               requirements to deliver  a preliminary  prospectus
               in connection with the  issuance of securities  by
               an issuer that has not previously been required to
               file  reports  pursuant  to Exchange  Act  Section
               13(a),  15  U.S.C.  78m(a),  or  15(d),  15 U.S.C.
               78o(d), were addressed in the October Interpretive
               Release.  See  October Interpretive Release, supra
               note 1, at 53462, n. 31.
==========================================START OF PAGE 18======

          written notice to a pledgee that, among other things, a
          security pledged is carried for the account of a
          customer.-[36]- 
         Rule 9b-1, which, among other things, requires a
          broker-dealer to furnish to each customer, and keep
          current, an options disclosure document, prior to
          accepting an order to purchase or sell an option on
          behalf of that customer.-[37]-

         Rule 10b-10, which requires a broker-dealer to give or
          send confirmation information to customers.-[38]- 
          In addition, broker-dealers must furnish to customers
          upon written request information such as the factors
          that affect the yield calculation related to asset-
          based securities.-[39]-

         Rule 10b-16, which requires both initial and periodic
          written disclosure of the credit terms of margin



---------FOOTNOTES----------
     -[36]-    17 CFR 240.8c-1(a)(1) and (f).

     -[37]-    17 CFR 240.9b-1(d).

     -[38]-    17  CFR  240.10b-10.    This  release,  therefore,
               resolves  the issues  in the  October Interpretive
               Release with respect to  Exchange Act Rule 10b-10,
               which    requires     broker-dealers    to    send
               confirmations  at  or  before  completion  of  the
               transaction by permitting  electronic delivery  of
               the confirmation. 17 CFR 240.10b-10.   See October
               Interpretive  Release,  supra  note  1,  at 53459,
               n.12.  

     In a release adopting certain amendments to Rule 10b-10, the
     Commission recognized the use of a facsimile machine to send
     customer confirmation  statements.   At that time,  however,
     the  Commission believed  that the  use of  other electronic
     means  to send confirmations should  be viewed on a case-by-
     case  basis.  See Exchange  Act Release No.  34962 (Nov. 10,
     1994);  59 FR 59612  (Nov. 17,  1994).   This interpretation
     supersedes the view expressed in the 1994 release.  

     Broker-dealers  are reminded  that,  when  a  prospectus  is
     required to be delivered,  it should be delivered  prior to,
     or concurrent with, delivery of the confirmation.   Thus, if
     a  confirmation is  sent by  facsimile, the  prospectus also
     should be sent by facsimile or equally prompt means.

     -[39]-    17 CFR 240.10b-10(a)(7).
==========================================START OF PAGE 19======

          loans.-[40]-

         Rule 11Ac1-3, which requires a broker-dealer to deliver
          to each customer, upon opening a new account and on an
          annual basis thereafter, an account statement
          disclosing the broker-dealer's policies relating to
          payment for order flow and its order routing
          policies.-[41]-

         Rule 15c1-5, which requires, under specified
          circumstances, written disclosure of control if a
          broker-dealer or municipal securities dealer is
          controlled by, controlling, or under common control
          with the issuer of a security.-[42]-

         Rule 15c1-6, which requires a broker-dealer or
          municipal securities dealer receiving advisory fees to
          disclose any participation or financial interest in the
          distribution of a security at or before the completion
          of a transaction in such security for the account of a
          customer.-[43]-

         Rule 15c2-1, which requires broker-dealers to obtain
          customers' written consent in order to hypothecate
          securities under circumstances that would permit the
          commingling of customers' securities.-[44]-

         Rule 15c2-5, which requires a written statement making
          disclosures prior to effecting transactions in special
          insurance premium funding accounts that would involve
          an extension or arrangement of credit, as well as
          retaining for its files, a written statement setting
          forth the basis for making a determination that the
          arrangement is suitable for the customer.-[45]- 

         Rule 15c2-11, with regard to the requirement that
          broker-dealers make certain information enumerated in



---------FOOTNOTES----------
     -[40]-    17 CFR 240.10b-16.

     -[41]-    17 CFR 240.11Ac1-3.

