[Federal Register Volume 61, Number 91 (Thursday, May 9, 1996)]
[Notices]
[Pages 21216-21217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11536]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37163; File No. SR-NASD-96-09]


Self-Regulatory Organizations; Order Approving 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

May 2, 1996.
    On March 13, 1996, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') a proposed rule change 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder.\2\ The rule change amends Part 
II of Schedule D to the NASD By-Laws (``Schedule D'') \3\ by adding 
precatory language recommending that Nasdaq issuers distribute interim 
reports to both shareholders of record and beneficial shareholders \4\ 
to shareholders if they

[[Page 21217]]

distribute such reports to shareholders of record \5\ and encouraging 
issuers to utilize communications technology to communicate to 
shareholders in a timely manner.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ NASD Manual,. Schedules to the By-Laws, Schedule D, Part II 
(CCH) Paras. 1803-06A.
    \4\ 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. 78m(a), 78o(d).
    \5\ 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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    Notice of the proposed rule change, together with the substance of 
the proposal, was provided by issuance of a Commission release 
(Securities Exchange Act Release No. 37010, March 21, 1996) and by 
publication in the Federal Register (61 FR 13909, March 28, 1996). No 
comment letters were received. This order approves the proposed rule 
change.
    The rule change approved today adds new Section 1(d) to Part II of 
Schedule D recommending that Nasdaq issuers distribute interim reports 
to both shareholders of record and beneficial shareholders if they 
distribute such reports to shareholders of record. The rule change also 
adds new Section 2(f) of Part II to Schedule D regarding the 
qualification requirements for issuers of non-Canadian foreign 
securities and American Depositary Receipts that are included in The 
Nasdaq Stock Market. Such issuers also are recommended to distribute 
interim reports to both shareholders of record and beneficial 
shareholders if they distribute such reports to shareholders of record. 
The rule change will apply to both the Nasdaq National Market and The 
Nasdaq SmallCap Market tiers of The Nasdaq Stock Market.
    The rule change is the product of a review by various industry 
groups, including the American Society of Corporate Secretaries and the 
Securities Industry Association, of listed \6\ 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 earning reports. Presently, some listed 
companies distribute interim reports to both record and beneficial 
shareholders, some listed companies send interim reports to 
shareholders of record only, and some do not send interim reports to 
any shareholders. The portion of the proposed rule change recommending 
that Nasdaq issuers distribute interim reports to both shareholders of 
record and beneficial shareholders to shareholders if they distribute 
such reports to shareholders of record is consistent with voluntary 
provisions adopted by the New York Stock Exchange and the American 
Stock Exchange \7\ and, therefore, would provide uniformity among these 
markets regarding the handling of listed company interim earnings 
reports.
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    \6\ 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 exchange-listed securities.
    \7\ See supra note 5.
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    New Sections 1(d) and 2(f) to Part II of Schedule D also 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 Nasdaq issuers to utilize new communications 
technology available to many but not all beneficial shareholders. The 
NASD stated in its filing that Nasdaq issuers should consider this 
provision of the rule change as a supplement to the first provision of 
the proposed rule change recommending that Nasdaq issuers distribute 
interim reports to both shareholders of record and beneficial 
shareholders to shareholders if they distribute such reports to 
shareholders of record.
    The rule change is precatory and does not impose new requirements 
on issuers. Nasdaq issuers that distribute interim reports to 
shareholders of record only would not be subject to Nasdaq actions for 
non-compliance with Nasdaq listing requirements.
    The Commission finds that the rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act. The 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 to distribute 
interim reports to both shareholders of record and beneficial 
shareholders to shareholders if they distribute such reports to 
shareholders of record. This provision of the proposed rule change is 
consistent with provisions adopted by the New York Stock Exchange and 
the American Stock Exchange \8\ and, therefore, will provide uniformity 
among these markets regarding the handling of listed company interim 
earnings reports. The rule change also encourages Nasdaq issuers to 
consider new technological means to communicate the information 
contained in their interim reports to shareholders in a timely and less 
costly manner. These provisions are intended to enhance shareholder 
communications in The Nasdaq Stock Market.
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    \8\ See supra note 5.
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    It is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change SR-NASD-96-09 be, and hereby is, 
approved.

    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. 96-11536 Filed 5-7-96; 8:45 am]
BILLING CODE 8010-01-M