43568 Federal Register / Vol. 62, No. 157 / Thursday, August 14, 1997 / Notices

1The NASD filed Amendment Nos. 1 and 2 with

the Commission on May 13, 1997, and May 22,

1997, respectively, the substance of which was

incorporated into the notice. See letters from Elliott

R. Curzon, Assistant General Counsel, NASDR, to

Katherine A. England, Assistant Director, Market

Regulation, Commission, dated May 8, 1997

(‘‘Amendment No. 1’’) and May 20, 1997

(‘‘Amendment No. 2).

2 15 U.S.C. 78s(b)(1).

3 17 CFR 240.19b–4.

4Amendment No. 3 amends Rule 10330 to state

that the Director will serve a copy of the award by

using any method available and convenient to the

parties and the Director, and that is reasonably

expected to cause the award to be delivered to all

parties, or their counsel, on the same day. Methods

available include, but are not limited to, registered

or certified mail, hand delivery, and facsimile or

other electronic means. Amendment No. 3 also

amends the purpose section of the proposed rule

change to state that it is important to permit service

by means other than registered mail or personal

service, because the Office is frequently asked to

provide arbitration awards by facsimile, and could

be asked to provide service by other alternative

means. In addition, Amendment No. 3 states that

it is important that all parties be served with

arbitration awards at approximately the same time

so that there is no confusion about when the time

to seek review of an award begins to run, and

parties all have approximately the same amount of

time to prepare for and seek review of an award.

Also, Amendment No. 3 states that parties should

not be required to accept service of awards through

means that are inconvenient or unavailable to them,

nor should the Office be required to serve an award

in a manner that is not readily available. See letter

from Elliott R. Curzon, Assistant General Counsel,

NASD Regulation, to Katherine A. England,

Assistant Director, Market Regulation, Commission,

dated July 14, 1997 (‘‘Amendment No. 3’’).

5Amendment No. 4 states that NASDR’s Office of

Dispute Resolution intends to modify its case

tracking system to add a status code that will show

when a claim, defense, or proceeding has been

dismissed with prejudice and whether the dismissal

was a sanction for failing to comply with an order.

In order to allow for sufficient time to implement

this change to the system, NASDR will make the

proposed rule changes in this rule filing effective

within forty-five days following Commission

approval. See letter from Elliott Curzon, Assistant

General Counsel, to Katherine A. England, Assistant

Director, Market Regulation, Commission, dated

July 23, 1997 (‘‘Amendment No. 4’’).

determining whether any proposed

action adequately remedies a conflict,

will be properly recorded in the minutes

of the meetings of the Board of Trustees

or other appropriate records, and such

minutes or other records shall be made

available to the Commission upon

request.

9. The Trust will notify all

Participating Insurance Companies that

separate account disclosure in their

respective Separate Account

prospectuses may be appropriate to

advise accounts regarding the potential

risks of mixed and shared funding. The

Trust shall disclose in its prospectus

that: (a) The Trust is intended to be a

funding vehicle for variable annuity and

variable life insurance contracts offered

by various insurance companies and for

Plans; (b) due to differences of tax

treatment and other considerations, the

interests of various Contract owners

participating in the Trust and the

interests of Plans investing in the Trust

may conflict; and (c) the Board of

Trustees 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.

10. The Trust will comply with all

provisions of the 1940 Act that require

voting by shareholders (which, for these

purposes, will be the persons having a

voting interest in the Shares of the

Trust), and, in particular, the Trust will

either provide for annual shareholder

meetings (except insofar as 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 Trust is

not one of the trusts described in the

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

as with Section 16(a) of the 1940 Act

and, if and when applicable, Section

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

will act in accordance with the

Commission’s interpretation of the

requirements of Section 16(a) with

respect to periodic elections of Trustees

and with whatever rules the

Commission may promulgate with

respect thereto.

11. If and to the extent that Rule 6e–

2 or 6e–3(T) under the 1940 Act is

amended, or proposed Rule 6e–3 under

the 1940 Act is adopted, to provide

exemptive relief from any provision of

the 1940 Act, or the rules promulgated

thereunder, with respect to mixed or

shared funding, on terms and conditions

materially different from any

exemptions granted in the order

requested in the application, then the

Trust and/or Participating Insurance

Companies, as appropriate, shall take

such steps as may be necessary to

comply with such Rules 6e–2 and 6e–

3(T), as amended, or proposed Rule 6e–

3 as adopted, to the extent that such

Rules are applicable.

