[Federal Register Volume 61, Number 114 (Wednesday, June 12, 1996)]
[Notices]
[Pages 29777-29782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14905]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37282; File No. SR-NASD-96-20]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
Changes in the Structure of the NASD Board of Governors

June 6, 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 May 28, 
1996,\1\ 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.
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    \1\ On June 5, 1996, the NASD filed Amendment No. 1 to the 
proposed rule change. Amendment No. 1 amends Article VI, Section 5 
to clarify that, in a contested election, the term of office of a 
candidate certified by the National Nominating Committee for 
inclusion on the ballet for the election of Governors pursuant to 
Article VI, Section 7(c) would be identical to the term of office of 
a candidate nominated by the National Nominating Committee pursuant 
to Article VI, Section 7(c). Amendment No 1 also amends Article VI, 
Section 7(a) to clarify that any person elected to the Board of 
Governors must be nominated or certified by the National Nominating 
Committee. See Letter from Suzanne E. Rothwell, Associate General 
Counsel, NASD to Katherine A. England, Assistant Director, Division 
of Market Regulation, Commission (dated June 4, 1996).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD is proposing to amend the NASD's By-Laws. The text of the 
proposed rule change is available at the Office of the Secretary, NASD 
and at the Commission.

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

Background

    In 1995, the NASD Board of Governors (``Board'') appointed The 
Select Command on Structure and Governance (``Select Committee'') to 
examine the corporate structure, governance, and functions of the NASD 
and to recommend changes and improvements to enable the NASD to meet 
its regulatory and business obligations. The Select Committee reported 
to the Board at its September 1995 meeting and recommended, among other 
things, the establishment of two distinct subsidiaries; one to perform 
the regulatory functions of the NASD and the other to run The Nasdaq 
Stock Market (``Nasdaq''). The Select Committee recommended that each 
subsidiary have an independent Board of Directors and that the NASD 
remain as parent corporation overseeing the operations of both 
subsidiaries.
    In January 1996, the NASD created a new subsidiary, NASD 
Regulation, Inc. (``NASD Regulation'') to provide regulation and member 
and constituent services, with the NASD retaining responsibility for 
general oversight over the effectiveness of the self-regulatory and 
business operations of the NASD and its major subsidiaries, Nasdaq and 
NASD Regulations, and final policymaking authority for the association 
as a whole. The NASD also

[[Page 29778]]

adopted Select Committee proposals to restructure and reduce the size 
of the NASD Board and to implement policies to ensure a balance of non-
industry and industry representation on the Nasdaq and NASD Regulation 
Boards. In Notice to Members 95-101 (December 11, 1995), members were 
asked to vote on By-Law changes to implement these policies. The 
amendments proposed in the Notice to Members would have: (1) deleted 
Article V of the NASD By-Laws related to Affiliated Registered 
Securities Associations; (2) amended Article VII of the NASD By-Laws to 
create a national nominating committee to nominate persons to serve on 
the Board of Governors and reconstitute the Board as a majority non-
industry Board; and (3) amend Article X to identify the Chief Executive 
Officers as the most senior executive of the NASD.
    Following member approval of the proposed By-Law changes, the SEC, 
on April 11, 1996, granted temporary approval for a period of 90 days 
to the amendments to Article VII Sections 4 and 6 that restructure the 
Board and to a new NASD rule providing for the delegation of the 
authority to act on behalf of the NASD to NASD Regulation and Nasdaq 
pursuant to the ``Plan of Allocation and Delegation of Functions by 
NASD to Subsidiaries'' (``Delegation Plan'').\2\ The Delegation Plan 
sets forth the purposes, functions and governance procedures of the 
three corporations working together.
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    \2\ Securities Exchange Act Release No. 37106 (April 11, 1996), 
61 FR 16944 (April 18, 1996) (``Release 34-37106''); Securities 
Exchange Act Release No. 37107 (April 11, 1996), 61 FR 16948 (April 
18, 1996) (``Release 34-37107'').
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    In order to complete the reorganization and restructuring 
contemplated by Notice to Members 95-101 and by the Delegation Plan, 
the NASD published for member vote further amendments to the NASD By-
Laws in Special Notice to Members 96-35.\3\ The last date for member 
vote is June 22, 1996. The proposed rule change filed herein, 
therefore, incorporates amendments approved by the membership in Notice 
to Members 95-101 and Special Notice to Members 96-35, that were not 
previously approved by the Commission in Release 34-37106.
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    \3\ The rule language published for member vote in Special 
Notice to Members 96-35 treated as if adopted the rule changes 
published for member vote in Notice to Members 95-101 and 96-01 
(January 1996). The latter Notice proposed to adopt amendments to 
the By-Laws to require members to file required documents 
electronically. These amendments will be filed shortly.
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Description of Proposed Rule Change \4\

