Investment Companies- AICPA Audit and Accounting Guide

For the latest information on audits of investment companies, turn to this guide. Updated with conforming changes as of May 1, 2007, it includes guidance in planning and performing audits under the new Risk Assessment Standards (SAS 104-111), as well as auditor’s responsibilities identifying and reporting internal control deficiencies as redefined by SAS 112.

Includes important updates on FASB statements 157 and 159 on Fair Value, plus guidance on FIN 48 and Fin 46r.

The Guide delivers "how-to" advice for handling almost every type of financial statement. It describes relevant matters, conditions, and procedures unique to the investment industry, and illustrates treatments of financial statements and reports to caution auditors and accountants about unusual problems.

Preface

Purpose

This American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide has been prepared to assist investment companies in preparing financial statements in conformity with generally accepted accounting principles (GAAP) and to assist independent auditors1 in auditing and reporting on those financial statements.

Applicability

This Guide describes operating conditions and auditing procedures unique to the investment company industry and illustrates form and content of investment company financial statements and related disclosures. Chapter 1 discusses the kinds of companies considered to be investment companies to which the provisions of this Guide apply.

Because many investment companies are subject to regulation under the Investment Company Act of 1940, rules under that Act are discussed extensively in this Guide. However, the rules, regulations, practices, and procedures of the investment company industry have changed frequently and extensively in recent years. The independent auditor should keep abreast of those changes as they occur.

Limitations

This Guide does not discuss the application of all GAAP and all generally accepted auditing standards (GAAS) that are relevant to the preparation and audit of financial statements of investment companies. This Guide is directed primarily to those aspects of the preparation and audit of financial statements that are unique to investment companies or those aspects that are considered particularly significant to them.

Auditing Guidance Included in This Guide

In March 2006, the ASB issued Statements on Auditing Standards No. 104-111 (the "risk assessment standards"). Collectively, the risk assessment standards establish standards and provide guidance concerning the auditor's assessment of the risks of material misstatement (whether caused by fraud or error) in a non-issuer financial statement audit; design and performance of tailored audit procedures to address assessed risks; audit risk and materiality; planning and supervision; and audit evidence. The most significant changes to existing practice that the auditor will be required to perform are as follows:

• Obtain a more in-depth understanding of the audited entity and its environment, including its internal control;
• Perform a more rigorous assessment of the risks of where and how the financial statements could be materially misstated (defaulting to a maximum control risk is no longer permitted);
• Provide a linkage between the auditor's assessed risks and the nature, timing and extent of audit procedures performed in response to those risks.

The statements are effective for audits of financial statements for periods beginning on or after December 15, 2006. Early adoption is permitted. See Appendix J for a more detailed comparison between the risk assessment standards and the existing standards.

This guide has been conformed to the new risk assessment standards to indicate, at a minimum, where these standards need to be applied. Additional implementation guidance, specific to this industry, is being developed and will be incorporated in the 2008 edition.

For additional guidance on the risk assessment standards, please refer the AICPA Audit Guide, Assessing and Responding to Risk in a Financial Statement Audit, and the AICPA Audit Risk Alert, Understanding the New Auditing Standards Related to Risk Assessment.

References to Professional Standards

In citing the professional standards, references are made to the AICPA Professional Standards publication. In those sections of the guide where specific PCAOB auditing standards are referred to, references are made to the AICPA's PCAOB Standards and Related Rules publication. Please refer to Appendix I of this Guide for a summary of major existing differences between AICPA Standards and PCAOB Standards. Additionally, when referencing professional standards, this Guide cites section numbers and not the original statement number, as appropriate. For example, Statement on Auditing Standards (SAS) No. 54 is referred to as AU section 317.

Impact on Other Literature

This Guide supersedes the AICPA Audit and Accounting Guide Audits of Investment Companies (with conforming changes as of May 1, 1998), and Statement of Position (SOP) 93-2, Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies.