12. The Participants, at least annually,

will submit to the Board of Trustees

such reports, materials, or data as the

Board of Trustees may reasonably

request so that the Board of Trustees

may fully carry out the obligations

imposed upon it by the conditions

contained in the application. Such

reports, materials, and data will be

submitted more frequently if deemed

appropriate by the Board of Trustees.

The obligations of the Participants to

provide these reports, materials, and

data to the Board of Trustees, when the

Board of Trustees so reasonably

requests, shall be a contractual

obligation of all Participants under their

agreements governing participation in

the Trust.

13. If a Plan should ever become a

holder of ten percent or more of the

assets of the Trust, such Plan will

execute a participation agreement with

the Trust. A Plan will execute an

application containing an

acknowledgment of this condition upon

such Plan’s initial purchase of the

Shares of the Trust.

Conclusion

For the reasons set forth above,

Applicants assert that the requested

exemptions are appropriate in the

public interest and consistent with the

protection of investors and purposes

fairly intended by the policy and

provisions of the Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–21567 Filed 8–13–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38907; File No. SR–NASD–

97–34]

Order of Granting Approval; Notice of

Filing and Order Granting Accelerated

Approval

August 6, 1997.

Self-Regulatory Organizations; National

Association of Securities Dealers, Inc.; Order

Granting Approval to Proposed Rule Change

and Notice of Filing and Order Granting

Accelerated Approval of Amendment Nos. 3

and 4 to Proposed Rule Change Relating to

Miscellaneous Amendments to Arbitration

Procedures and Clarifications of the Code of

Arbitration Procedure.

I. Introduction

On May 5, 1997,1 the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) submitted

to the Securities and Exchange

Commission (‘‘Commission’’), pursuant

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

Exchange Act of 1934 (‘‘Act’’) 2 and Rule

19b–4 thereunder,3 a proposed rule

change to amend and clarify its

arbitration procedures.

Notice of the proposed rule change,

together with the substance of the

proposal, was published for comment in

Securities Exchange Act Release No.

38692 (May 29, 1997), 62 FR 30920

(June 5, 1997). No comments were

received on the proposal. The NASD

subsequently filed Amendment Nos. 3

and 4 on July 15, 1997 4 and July 25,

1997, respectively.5
Federal Register / Vol. 62, No. 157 / Thursday, August 14, 1997 / Notices 43569

6While NASDR does not believe that the changes

proposed in this filing will conflict with

amendments to the Code to be proposed in response

to the recommendations of the NASD’s Arbitration

Policy Task Force, some of the changes proposed

herein will ultimately be replaced or superseded by

those amendments and are, therefore, temporary in

nature. For example, the proposed change to the

peremptory challenge provision discussed below

will be superseded when the Association’s list

selection rule is filed with and approved by the

Commission. Nevertheless, NASDR believes that

the rule changes in this proposed rule filing are

important enough to be made now even if some of

them will eventually be superseded.

7See Amendment No. 3, supra note 4.

8While the NASD believes that arbitrators

currently have plenary power to issue such

dismissal orders, this power is rarely exercised

because it is not expressly provided for in the Code

and arbitrators appear to be reluctant to wield such

sanctioning power without express authority.

9The Commission notes that NASDR has stated

its intention to modify its case tracking system in

order to show when a claim, defense, or proceeding

has been dismissed with prejudice, and whether the

dismissal was a sanction for failing to comply with

an order of the arbitrators. See Amendment No. 4,

supra note 5.

10Although the notice prepared by the NASD

stated in the purpose section describing the

proposed rule change that the time limitation to

exercise a peremptory challenge under Rule 10311

was extended from 5 to 10 days prior to the hearing,

the actual language of the rule under the proposed

rule change states that the time limitation to

exercise a peremptory challenge is 10 business

days, ‘‘of notification of the identity of the person(s)

named under Rule 10310 or Rule 10321 (d) or (e),

whichever comes first.’’

11See Amendment No. 3, supra note 4.

12See Amendment No. 3, supra note 4.

13See Amendment No. 3, supra note 4.

