Interpretive Letter to Forrest R. Foss, T. Rowe Price Associates, Inc.

January 28, 2002

Forrest R. Foss
Vice President and Associate Legal Counsel
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202

Re: Recordkeeping and Retention of Web Sites

Dear Mr. Foss:

This letter responds to your letter to Pramit Das dated November 21, 2001, in which you seek clarification of the recordkeeping requirements for member web sites under NASD Rule 2210(b)(2). You state in your letter that T. Rowe Price ("T. Rowe") has maintained an Internet web site since 1996. At the time T. Rowe launched the web site, and when it was substantially revised in 1998, a T. Rowe registered principal reviewed the entire site and T. Rowe filed all web site advertisements and sales literature concerning registered investment companies with the NASD. T. Rowe also retained paper copies of the web site in its files under Rule 2210(b)(2).

Since these filings, T. Rowe has made two types of changes to the web site on a regular basis. First, T. Rowe has updated statistical information, such as daily fund prices, daily, monthly and quarterly fund returns, fund rankings, and quarterly fund holdings ("Statistical Updates"). We understand that Statistical Updates do not include new or revised narrative descriptions of investment products or performance, or any material changes to any template or graph that presents statistical information. Second, T. Rowe has made substantive changes to the web site’s content, such as the addition of a new fund or a new discussion on how mutual funds may be used for retirement or college ("Substantive Changes"). You note that a T. Rowe registered principal approves all Substantive Changes, and to the extent that a Substantive Change concerns a registered investment company, it is filed with the NASD. T. Rowe also retains paper records of all Substantive Changes for a three-year period in accordance with NASD Rule 2210(b)(2).

You seek clarification of Rule 2210(b)(2)’s recordkeeping and retention requirements with respect to your web site. You do not believe that it is practical or necessary under Rule 2210 to maintain records of Statistical Updates. You note that there are thousands of Statistical Updates over the course of a one-year period and that all Statistical Updates are subject to an internal verification and review process designed to ensure that information is updated in a timely and accurate manner. You also note that having either to print out a paper copy of the web site or to take an electronic "snapshot" of the entire site every time there is a Statistical Update would be very expensive and might not recreate the web site as it appeared at a given time. You believe that investors are fully protected and NASD can perform its oversight responsibilities so long as: (1) a T. Rowe registered principal approves all Substantive Changes pursuant to Rule 2210(b)(1); (2) T. Rowe files all Substantive Changes that concern registered investment companies with the NASD; and (3) T. Rowe keeps records of all Substantive Changes pursuant to Rule 2210(b)(2).

As you know, Rule 2210(b)(1) requires that a registered principal approve each item of advertising and sales literature prior to use or filing with the NASD. Rule 2210(b)(2) requires members to maintain a separate file of all advertisements and sales literature, including the names of the persons who prepared them or approved their use, for a period of three years from the date of each use. Rule 2210(c)(1) requires members to file with the NASD’s Advertising Regulation Department all advertisements and sales literature concerning registered investment companies and public direct participation programs, and advertisements concerning government securities, within 10 days of first use or publication by any member.

It is the staff’s position that the approval, filing and recordkeeping requirements under Rule 2210 generally do not apply to statistical updates of the type you describe in your letter, because they consist of updates of statistical information contained in pre-existing templates. Thus, the staff generally does not regard them as the kind of new content to which these requirements are intended to apply. Accordingly, it is the staff’s position that T. Rowe is not required to approve, file or maintain as advertising records under Rule 2210 the Statistical Updates described in your letter. This position is based in part on your representation that T. Rowe maintains procedures to review and verify statistical information that is posted on your web site to ensure that it is timely and accurate. Additionally, we understand that a registered principal is responsible for reviewing and approving procedures designed to ensure that the web site does not include any false or misleading statistical information.

I hope that this letter responds to your request. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation, Inc. This letter responds only to the issues you have raised based on the facts as you have described them, and does not address any other rule or interpretation of the NASD, or all possible regulatory and legal issues involved. In particular, this letter does not address any issues raised by Securities and Exchange Commission record keeping rules, including Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934.

Sincerely,

Thomas M. Selman