47856 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices

7Board of Governors of the Federal Reserve

System et al., Interagency Statement on Retail Sales

of Non-deposit Investment Products, p. 10

(February 15, 1994).

8Section 15A(b)(6) requires the Commission to

determine that a registered national securities

association’s rules are designed to promote just and

equitable principles of trade, to remove

impediments to and perfect the mechanism of a free

and open market and national market system; and

are not designed to permit unfair discrimination

among customers, issuers, brokers, or dealers.

9The Commission has considered the proposed

rule’s impact on efficiency, competition, and capital

formation. 15 U.S.C. § 78c(f).

10The NASD plans to issue a Notice to Members

to clarify member firms’ supervisory

responsibilities concerning non-branch offices.

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30–3(a)(12).

1The NASD filed Amendment No. 1 to the

proposed rule change on July 25, 1997, the

substance of which was incorporated into the

notice. See letter from Elliott R. Curzon, Assistant

General Counsel, NASDR, to Katherine A. England,

Assistant Director, Market Regulation, Commission,

dated July 25, 1997 (‘‘Amendment No. 1’’).

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

3 17 CFR 240.19b–4.

4The rule, in pilot form, became effective for one

year on May 2, 1995, was extended to August 1,

1996, extended again until August 1, 1997, and

temporarily extended until approval of this rule

proposals. See Securities Exchange Act Release

Nos. 35314 (February 1, 1995), 60 FR 7241

(February 7, 1995) (original approval of pilot

program); 37154 (April 30, 1996), 61 FR 20301 (May

6, 1996) (temporary extension until August 1, 1996);

37513 (August 1, 1996), 61 FR 41438 (August 8,

1996) (exentsion until August 1, 1997); and 38879

(July 28, 1997), 62 FR 41454 (August 1, 1997)

(temporary extension).

Form BD and such location is subject to

an annual NASD fee of $75.00.

Rule 3010 does not address the

circumstance in which a business

location is used exclusively for

appointments from time to time

between registered representatives and

customers. This issue may arise under

networking arrangements between

NASD members and banks. In this

context, registered representatives of the

member may periodically schedule

appointments with bank customers at a

bank location where the NASD member

conducts no securities activities. Under

the Interagency Statement on Retail

Sales of Non-deposit Investment

Products, banks are required to use

signage at the place of the appointment

to identify the NASD member that

employ the registered person.7 Thus, the

presence of this signage at the place of

appointment could be interpreted as the

member or its agent designating the

location as a branch office for which

branch office registration requirements

would apply. Thus, the NASD has

created another exception to the

definition of branch office to address

this type of situation.

The proposed amendment adds

language to paragraph (g) of Rule 3010

to exempt from the definition of branch

office certain locations where a person

conducts business for the member firm

occasionally and exclusively by

appointment for the convenience of

customers, and where the member

maintains no other tangible presence.

To be consistent with other provisions

of Rule 3010, the persons conducting

business at such locations would be

required to provide each customer with

the address and telephone number of

the branch office or office of supervisory

jurisdiction of the firm from which the

person who is conducting the meeting is

supervised.

III. Discussion

The Commission believes the

proposed rule change is consistent with

the Act and rules and regulations

promulgated thereunder. Specifically,

the Commission believes that approval

of the proposed rule change is

consistent with Section 15A(b)(6)8 of

the Act.9 Pursuant to Section 15A(b)(6),

the proposed rule change permits

member firms and their representatives

to be flexible when scheduling

appointments at a location convenient

to their customers without being

assessed an additional branch office

registration fee. However, the

Commission reiterates that member

firms, pursuant to NASD Rules, are

required to monitor and supervise

representatives and their activity,

whether they conduct business in a

branch or non-branch office. The status

of a location as a branch or non-branch

office is not relevant to the duty to

supervise.10

IV. Conclusion

For the above reasons, the

Commission believes that the proposed

rule change is consistent with the

provisions of the Act, and in particular

with Section 15A(b)(6).

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,11 that the

proposed rule change (SR–NASD–97–

41) be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24133 Filed 9–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39024; File No. SR–NASD–

97–52]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Granting Approval

to Proposed Rule Change Relating to

Extension of the Large and Complex

Case Rule and Making Application of

the Rule Voluntary

September 5, 1997.

I. Introduction

On July 22, 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 Rule 10334 of the

NADS’s Code of Arbitration Procedure

(‘‘Code’’) to extend the effectiveness of

Rule 10334 to August 1, 2002, and to

make application of Rule 10334

voluntary.

Notice of the proposed rule change,

together with the substance of the

proposal, was published for comment in

Securities Exchange Act Release No.

38879 (July 28, 1997), 62 FR 41454

(August 1, 1997). No comments were

received on the proposal. This order

approve the proposed rule change.

II. Description

Rule 10334 provides special

procedures for large and complex

cases.4 Any claim where the amount in

controversy is $1 million or more, or

where all parties agree, is eligible for

disposition under the procedures.

Currently, Rule 10334 requires that

the parties in any eligible case

participate in an administrative

conference with a member of the staff of

the Office of Dispute Resolution

(‘‘Office’’). The purpose of the

conference is to permit the parties and

staff to develop a plan for administering

the case, including planning for

discovery and narrowing the issues to

be decided at the hearing. Application

of all other provisions of the Rule to a

case is completely voluntary.

