[Federal Register Volume 60, Number 96 (Thursday, May 18, 1995)]
[Notices]
[Pages 26753-26754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12258]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35712; File No. SR-NASD-95-18]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc., Relating to 
Corporate Financing Underwriting Terms and Arrangements

May 12, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on May 3, 
1995, the National Association of Securities Dealers, Inc. (``NASD'' or 
``Association'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items, I, II, and III below, which Items have been prepared by the 
NASD. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The NASD is herewith filing a proposed rule change to Article III, 
Section 44 of the Rules of Fair Practice. Proposed new language is 
italicized; proposed deletions are in brackets.
THE CORPORATE FINANCING RULE
Underwriting Terms and Arrangements

Sec. 44

* * * * *
(c) Underwriting Compensation and Arrangements
* * * * *
(6) Unreasonable Terms and Arrangements
* * * * *
    (B) Without limiting the foregoing, the following terms and 
arrangements, when proposed in connection with the distribution of a 
public offering of securities, shall be unfair and unreasonable:
    (i)-(x) (Unchanged)
    (xi) for a member or person associated with a member to accept, 
directly or indirectly, any non-cash sales incentive item including, 
but not limited to, travel bonuses, prizes and awards, from an issuer 
or affiliate thereof in excess of [$50] $100 per person per issuer 
annually. Notwithstanding the foregoing, a member may provide non-cash 
sales incentive items to its associated persons provided that no 
issuer, or an affiliate thereof, including specifically an affiliate of 
the member, directly or indirectly participates in or contributes to 
providing such non-cash sales incentive; or
    (xii) (Unchanged)

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASD has prepared summaries, set forth in Sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Subsection 44(c)(6)(B)(xi) of the Corporate Financing Rule (the 
``Rule'') currently prohibits NASD members from receiving non-cash 
sales incentives from an issuer or its affiliates valued in excess of 
$50 per person per issuer annually. Such non-cash sales incentives are 
typically de minimis in nature, such as small souvenir or gift items, 
provided by issuers to a member or associated persons of a member. The 
NASD is proposing an amendment to the Rule to raise the permissible 
level of non-cash sales incentives to $100 per person, annually.
    The NASD believes that a dollar amount of $100 is still relatively 
low and will neither compromise the intent, nor reduce the ability, of 
the rule to prevent fraudulent acts and practices that might arise in 
connection with the giving of gifts or payments by issuers and their 
affiliates as non-cash compensation to members or persons associated 
with members.
    Additionally, the amendment would make the value-limitation 
provisions of the Rule consistent with similar provisions in Article 
III, Sections 10 and 34 of the Rules of Fair Practice, with proposed 
amendments to Sections 26 and 29 now pending SEC approval, and with 
Rule 350(a) of the New York Stock Exchange (``NYSE''). The amendment to 
the Rule would provide regulatory consistency and simplify compliance 
for member firms that are also members of the NYSE.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act,\1\ which require that 
the rules of the association be designed to prevent fraudulent and 
manipulative acts and promote just and equitable principles of trade in 
that the proposed rule change allows for an increase in the dollar 
limit to a level that is still reasonably de minimis and provides for 
regulatory consistency with other rules of the NASD and the NYSE.

    \1\ 15 U.S.C. 78o-3.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The NASD does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. by order approve such proposed rule change, or
    B. institute proceedings to determine

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Security, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in 
[[Page 26754]] the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the NASD. All submissions should refer to the file 
number in the caption above and should be submitted by June 8, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12258 Filed 5-17-95; 8:45 am]
BILLING CODE 8010-01-M