[Federal Register Volume 62, Number 205 (Thursday, October 23, 1997)]
[Notices]
[Pages 55295-55296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28122]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39250; File No. SR-NASD-97-75]
October 16, 1997.


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. Relating to the Distribution of Information 
Concerning the Availability of the NASD Regulation, Inc. Public 
Disclosure Program

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 14, 1997, 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 one constituting a stated policy, practice, or 
interpretation with respect to the meaning of an existing rule under 
Section 19(b)(3)(A)(i) of the Act,\2\ 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. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(i).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD Regulation is proposing a rule change to amend Conduct Rule 
2280 of the National Association of Securities Dealers, Inc. (``NASD'' 
or ``Association''), to postpone the effective date from September 10, 
1997, to January 1, 1998. The text of Rule 2280 is not changed.

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 the 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

    On February 11, 1997, NASD Regulation proposed Rule 2280, 
``Investor Education and Protection,'' which requires certain NASD 
members to provide customers with specified disclosures regarding NASD 
Regulation's Public Disclosure Program in writing not less than once 
every calendar year. NASD Regulation filed Amendment No. 1 on July 31, 
1997. The SEC approved Rule 2280 on September 10, 1997, therefore, the 
rule was effective on that date. Rule 2280 contemplates that the 
specified disclosures concerning the Public Disclosure Program will be 
made through customer account statements or in another type of 
publication at least once each calendar year. The proposed rule change 
is necessary to provide members with sufficient time to comply with the 
Rule.
    Members generally send account statements to customers on a monthly 
basis if there is account activity, or on a quarterly basis if there is 
none. Rule 2280, with its current effective date of September 10, 1997, 
is draconian in that it would leave members with very little time in 
which to modify their account statement production processes to include 
the disclosures required under Rule 2280. Members would have only a few 
weeks to comply with a Rule that envisioned a compliance period of up 
to one year. Many members have already earmarked their account 
statements for the remainder of the calendar year with pertinent year-
end information, such as tax-related notices, and in many cases there 
may not be sufficient space to include these additional disclosures 
without incurring substantial costs. Additionally, for members with 
customers with inactive accounts, a separate mailing would be required 
because year-end or fourth-quarter account statements would not comply 
with Rule 2280 since such notices would not be sent until early 1998.
    The Commission's Order approving Rule 2280 noted that the Rule was 
amended to address concerns that compliance with Rule 2280 would impose 
``significant costs'' on firms that normally do not carry customer 
accounts and hold customer funds or securities. The case for postponing 
the effective date of Rule 2280 is even more compelling. In the absence 
of a postponement of the effective date, many members would be required 
to create an entirely separate mailing to customers to provide the 
disclosures required under Rule 2280. The cost of such a mailing would 
be very significant and would be inconsistent with the objective of 
Rule 2280, which is to allow members to provide the specified 
disclosures in a cost-effective manner.
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b) of the Act \3\ in that 
postponing the effective date of Rule 2280 does not diminish the rule's 
effectiveness in protecting investors and the public interest.
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    \3\ 15 U.S.C. 78o-3.
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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.

[[Page 55296]]

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 upon filing pursuant 
to Section 19(b)(3)(A)(i) of the Act and subparagraph (e) of Rule 19b-4 
\4\ thereunder in that it constitutes a stated policy, practice, or 
interpretation with respect to the meaning of an existing rule.
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    \4\ 17 CFR 240.19b-4(e).
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    At any time within 60 days of the filing of a rule change pursuant 
to Section 19(b)(3)(A) of the Act, the Commission may summarily 
abrogate the rule change if it 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. Sec. 552, will be available for inspection and copying in 
the Commissions' 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 Number SR-NASD-97-75 and 
should be submitted by November 13, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-28122 Filed 10-22-97; 8:45 am]
BILLING CODE 8010-01-M