This Guide incorporates the following authoritative material specific to investment companies:

1. SOP 89-2, Reports on Audited Financial Statements of Investment Companies
2. SOP 89-7, Report on the Internal Control Structure in Audits of Investment Companies
3. SOP 93-1, Financial Accounting and Reporting for High-Yield Debt Securities by Investment Companies
4. SOP 93-4, Foreign Currency Accounting and Financial Statement Presentation for Investment Companies
5. SOP 95-2, Financial Reporting by Nonpublic Investment Partnerships
6. SOP 95-3, Accounting for Certain Distribution Costs of Investment Companies
7. SOP 01-1, Amendment to Scope of Statement of Position 95-2, Financial Reporting by Nonpublic Investment Partnerships, to Include Commodity Pools
8. SOP 03-4, Reporting Financial Highlights and Schedule of Investments by Nonregistered Investment Partnerships: An Amendment to the Audit and Accounting Guide Audits of Investment Companies and AICPA Statement of Position 95-2, Financial Reporting by Nonpublic Investment Partnerships
9. SOP 03-5, Financial Highlights of Separate Accounts: An Amendment to the Audit and Accounting Guide Audits of Investment Companies

This Guide incorporates authoritative material specific to investment advisors in SOP 06-1, Reporting Pursuant to the Global Investment Performance Standards.

Summary of New Accounting Standards

This Guide requires the following:

1. Premiums and discounts on debt securities should be amortized using the interest method. The prior Guide was silent on whether funds should be required to amortize premiums and discounts on debt securities. (See paragraph 2.53.)
2. Guidance is provided in paragraphs 8.17 through 8.25 for the accounting for organization costs and offering costs as follows:
   1. Types of costs that should be accounted for as organization costs and offering costs are listed.
   2. The requirements of SOP 98-5, Reporting on the Costs of Start-Up Activities, to expense organization costs as incurred are discussed.
   3. Offering costs for closed-end funds and investment partnerships should be charged to paid-in capital upon sale of the shares or units. Offering costs for open-end funds and closed-end funds with a continuous offering period should be accounted for as a deferred charge until operations begin and thereafter, amortized to expense over twelve months on a straight-line basis. This guidance does not change prevailing industry practice nor does it differ from that provided in the prior Guide.
   4. Offering costs for unit investment trusts (UITs) should be charged to paid-in capital on a pro rata basis as the units or shares are issued or sold by the trust (when the units are purchased by the underwriters). The prior Guide did not provide guidance on accounting for offering costs of UITs.
3. Paydown gains and losses on mortgage- and asset-backed securities should be recorded as adjustments to interest income, not as realized gains and losses. (See paragraph 2.53.)
4. Guidance is provided in paragraphs 7.56 through 7.58 on the accounting for payments by affiliates and corrections of restriction violations. Affiliates may make payments to a fund for one of the following reasons: AAG-INV xii a. To reimburse the effect of a loss (realized or unrealized) on a portfolio investment, often caused by a situation outside the fund's, or its affiliate's, direct control b. To make the fund whole relative to a realized loss on a portfolio investment directed by the fund adviser in violation of the fund's investment restrictions The Guide requires both types of payments as well as any gain or loss realized on an investment restriction violation to be combined and reported as a separate line item in the statement of operations. Each type of payment and any gain or loss on investment restriction violations should be disclosed and described separately in the notes to the financial statements. In addition, the effect on total return of the payments and any gain or loss on investment restriction violations should be quantified and disclosed in a manner similar to disclosure of the effect of voluntary waivers of fees and expenses on expense ratios.
5. A liability for "excess expense" plans should be recorded if, and to the extent that, the established terms for repayment of the excess expenses to the adviser by the fund and the attendant circumstances meet the criteria of (a) Financial Accounting Standards Board (FASB) Statement of Financial Accounting Concepts No. 6, Elements of Financial Statements, paragraph 36, and (b) FASB Statement No. 5, Accounting for Contingencies, paragraph 8. In most instances a liability for excess expenses under such plans will not be recorded until amounts are actually due to the adviser under the reimbursement agreement because it is not likely the criteria of those paragraphs will be met at an earlier time. (See paragraph 8.05.)
6. New guidance has been provided for accounting, reporting, and auditing of multiple-class funds, master-feeder funds, and funds of funds. The new guidance is primarily derived from Securities and Exchange Commission (SEC) rules, letters, and positions in exemptive orders and prevailing industry practice. (See Chapter 5.)
7. Certain financial statement presentation and disclosures including the following:
   1. The prior Guide required investment companies to disclose a complete listing of investments consistent with the SEC's disclosure requirements of Regulation S-X.2 This Guide defines the reporting requirements for two groups of investment companies: investment companies and nonpublic investment partnerships. Nonpublic investment partnerships are required to follow the reporting requirements of SOP 95-2, as amended by SOP 01-1 and SOP 03-4. As indicated in paragraph 7.14 of this Guide, other investment companies should disclose the following in the absence of regulatory requirements:
      1. Each investment (including short sales, written options, futures, forwards, and other investmentrelated liabilities) whose fair value constitutes more than 1 percent of the fund's net assets
      2. All investments in any one issuer whose fair values aggregate more than 1 percent of the fund's net assets
      3. At a minimum, the fifty largest investments.
   2. Investment companies presenting financial statements in accordance with GAAP should also include disclosure of financial highlights, which consists of per share operating performance, net investment income and expense ratios, and total return for all investment companies organized in a manner using unitized net asset value. For investment companies not using unitized net asset value, financial highlights should be presented and consist of net investment income and expense ratios and total return. (See paragraph 7.01.)
   3. Total distributable earnings and total distributions (with returns of capital reported for tax purposes shown as a separate line item) may be presented in the statement of assets and liabilities and the statement of changes in net assets, respectively, with disclosure of the tax basis components of net assets and distributions in the notes to the financial statements. The prior Guide required separate reporting of the components of distributable earnings as undistributed net investment income, accumulated net realized gains or losses, and unrealized appreciation or depreciation, and separate reporting of distributions from each of the first two components. (See paragraph 7.01.)

