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GAO-03-953R 1 (2003-07-03)

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       Accountability * Integrity * Reliability
United States General Accounting Office
Washington, DC 20548

          B-292474



          July 3, 2003

          The Honorable Richard C. Shelby
          Chairman
          The Honorable Paul S. Sarbanes
          Ranking Minority Member
          Committee on Banking, Housing, and Urban Affairs
          United States Senate

          The Honorable Michael G. Oxley
          Chairman
          The Honorable Barney Frank
          Ranking Minority Member
          Committee on Financial Services
          House of Representatives

          Subject: Securities and Exchange Commission: Certain Research and Development
                  Companies

          Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a
          major rule promulgated by the Securities and Exchange Commission (Commission),
          entitled Certain Research and Development Companies (RIN: 3235-AI57). We
          received the rule on June 17, 2003. It was published in the Federal Register as a final
          rule on June 20, 2003. 68 Fed. Reg. 37046.

          The final rule under the Investment Company Act of 1940 provides a nonexclusive
          safe harbor from the definition of investment company for certain bona fide research
          and development companies (R&D companies). The rule allows R&D companies
          greater flexibility to raise and invest capital pending its use in research,
          development, and other operations and clarifies the extent to which a company
          relying on the rule may make investments in other companies pursuant to
          collaborative research and development arrangements.

          Enclosed is our assessment of the Commission's compliance with the procedural
          steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the
          rule. Our review indicates that the Commission complied with the applicable
          requirements.


GAO-03-953R

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