II. Description

NASD Regulation, Inc. (‘‘NASDR’’) is

proposing to amend the Code of

Arbitration Procedure (‘‘Code’’) to make

certain minor procedural changes

designed to enhance the arbitration

process.6 Specifically, NASDR is

proposing to amend: (1) Rule 10305

(formerly Section 16), to permit

arbitrators to dismiss claims with and

without prejudice; (2) Rule 10310

(formerly Section 21), to extend the time

periods for notice of selection of

arbitrators and further inquiries

concerning an arbitrator; (3) Rule 10311

(formerly Section 22), to permit the

Director of Arbitration to grant

additional peremptory challenges of

arbitrators; (4) Rule 10313 (formerly

Section 24), to extend the time in which

a party can exercise its right to

challenge a replacement arbitrator; and

(5) Rule 10330 (formerly Section 41), to

permit awards to be served by means

other than registered mail or personal

service.7

NASDR is proposing to amend Rule

10305 of the Code (formerly Section 16),

which relates to dismissal of arbitration

proceedings, to clarify that the

arbitrators may dismiss a proceeding

without prejudice to the claims or

defenses of the parties and refer the

parties to their judicial remedies and, in

addition, to any other dispute resolution

forum agreed to by the parties. The Code

does not specify the grounds for

dismissals without prejudice; however,

such dismissals would generally occur

only when appropriate and in the

interest of justice, such as where the

parties have agreed to the dismissal

(especially if they have agreed to

proceed in another forum), or where an

indispensable party cannot be jointed in

the arbitration.

NASDR is also proposing to amend

Rule 10305 by adding a new subsection

(b) granting arbitrators the express

authority to dismiss a claim, defense, or

proceeding with prejudice as a sanction

for willful and intentional material

failure to comply with an order of the

arbitrator(s), but only if lesser sanctions

have proven ineffective.8 This provision

is intended to establish clearly that

arbitrators have the power to issue

orders in aid of the arbitration process

and to enforce those orders by use of the

ultimate sanction of dismissal with

prejudice. Such a sanction would be

used, for example, where a party refused

to produce documents necessary for

another party’s claim or defense. In such

instances, after the arbitrators have

imposed lesser sanctions that have not

induced compliance with the order, the

arbitrators may dismiss a claim, defense,

or the entire arbitration proceeding,

with prejudice.9

NASDR is proposing to amend Rules

10310, 10311, and 10313 of the Code

(formerly Sections 21, 22, and 23),

which relate to arbitrator selection,

peremptory challenges and arbitrator

disclosures, to extend the time

limitations on a party to (1) seek

additional information under Rules

10310 and 10313 about replacement

arbitrators, and (2) exercise a

peremptory challenge under Rule

10311, from 5 days to 10 business days

after notification of the identity of the

person(s) proposed as arbitrators.10 In

addition, Rule 10310 is proposed to be

amended to extend the Arbitration

Department’s obligation to provide the

parties with the names and histories of

the arbitrators from 8 to 15 days prior

to the date of the first hearing. The

proposed rule change further amends

Rule 10310 to replace ‘‘the Director of

Arbitration’’ with ‘‘the Director’’

whenever it occurs.

NASDR is also proposing to amend

Rule 10311 to permit the Director to

grant additional peremptory challenges

under certain circumstances. Currently,

the rule permits the Director to grant

additional peremptory challenges in

multi-party cases when the Director, ‘‘in

the interests of justice,’’ determines that

additional peremptory challenges are

warranted by the circumstances of the

case. For example, on occasion a party

will discover grounds for a cause

challenge to one arbitrator after the

party has used its peremptory challenge

against that arbitrator. In such an

instance, the party may argue that it

would have used its peremptory

challenge differently had it known of

the information. Under the current rule,

if that circumstance arose in a multiparty case, the Director may, ‘‘in the

interests of justice,’’ grant additional

challenges. NASDR believes that similar

circumstances may arise in single-party

cases and, therefore, is seeking to amend

the rule to permit the Director to grant

such additional challenges.

NASDR is also proposing to amend

Rule 10330 of the Code (formerly

Section 41) to permit the Office of

Dispute Resolution to serve arbitration

awards by means other than registered

mail or personal service.11 The Office

frequently is asked to provide

arbitration awards to parties by

facsimile. Because the Code does not

provide for this method of service, the

Office serves the award by facsimile and

also duplicate service by one of the

other methods specified in the Code. In

addition, the Office may be asked to

provide arbitration awards by methods

other than registered, facsimile, or

personal service.12 By amending the

Code to permit facsimile service, the

Office will not be required to serve

duplicates by another approved method.