    The proposed rule change would permit the NASD to continue the 
restructuring necessary to implement the principles articulated in the 
report of the Select Committee. The NASD is proposing to amend its By-
Laws to complete the reorganization proposed in Notice to Members 95-
101 and to make the By-Laws consistent with the Delegation Plan 
approved by the Commission in Release 34-37107 by providing for the 
creation of a national nominating committee to identify and nominate 
for election industry and non-industry persons to serve on the Board 
and by deleting sections and language now unnecessary or inappropriate 
as a result of the Delegation Plan. Included in the proposed rule 
change is the deletion of nearly all references to the Districts and 
local administration, because responsibility for the local 
administration of regulatory affairs under the Delegation Plan has been 
assigned to NASD Regulation.\5\ The NASD is also proposing to amend its 
By-Laws to conform terms and rule citations to those used in the 
reorganized NASD Manual, including, for example, replacing the term 
``Code of Procedure'' with ``Procedural Rules,'' \6\ and to make 
various miscellaneous clarifying corrections to the By-Laws. Changes to 
punctuation and other minor, non-substantive changes to the rule 
language will not be described below. Finally, all references to the 
NASD ``Certificate of Incorporation'' are being changed to the 
``Restated Certificate of Incorporation'' to reflect that the 
Certificate of Incorporation has been amended to be consistent with the 
changes previously adopted and proposed herein to the By-Laws.\7\
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    \4\ Certain minor, non-substantive changes from the rule 
language published for member vote in Special Notice to Members 96-
35 have been made to the rule language proposed herein to correct 
inadvertent errors and, in particular, to ensure that the language 
of the proposed rule change is consistent with the reorganization of 
the NASD Manual.
    \5\ In recognition of this assignment of responsibility, the 
Board of Directors of NASD Regulation adopted a resolution at its 
May 13, 1996, meeting to appoint the Districts and District 
Committees as Districts and District Committees of NASD Regulation.
    \6\ The new version of the NASD Manual is divided into four 
sections (Administrative, Corporate Organization, Rules of the 
Association, and SEC Rules and Regulation T) and includes an 
expanded key work index. See Notice to Members 96-25 (April 1996).
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Article I. Definitions

    The NASD is proposing three new definitions. ``Delegation Plan'' is 
the term by which the ``Plan of Allocation and Delegation of Functions 
by NASD to Subsidies'' will be known. ``Corporations'' and ``Boards'' 
are the terms that will refer to the NASD, its subsidiaries and their 
boards of directors.
    In addition, the definition of ``Act'' is proposed to be revised to 
match the definition in the Delegation Plan, and the definition of 
``rules of the Corporation'' to be consistent with the various 
references to rule in the reorganized NASD Manual.\7\
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    \7\ The definition published for member vote in Special Notice 
to Members 96-35, attached as Exhibit 2 to the proposed rule change, 
has been modified to eliminate certain rule language that would not 
have been consistent with the reorganized NASD Manual.
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    Finally, the definition of ``bank'' is proposed to be revised to 
expand the reference to national banks to include the citation that 
such banks are included in the definition that are ``under the 
authority of the Comptroller of the Currency pursuant to the first 
section of Public Law 87-722 (12 U.S.C. 92a). * * *.''

Article II. Qualifications of Members and Associated Persons

Sec. 1. Persons Eligible To Become Members and Associated Persons of 
Members

    No change.

Sec. 2. Authority of Board To Adopt Qualification Requirements

    The NASD is proposing to delete the second sentence of Subsection 
(c), which authorizes the Board to amend its rules related to 
qualification requirements without recourse to the membership for vote, 
because the provision is redundant to Sec. 1(a)(2) of Article VI 
(formerly Article VII).

Sec. 3. Ineligibility of Certain Persons for Membership or Association

    The NASD is proposing to replace ``Code of Procedure'' in 
Subsection (d) with the more general term ``Procedural Rules,'' as used 
in the reorganized NASD Manual.

Sec. 4. Definition of Disqualification

    No change.