     -[42]-    17 CFR 240.15c1-5.

     -[43]-    17 CFR 240.15c1-6.

     -[44]-    17 CFR 240.15c2-1(a)(1).

     -[45]-    17 CFR 240.15c2-5.
==========================================START OF PAGE 20======

          the rule reasonably available upon request.-[46]-

         Rule 15c2-12, with regard to the requirements that
          municipal securities underwriters provide, upon
          request, a preliminary official statement (if one
          exists) and a final official statement.-[47]-
         Rule 15c3-2, which requires a broker-dealer to give or
          send to its customers a written notification of a free
          credit balance, that the broker-dealer may use that
          free credit balance in its business operations, and
          that the funds are payable upon demand of the
          customer.-[48]-

         Rule 15c3-3, which requires that broker-dealers obtain
          repurchase agreements in writing and confirm in writing
          the specific securities that are the subject of hold in
          custody repurchase agreements.-[49]-

         Rules 15g-3 through 15g-8, which require a broker-
          dealer, among other things, to disclose to its
          customers, both prior to effecting a transaction in a
          penny stock and on the written confirmation, bid and
          ask quotations and broker-dealer and associated person
compensation.-[50]-

---------FOOTNOTES----------
     -[46]-    17 CFR 240.15c2-11(a)(4) and (a)(5).

     -[47]-    17 CFR 240.15c2-12.

     -[48]-    17 CFR 240.15c3-2.

     -[49]-    17 CFR 240.15c3-3(b)(4).

     -[50]-    17 CFR 240.15g-3 through 15g-8.  

     The Commission believes that the requirements under Exchange
     Act Rules  15g-2 and 15g-9, which  require broker-dealers to
     obtain from  a customer  prior to effecting  transactions in
     penny stocks  (1) a  manually signed acknowledgement  of the
     receipt  of  a  risk  disclosure  document,  (2)  a  written
     agreement to transactions involving  penny stocks, and (3) a
     manually  signed and  dated  copy of  a written  suitability
     statement,  should not be met by means of electronic media. 
     In  adopting  these provisions  pursuant  to the  Securities
     Enforcement Remedies and Penny Stock Reform Act of 1990, the
     Commission intended to provide customers with an opportunity
     to make  an informed,  deliberate decision without  the high
     pressure sales  practices that sometimes  are characteristic
     of transactions in these securities.  For similar reasons, a
     facsimile  copy  of  a  customer's signature  has  not  been
     sufficient to satisfy the requirements under Rules 15g-2 and
                                                   (continued...)
==========================================START OF PAGE 21======

         Rule 17a-5, which requires a broker-dealer to send to
          its customers audited and unaudited financial
          statements.-[51]-

         Rule 17Ad-5, which requires a transfer agent to respond
          within certain time frames to written requests for the
          status of items presented for transfer, for
          acknowledgement of transfer instructions, for
          confirmation of a transfer agent's possession of a
          certificate, for a transcript of a person's account, or
          for dividend and interest payments.-[52]-  

     B.   Advisers Act

         Section 205(a)(2) of the Advisers Act, which requires
          an investment adviser to obtain its client's consent to
          the assignment of an advisory contract.-[53]-

---------FOOTNOTES----------
     -[50]-(...continued)
     15g-9 that  certain documents be manually  signed and dated.
     See  Exchange Act  Release No.  32576  (July 2,  1993); NASD
     Notice to Members  90-65 (Oct. 1990); NASD Notice to Members
     90-18 (Mar. 1990).  

     While broker-dealers may not meet the  signature requirement
     under  Rule  15g-9  by   electronic  means,  the  Commission
     believes  that, consistent  with the  guidance set  forth in
     this   interpretation,  they   may   meet   their   delivery
     obligations to their customers under this rule by electronic
     means.  The  "risk disclosure document" that  broker-dealers
     are required to  furnish to their customers under Rule 15g-2
     is subject to strict formatting and typefacing restrictions.
     In  order to comply with  the requirements set  forth in the
     instructions  to Schedule  15G,  a risk  disclosure document
     delivered electronically, when printed, would have to result
     in a document  that meets the requirements  and contains the
     exact text of Schedule 15G.  