Effective Date and Transition

The accounting and financial reporting provisions of this Guide that describe changes required by other new authoritative literature should be applied using the effective dates specified in that literature. Except as described below, changes in accounting and financial reporting required by this Guide shall be applied prospectively and shall be effective for annual financial statements issued for fiscal years beginning after December 15, 2000, and for interim financial statements issued after initial application. Earlier application is permitted. Restatement of previously issued financial statements is not permitted.

Paragraph 2.53 describes the required accounting for the amortization of premium and discount on debt securities. The effect of initially applying changes required by this Guide will not result in adjustments to the net assets reported in the financial statements. Rather, the cumulative effect of the change should be reflected as an adjustment to the disclosed amount of amortized cost of debt securities held as of the beginning of the year in which this Guide is first applied, based on retroactive recomputation of premium or discount from the initial acquisition date of each security. If the entity discloses the components of net assets in its financial statements, the cumulative effect of the change should AAG-INV xiv also be reflected as an adjustment of the undistributed net investment income and net unrealized gains or losses as of the beginning of the year in which the Guide is first applied. Disclosure should be made in the notes to the financial statements of (1) the cumulative effect of the change to the amount of amortized cost of debt securities held as of the beginning of the year in which the changes required by the Guide are first applied, and (2) the effect of the change for the year of implementation on net investment income, net unrealized gains or losses, and net realized gains or losses as reported in the statement of operations. Additionally, the effect of the change for the year of implementation on the per share data and ratio of net investment income to average net assets as disclosed in the financial highlights table should be shown in a footnote to that table.

Paragraph 8.05 describes the required accounting for excess expense plans. The effect of initially applying changes required by this Guide with respect to excess expense plans should be reported as a charge or credit, as appropriate, in the statement of operations as a cumulative effect of a change in accounting principle.

Paragraph 8.21 describes those expenditures that are included in offering costs. Unamortized capitalized offering costs at the date of initial adoption of this Guide not meeting the description in paragraph 8.21 (and which are not organization costs subject to paragraph 23 of SOP 98-5) should be reported as a charge in the statement of operations as a cumulative effect of a change in accounting principle. Those expenditures that are organization costs subject to the provisions of paragraph 23 of SOP 98-5 incurred prior to the date of initial application of SOP 98-5 should be reclassified to organization costs and amortized as described in that SOP.

