[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Notices]
[Pages 13921-13922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7281]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38398; File No. SR-NASD-97-05]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc., 
Relating to the Transfer of Limited Partnership Securities

March 13, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 29, 1997 the NASD 
Regulation, Inc. (``NASD Regulation'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items, I, II, and III below, which Items have been 
prepared by the self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Regulation is proposing to amend Rules 11580 and 11870 of the 
National Association of Securities Dealers, Inc. (``NASD'' or 
``Association'') to expand the current exceptions to the requirement 
that members use the Limited Partnership Transfer Forms for the 
transfer of limited partnership securities and require that the Forms 
be used by members in account transfers of limited partnerships.

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 self-regulatory organization 
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 self-regulatory organization 
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

1. Purpose
    On January 29, 1996, the Commission approved new NASD Rule 11580 
(formerly, Section 73) to the NASD's Uniform Practice Code requiring 
members to use Standardized Transfer Forms when transferring limited 
partnership securities.\2\ Use of the forms became mandatory for NASD 
members on May 15, 1996. NASD Regulation is proposing two amendments 
related to the use of the Standardized Transfer Forms. The first is an 
amendment to NASD Rule 11580 to expand the current exceptions to 
include limited partnerships that trade in the non-Nasdaq over-the-
counter market that are in a depository. The second amendment is to 
NASD Rule 11870 (formerly, Section 65) to require that the Standardized 
Transfer Forms be used by members in account transfers of limited 
partnerships.
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    \2\ Securities Exchange Act Release No. 36783 (Jan. 29, 1996), 
61 FR 3955 (Feb. 2, 1996).
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    i. Amendment to Rule 11580. This rule includes an exception for 
limited partnership securities that are listed on an exchange or the 
Nasdaq Stock Market. The exception does not cover those limited 
partnership securities that are quoted on the OTC Bulletin Board that 
trade with such frequency that use of the Standardized Transfer Forms 
would not be appropriate. In order to broaden the exception, NASD 
Regulation is proposing to amend subparagraph (a) of NASD Rule 11580 to 
except from the requirements of the rule those limited partnership 
securities that are in a depository and that settle regular way.\3\ It 
is believed that the proposed criteria of depository eligibility and 
regular way settlement identify that group of non-Nasdaq over-the-
counter limited partnership securities that do not need the 
Standardized Transfer Forms to facilitate settlement. The Forms were 
specifically adopted to address problems associated with the settlement 
of limited partnership interests that are generally illiquid and where 
the transfer requirements contained in the General Partnership 
Agreement vary widely as to the type of information and documents 
necessary for a valid transfer of a interest.
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    \3\ The Commission notes that the proposal requires that the 
securities be physically present in a depository to qualify for this 
exception. Simply being ``eligible for deposit'' in a depository is 
not enough.

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[[Page 13922]]

    ii. Amendment to Rule 11870. Since the adoption of NASD Rue 11580, 
members have inquired as to whether the Standardized Transfer Forms can 
be used to accomplish account transfers under NASD Rule 11870. In order 
to clarify this issue, NASD Regulation is proposing to amend Rule 11870 
to provide that in the case of limited partnership securities, members 
must use the Standardized Transfer Forms unless exempted by that 
rule.\4\
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    \4\ The Commission notes that use of the Forms will supplement, 
rather than replace, the current forms utilized by members, when 
effecting an account transfer. NASD Regulation represents that the 
use of the Forms is necessary because these securities are held in 
the member's name for the benefit of the investor. Thus, it is 
necessary to notify the general partner of the ``change in 
ownership'' when an investor transfers its account to a different 
member so the general partner may adjust its records accordingly. 
Telephone conversation between Suzanne E. Rothwell, Dorothy Kennedy, 
NASD Regulation, and Anthony P. Pecora, Division of Market 
Regulation, SEC (Mar. 7, 1997).
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2. Statutory Basis
    NASD Regulation believes the proposed rule change is consistent 
with the provisions of Section 15A(b)(6) of the Act \5\ in that the 
proposed rule change is designed to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities and, in general, to protect the public interest.
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    \5\ 15 U.S.C. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation believes the proposed rule change will not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    NASD Regulation has neither solicited nor received written 
comments.

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

    Within 35 days of the 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 the 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 at the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Also, copies of such filing will be available 
for inspection and copying at the principal office of NASD. All 
submissions should refer to File No. SR-NASD-97-05 and should be 
submitted by April 14, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 C.F.R. 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-7281 Filed 3-21-97; 8:45 am]
BILLING CODE 8010-01-M