Also, it is important that all parties be

served with arbitration awards at

approximately the same time so that

there is no confusion about when the

time to seek review of an award begins

to run, and parties all have

approximately the same amount of time

to prepare for and seek review of an

award. Finally, parties should not be

required to accept service of awards

through means that are inconvenient or

unavailable to them; nor should the

Office be required to serve an award in

a manner that is not readily available.

Thus, if Party A does not have access to

a facsimile machine, the Office may

serve other parties by facsimile as long

as the Office serves the award on Party

A in a manner that is reasonably

expected to secure delivery to Party A

on the same day.13

The proposed rule change also

amends references to numbers, such as

‘‘eight (8)’’ or ‘‘fifteen (15)’’, throughout

the proposed rule change to delete the
43570 Federal Register / Vol. 62, No. 157 / Thursday, August 14, 1997 / Notices

14 15 U.S.C. 78o-3.

15 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

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

16As previously noted, NASDR has stated its

intention to modify its case tracking system in order

to show when a claim, defense, or proceeding has

been dismissed with prejudice, and whether the

dismissal was a sanction for failing to comply with

an order of the arbitrators. See supra note 9 and

Amendment No. 4, supra note 5.

17The proposed changes extend the time

limitations on a party to (1) seek additional

information under Rules 10310 and 10313 about

replacement arbitrators, and (2) exercise a

peremptory challenge under Rule 10311, from 5

days to 10 business days after notification of the

identity of the person(s) proposed as arbitrators. In

addition, Rule 10310 is proposed to be amended to

change the Office of Dispute Resolution’s obligation

to provide the parties with the names and histories

of the arbitrators from 8 to 15 days before the date

of the first hearing.

18Amendment No. 3 amends Rule 10330 to allow

for service of awards by alternative means while

still providing for service in a manner reasonably

expected to ensure notice to all the parties on the

same day, and in a manner that is not inconvenient

or unavailable to them. Amendment No. 3 is

designed to avoid confusion as to when the time to

seek review of an award begins to run and to

provide all parties approximately the same amount

of time to prepare for and seek review of an award.

In addition, by allowing for alternative means of

service, such as by facsimile, the Office will not be

required to make duplicative service, as they do

now when they are asked to serve an award by

facsimile or other means not allowed in the current

rule.

19See Amendment No. 3, supra note 4. In

addition, the proposed rule change also amends

references to numbers, such as ‘‘eight (8)’’ or

‘‘fifteen (15)’’, throughout the proposed rule change

to delete the word form and retain the Arabic

numeral. Finally, the proposed rule change amends

Rule 10310 to replace ‘‘the Director of Arbitration’’

with ‘‘the Director’’ whenever it occurs.

word form and retain the Arabic

numeral.

III. Discussion

The Commission believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act 14 in that clarifying procedures,

eliminating ambiguities, and adjusting

procedures to accommodate changing

practices are consistent with the

NASD’s goal of providing the investing

public with a fair, efficient, and costeffective forum for the resolution of

disputes.15

The Commission believes that the

portion of the proposed rule change to

Rule 10305, relating to dismissal of

arbitration proceedings with and

without prejudice, is consistent with the

Act. This portion of the proposed rule

change will provide for a fair, efficient

and cost-effective arbitration process by

clarifying that the arbitrators can

dismiss the proceeding either with or

without prejudice; currently, Rule

10305 does not distinguish between

these two choices. Also, the proposed

rule change amends Rule 10305 to add

that the arbitrators, when dismissing

without prejudice, can refer the parties

to any dispute resolution forum agreed

to by the parties, in addition to their

judicial remedies. The Commission

notes that the NASD stated in the notice

that such dismissals without prejudice

would generally occur only where

appropriate and in the interest of

justice, such as where the parties have

agreed to the dismissal (especially if

they have agreed to proceed in another

forum), or where an indispensable party

cannot be joined in the arbitration.