Article III. Membership

Sec. 1. Application for Membership

    In a change made necessary by the Delegation Plan, the NASD is 
proposing to amend Subsection (a)(3) of this provision to extend to the 
Nasdaq and NASD Regulation Boards, committee members, officers, and 
employees protection from liability for action taken within the scope 
of authority, except for

[[Page 29779]]

willful malfeasance. See also Article IV, Sec. 2(a)(2) of the By-Laws. 
The NASD is further proposing to replace ``Board of Governors'' with 
``Corporation'' in Subsection (a)(4) because it is the corporate staff 
that requests information and processes applications for membership.
    Consistent with the reorganized NASD Manual, which moved membership 
application procedures to the Procedural Rules, the NASD is proposing 
to delete rule language in Subsection (b) providing a procedure for the 
processing of membership applications and to add language requiring 
that applications be processed in the manner set forth in the 
Procedural Rules.
    The NASD is also proposing to delete Subsection (c), as part of the 
general deletion references to Districts.

Sec. 2. Similarity of Membership Names

    No change.

Sec. 3. Executive Representative

    No change.

Sec. 4. Membership Roll

    No change.

Sec. 5. Resignation of Members

    The NASD is proposing to replace ``Code of Procedure'' with 
``Procedural Rules.''

Sec. 6. Retention of Jurisdiction

    The NASD is proposing to replace ``Code of Procedure'' with 
``Procedural Rules.''

Sec. 7. Transfer and Termination of Membership

    The NASD is proposing to replace ``Rules of Fair Practice'' with 
``rules of the Corporation'' in Subsection (a).

Sec. 8. Registration of Branch Offices

    The NASD is proposing to amend Subsection (a) to change the cross-
reference from Article VI to Article V, as current Aritcle V is 
proposed to be deleted.

Sec. 9. Vote of Branch Offices

    The NASD is proposing to delete this section, as part of general 
deletion of references to Districts.

Sec. 10. District Committees' Right to Classify Branches

    The NASD is proposing to delete this section, as part of the 
general deletion of references to districts.

Article IV. Registered Representatives and Associated Persons

Sec. 1. Qualification Requirements

    No change.

Sec. 2. Application for Registration

    The NASD is proposing to amend Subsection (a)(1) to make a non-
substantiative correction to replace the word ``including'' with 
``and.'' As in Article III, Sec. 1(a)(3), in a change made necessary by 
the Delegation Plan, the NASD is proposing to amend Subsection (a)(2) 
to extend to the Nasdaq and NASD Regulation Boards, committee members, 
officers, and employees protection from liability for action taken 
within the scope of authority, except for willful malfeasance. See also 
Article IV, Sec. 2(a)(2) of the By-Laws. Moreover, all references to 
the ``Board of Governors'' are proposed to be changed to 
``Corporation.''

Sec. 3. Notification by Member to Corporation and Associated Person of 
Termination; Amendments to Notification

    The NASD is proposing to amend Subsection (a) to replace ``Code of 
Procedure'' with ``rules of the Corporation,'' ``Board of Governors'' 
with ``Corporation,'' and ``Association'' with ``Corporation.''

Sec. 4. Retention of Jurisdiction

    The NASD is proposing to amend the introduction to replace ``Code 
of Procedure'' with ``rules of the Corporation'' and to amend the 
introduction and Subsection (b) to clarify that the reference to Rule 
8210 is to an NASD rule

Article V. Affiliates

    The NASD is proposing to delete Article V to remove an unnecessary 
reference to the affiliation of other Registered Securities 
Associations with the NASD. Such affiliations remain authorized by 
Section 15A of the Act.

Article VI. Dues, Assessments and Other Charges

    This Article is proposed to be redesignated as Article V.

Sec. 1. Power of Board To Fix and Levy Assessments

    The NASD is proposing to replace references to the ``Board of 
Governors'' with ``Corporation'' in the section heading and text, and 
to delete language that is redundant to Sec. 1(a)(2) of Article VI 
(formerly Article VII) that authorizes the Board to adopt changes to 
any fee, due, or assessment without recourse to the membership for 
vote.

Sec. 2. Reports of Members

    No change.

Sec. 3. Suspension or Cancellation of Membership or Registration

    No change.

Sec. 4. Reinstatement of Membership or Registration

    No change.

Article VII. Board of Governors

    This Article is proposed to be redesignated as Article VI.

Sec. 1. Powers and Authority of Board of Governors

    The NASD is proposing to replace ``Rules,'' with the more general 
reference to the defined term ``rules of the Corporation'' in 
Subsections (a)(2) and (3).
    In conjunction with the implementation of the Delegation Plan, the 
NASD is proposing to add a new Subsection (c) that sets forth the 
authority of the Corporation to delegate functions, provided that such 
delegations are not inconsistent with the Delegation Plan.