Paragraph 8.24 describes how offering costs of unit investment trusts should be charged to paid-in capital. Unamortized capitalized unit investment trust offering costs at the date of initial adoption of this Guide should be adjusted to conform with the guidance in paragraph 8.24 with the cumulative effect of the change charged or credited directly to paid-in capital. The effect of the change should be disclosed in the notes to the financial statements.

Entities are not required to report the pro forma effects of retroactive application in adopting this Guide.

Introduction

This Guide has been written with the assumption that readers are proficient in accounting and auditing in general but not necessarily familiar with the investment company industry. Accordingly, the Guide includes extensive investment company industry background and explanatory material.

Chapter 1 provides background information and terminology that is intended to help the reader better understand the industry.

Chapters 2 through 4 and Chapter 8 focus on the major financial statement components that have unique accounting and auditing requirements for investment companies.

Chapter 5 focuses on unique accounting, operational, and auditing aspects of complex capital structures of investment companies, including multiple-class funds, master-feeder funds, and funds of funds. Illustrative financial statements are presented for multiple-class funds, master funds, feeder funds, and funds of funds.

Chapter 6 focuses on two distinct aspects of taxes for investment companies: financial statements and other matters, and taxation of regulated investment companies.

Chapter 7 focuses on financial statement presentation and disclosure requirements of investment companies. Additional disclosures required by the Securities and Exchange Commission (SEC) for registered investment companies and generally accepted accounting principles (GAAP) disclosure requirements are identified. Illustrative financial statements of a typical open-end management investment company are presented.

Chapter 9 provides background information and unique matters related to UITs. This chapter also contains illustrative financial statements for these entities.

Chapter 10 provides background, product design, operational, and regulatory information related to separate accounts of life insurance companies. This chapter also describes auditing considerations and contains illustrative financial statements for these entities.

Chapter 11 discusses reports on audited financial statements of investment companies, reports on internal control required by the SEC, reports on processing of transactions by transfer agents, reports on examinations of investment performance statistics, and other reports unique to the investment company industry. Numerous report examples are included in this chapter.

Chapter 12 provides basis for conclusions for significant new accounting standards.

A glossary of terms and several appendixes have been included to provide the reader with additional sources of information regarding the investment company industry. The appendixes are:

• Appendix A--Venture Capital and Small Business Investment Companies
• Appendix B--Computation of Tax Amortization of Original Issue Discount, Market Discount, and Premium
• Appendix C--Internal Revenue Code Worksheets
• Appendix D--Worksheet for Diversified Management Investment Companies
• Appendix E--Illustrative Financial Statement Presentation for Tax-Free Business Combinations of Investment Companies
• Appendix F--Illustrations for Separately Calculating and Disclosing the Foreign Currency Element of Realized and Unrealized Gains and Losses
• Appendix G--References to AICPA Technical Practice Aids
• Appendix H--Statement of Position (SOP 07-01), Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies
• Appendix I--Major Existing Differences Between AICPA Standards and PCAOB Standards
• Appendix J--Comparison of Key Provisions of the Audit Risk Standards to Previous Standards
• Appendix K--Schedule of Changes Made to Investment Companies

Applicability of Requirements of the Sarbanes-Oxley Act of 2002, Related Securities and Exchange Commission Regulations, and Standards of the Public Company Accounting Oversight Board

Publicly-held companies and other "issuers" (see definition below) are subject to the provisions of the Sarbanes-Oxley Act of 2002 (Act) and related Securities and Exchange Commission (SEC) regulations implementing the Act. Their outside auditors are also subject to the provisions of the Act and to the rules and standards issued by the PCAOB.

Presented below is a summary of certain key areas addressed by the Act, the SEC, and the PCAOB that are particularly relevant to the preparation and issuance of an issuer's financial statements and the preparation and issuance of an audit report on those financial statements. However, the provisions of the Act, the regulations of the SEC, and the rules and standards of the PCAOB are numerous and are not all addressed in this section or in this Guide. Issuers and their auditors should understand the provisions of the Act, the SEC regulations implementing the Act, and the rules and standards of the PCAOB, as applicable to their circumstances.

Definition of an Issuer

The Act states that the term "issuer" means an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)), the securities of which are registered under section 12 of that Act (15U.S.C. 78l), or that is required to file reports under section 15(d) (15 U.S.C. 78o(d)), or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.

