Proposed Transaction

Continental has been active as a trustee of

pension and profit-sharing plans qualified under Code section 401 and as trustee of the Self-Employed Investment Trust (the "SEIT"), a collective trust for the investment of H.R. 10 plans which is exempt from income taxation as a pooled employee benefit trust of the type described in Rev. Rul. 56-267. Under the Pension Act, Continental proposes to offer to serve as trustee of IRA trusts and Group IRA trusts under a prototype plan which permits the participant to direct the investment of the assets of his account in one or more of the separate funds of the SEIT, a savings account with Continental, or a Certificate of Deposit or other savings instrument with Continental. Continental intends to limit investment in the SEIT funds to IRA trusts for residents of Illinois. The SEIT will continue to serve as the collective trust for investment of the assets of HR. 10 plans qualified under Code section 401. Continental will act as a fiduciary with respect to the SEIT and will be subject to the fiduciary responsibility standards of Title I as well as the prohibited transaction rules of Code section 4975. Subject to the respective investment policies announced for the separate funds of the SEIT (currently a fixed income and an equity fund), Continental has investment management discretion with respect to the assets of the SEIT and may invest in a variety of securities.

Continental will not act with respect to the assets of an IKA trust, Group IRA trust, or collective trust for their investment other than as a fiduciary, either under state law, Regulation 9 or Title 1, and seeks the advice of the Commission Staff with respect to the matters stated in this letter only where it is acting in such a fiduciary capacity.

65-699 - 76-26

No-action Request

By this letter, we are requesting the Division of Investment Management Regulation to state that it will take no action to require Continental to register under the Act the following, where operated in accordance with this letter: (1) any IRA trust or Group IRA trust of which Continental acts as trustee, which meets the requirements for exemption from income taxation under Code section 408(e), and which is invested solely as described above; or (2) any common investment fund consisting solely of the assets of IRA trusts, Group IRA trusts and/or employees' pension or profit-sharing trusts which meet the requirements for qualification under Code section 401, where such common investment fund meets the requirements for exemption from income taxation under rules similar to those established by Rev. Rul. 56-267, as described at pp. 337-38 of the Conference Report. No request is being made in this letter with respect to a statement of the Staff's position under the Securities Act of 1933 with respect to any separate security represented by an interest in an IRA trust, a Group IRA trust, or a collective trust for their investment.

We are also requesting the Division of Corporation Finance to state that it will take no action to require registration under section 12(g)(1) of the Exchange Act of any interest in an IRA or Group IRA trust invested solely as described above or in any collective trust fund maintained by Continental for the investment of assets of IRA trusts, Group IRA trusts and employees' pension or profit-sharing plans qualified under Code section 401, where such collective trust funds are exempt from taxation under rules similar to those established in Rev. Rul. 56-267, as described at pp. 337-38 of the Conference Report.

Rationale

General

IT TRA trusts and Group IRA trusts had been made exempt under Code section 501 as an organization described in Code section 401(a), an exemption would be available under the Act and the Exchange Act for IRA trusts, Group IRA trusts and collective trusts for their investment without further action by the Commission. The legislative determination to recognize the exemption under section 408 may have been merely a matter of drafting technique, as described in the Memorandum at p. 2. (The conferees were, however, conscious of the issues raised under the federal securities laws by IRA trusts. Conference Report p. 338). In any event, the purposes of the IRA trust and Group IRA trust are substantially the same as the purposes of corporate and H.R. 10 pension and profit-sharing plans, which are exempt from the Act under Act section 3(c)(11) and interests in which are exempt from the registration requirements of the Exchange Act under Exchange Act section 12(g) (2) (H), As to the Exchange Act, see First Union, Inc., '71-'72 CCH Dec. 78,597 (SEC 1971). The Commission has looked to the primary purpose of specialized entities created under the Code, and, where the regulatory structure provided under applicable laws and the regulations of other departments have made application of the federal securities laws unnecessary, the Commission has recognized an appropriate exemption. See American Council on Education, '72-'73 CCH Dec. 79,179 (SEC 1972); and Investment Company Institute, not reported, Commission Letter dated September 20, 1974. This principle was applied broadly by the Staff in the case of collective trusts for Code section 401 qualified pension and profit-sharing trusts prior to the specific recognition of their exemption in the Investment Company Amendments Act of 1970. See H.R. Rep. 93-1382. 91st Cong. 2d Sess. 18 (1970); Sunmary Volume, Institutional Investor Study Report pp. 69-70; Vol. 3, Institutional Investor Study Report pp. 995-998. The 1970 ainendments codified the Commission's positions in this area.

A primary basis for the Commission's view has been reliance on the status of a bank as a regulated fiduciary. See Bank of America, '71-'72 CCH Dec. ¶ 78,614 (SEC 1971), where the staff refused to recognize the exemption under section 3(a)(2) of the Securities Act of 1933 or Act section 3(c)(11) where the trustee would act as a mere custodian subject to investment management discretion exercised by others. See also Bank of Delaware, 172-173 CCH Dec. 79,292 (SEC 1972). Continental would act as a fiduciary with substantial investment discretion in each of the capacities described above, subject to the power of an individual participant to direct investment in one or more of the funds described above.

IRA Trusts

An IRA trust created by an individual without the involvement of an employer or association of employees should be exempt from the Act in any event pursuant to Act section 3(c)(1) (issuers whose securities are owned by less than 100 persons and who are not engaged in a public offering). Similarly, interests in an IRA trust would not come within the registration threshold of Exchange Act section 12(g)(1). (Nor would there be a "public offering" of such interests requiring registration under the Securities Act of 1933. However, no request is made in this letter with respect. to '33 Act matters.)

Collective Trusts

Provisions for protection of the participant in a collective trust for employee benefit plans have been made more comprehensive by the Pension Act than those applicable under prior law when the Commission recognized exemptions under the Act and the Exchange Act for such plans. Although the Conference Report properly reserves the authority of the Commission to resolve the Federal

securities laws questions raised by the new legislation, this is an area in which the legislative expectation that comparable treatment will be provided for Individual Retirement Accounts and other retirement savings vehicles is fairly clear.

We believe the questions raised by this letter are of broad interest to the banking community and the United States Treasury Department, which primarily sponsored and supported the Individual Retirement Account provisions of the Pension Act. We would appreciate the opportunity to meet with you at your convenience to provide any further information you may require.

We are authorized to file, on behalf of Continental, in the very near future, a submission requesting the Commission to exercise its authority to provide a limited exemption under the '33 Act for interests in IRA trusts, Group IRA trusts and collective trusts for their investment, when operated as described in this letter and the Memorandum. Nevertheless, we believe this no-action request under the Act and the Exchange Act may and should be considered independently and expeditiously in order that IRA trusts may have access to the collective forms of investment which the cognizant committees of Congress anticipated.

Very truly yours,

MAYER, BROWN & PLATT

By

Charles W. Petty Jr.

Charles W. Petty, Jr.

CWP:bah

Enclosure