[Federal Register Volume 62, Number 94 (Thursday, May 15, 1997)]
[Notices]
[Pages 26843-26844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12750]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38593; File No. SR-NASD-97-33]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by National Association of
Securities Dealers, Inc. Relating to Rule 2210 of the Conduct Rules
May 9, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 1, 1997, the NASD
Regulation Inc. (``NASD Regulation'') 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 NASD Regulation. NASD Regulation has designated this
proposal as concerned solely with the administration of the National
Association of Securities Dealers, Inc. (``NASD'' or ``Association'')
pursuant to Section 19(b)(3)(A)(ii) of the Act \2\ and paragraph (e) of
Rule 19b-4 \3\ thereunder, which renders the rule effective upon the
Commission's receipt of this filing. 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. Sec. 78s(b)(1)(1988).
\2\ 15 U.S.C. Sec. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(e) (1991).
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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 Rule 2210 of the Conduct
Rules of the NASD, by merging into this rule, effective immediately,
the provisions contained in Section 8(c)(1) (A) and (B) of the
Government Securities Rules, which provisions were deleted on August
20, 1996. Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
CONDUCT RULES
2200. COMMUNICATIONS WITH CUSTOMERS AND THE PUBLIC
2210. Communications with the Public
* * * * *
(c) Filing Requirements and Review Procedures
(1) Advertisements and sales literature concerning registered
investment companies (including mutual funds, variable contracts and
unit investment trusts) not included within the requirements of
paragraph (c)(2), and public direct participation programs (as defined
in Rule 2810), and advertisements concerning government securities (as
defined in Section 3(a)(42) of the Act) shall be filed with the
Association's Advertising/Investment Companies Regulation Department
(Department) within 10 days of first use or publication by any member.
The member must provide with each filing the actual or anticipated date
of first use. Filing in advance of use is recommended. Members are not
required to file advertising and sales literature which have previously
been filed and which are used without change. Any member filing any
investment company advertisement or sales literature pursuant to this
paragraph (c) that includes or incorporates rankings or comparisons of
the investment company with other investment companies shall include a
copy of the ranking or comparison used in the advertisement or sales
literature.
(2) Advertisements concerning collateralized mortgage obligations
[registered under the Securities Act of 1933], and advertisements and
sales literature concerning registered investment companies (including
mutual funds, variable contracts and unit investment trusts) that
include or incorporate ranking or comparisons of the investment company
with other investment companies where the ranking or comparison
category is not generally published or is the creation, either directly
or indirectly, of the investment company, its underwriter or an
affiliate, shall be filed with the Department for review at least 10
days prior to use (or such shorter period as the Department may allow
in particular circumstances) for approval and, if changed by the
Association, shall be withheld from publication or circulation until
any changes specified by the Association have been made or, if
expressly disapproved, until the advertisement has been refiled for,
and has received, Association approval. The member must provide with
each filing the actual or anticipated date of first use. Any member
filing any investment company advertisement or sales literature
pursuant to this paragraph shall include a copy of the data, ranking or
comparison on which the ranking or comparison is based.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD Regulation 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. NASD Regulation 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
(a) The Government Securities Act Amendments of 1993 (``Government
Securities Amendments'') were signed into law on December 13, 1993, and
eliminated the statutory limitation on the NASD's authority to regulate
the sales practices of exempted securities, including government
securities transactions, other than municipals.\4\
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\4\ The terms ``exempted securities'', ``government securities''
and ``municipal securities'' are defined in Sections 3(a)(12),
3(a)(42) and 2(a)(29) of the Act, respectively.
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In order to implement the expanded sales practice authority granted
to the NASD pursuant to the Government Securities Amendments, the NASD
filed a rule change on September 15, 1995, to merge the rules which has
governed the conduct of members with respect to transactions in
government securities (``Government Securities Filing''), where
applicable, into the Rules of Fair Practice (``Conduct Rules'') and to
make other related changes.\5\ Section 8(c)(1) (A) and (B) of the
Government Securities Rules, were intended to be merged into the
Conduct Rules, but were inadvertently omitted in the Government
Securities Filing. This filing is intended to clarify the intent of the
Government Securities Filing by merging old Section 8(c)(1) (A) and (B)
of the Government Securities Rules into
[[Page 26844]]
the Conduct Rules, effective immediately.\6\
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\5\ See Securities Exchange Act Release No. 36383 (October 17,
1995), 60 FR 54530 (October 24, 1995) [File No. SR-NASD-95-39].
\6\ See Securities Exchange Act Release No. 37588 (August 20,
1996), 61 FR 44100 (August 27, 1996) [File No. SR-NASD-95-39].
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Section 8(c)(1)(A) of the Government Securities Rules required
members to file for review with the Association's Advertising
Department all advertisements concerning government securities (as
defined in Section 3(a)(42) of the Act) other than collateralized
mortgage obligations (``CMOs'') within 10 days of first use or
publication. Section 8(c)(1)(B) of the Government Securities Rules
required members to file for review with the Association's Advertising
Department all advertisements concerning CMOs at least 10 days prior to
use (or such shorter period as the Advertising Department allowed in
particular circumstances). Section 8(c)(1)(B) also provided that, if
the advertisements were changed or expressly disapproved by the
Association, such advertisements would be withheld from publication or
circulation until any changes specified by the Association had been
made, or in the event of disapproval, until the advertisement had been
refiled for, and had received, Association approval.
In order to merge the member obligations that were contained in
Section 8(c)(1)(A) of the Government Securities Rules, NASD Regulation
proposes inserting a similar provision into Rule 2210(c)(1) of the
Conduct Rules. In Order to merge the member obligations that were
contained in Section 8(c)(1)(B) of the Government Securities Rules,
NASD Regulation proposes deleting the phrase ``registered under the
Securities Act of 1933'' in Rule 2210(c)(2) of the Conduct Rules. This
deletion would expand member obligations concerning registered CMOs in
Rule 2210(c)(2) to all CMOs, which was the broader security product
addressed in Section 8(c)(1)(B) of the Government Securities Rules.
NASD Regulation is proposing that the rule change be effective upon
filing pursuant to Section 19(b)(3)(A)(iii) of the Act \7\ and
paragraph (e) of Rule 19b-4 \8\ thereunder as concerned solely with the
administration of the NASD because it is correcting the inadvertent
omission of provisions from an earlier rule filing.
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(e).
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(b) NASD Regulation believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(6) of the Act,\9\
which requires that the rules of the Association be 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 in that the
proposed rule change will implement the Association's expanded sales
practice authority over exempted securities, except for municipals, by
adding certain member obligations concerning the advertising of
government securities and CMOs, which were contained in Section 8(c)(1)
(A) and (B) of the Government Securities Rules, to Rule 2210 of the
Conduct Rules.
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\9\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD Regulation 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
The foregoing rule change has become effective on May 1, 1997, the
date of receipt of this filing by the Commission, pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and paragraph (e) of Rule 19b-4 \11\
thereunder, because it is concerned solely with the administration of
the NASD in that it is correcting the inadvertent omission of
provisions from an earlier rule filing.
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\10\ 15 U.S.C. Sec. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(e).
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At any time within sixty days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change it if
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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 File No. NASD-97-33 and should be
submitted by June 5, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12750 Filed 5-14-97; 8:45 am]
BILLING CODE 8010-01-M