43384 Federal Register / Vol. 62, No. 156 / Wednesday, August 13, 1997 / Notices

Applicant’s Legal Analysis

1. Section 12(d)(1)(A) of the Act

provides that no registered investment

company may acquire securities of

another investment company if such

securities represent more than 3% of the

acquired company’s outstanding voting

stock, more than 5% of the acquiring

company’s total assets, or if such

securities, together with the securities of

any other acquired investment

companies, represent more than 10% of

the acquiring company’s total assets.

2. Section 12(d)(1)(F) of the Act

provides that section 12(d)(1) does not

apply to securities purchased or

otherwise acquired by a registered

investment company if immediately

after the purchase or acquisition not

more than 3% of the total outstanding

stock of the acquired company is owned

by the acquiring company and its

affiliated persons and the acquiring

company does not impose a sales load

on its shares of more than 1.5%. In

addition, no acquired company may be

obligated to honor any acquiring

company’s redemption request in excess

of 1% of the acquired company’s

securities during any period of less than

30 days. The acquiring company also

must vote its acquired company shares

either in accordance with instructions

from the acquiring company’s

shareholders or in the same proportion

as all other shareholders of the acquired

company.

3. Section 12(d)(1)(J) provides that the

SEC may exempt any series of

transactions from any provision of

section 12(d)(1) of the Act if and to the

extent that such exemption is consistent

with the public interest and the

protection of investors. Applicant

believes that the requested relief meets

the standards set forth in section

12(d)(1)(J).

4. Applicant asserts that section

12(d)(1) is intended to mitigate or

eliminate actual or potential abuses that

might arise when one investment

company acquires shares of another

investment company, including the

excessive layering of sales charges.

Applicant believes that its proposal

does not present any danger of excessive

sales loads. If a Portfolio determines to

invest in shares of an Underlying Fund

that bears sales charges or service fees,

applicant states that the aggregate sales

charges or service fees will not exceed

the limits set forth in rule 2830(d) of the

Conduct Rules of the National

Association of Securities Dealers

(‘‘NASD’’). Applicant believes that it is

appropriate to apply the limits on sales

charges and service fees by the NASD’s

rules to the proposed arrangement in

place of the sales load limitation in

section 12(d)(1)(F). Further, as

discussed above, applicant states that

the Portfolios intend to structure their

purchases of Underlying Funds so as to

purchase most, if not all, of the

Underlying Funds without incurring

sales charges.

5. Applicant states that each Portfolio

provides investors with the opportunity

to participate in a professionally

selected, diversified portfolio of

investment company shares in one

package and at one sales load. Applicant

contends that, for many smaller

investors, a packaged product may be

less expensive than direct acquisition

and maintenance of a comparable

portfolio. Applicant submits that the

convenience (such as ease of acquisition

and sale), diversification, professional

management, and selection of securities

justify any administrative costs

associated with creating such a

Portfolio. Applicant also submits that

Underlying Funds will benefit from the

additional economies of scale resulting

from the sale of a large number of shares

to a Portfolio, because each Portfolio

will be carried on the books as a single

shareholder account.

Applicant’s Conditions

Applicant agrees that the order

granting the requested relief will be

subject to the following conditions:

1. Any sales charges or service fees

charged with respect to a class of shares

of a Portfolio, when aggregated with any

sales charges or service fees paid by the

Portfolio with respect to securities of the

Underlying Funds held by the Portfolio,

will not exceed the limits set forth in

rule 2830(d) of the NASD’s Conduct

Rules.

2. Each Portfolio will comply with

section 12(d)(1)(F) in all respects except

for sales load limitation of section

12(d)(1)(F)(ii).

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–21365 Filed 8–12–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Issuer Delisting; Notice of Application

to Withdraw From Listing and

Registration; (Grove Property Trust,

Common Stock, $.01 Par Value) File

No. 1–13080

August 7, 1997.

Grove Property Trust (‘‘Company’’)

has filed an application with the

Securities and Exchange Commission

(‘‘Commission’’), pursuant to Section

12(d) of the Securities Exchange Act of

1934 (‘‘Act’’) and Rule 12d2–2(d)

promulgated thereunder, to withdraw

the above specified security (‘‘Security’’)

from listing and registration on the

Boston Stock Exchange, Inc. (‘‘BSE’’ or

‘‘Exchange’’).