Issuers, as defined by the Act, and other entities when prescribed by the rules of the SEC (collectively referred to in this section of the Guide, and in other sections of the Guide that discuss the Rules and Standards of the PCAOB, as "issuers" or "issuer") and their public accounting firms (who must be registered with the PCAOB) are subject to the provisions of the Act, implementing SEC regulations, and the rules and standards of the PCAOB, as appropriate.

Non-issuers are those entities not subject to the Act or the rules of the SEC.

Guidance for Issuers

Management Assessment of Internal Control

As directed by Section 404 of the Act, the SEC adopted final rules requiring companies subject to the reporting requirements of the Securities Exchange Act of 1934, other than registered investment companies as discussed below and certain other entities to include in their annual reports a report of management on the company's internal control over financial reporting. See the SEC web site at www.sec.gov/rules/final/33-8238.htm for the full text of the regulation. Section 405 of the Act generally exempts registered investment companies from the provisions of Section 404 that require a report of management on internal control over financial reporting. Business development companies, however, do not fall within the scope exception contained in Section 405 and are required to include a report of management on the company's internal control over financial reporting.

Companies that are "large accelerated filers" or "accelerated filers," as defined in Exchange Act Rule 12b-2, were required to comply with these rules for fiscal years ending on or after November 15, 2004. Foreign private issuers that are "large accelerated filers" or "accelerated filers" and that file their annual reports on Form 20-F or 40-F must begin to comply with the rules for the first fiscal year ending on or after July 15, 2006. "Non-accelerated filers" including foreign private issuers that are not accelerated filers, are required to comply with the rules for the first fiscal year ending on or after December 15, 2007. See the SEC Web site for further information.

The SEC rules clarify that management's assessment and report is limited to internal control over financial reporting. The SEC's definition of internal control encompasses the Committee of Sponsoring Organizations of the Treadway Commission (COSO) definition but the SEC does not mandate that the entity use COSO as its criteria for judging effectiveness.

Under the SEC rules, the company's annual 10-K must include:

1. Management's Annual Report on Internal Control Over Financial Reporting
2. Attestation Report of the Registered Public Accounting Firm
3. Changes in Internal Control Over Financial Reporting

The SEC rules also require management to evaluate any change in the entity's internal control that occurred during a fiscal quarter and that has materially affected, or is reasonably likely to materially affect, the entity's internal control over financial reporting.

Audit Committees and Corporate Governance

Section 301 of the Act establishes requirements related to the makeup and the responsibilities of an issuer's audit committee. Among those requirements--

• Each member of the audit committee must be a member of the board of directors of the issuer, and otherwise be independent.
• The audit committee of an issuer is directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by that issuer.
• The audit committee shall establish procedures for the "receipt, retention, and treatment of complaints" received by the issuer regarding accounting, internal controls, and auditing.

In April 2003, the SEC adopted a rule to direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the audit committee requirements mandated by the Act.

Disclosure of Audit Committee Financial Expert and Code of Ethics

In January 2003, the SEC adopted amendments requiring issuers, including business development companies that are issuers, to include two new types of disclosures in their annual reports filed pursuant to the Securities Exchange Act of 1934. These amendments conform to Sections 406 and 407 of the Act and relate to disclosures concerning the audit committee's financial expert and code of ethics relating to the companies' officers. An amendment specifies that these disclosures are only required for annual reports. In January 2003, the SEC adopted amendments requiring registered management investment companies to disclose information concerning the investment company's code of ethics and audit committee financial expert in Items 2 and 3, respectively, of annual reports filed on Form N-CSR.

Certification of Disclosure in an Issuer's Quarterly and Annual Reports

Section 302 of the Act requires the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of each issuer to prepare a statement to accompany the audit report to certify the "appropriateness of the financial statements and disclosures contained in the periodic report, and that those financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the issuer." In August 2002, the SEC adopted final rules for Certification of Disclosure in Companies' Quarterly and Annual Reports in response to Section 302 of the Act. CEOs and CFOs are now required to certify the financial and other information contained in quarterly and annual reports.