     When the Commission  next reviews the penny stock  rules, it
     may  be willing  to consider  a "cooling-off"  period  as an
     alternative to  the requirement of a  manual signature under
     Rules 15g-2 and 15g-9.   The Commission requests comment  on
     this approach.

     -[51]-    17 CFR 240.17a-5(c).

     -[52]-    17  CFR  17Ad-5.    Under  certain  circumstances,
               transfer agents currently are permitted to respond
               to requests by telephone.

     -[53]-    15 U.S.C. 80b-5(a)(2).
==========================================START OF PAGE 22======

         Section 205(a)(3) of the Advisers Act, which requires
          an investment adviser to notify its clients, if the
          adviser is organized as a partnership and there is a
          change in members of partnership.-[54]-

         Section 206(3) of the Advisers Act, which prohibits
          certain principal and agency transactions with a client
          without prior written disclosure about the transaction
          and consent of the client.-[55]-

         Rule 204-3, which requires investment advisers to
          deliver a written disclosure statement, or "brochure,"
          to clients at least 48 hours before entering into an
          advisory contract, unless the client has the right to
          terminate the contract without penalty within five
          business days.-[56]-  In addition, investment
          advisers are required, except in certain cases, to make
          available "without charge" updates to its
          brochure.-[57]-

---------FOOTNOTES----------
     -[54]-    15 U.S.C. 80b-5(a)(3).

     -[55]-    15 U.S.C. 80b-6(3).

     -[56]-    17  CFR 275.204-3(b).   To  the extent  an adviser
               relies on 48-hour advance delivery rather than the
               five-day cancellation period,  the 48-hour  period
               would be measured from the time at which notice is
               given  to  the   client  that  the   statement  is
               available through a specified electronic medium or
               source.  Investment advisers should have reason to
               believe  that  the nature  of  the  system or  any
               limitations on the client's  access to that system
               will  not  result in  any  material  delay in  the
               client's  access  to  the   information  following
               receipt of the notice.

     -[57]-    17  CFR 275.204-3(c).  If a  client has elected to
               receive  the disclosure  statement electronically,
               and neither the adviser nor any system used by the
               adviser  to   disseminate  updates  electronically
               imposes a charge upon  the client specifically for
               the  receipt of  this information,  the Commission
               would  consider  this requirement  satisfied, even
               though  a  system selected  by  a  client to  gain
               access to the adviser's system may  impose charges
               for     access,    printing     or    downloading.
               Alternatively, the Commission  would consider  the
               requirement satisfied  so long as a  paper version
               of  the   update  is  available   without  charge,
                                                   (continued...)
==========================================START OF PAGE 23======

         Rule 205-3(d), which requires disclosure regarding
          advisory arrangements involving performance
          fees.-[58]-

         Rule 206(3)-2, which permits agency cross transactions,
          provided that the investment adviser provides general
          written disclosure about its role in the transactions,
          receives from clients consent to agency cross
          transactions, and sends both written confirmation of
          each transaction and an annual written disclosure
          statement.-[59]-

         Rule 206(4)-2, which requires certain disclosure
          relating to adviser custody of client
          assets.-[60]-

         Rule 206(4)-3, which requires certain disclosures to be
          made by solicitors who receive cash solicitation fees
          from advisers and a signed and dated acknowledgement
          from clients of the receipt of the investment advisers
          and solicitors written disclosure
          statements.-[61]-

IV.  Additional Securities Act, Exchange Act, and Investment
     Company Act Examples

     The October Interpretive Release included a series of
examples  illustrating the general concepts set forth earlier in
that release in order to provide guidance in applying those
concepts to specific facts and circumstances.  The Commission is
publishing here the following, additional examples to provide

---------FOOTNOTES----------
     -[57]-(...continued)
               notwithstanding  any charges  that may  be imposed
               upon a client for  access, printing or downloading
               by the  system used  by an adviser  to disseminate
               updates electronically.

     -[58]-    17 CFR 275.205-3(d).