The reasons cited in the application

for withdrawing the Security from

listing and registration include the

following:

According to the Company, the

Security is also listed on the American

Stock Exchange, Inc. (‘‘Amex’’) effective

May 23, 1997.

The Company has complied with the

requirements of the BSE by filing with

the Exchange a certified copy of

preambles and resolutions adopted by

the Company’s Board of Directors

authorizing the withdrawal of its

Security from listing on the BSE and by

setting forth in detail to the Exchange

the reasons for such proposed

withdrawal, and the facts in support

thereof.

In making the decision to withdraw

its Security from listing on the BSE, the

Company considered the direct and

indirect costs and expenses associated

with maintaining the dual listing of its

Security on the BSE and the Amex. The

Company does not see any particular

advantage in the dual trading of its

securities and believes that dual listing

may fragment the market for its

securities.

Any interested person may, on or

before August 28, 1997, submit by letter

to the Secretary of the Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549, facts

bearing upon whether the application

has been made in accordance with the

rules of the exchanges and what terms,

if any, should be imposed by the

Commission for the protection of

investors. The Commission, based on

the information submitted to it, will

issue an order granting the application

after the date mentioned above, unless

the Commission determines to order a

hearing on the matter.
Federal Register / Vol. 62, No. 156 / Wednesday, August 13, 1997 / Notices 43385

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3Letter from Alden S. Adkins, General Counsel,

NASD Regulation, Inc. to Katherine A. England,

Assistant Director, Division of Market Regulation,

Commission, dated April 23, 1997 (‘‘Amendment

No. 1’’).

4Securities Exchange Act Release No. 38545 (Apr.

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

notice of SR–NASD–97–28) (‘‘Original Proposal’’).

5Securities Exchange Act Release No. 38831 (July

11, 1997), 62 FR 38156 (July 16, 1997)

(‘‘Amendment No. 2’’).

6Letter from Alden S. Adkins, General Counsel,

NASD Regulation, to Katherine A. England,

Assistant Director, Division of Market Regulation,

Commission, dated July 11, 1997 (‘‘Amendment No.

3’’). Except for technical, clarifying changes, a

description of the proposed changes set forth in

Amendment No. 3 regarding the investigations and

sanctions, disciplinary, and member admission

procedures is provided below. In addition to the

NASD’s proposed changes to the Original Proposal,

the NASD included in Amendment No. 3 its

response to the two submitted comment letters

(‘‘NASD Response’’). See also Colish Letter and

ABA Letter, infra note 9.

7Letter from Alden S. Adkins, General Counsel,

NASD Regulation, Inc. to Katherine A. England,

Assistant Director, Division of Market Regulation,

Commission, dated July 21, 1997 (‘‘Amendment No.

4’’).

8Letter from Alden S. Adkins, General Counsel,

NASD Regulation, Inc. to Katherine A. England,

Assistant Director, Division of Market Regulation,

Commission, dated August 4, 1997 (‘‘Amendment

No. 5’’). Certain minor modifications to the

Delegation Plan needed to ensure conformity to the

changes in the rules of the NASD contained in this

rule filing are set forth in Amendment No. 5 to SR–

NASD–96–29, which is being temporarily approved

concurrently with this filing. Securities Exchange

Act Release No. 38909 (Aug. 7, 1997).

9Letter from Faith Colish, Attorney, Faith Colish

P.C., to Jonathan G. Katz, Secretary, Commission,

dated June 9, 1997 (‘‘Colish Letter’’); letter from

George S. Frazza, Chair, Section of Business Law

and Barry F. McNeil, Chair, Section of Litigation,

American Bar Association, to Jonathan G. Katz,

Secretary, Commission, dated June 17, 1997 (‘‘ABA

Letter’’).

10Securities Exchange Act Release No. 37538

(Aug. 8, 1996), SEC’s Order Instituting Public

Proceedings Pursuant to Section 19(h)(1) of the

Securities Exchange Act of 1934, Making Findings

and Imposing Remedial Sanctions, In the Matter of

National Association of Securities Dealers, Inc.,

Administrative Proceeding File No. 3–9056. SEC,

Report and Appendix to Report Pursuant to Section

21(a) of the Securities Exchange Act of 1934

Regarding the NASD and The Nasdaq Stock Market

(Aug. 8, 1996) (‘‘21(a) Report’’).