Sec. 2. Authority To Suspend for Failure to Submit Required Information

    The NASD is proposing to change numerous references to the 
``President'' in this Subsection (b) and in other By-Law sections to 
``Chief Executive Officer'' to make clear that the person referenced is 
the most senior executive of the Association.

Sec. 3. Authority To Take Action Under Emergency or Extraordinary 
Market Conditions

    The NASD is proposing to eliminate the special committee 
established by Section 3 that has authority to take action in case of 
emergencies or extraordinary market conditions when the full Board is 
not available. Instead, the NASD is proposing that either the full 
Board, or any person or persons designated by the Board, have authority 
to take action under emergency conditions.

Sec. 4. Composition and Qualifications of the Board

    The amendments approved by the Commission in Release No. 34-37106 
reorganized Section 4 to Article VII into one provision that 
reconstituted the NASD Board of Governors as a smaller, majority Non-
industry Board, comprising the Chief Executive Officer, one or more 
Non-Industry Governors representative of issuers and investors and not 
associated with an NASD member, and one or more Industry Governors. 
This change reduced the minimum size of the Board from 25 to 5. The 
rule change also adopted

[[Page 29780]]

definitions of Industry and Non-Industry Governors.
    The NASD is proposing to reorganize this section into two 
subsections. The amendments retain in Subsection (a) the new 
organization of the Board as a majority Non-Industry Board but delete 
the definitions of Industry and Non-Industry Governor, because those 
terms, and a definition of Public Governor, are now contained at 
Section I.A. of the Delegation Plan, which definitions also apply to 
the Directors of Nasdaq and NASD Regulation.\8\ As revised, this 
section requires that the Board of Governors be composed in a manner 
consistent with the Delegation Plan and Section 15A(b)(4) of the 
Securities Exchange Act of 1934. This will ensure that the Board will 
at all times include full representation of issuers, investors, and the 
securities industry, with a Non-Industry majority. In addition, new 
Subsection (b) incorporates from Article X (to be redesignated Article 
VII), Section 1 rule language providing for the election by the Board 
of Governors of a Chairman and such other persons having titles as the 
Board may choose.
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    \8\See also Section I.C. of the Delegation Plan, which contains 
provisions applicable to the composition, nomination, and election 
of Governors. Release 34-37107.
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Sec. 5. Term of Office of Governors

    The NASD is proposing to amend this provision to provide that, 
except for the Chief Executive Officer, no Governor may serve more than 
two consecutive three-year terms; with the limited exception that a 
Governor appointed to fill a term of less than one year may serve up to 
two consecutive terms following the expiration of that Governor's 
current term.

Sec. 6. Filling of Vacancies

    The NASD is proposing to amend this provision to clarify that the 
filling of vacancies cannot be inconsistent with the Delegation Plan.

Sec. 7. Election of Board Members

    Consistent with Section I.C. of the Delegation Plan, which 
describes the procedures for the nomination and election of NASD 
Governors, the NASD is proposing to amend this Section to replace all 
current language with new Subsections (a), (b) and (c) that provide 
that the members of the NASD Board of Governors shall be elected by a 
plurality of the votes of the members of the NASD that are present in 
person or represented by proxy at the annual meeting of the NASD and 
entitled to vote. The provision further authorizes the Board of 
Governors to establish a National Nominating Committee, which will 
consist of six or more persons meeting qualifications to be established 
by the NASD Board in conformance with the Delegation Plan,\9\ to 
nominate or certify one or more persons for each governorship up for 
election. Any person nominated or certified for election to the Board 
is required to have demonstrated to the National Nominating Committee 
that that person meets the applicable qualifications for the position.
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     \9\ See Release 34-37107. The Delegation Plan provides that the 
National Nominating Committee shall be composed of at least 6 and 
not more than 9 members, equally balanced between Industry and Non-
industry Committee Members (including at least 2 Public Committee 
Members), with 2 members of the National Nominating Committee 
selected by NASD, NASD Regulation, and Nasdaq, respectively. The 
National Nominating Committee shall propose to the NASD Board one or 
more nominees for each vacant or new Governor position, and for each 
Director position on the Boards of Directors of the Subsidiaries.
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Sec. 8. Filling of Vacancies on Board

    This provision is proposed to be deleted consistent with the prior 
approval of a new provision as Section 6 that provides a procedure for 
the filling of vacancies on the Board of Governors in Release 34-37106. 
See discussion above regarding Section 6.