     -[59]-    17 CFR 275.206(3)-2.

     -[60]-    17 CFR 275.206(4)-2.

     -[61]-    17 CFR 275.206(4)-3.   Cf. Investment Company  Act
               Release  No. 21260 at n. 38 (July 27, 1995), 60 FR
               39574  (contemplating  that notification  required
               under  proposed Investment  Company Act  Rule 3a-4
               could  be  provided  electronically by  investment
               advisers and other sponsors of investment advisory
               programs).
==========================================START OF PAGE 24======

further guidance and illustration.  These examples are based on
questions that have been raised with the staff by industry
representatives since the publication of the October Interpretive
Release.  Any party (whether or not a registered investment
company) may look to these examples for guidance.

     (1)  Company XYZ places a prospectus for any securities
offering on its electronic mail system.  Company XYZ also uses
its electronic mail system to disseminate documents required
under the Exchange Act.  Employees use the company's electronic
mail in the ordinary course of performing their duties as
employees and ordinarily are expected to log-on to electronic
mail routinely to receive mail and communications.  Those
employees who do not log-on have alternative means of receiving
electronic mail messages, such as having them sent to secretaries
or co-workers who then deliver them to the employee.  The
electronic mail either includes the actual document or announces
the availability of the document and provides information as to
how to access the document through the local area network.  The
electronic mail also prominently states that a paper version of
the document is available upon request.
     This would satisfy delivery obligations with respect to
employees who use the company's electronic mail system in the
course of performing their duties or who are expected to have
alternative means made available to receive electronic mail
messages. 

     (2)  Company XYZ places a notice announcing its unregistered
Dividend Reinvestment Plan-[62]- on its Internet Web site
under a menu heading "Dividend Reinvestment Plan."  The
announcement also contains the phone number of the Company's
agent (which is independent from the Company) from whom
additional information regarding the operation of the Dividend
Reinvestment Plan can be obtained.  Additionally, the Company's
Internet Web site contains a hypertext link to the independent
agent's Internet Web site where a brochure describing the
operation of the Dividend Reinvestment Plan and an enrollment
card can be obtained.


---------FOOTNOTES----------
     -[62]-    A   company  need   not   register  its   dividend
               reinvestment  plan under the  Securities Act where
               its  involvement  in   the  plan  is   limited  to
               administrative  or  ministerial  functions.    For
               additional  information,  including  a listing  of
               permitted  functions,  see Securities  Act Release
               No. 4790  (July 13, 1965),  30 FR  9059 (July  20,
               1965); Securities  Act Release No.  5515 (July 22,
               1974), 39  FR 28520  (August 8,  1974); Securities
               Act  Release No.  6188 (February  1, 1980),  45 FR
               8960 (February 11, 1980).         
==========================================START OF PAGE 25======

     This would be permissible, so long as the information on the
Company's Internet Web site is limited to the announcement of the
unregistered Dividend Reinvestment Plan and the name and address
of the independent agent from whom additional information can be
obtained. (This would be analogous to the communications that an
issuer of an unregistered plan could make in paper format.)  As
with communications in paper format, the Company may not use its
Internet Web site to advertise the Dividend Reinvestment Plan or
its benefits.  Further, the use of a hypertext link to the home
page of the independent agent would be permitted; however, the
Company could not provide a hypertext link directly to the
Dividend Reinvestment Plan materials.        

     (3)  Brokerage firm ABC, a recordholder of Company XYZ's
common stock, received consents from beneficial holders of
Company XYZ's common stock for electronic delivery of Company
XYZ's annual report and proxy materials and for electronic
processing of voting instructions.  These customers are provided
with the Internet Web site address where Company XYZ's annual
report and proxy materials are located and the Internet Web site
address where they can provide their voting instructions
electronically to the brokerage firm.

     The electronic processing of voting instructions from
beneficial holders and the electronic voting of proxies would be
consistent with the proxy rules.  Issuers and others are reminded
to consider any applicable state laws or self-regulatory
organization rules.