11The Commission found that the DBCCs

performed a ‘‘grand jury’’ function, in which the

NASD staff were required to seek DBCC

authorization to initiate a disciplinary proceeding.

Continued

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–21366 Filed 8–12–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38908; File No. SR–NASD–

97–28]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving

Proposed Rule Change and

Amendment No. 1 to the Proposed

Rule Change, Order Granting

Accelerated Approval of Amendment

No. 2 to the Proposed Rule Change,

and Notice of Filing and Order

Granting Accelerated Approval of

Amendment Nos. 3, 4, and 5 to

Proposed Rule Change Regarding

Membership Application Procedures,

Disciplinary Proceedings,

Investigations and Sanctions

Procedures, and Other Conforming

Changes

August 7, 1997.

On April 18, 1997, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

a proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’) 1, and

Rule 19b-4 thereunder.2 The Association

originally proposed to amend: (1) The

By-Laws of the NASD; (2) the By-Laws

of NASD Regulation, Inc. (‘‘NASD

Regulation’’ or ‘‘NASDR’’); (3) the ByLaws of The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’); (4) the Plan of Allocation

and Delegation of Functions By NASD

to Subsidiaries (‘‘Delegation Plan’’); (5)

Rule 0120; (6) Rule IM–2210–4; (7) the

Rule 1010 Series; (8) the Rule 8000

Series; and (9) the Rule 9000 Series.

On April 23, 1997, the NASD filed a

technical amendment to the proposed

rule change.3 Notice of the proposed

rule change, including Amendment No.

1, was provided by issuance of a

Commission release on April 24, 1997

and by publication in the Federal

Register on May 8, 1997.4 On July 10,

1997, the NASD filed Amendment No.

2, pertaining to changes to the 9400

Series (Members Experiencing Financial

or Operational Difficulties), the 9500

Series (Summary and Non-Summary

Suspensions, Cancellation, Bar, and

Limitation or Prohibition on Access to

NASD Services), and the 9600 Series

(Procedures for Exemptions from

Certain NASD Rules). Notice of

Amendment No. 2 to the proposed rule

change was provided by issuance of a

Commission release on July 11, 1997

and by publication in the Federal

Register on July 16, 1997.5 On July 11,

1997, the NASD filed Amendment No.

3 to the proposed rule change, making

several clarifying changes to the

investigations and sanctions,

disciplinary, and member admission

procedures.6 Amendment No. 3 also

withdrew the proposed amendments to

the by-laws of the NASD, NASD

Regulation, and Nasdaq, as well as

proposed amendments to these entities’

restated Certificates of Incorporation

and the Delegation Plan. These

documents will be amended to reflect

the corporate restructuring recently

approved by the NASD Board of

Governors and will be submitted in a

separate rule filing at a later date. On

July 21, 1997, the NASD filed

Amendment No. 4 to the proposed rule

change making several technical,

nonsubstantive amendments.7 On

August 4, 1997, the NASD filed

Amendment No. 5 to the proposed rule

change, which modified the timing of

the effectiveness of the proposed rule

change and included several technical

amendments.8 The Commission

received two comment letters on the

proposal.9

I. Introduction and Background

On August 8, 1996, the Commission

issued an order (‘‘SEC Order’’) pursuant

to Section 19(h)(1) of the Act. This order

made certain findings about the NASD

and conduct on Nasdaq and imposed

remedial sanctions, including ordering

the NASD to comply with certain

undertakings (‘‘Undertakings’’).10 The

Commission determined that the NASD

had not complied with the NASD’s rules

or satisfied its obligations under the Act

to enforce its rules and the federal

securities laws. In particular, the

Commission determined that the NASD

failed to thoroughly investigate certain

misconduct by dealers and to take

effective regulatory action. Moreover,

the Commission determined that the

NASD failed to enforce market makers’

obligations to trade at their quotations,

and report transactions on a timely and

accurate basis. The Commission also

determined that the NASD processed

applications for membership of certain

firms in a manner inconsistent with its

rules.

In addition, the Commission found in

its 21(a) Report, among other things,

that market making firms were afforded

a disproportionate representation on the

boards and committees that govern the

NASD, administer its disciplinary

process, and operate the Nasdaq market.

The Commission concluded in the 21(a)

Report that market makers had unduly

exerted their influence over the

disciplinary process through their

participation in the District Business

Conduct Committees (‘‘DBCCs’’).11 In