Sec. 9. Meetings of Board

    This section is proposed to be redesignated as Sec. 8. The title of 
this provision is proposed to be changed to ``Meetings of the Board; 
Quorum; Required Vote.'' The NASD is proposing to clarify that a quorum 
of the Board shall consist of a majority of the ``total number'' of the 
Governors, rather than a majority of the ``members'' of the Board. The 
current rule language permitting meetings by mail, telephone or 
telegraph is proposed to be amended to permit members of the Board or 
any committee of the NASD to participate in a meeting by communications 
facilities that permit the parties to hear and speak to each other. It 
is further clarified that participation in a meeting constitutes the 
person's presence at a meeting. The current rule language is retained 
that no member of the Board shall vote by proxy at any meeting.

Sec. 10. Offices of Corporation

    This section is proposed to be deleted as unnecessary as it 
restates what is true by operation of law; namely, that the NASD may 
maintain such offices as the Board of Governors may deem necessary.\10\
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    \10\ In Notice to Members 95-101, this provision was proposed to 
be deleted and replaced by new Section 9 that would provide 
authority to the Board for action by written consent. In Special 
Notice to Members 96-35, the new provision was proposed to be 
deleted since this authority is already provided by operation of 
Delaware General Corporation Law.
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Article VIII. District Committees and Article IX. Nominating 
Committees

    These two articles that address the creation of District Committees 
and of District Nominating Committees, respectively, are proposed to be 
deleted, as part of the general deletion of references to Districts. As 
noted above, the local administration of regulatory affairs under the 
Delegation Plan is now the responsibility of NASD Regulation, and the 
NASD Regulation Board has appointed the Districts and District 
Committees as that corporation's mechanisms for local administration.

Article X. Officers and Employees

    This Article is proposed to be redesignated as Article VII. The 
words ``and Employees'' have been deleted from the article title, 
because this article concerns only officers of the Corporation, not 
employees.

Sec. 1. Election of Officers of the Board

    This provision has been relocated in Article VII (redesignated VI), 
Section 4(b). The current rule language specifies that the provision 
applies to the election by the Board of a ``Chairman, one or more Vice 
Chairmen, and such other officers as it shall deem necessary or 
advisable. * * *'' The proposed rule change in Section 4(b) would 
modify the rule language of the provision to reference only the 
Chairman ``and such other persons having titles as it shall deem 
necessary or advisable. * * *''

Sec. 2. Officers of the Corporation

    This Section is proposed to be redesignated as Sec. 1. The title is 
proposed to be deleted as redundant of the article title. This 
provision is proposed to be amended to specify that the powers and 
duties assigned to the Chief Executive Officer of the Corporation may 
not be inconsistent with the requirements of the Delegation Plan, and 
therefore deletes the Chief Executive Officer's ex-officio membership 
in all committees.

Sec. 3. Absence of President

    This Section is proposed to be redesignated as Sec. 2. The title is 
proposed to be changed to ``Absence of Chief Executive Officer.''

Sec. 4. Employment of Counsel

    This Section is proposed to be redesignated as Sec. 3.

Sec. 5. Administrative Staff

    This Section is proposed to be redesignated as Sec. 4. The NASD is

[[Page 29781]]

proposing to amend this provision to clarify that determinations of the 
NASD Board regarding the employment of administrative staff shall not 
be inconsistent with the Delegation Plan.

Sec. 6. Compensation of Board and Committee Members

    This Section is proposed to be redesignated as Sec. 5. The 
provision is proposed to be revised to delete a reference to District 
Committees and to reference, instead, any committee of the Corporation.

Article XI. Committees

    This Article is proposed to be redesignated as Article VIII.

Sec. 1. National Committees

    The NASD is proposing to delete the section subtitle of ``National 
Committees'' as unnecessary in light of the deletion of Section 2 and 
to amend the provision to clarify that the determination of the Board 
with respect to the establishment of committees shall not be 
inconsistent with the Delegation Plan.

Sec. 2. Committees of the Districts

    This provision is proposed to be deleted, as part of the general 
deletion of references to Districts.

Sec. 3. Removal of Committee Member

    This section is proposed to be redesignated as Sec. 2. The NASD is 
proposing to amend this provision to change the reference to Article XI 
to Article VIII, and delete references to District Committees.

Sec. 4. Executive Committee

    This provision is proposed to be deleted, because the authority to 
create an Executive Committee exists by operation of Delaware General 
Corporation Law and Section 1 of this Article.

