30458 Federal Register / Vol. 65, No. 92 / Thursday, May 11, 2000 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 42439

(Feburary 18, 2000), 65 FR 10573.

Plan shall vote as required by applicable

law and its governing Qualified Plan

documents.

7. Each Fund will comply with all

provisions of the 1940 Act requiring

voting by shareholders (which, for these

purposes, shall be the persons having a

voting interest in the shares of the

Fund), and, in particular, each Fund

will either provide for annual meetings

(except to the extent that the

Commission may interpret Section 16 of

the 1940 Act not to require such

meetings) or comply with Section 16(c)

of the 1940 Act (although the Funds are

not one of the trusts described in

Section 16(c) of the 1940 Act), as well

as with Section 16(a), and, if applicable,

Section 16(b) of the 1940 Act. Further,

each Fund will act in accordance with

the Commission’s interpretation of the

requirements of Section 16(a) with

respect to periodic elections of directors

(or trustees) and with whatever rules the

Commission may promulgate with

respect thereto.

8. Each Fund will notify all

Participants that disclosure in Separate

Account or Qualified Plan prospectuses,

or other disclosure documents,

regarding potential risks of mixed and

shared funding may be appropriate.

Each Fund shall disclose in its

prospectus that: (a) shares of the Fund

may be offered to insurance company

separate accounts of both annuity and

life insurance variable contracts, an

Qualified Plans; (b) due to differences of

tax treatment and other considerations,

the interests of various contract holders

participating in the Funds and the

interests of Qualified Plans investing in

the Funds may at some time be in

conflict; and (c) the Board will monitor

events in order to identify the existence

of any material irreconcilable conflicts

and to determine what action, if any,

should be taken in response to any such

conflict.

9. The Participants shall at least

annualy submit to each Board such

reports, materials or data as such Boards

may reasonably request so that such

Boards may fully carry out obligations

imposed upon them by the conditions

contained in the Application. Such

reports, materials and data shall be

submitted more frequently if deemed

appropriate by the Boards. The

obligations of the Participants to

provide these reports, materials and

data to the appropriate Board when it so

reasonably requests, shall be a

contractual obligation of all Participants

under the agreement governing their

participation in the Funds.

10. All reports received by a board

with respect to potential or existing

conflicts and all board action with

regard to (a) determination of the

existence of a conflict, (b) notification of

Participants of the existence of a conflict

and (c) determination of whether any

proposed action adequately remedies a

conflict, will be properly recorded in

the minutes of the meetings of the

appropriate Board or other appropriate

records, and such minutes or other

records will be made available to the

Commission upon request.

11. If and to the extent Rule 6–92 or

6–93(T) is amended, or proposed Rule

6–93 is adopted, to provide exemptive

relief from any provision of the 1940

Act or the rules thereunder with respect

to mixed and shared funding on terms

and conditions materially different from

any exemptions granted in the order

requested by Applicants, then the Funds

and/or the Participants, as appropriate,

shall take such steps as may be

necessary to comply with Rule 6–92 or

6–93(T), as amended, or Rule 6–93, as

adopted, to the extent such rules are

applicable.

12. None of the Funds will accept a

purchase order from a Qualified Plan if

such purchase would make the

Qualified Plan shareholder an owner of

10% or more of the assets of a Fund

unless such Qualified Plan executes a

fund participation agreement with such

Fund that includes the conditions set

forth herein to the extent applicable. A

Qualified Plan will execute an

application containing an

acknowledgment of this condition at the

time of its initial purchase of shares of

a Fund.

Conclusion

For the reasons summarized above,

Applicants assert that the requested

exemptions are necessary or appropriate

in the public interest, consistent with

the protection of investors, and

consistent with the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11864 Filed 5–10–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34– 42750; File No. SR–CBOE–

99–60]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to the Maintenance

Standards for the Dow Jones High

Yield Select Ten Index

May 2, 2000.

I. Introduction

On November 9, 1999, the Chicago

Board Options Exchange, Inc. (‘‘CBOE’’

or ‘‘Exchange’’) submitted to the

Securities and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4 2

thereunder, a proposed rule change. In

its proposal, the CBOE seeks to clarify

certain procedures regarding the

maintenance of the Dow Jones High

Yield Select 10 Index (‘‘Index’’). The

proposed rule change was published for

comment in the Federal Register on

February 28, 2000.3 The Commission

received no comments on the proposed

rule change and this order approves the

proposal.

II. Description of the Proposal

The CBOE currently lists and trades

European-style, cash-settled options on

the Dow Jones High Yield Select 10

Index, an equal weighted index

composed of the ten highest yielding

stocks from the 30 stocks in the Dow

Jones Industrial Average (‘‘DJIA’’). The

Index was designed to replicate a

popular contrarian strategy that assumes

that the ten highest yielding stocks in

the DJIA are oversold and therefore,

undervalued relative to the other stocks

in the average. The index is

reconstituted annually and the stocks

comprising the index are retained for a

full year.