     (4)  A fund makes supplemental sales literature and its
prospectus available through a commercial on-line service.  Under
section 5(b) of the Securities Act, sales literature, whether in
paper or electronic form is required to be preceded or
accompanied by a final prospectus meeting the requirements of
section 10(a) of the Securities Act.  By contrast, an
advertisement satisfying the requirements of Securities Act Rule
134 or 482 need not be preceded or accompanied by a prospectus. 
Users could click on a box in the supplemental sales literature
to have the prospectus downloaded or to request that a prospectus
be mailed.  While the system permits the sales literature to be
viewed on-line, it does not allow users to view the prospectus. 
Unlike the system in example 36 in the October Interpretive
Release, this system would not require that a user have
downloaded or printed the prospectus before viewing the
supplemental sales literature.  Users accessing the supplemental
sales literature would give specific consent to electronic
delivery of the prospectus.

     This would not satisfy the prospectus delivery requirement
because there would not be sufficient access to the prospectus. 
Because the system does not give users the opportunity to view
the prospectus, it would lack the sort of reasonably comparable
==========================================START OF PAGE 26======

access to the prospectus and the sales literature present in
examples 14, 15, and 35 in the October Interpretive Release.  The
opportunity to request that a prospectus be mailed or downloaded
would not, under current technology, be considered to give
investors sufficient access to the prospectus.  Instead, it would
be analogous to giving investors sales literature in paper with a
toll-free telephone number for requesting the prospectus:  under
those circumstances the prospectus would be received later and
would not be considered to have preceded or accompanied the sales
literature.-[63]-

     (5)  A fund places its prospectus on its site on the World
Wide Web or some other electronic system.  Shareholders provide a
written, revocable consent to receive prospectuses electronically
through the system.  The consent informs shareholders that the
current version of each prospectus will be available continuously
on the system and that the fund will use the quarterly account
statement or quarterly newsletter as the means of notification of
prospectus amendments.  It also states that another means of
notification may be used, but only after shareholders have been
notified of the change by the then current means of
notification.-[64]-  The fund replaces its prospectus with
an annual amendment updating the fund's financial information and
making other changes.-[65]-  The fund has provided
notification that the prospectus will be updated by including
notification in the preceding account statement or shareholder
newsletter; the notification provides the approximate date on
which the amendment will be available.  A subsequent amendment to
the fund's prospectus reflects the addition of a redemption fee. 

---------FOOTNOTES----------
     -[63]-    As technology  develops, some  users may have  the
               capacity to  download and view a  prospectus in no
               more time than it takes to jump via hyperlink from
               the  sales literature  to  the prospectus.   Under
               those  circumstances,  the  capacity  to  download
               would be considered to give those users reasonably
               comparable  access  to the  prospectus  that would
               provide sufficient access.

     -[64]-    A  change  in  means of  notification  under  such
               circumstances would also be effective in the  case
               of notification of the availability of shareholder
               reports discussed  in example  46  in the  October
               Interpretive   Release.     October   Interpretive
               Release, supra note 1.

     -[65]-    Under section  10(a)(3) of  the Securities  Act, a
               fund that  continuously  offers its  shares  would
               have to  amend its  prospectus no  less frequently
               than every  16 months in order  to include updated
               financial statements.
==========================================START OF PAGE 27======

Notification of the prospectus amendment has been included in the
preceding statement or newsletter.-[66]-

     Just as the use of a newsletter or statement in example 46
in the October Interpretive Release constituted sufficient notice
for effective delivery of the semi-annual reports required under
the Investment Company Act of 1940, the use of a newsletter or
statement here would constitute sufficient notice for effective
delivery with respect to the scheduled prospectus update.

     (6)  A fund's on-line prospectus has the same text as the 
paper version, but the text appears in a different format.  For
example, text that appears as a block in the margin of a page in
the paper prospectus appears in a box in the flow of the text in
the electronic version.  The fund does not make a separate filing
under Securities Act Rule 497 with respect to the electronic
version.

     The mere difference in format without any difference in text
would not qualify the electronic version as a different "form of
prospectus" for which filing is required.

