[Federal Register Volume 61, Number 61 (Thursday, March 28, 1996)]
[Notices]
[Pages 13909-13911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7503]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37010; File No. SR-NASD-96-09]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
the Distribution of Interim Reports to Beneficial Owners and the Use of 
New Technology To Communicate Such Information to Shareholders

March 21, 1996.
    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 March 
13, 1996, 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.

[[Page 13910]]


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

    The NASD is filing a proposed rule change to Part II of Schedule D 
to the NASD By-Laws \1\ recommending the distribution of interim 
reports to all beneficial shareholders if sent to any registered 
shareholders and encouraging the use of communications technology to 
make timely communications to shareholders. Below is the text of the 
proposed rule change. Proposed new language is italicized; proposed 
deletions are in brackets.

    \1\ NASD Manual, Schedules to the By-Laws, Schedule D, Part II 
(CCH) Paras.  1803-06A.
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Schedule D \2\--Part II; Qualification Requirements for NASDAQ Stock 
Market Securities

Sec. 1  Qualification Requirements for Domestic and Canadian Securities
* * * * *
    (d) Nasdaq issuers which distribute interim reports to shareholders 
shold distribute such reports to both registered and beneficial 
shareholders. Nasdaq issuers are also encouraged to consider additional 
technological methods to communicate such information to shareholders 
in a timely and less costly manner as such technology becomes 
available.

    \2\ Pursuant to a new rule numbering system for the NASD Manual 
anticipated to be effective no later than May 1, 1996, Sections 1 
and 2 of Part II to Schedule D that are the subject of this proposed 
rule change will become Rules 4310 (regarding qualification 
requirements for Nasdaq domestic and Canadian securities and Rule 
4320 (regarding qualification requirements for Nasdaq Non-Canadian 
foreign securities and American Depositary Receipts (``ADRs'')), 
respectively. See Securities Exchange Act Release No. 36698 (January 
11, 1996), 61 FR 1419 (January 19, 1996) (order approving SR-NASD-
95-51).
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Sec. 2  Qualification Requirements for non-Canadian Foreign Securities 
and American Depository Receipts
* * * * *
    (f) Nasdaq issuers which distribute interim reports to shareholders 
should distribute such reports to both registered and beneficial 
shareholders. Nasdaq issuers are also encouraged to consider additional 
technological methods to communicate such information to shareholders 
in a timely and less costly manner as such technology becomes 
available.
* * * * *

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

    The NASD is proposing to add new Section 1(d) to Part II of 
Schedule D of the By-Laws (``Schedule D'') to recommend that Nasdaq 
issuers which distribute interim reports \3\ to shareholders distribute 
such reports to both registered and beneficial shareholders.\4\ The 
NASD also is proposing to add the same provision as new section 2(f) of 
Part II to Schedule D regarding the qualification requirements for 
issuers of non-Canadian foreign securities and ADRs that are included 
in The Nasdaq Stock Market.

    \3\ Interim reports are reports that are voluntarily distributed 
by an issuer as part of its shareholder relations activities and do 
not include quarterly financial reports required to be filed with 
the Commission pursuant to Sections 13(a) and 15(d) of the Act, 15 
U.S.C. Secs. 78m(a), 78o(d).
    \4\ The substance of this portion of the proposed rule change 
has been adopted by the New York Stock Exchange and American Stock 
Exchange. See NYSE Company Manual Rule 203.02 and American Stock 
Exchange Company Guide Section 623.
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    The NASD proposal is the product of a review by various industry 
groups, including the American Society of Corporate Secretaries and the 
Securities Industry Association, of listed \5\ companies' dissemination 
of interim earnings reports to shareholders. The industry groups have 
been attempting to achieve some uniformity among listed companies in 
the handling of interim earnings reports. Presently, some listed 
companies distribute interim reports to both record and beneficial 
shareholders, some listed companies only send interim reports to record 
shareholders, and some do not send interim reports to any shareholders. 
The portion of the proposed rule change recommending that Nasdaq 
issuers which distribute interim reports to shareholders distribute 
such reports to both registered and beneficial shareholders is 
consistent with voluntary provisions adopted by the New York Stock 
Exchange and the American Stock Exchange and, therefore, would provide 
the uniformity among these markets regarding the handling of listed 
company interim earnings reports that was sought by the above noted 
industry groups.

    \5\ The securities of Nasdaq issuers are ``included in'' The 
Nasdaq Stock Market, they are not ``listed on'' the Nasdaq Stock 
Market. However, for purposes of this filing, the term ``listed'' 
will apply to Nasdaq, as well as an exchange-listed securities.
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    The NASD also proposes to add language to new Sections 1(d) and 
(2)(f) to Part II of Schedule D that would encourage Nasdaq issuers to 
consider additional technological methods to communicate such 
information to shareholders in a timely and less costly manner as such 
technology becomes available. This provision is intended to encourage 
further Nasdaq issuers to utilize the new technological communications 
available to many but not all beneficial shareholders. This provision 
of the proposal rule change, therefore, is intended to be considered by 
Nasdaq issuers as a supplement to the first provision of the proposed 
rule change recommending that Nasdaq issuers which distribute interim 
reports to shareholders should distribute such reports to both 
registered and beneficial shareholders.
    The proposed rule change is a recommendation to Nasdaq issuers and 
is voluntary in nature. Non-compliance with the provisions of the 
proposed rule change, therefore, would not subject Nasdaq issuers to 
Nasdaq actions for non-compliance with Nasdaq listing requirements. The 
proposed rule change would apply to both the Nasdaq National Market and 
The Nasdaq SmallCap Market tiers of The Nasdaq Stock Market.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act in that the proposed 
rule change is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest by, among other things, encouraging Nasdaq issuers 
which distribute interim reports to shareholders to distribute such 
reports to both registered and beneficial shareholders. This provision 
of the proposed rule change is consistent with provisions adopted by 
the New York Stock Exchange and the American Stock Exchange and, 
therefore, would provide the uniformity among these markets regarding 
the handling of listed company interim earnings reports that was sought 
by the above-noted industry groups. The proposed rule change, in 
addition, would encourage Nasdaq issuers to consider additional 
technological methods to communicate the information contained in their

[[Page 13911]]
interim reports to shareholders in a timely and less costly manner, as 
such technology becomes available. The NASD believes that the proposed 
rule change will enhance shareholder communications in The Nasdaq Stock 
Market.

(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 reason for so finding or (ii) as to 
which the self-regulatory organizations consents, the Commission will:
    A. by order approve such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington DC 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 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 SR-NASD-96-09 and should be 
submitted by April 18, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Jonathan G. Katz,
Secretary.
[FR Doc. 96-7503 Filed 3-27-96; 8:45 am]
BILLING CODE 8010-01-M