The Commission notes that the

proposed change to Rule 10305 allowing

for dismissal with prejudice is intended

to establish clearly that arbitrators have

the power to issue orders in aid of the

arbitration process and to enforce those

orders by use of the sanction of

dismissal with prejudice. Such a

sanction would be used, for example,

where a party refused to produce

documents that the arbitrators already

have ordered them to produce as

necessary for another party’s claim or

defense. In such instances, after the

arbitrators have imposed lesser

sanctions that have not induced

compliance with their order, the

arbitrators may dismiss a claim, defense,

or the entire arbitration proceeding,

with prejudice. The Commission

believes that this proposed rule change

would provide for a more efficient

arbitration process because it will allow

the arbitrators to assert greater control

over the proceedings and will provide

parties with clear notice of the possible

consequences of non-compliance with

an order of the arbitrators. It also would

help to protect all parties to an

arbitration, and ensure that one party to

the proceeding does not take advantage

of the other.16

The Commission believes that the

proposed changes to Rules 10310,

10311, and 10313 providing for an

extension of time limitations relating to

arbitrator selection, peremptory

challenges, and arbitrator disclosures

are consistent with the Act because they

allow the parties more time to gather

information to prepare for the

arbitration proceedings.17

The Commission believes that the

proposed change to Section 10311 that

allows the Director of Arbitration to

grant additional peremptory challenges

in certain circumstances is reasonable

under the Act. This proposed rule

change allows the Director to grant

additional peremptory challenges where

there is a single claimant or respondent,

in appropriate circumstances, which the

Director may already do in cases where

there are multiple claimants or

respondents. For example, the NASDR

noted in its filing that on occasion a

party will discover grounds for a cause

challenge to one arbitrator after the

party has used its peremptory challenge

against the arbitrator. In such an

instance, the party may argue that it

would have used its peremptory

challenge differently had it known of

the information. Under the current rule

if that circumstance arose in a multiparty case, the Director may, ‘‘in the

interests of justice,’’ grant additional

challenges. The proposed rule change

provides clearly that the Director may

grant additional challenges in a case

with a single claimant or respondent.

The Commission finds good cause to

approve Amendment Nos. 3 and 4 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

believes that the proposed change to

Rule 10330, including Amendment No.

3, that allows for service by means other

than registered mail or personal service,

such as facsimile or other electronic

transmission, is reasonable under the

Act because it will help to provide for

more efficient service.18 The NASD has

stated that its Office frequently is asked

to provide arbitration awards to parties

by facsimile, but because the Code does

not provide for this method of service,

the Office provides the award by

facsimile but it also duplicates service

by one of the other methods specified in

the Code. By amending the Code to

permit alternative means of service, the

Office will not be required to duplicate

service by another approved method.

The Commission notes that the

proposed rule change provides adequate

safeguards to allow for all parties to

receive notice of the awards in a way

that is reasonably expected to provide

notice on the same day, for purposes of

time limitations on post-award motions.

Also, the NASD states that the Office

will not serve awards on parties in a

way that is inconvenient or unavailable

to the party, and the Office will not be

required to serve an award in a manner

that is not readily available.19

Amendment No. 4, which states that

the NASDR intends to modify its case

tracking system to show when claims,

defenses, or proceedings are dismissed

with prejudice and whether the

dismissal was a sanction for failing to

comply with an order of the arbitrators,

is consistent with the Act because it will

help to protect investors and the public

by monitoring when arbitrators use the

sanction of dismissal with prejudice.

Finally, the Commission notes that the
Federal Register / Vol. 62, No. 157 / Thursday, August 14, 1997 / Notices 43571

20 15 U.S.C. 78s(b)(2).

21 17 CFR 200.30–3(a)(12).

1The Commission previously published notice of

the proposed rule change and granted accelerated

approval thereto for periods of 120 days, six months

and six months (Securities Exchange Act Release

No. 37425 (July 11, 1996), 61 FR 37518 (July 18,

1996) (‘‘Release No. 34–37425’’), Securities

Exchange Act Release No. 37957 (November 15,

1996), 61 FR 59267 (November 21, 1997) (‘‘Release

No. 34–37957’’) and Securities Exchange Act

Release No. 38645 (May 15, 1997), 62 FR 28086

(May 22, 1997) (‘‘Release No. 34–38645’’),

respectively.

2Securities Exchange Act Release No. 37107

(April 11, 1996), 61 FR 16948 (April 18, 1996)

(‘‘Release No. 34–37107’’).

3Release No. 34–37425. Release Nos. 34–37107

and 34–37425 published the complete text of the

rule change.