     (7)  An investment company produces both an electronic
version (such as a CD-ROM) and a paper version of its prospectus. 
Each version contains all information required by, and otherwise
complies with, the applicable form and all other applicable
provisions of the federal securities laws.  The electronic
version contains a movie that does not appear in the paper
version.  Each version of the prospectus indicates that there may
be other versions of the prospectus and, if the issuer determines
to make such other versions available, provides information on
how to obtain such other versions.-[67]-  The paper version
does not include a summary or transcript of the movie in the
electronic version.  Both versions of the prospectus are filed
with the Commission as part of the company's registration





---------FOOTNOTES----------
     -[66]-    With  unscheduled  material prospectus  amendments
               for  which  such  advance   notice  would  not  be
               feasible, the  fund would need to  use other forms
               of  notification  such  as  a postcard  or  e-mail
               message.  See October Interpretive  Release, supra
               note 1, example 43.

     -[67]-    The  facts of this  example should not  be read as
               imposing any obligation on the issuer to make such
               other  versions of its prospectus available to any
               person.
==========================================START OF PAGE 28======

statement, or separately pursuant to Rule 497.-[68]-

     The use of either version of the prospectus to satisfy
delivery requirements would be permissible.-[69]-  The
issuer (or other party to whom the law assigns the
responsibility) remains responsible for ensuring that each
version satisfies applicable statutory requirements.-[70]-

V.   Solicitation of Comments

     Any interested person wishing to submit written comments
relating to the views expressed in this release are invited to do
so by submitting them in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Mail Stop 6-9, Washington, D.C. 20549.  Comments also may
be submitted electronically at the following electronic mail
address:  rule-comments@sec.gov.  All comment letters should
refer to File Number S7-13-96.  This file number should be
included on the subject line if comments are submitted using
electronic mail.  Comment is requested not only on the specific
issues discussed in detail in the release, but on any other
issues that should be considered in connection with facilitating
the use of electronic media by broker-dealers, transfer agents,
and investment advisers.  Comment is sought from both the point
of view of the sender and the intended recipient.  The Commission
further requests comment on any competitive burdens that may
result from this interpretation.  Comments must be received on or
before [insert date 45 days after date of publication in the
Federal Register].  Comments received will be available for
public inspection and copying in the Commission's public reading
room, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Electronically submitted comment letters will be posted on the
Commission's Internet web site (http://www.sec.gov).

List of Subjects 

17 CFR Parts 231 and 241


---------FOOTNOTES----------
     -[68]-    Alternatively,  the  company  may  file  with  the
               Commission as  an appendix to  the prospectus  the
               script  of  the  movie  and a  fair  and  accurate
               narrative  description of  the  graphic  or  image
               material.  See October Interpretive Release, supra
               note 1, example 13.

     -[69]-    Of  course,  the  general   principles  concerning
               electronic  delivery, as described  in the October
               Interpretive Release, supra note 1, would apply.

     -[70]-    See id. at 53460.
==========================================START OF PAGE 29======

     Securities.

17 CFR Parts 271 and 276

     Investment companies, Securities.

Amendment to the Code of Federal Regulations

     The Commission is amending Title 17, Chapter II of the Code
of Federal Regulations in the manner set forth below:

PART 231 - INTERPRETATIVE RELEASES RELATING TO THE SECURITIES ACT
OF 1933 AND GENERAL RULES AND REGULATIONS THEREUNDER

     Part 231 is amended by adding Release No. 33-7288 and the
release date of May 9, 1996 to the list of interpretive releases.

PART 241 - INTERPRETATIVE RELEASES RELATING TO THE SECURITIES
EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER

     Part 241 is amended by adding Release No. 34-37182 and the
release date of May 9, 1996 to the list of interpretive releases.

PART 271 - INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT
COMPANY ACT  OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER

     Part 271 is amended by adding Release No. IC-21945 and the
release date of May 9, 1996 to the list of interpretive releases.

PART 276 - INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT
ADVISERS ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER

     Part 276 is amended by adding Release No. IA-1562 and the
release date of May 9, 1996 to the list of interpretive releases.

By the Commission.

                                   Jonathan G. Katz
                                   Secretary

Dated:  May 9, 1996