Normally, the Index represents a

subset of the DJIA. However, Dow Jones

can change the components of the DJIA

at any time, and in some cases remove

stocks that also happen to be

components of the Index. The strategy

upon which the Index is based, and the

convention followed by investors and

money managers, calls for the portfolio

to be held for a full year even if certain

components are no longer part of the

DJIA.

The maintenance procedures set forth

in SR–CBOE–97–63 state that if it

Federal Register / Vol. 65, No. 92 / Thursday, May 11, 2000 / Notices 30459

4See Securities Exchange Act Release No. 39453

(December 16, 1997), 62 FR 67101 (December 23,

1997) (order approving SR–CBOE–97–63).

5On November 1, 1999, Dow Jones removed four

stocks from the DJIA and replaced these stocks with

new ones. These four stocks also happened to be

components of the Index, i.e., four of the highest

yielding stocks in the DJIA. Before this component

change in the DJIA, CBOE realized that, contrary to

industry practice, its maintenance rules for the

index required it to remove the four stocks from the

Index. To prevent these Four stocks from being

removed from the Index until the annual

rebalancing of the Index, CBOE submitted a rule

change under Section 19(b)(3)(A) of the Act. See

Securities Exchange Act Release No. 42187

(November 30, 1999), 64 FR 68708 (December 8,

1999).

6 In addition, pursuant to Section 3(f) of the Act,

the Commission has considered the proposed rule’s

impact on efficiency, competition, and capital

formation. 15 U.S.C. 78c(f).

7 15 U.S.C. 78f(b)(5).

8 15 U.S.C. 78s(b)(2).

9 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 In Amendment Nos. 1 and 2, the Exchange

reworded the proposed language in the

interpretation for clarity. No substantive changes

were made in the amendments. See Letters from

Gary L. Goldsholle, Assistant General Counsel,

NASD Regulation, to Katherine A. England,

Assistant Director, Division of Market Regulation

(‘‘Division’’), SEC. dated April 28, 2000

(‘‘Amendment No. 1’’) and May 2, 2000

(‘‘Amendment No. 2’’).

becomes necessary to remove a stock

from the Index, it will be replaced by

the stock in the DJIA which has the

highest yield of the stocks not already

in the Index.4 CBOE intended for this

passage to describe the actions it would

take if the shares of an Index component

became unavailable for trading, either

due to a corporate action such as a

takeover or merger, or due to

bankruptcy. However, CBOE made no

distinction between this type of

component change and a discretionary

component change in the Dow Jones

Industrial Average, in which the shares

of a company removed from the DJIA

continue to trade.5

CBOE, therefore, proposes to clarify

its maintenance procedures under

which component changes can be made

to the Index. Specifically, if it becomes

necessary to remove a stock from the

Index in the event that its shares cease

to trade and a proxy for those shares is

not available, it will be replaced by the

stock in the DJIA that has the highest

yield of the stocks not already in the

Index. If a stock is removed from the

DJIA at the discretion of Dow Jones, but

its shares continue to trade, that stock

will remain in the Index until the time

of the annual re-balancing.

III. Discussion

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of the

Act.6 In particular, the Commission

finds the proposal is consistent with

Section 6(b)(5) 7 of the Act. Section

6(b)(5) requires, among other things,

that the rules of an exchange be

designed to promote just and equitable

principles of trade and to protect

investors and the public interest.

The Commission believes that the

proposal is consistent with the Act

because it helps protect investors. In the

proposal, CBOE sets forth its procedures

for maintaining the Index when the Dow

Jones corporation decides to replace a

stock in the Dow Jones Industrial

Average. CBOE’s procedures will now

be consistent with industry practice for

maintaining the Index, which should

help protect investors by eliminating

potential confusion about the

composition of the Index. Further, this

clarification helps protect investors

because it gives investors advance

notice about the treatment of the Index

and, therefore, allows them to make an

informed investment decision.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (SR–CBOE–99–

60) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11804 Filed 5–10–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42761; File No. SR–NASD–

00–24]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to Disclosure

Requirements for Transactions

Involving Callable Common Stock and

Amendment Nos. 1 and 2 Thereto

May 5, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder, 2

notice is hereby given that on April 25,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’),

through its wholly owned subsidiary,

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. On May

1, 2000 and May 3, 2000, the Exchange

submitted Amendment Nos. 1 and 2,

respectively, to the proposed rule

change. 3

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

interpret NASD Rule 2110, Standards of

Commercial Honor and Principles of

Trade, to require a member that

provides a written confirmation for a

transaction involving callable common

stock to disclose on the written

confirmation that the security is callable

and that the customer may wish to

contact the member for more

information. Below is the text of the

proposed rule change. Proposed new

language is italicized.

IM–2110–6. Confirmation of Callable

Common Stock

Any member providing a customer

confirmation pursuant to SEC Rule 10b–

10 in connection with any transaction in

callable common stock shall disclose on

such confirmation that:

•The security is callable common

stock; and

• A customer may contact the member

for more information concerning the

security.

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 basic 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

1. Purpose

An issuer’s common stock generally

continues to trade on a market until the

issuer fails to meet the market’s listing

requirements, combines with another