4Release Nos. 34–37957 and 34–38645,

respectively.

5Securities Exchange Act Release No. 38545

(April 24, 1997), 62 FR 25226 (May 8, 1997)

(‘‘Release No. 34–38545’’), the Notice of Filing of a

Proposed Rule Change by the National Association

of Securities Dealers, Inc. to Proposed Changes in

the By-Laws of the NASD, NASD Regulation, Inc.,

The Nasdaq Stock Market, Inc., the Plan of

Allocation and Delegation of Functions by the

NASD to Subsidiaries, Membership Application

Procedures, Disciplinary Proceedings, Other

Proceedings, and Other Conforming Changes

(‘‘Release No. 34–38545’’). The comment period for

Release No. 34–38545 expired on June 6, 1997. SR–

NASD–97–28 is being approved simultaneously

with the instant filing, see Securities Exchange Act

Release No. 38908 (‘‘Release No. 34–38908’’).

6See Letter from Alden S. Adkins, Vice President

and General Counsel, NASD Regulation, to

Katherine A. England, Assistant Director, Division

of Market Regulation, Commission (dated July 11,

1997).

proposed rule change was noticed for

the full comment period and no

comment letters were received.

Accordingly, the Commission believes

that it is consistent with Section

15A(b)(6) of the Act to approve

Amendment No. 3 to the proposal on an

accelerated basis.

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment Nos.

3 and 4 to the rule proposal. Persons

making written submissions should file

six copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

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

Room. Copies of such filing also will be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–97–34 and should be

submitted by September 4, 1997.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,20 that the

proposed rule change (SR–NASD–97–

34), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.21

Jonathan G. Katz,

Secretary.

[FR Doc. 97–21445 Filed 8–13–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38909; File No. SR–NASD–

96–29; Amendment No. 5]

Notice of Filing and Order Granting

Temporary Accelerated Approval

August 7, 1997.

Self-Regulatory Organizations; Notice of

Filing and Order Granting Temporary

Accelerated Approval of Proposed Rule

Change by National Association of Securities

Dealers, Inc. Relating to the Allocation and

Delegation of Authority and Responsibilities

by the National Association of Securities

Dealers, Inc., to NASD Regulation, Inc., and

The Nasdaq Stock Market, Inc.

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 August 5, 1997, the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) Amendment No. 5 to

the proposed rule change as described

in Items I, II and III below, which Items

have been prepared by the NASD.1 The

Commission is publishing this notice to

solicit comments on the proposed rule

change as further amended by

Amendment No. 5 from interested

persons and is simultaneously granting

accelerated approval to the proposed

rule change for a period of six months.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The NASD is proposing to amend the

Plan of Allocation and Delegation of

Functions by NASD to Subsidiaries

(‘‘Delegation Plan’’) setting forth the

purpose, function, governance,

procedures and responsibilities of the

NASD, NASD Regulation, Inc. (‘‘NASD

Regulation’’) and The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’), following the

reorganization of the NASD.

The initial version of the Delegation

Plan (with the implementing provisions

contained in Rule 0130) was originally

filed with the Commission in SR–

NASD–96–16. It was published for

comment and approved by the

Commission on a temporary basis for a

period of 90 days.2 On July 11, 1996, the

Commission issued another release

publishing for comment three changes

to the Delegation Plan and further

approving the Delegation Plan as

amended for a period of 120 days.3 On

November 15, 1996 and May 15, 1997,

the Commission extended temporary

approval of the instant proposed rule

change for two additional six month

periods.4

On April 18, 1997, the NASD filed

SR–NASD–97–28, seeking approval of,

among other matters, certain proposed

amendments to the Delegation Plan.5

The proposed amendments to the

Delegation Plan contained therein were

withdrawn by Amendment No. 3

thereto.6

The NASD hereby files this

Amendment No. 5 to the instant rule

filing, pursuant to Section 19(b)(1) of

the Act and Rule 19b–4 thereunder, to

continue temporary approval of the

Delegation Plan, revised to conform to

the Rules of the Association, as

amended by Release No. 34–38908.

Approval until November 15, 1997, the

remaining effective period of

Amendment No. 4 to the instant rule

filing, is requested. During this interval,

there will be no further amendments to

the Delegation Plan, absent Commission

approval of a corresponding Rule 19b–

4 filing.

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