Article XII. Rules of Fair Practice

    This Article is proposed to be redesignated as Article IX. The NASD 
is proposing to delete ``Sec. 1,'' because there is only one section.

Article XIII. Disciplinary Proceedings

    This Article is proposed to be redesignated as Article X.

Sec. 1

    The NASD is proposing to delete language that is redundant to Sec. 
1(a)(2) of Article VI (formerly Article VII) that authorizes the Board 
of Governors to amend the Procedural Rules without the need for 
membership vote.

Sec. 2

    No change.

Article XIV. Powers of Board To Prescribe Sanctions

    This Article is proposed to be redesignated as Article XI.

Sec. 1

    The NASD is proposing in Subsection (c) to change the word ``Code'' 
to ``Arbitration Code'' to clarify the reference to this code and in 
Subsection (e) to delete references to committees that are now 
committees of NASD Regulation.

Article XV. Uniform Practice Code

    This Article is proposed to be redesignated as Article XII.

Sec. 1. Authority To Adopt Code

    The NASD is proposing to delete the last sentence of the section, 
which is redundant to Sec. 1(a)(2) of Article VI (formerly Article 
VII).

Sec. 2. Administration of Code

    The NASD is proposing to replace the word ``code'' with ``Uniform 
Practice Code'' in the last sentence to clarify the reference.

Sec. 3. Transactions Subject to Code

    The NASD is proposing to replace the word ``code'' with ``Uniform 
Practice Code'' in the last sentence to clarify the reference.

Article XVI. Limitation of Powers

    This Article is proposed to be redesignated as Article XIII.

Sec. 1. Prohibitions

    No change.

Sec. 2. Use of Name of Corporation by Members

    No change.

Sec. 3. Unauthorized Expenditures

    The NASD is proposing to delete the reference to District 
Committees and replace ``President'' with ``Chief Executive Officer.''

Sec. 4. Conflicts of Interest

    The NASD is proposing to delete language which is now redundant of 
language of the Procedural Rules in the reorganized NASD Manual.

Sec. 5. Municipal Securities

    No change.

Sec. 6. Government Securities

    No change.

Article XVII. Procedure for Adopting Amendments to By-Laws

    This Article is proposed to be redesignated as Article XIV. The 
NASD is proposing to delete ``Sec. 1,'' because there is only one 
section.

Article XVIII. Corporate Seal

    This Article is proposed to be redesignated as Article XV. The NASD 
is proposing to delete ``Sec. 1,'' because there is only one section.

Article XIX. Checks.

    This Article is proposed to be redesignated as Article XVI. The 
NASD is proposing to delete ``Sec. 1,'' because there is only one 
section.

Article XX. Annual Financial Statement

    This Article is proposed to be redesignated as Article XVII. The 
NASD is proposing to delete ``Sec. 1,'' because there is only one 
section.

Requested Effective Date

    The NASD is requesting that the proposed rule change be effective 
no later than July 11, 1996, as the 90-day temporary approval granted 
by the SEC to the proposed restructuring of the NASD Board and to the 
Delegation Plan expires on July 10, 1996.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Sections 15A(b)(2), (4), and (6) of the Act 11 
in that the restructured organization will: (1) provide for the 
organization of the Association in a manner that will permit the 
Association, through its operating subsidiaries, to carry out the 
purposes of the Act, to comply with the Act, and to enforce compliance 
by Association members and persons associated with members with the 
Act, the rules and regulations thereunder, the rules of the Association 
and the federal securities laws; (2) provide for the fair 
representation of members, issuers and investors on the Board of 
Governors and in the administration of the NASD's affairs; and (3) 
enhance the NASD's ability to protect investors and the public interest 
in furtherance of the purposes of the Act.
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    \11\ 15 U.S.C. Sec. 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.

[[Page 29782]]

(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. However, in 
connection with the publication of certain parts of the proposed rule 
change for member vote in Notice to Members 95-101, attached as Exhibit 
2 to rule filing SR-NASD-96-02, the NASD receive three comments, which 
were attached as Exhibit 4 to SR-NASD-96-02. The NASD's statement on 
the comments received with respect to Notice to Members 95-101 is set 
forth in rule filing SR-NASD-96-02 and was published by the Commission 
in Release 34-37106.

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 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, N.W., 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 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 July 3, 1996.

    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. 96-14905 Filed 6-11-96; 8:45 am]
BILLING CODE 8010-01-M