Improper Influence on Conduct of Audits

Section 303 of the Act makes it unlawful for any officer or director of an issuer to take any action to fraudulently influence, coerce, manipulate, or mislead any auditor engaged in the performance of an audit for the purpose of rendering the financial statements materially misleading. In April 2003, the SEC adopted rules implementing these provisions of the Act.

Disclosures in Periodic Reports

Section 401(a) of the Act requires that each financial report of an issuer that is required to be prepared in accordance with generally accepted accounting principles (GAAP) shall "reflect all material correcting adjustments . . . that have been identified by a registered accounting firm . . . ." In addition, "each annual and quarterly financial report . . . shall disclose all material off-balance sheet transactions" and "other relationships" with "unconsolidated entities" that may have a material current or future effect on the financial condition of the issuer. Section 405 of the Act exempts from Section 401, and from rules made by the SEC under that section, investment companies registered under Section 8 of the Investment Company Act of 1940.

In January 2003, the SEC adopted rules that require disclosure of material off-balance sheet transactions, arrangements, obligations, and other relationships of the issuer with unconsolidated entities or other persons, that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. The rules require an issuer to provide an explanation of its off-balance sheet arrangements in a separately captioned subsection of the Management's Discussion and Analysis section of an issuer's disclosure documents. See SEC Release No. 8182. The rules apply to business development companies.

Guidance for Auditors

The Act mandates a number of requirements concerning auditors of issuers, including mandatory registration with the PCAOB, the setting of auditing standards, inspections, investigations, disciplinary proceedings, prohibited activities, partner rotation, and reports to audit committees, among others. Auditors of issuers should familiarize themselves with applicable provisions of the Act and the standards of the PCAOB. The PCAOB continues to establish rules and standards implementing provisions of the Act concerning the auditors of issuers.

Applicability and Integration of Generally Accepted Auditing Standards and Public Company Accounting Oversight Board Standards

The Act authorizes the PCAOB to establish auditing and related attestation, quality control, ethics, and independence standards to be used by registered public accounting firms in the preparation and issuance of audit reports for entities subject to the Act or the rules of the SEC. Accordingly, public accounting firms registered with the PCAOB are required to adhere to all PCAOB standards in the audits of "issuers," as defined by the Act, and other entities when prescribed by the rules of the SEC.

For those entities not subject to the Act or the rules of the SEC, the preparation and issuance of audit reports remain governed by GAAS as issued by the ASB.

Major Existing Differences Between GAAS and PCAOB Standards

The major differences between GAAS and PCAOB standards are described in both Part I of volume one of the AICPA Professional Standards and in Part I of the AICPA publication titled PCAOB Standards and Related Rules. Please refer to Appendix I of this Guide for a summary of major existing differences between AICPA Standards and PCAOB Standards.

Sarbanes Oxley Requirements

The Act contains requirements in a number of other important areas, and the SEC has issued implementing regulations in certain of those areas as well. For example,

• The Act prohibits auditors from performing certain non-audit or non-attest services. The SEC adopted amendments to its existing requirements regarding auditor independence to enhance the independence of accountants that audit and review financial statements and prepare attestation reports filed with the SEC. This rule conforms the SEC's regulations to Section 208(a) of the Act and, importantly, addresses the performance of non-audit services.
• The Act requires the lead audit or coordinating partner and the reviewing partner to rotate off of the audit every 5 years. (See SEC Releases 33-8183 and 33-8183A for SEC implementing rules.)
• The Act directs the PCAOB to require a second partner review and approval of audit reports (concurring review).
• The Act states that an accounting firm will not be able to provide audit services to an issuer if one of that issuer's top official's (CEO, Controller, CFO, Chief Accounting Officer, etc.) was employed by the firm and worked on the issuer's audit during the previous year. In January 2003, the SEC adopted amendments to its rules regarding auditor independence that prohibit an accounting firm from auditing an issuer's financial statements if the issuer has employed in a financial reporting oversight role a person that had been a member of the audit engagement team within the one year period preceding the commencement of audit procedures. For investment companies, the one-year period extends to positions at any entity in the investment company complex that are directly responsible for the operations or financial reporting of the investment company.

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