Rule 10334 was developed to meet the

special needs of parties in large and

complex cases, including the need for

arbitrators with particular experience

and the need in some cases for

additional discovery, including the

availability of depositions. NASD

Regulation’s experience in the two years

that Rule 10334 has been effective is

that few parties use the procedures.

From May 2, 1995 until January 28,

1997, 880 cases were eligible for

treatment under Rule 10334. Parties

agreed to proceed under Rule 10334,

however, in only 43 cases.
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices 47857

5 15 U.S.C. 78o–3.

6 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).

7The procedures will be available if the parties

voluntarily agree to proceed with an administrative

conference and to develop a written agreement to

proceed under Rule 10334.

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 15 U.S.C. 78o–3.

NASD Regulation has found that

parties are deterred from using these

procedures by the extra compensation

paid to arbitrators and the additional

administrative fees required under Rule

10334. At the same time, NASD

Regulation found that one of the most

attractive aspects of Rule 10334 is the

availability of a list selection procedure

for the appointment of arbitrators,

which is not yet generally available for

other types of arbitration cases.

In addition, the attractiveness of the

procedures may be affected by the

required administrative conference with

the staff. This conference may be

beneficial in assisting the parties to

develop a road map for a proceeding,

even if the parties to not agree to use

other procedures under Rule 10334.

However, the requirement that the

administrative conference be conducted

in all cases over $1 million, regardless

of whether the parties plan to proceed

under Rule 10334, creates a cost burden

to the parties and to the Office.

Accordingly, NASD Regulation is

proposing to amend Rule 10334 to

provide for an administrative

conference with the staff only if all

parties request such a conference in

writing. The procedures will be

available if the parties voluntarily agree

to proceed with an administrative

conference and to develop a written

agreement to proceed under Rule 10334.

An administrative conference will,

however, continue to be a prerequisite

to the use of the special procedures

provided by Rule 10334. In addition,

NASD Regulation is proposing to amend

Rule 10334 to extend the Rule for five

more years to August 1, 2002.

III. Discussion

The Commission believes that the

proposed rule change is consistent with

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

the Act 5 in that extending the

effectiveness of the procedures for large

and complex cases and making their use

entirely voluntary will serve the public

interest, by enhancing the satisfaction

and perceived fairness of such

proceedings by the parties to the

proceedings.6 The Commission notes

that providing for a five-year extension

of the pilot program will permit

arbitration participants to continue to

utilize the procedures. In addition, an

extension of the pilot program will

allow the NASD to gather additional

data on the program and to continue to

monitor the usefulness of the large and

complex rule to arbitration parties, in

order to see if the pilot program should

be approved on a permanent basis.

The Commission also believes that

amending Rule 10334 to provide for an

administrative conference with the staff

only if all parties request such a

conference in writing 7 is reasonable

under the Act because the elimination

of the requirement for an administrative

conference in all cases should result in

reduced costs to the parties and to

NASD Regulation. The Commission also

notes that an administrative conference

will continue to be a prerequisite to the

use of the special procedures provided

by Rule 10334.

IV. Conclusion

It is therefore ordered, pursuant to

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

proposed rule change (SR–NASD–97–

52) is approved, through August 1,

2002.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24135 Filed 9–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39021; File No. SR–NASD–

97–45]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving

Proposed Rule Change Relating to

Modifications to the Definition of

Qualified Independent Underwriter

September 4, 1997.

I. Introduction

On June 26, 1997, the National

Association of Securities Dealers, Inc.,

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

the Securities and Exchange

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

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

Securities Exchange Act of 1934

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

proposed rule change relating to

modifications to the definition of

‘‘qualified independent underwriter.’’

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 38833 (July

11, 1997), 62 FR 38333 (July 17, 1997).

The Commission received no comments

on the proposal. This order approves the

proposed rule change.

II. Description of the Proposal

NASD is proposing to amend Rule

2720, Distribution of Securities of

Members and Affiliates—Conflicts of

Interest, that regulates the conduct of

offerings by members of their own

securities, those of the member’s parent,

or an affiliate, and other offerings in

which a member has a conflict of

interest.

When a member proposes to

participate in the distribution of a

public offering of its own or an

affiliate’s securities, or of securities of a

company with which it otherwise has a

conflict of interest, NASD Rule 2720

requires that the price at which an

equity issue or the yield at which a debt

issue is to be distributed to the public

be established at a price no higher or a

yield no lower than that recommended

by a member acting as a ‘‘qualified

independent underwriter.’’ The

qualified independent underwriter must

also participate in the preparation of the

offering document and is expected to

exercise the usual standards of due

diligence in respect thereto. The

participation of a qualified independent

underwriter is intended to assure the

public of the independence of the

pricing and due diligence functions in

a situation where a member is

participating in an offering where the

member has a conflict of interest.

The NASD is proposing to delete the

requirement that a qualified

independent underwriter has had net

income from operations of the broker/

dealer entity or from the pro forma

combined operations of predecessor

broker/dealer entities, exclusive of

extraordinary items, as computed in

accordance with generally accepted

accounting principles, in at least three

of the five years immediately preceding

the filing of the registration statement.

III. Discussion

The Commission believes the NASD’s

proposed rule change is consistent with

the Act, and specifically with Section

15A(b)(6) thereunder.3 Section

15A(b)(6) requires that the rules of a

national securities association be

designed to promote just and equitable

principles of trade, to foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in