Federal Register / Vol. 62, No. 184 / Tuesday, September 23, 1997 / Notices 49717

containing an acknowledgment of this

condition upon such Plan’s initial

purchase of the shares of any Portfolio.

Conclusion

For the reasons stated above,

Applicants assert that the requested

exemptions from Sections 9(a), 13(a),

15(a) and 15(b) of the 1940 Act and

Rules 6e–2(b)(15) and 6e–3(T)(b)(15)

thereunder are appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provision of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25133 Filed 9–22–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39084; File No. SR–MSRB–

97–5]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Municipal Securities Rulemaking

Board Relating to Interpretation of

Rule G–37 on Political Contributions

and Prohibitions on Municipal

Securities Business

September 16, 1997.

On September 9, 1997, the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) a proposed

rule change (File No. SR–MSRB–97–5),

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), and Rule

19b–4 thereunder. The proposed rule

change is described in Items I, II, and III

below, which Items have been prepared

by the Board. The Board has designated

this proposal as constituting a stated

policy, practice, or interpretation with

respect to the meaning, administration,

or enforcement of an existing rule of the

Board under Section 19(b)(3)(A) of the

Act, which renders the proposal

effective upon receipt of this filing by

the Commission. 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

The Board is filing herewith a notice

of interpretation concerning rule G–37

on political contributions and

prohibitions on municipal securities

business (hereafter referred to as ‘‘the

proposed rule change’’). The proposed

rule change is as follows:

Rule G–37: Political Contributions and

Prohibitions on Municipal Securities

Business

Transition and Inaugural Expenses

1. Q: May a municipal finance

professional who is entitled to vote for

an issuer official make contributions to

pay for such official’s transition or

inaugural expenses without causing a

prohibition on municipal securities

business with the issuer?

A: Yes, under certain conditions. The

de minimis exception allows a

municipal finance professional to

contribute up to $250 per candidate per

election if the municipal finance

professional is entitled to vote that

issuer official. The de minimis

exception is keyed to an election cycle;

therefore, if a municipal finance

professional contributed $250 to the

general election of an issuer official, the

municipal finance professional would

not be able to make any contributions to

pay for transition or inaugural expenses

without causing a prohibition on

municipal securities business with the

issuer. If a municipal finance

professional made no contributions to

an issuer official prior to the election,

then the municipal finance professional

may, if entitled to vote for the

candidate, contribute up to $250 to pay

for transition or inaugural expenses and

payment of debt incurred in connection

with the election without causing a

prohibition on municipal securities

business.

Definition of Issuer Official

2. Q: An incumbent was seeking reelection as an issuer official but she lost

the election. She is now soliciting

money to pay for the debt incurred in

connection with this election. Would

there be a prohibition on engaging in

municipal securities business with the

issuer if a dealer or a municipal finance

professional provides money for the

payment of this debt?

A: No, under certain conditions. If the

incumbent is out of office at the time

she is soliciting money to pay for the

election debt, then she is no longer

considered to be within the definition of

‘‘official of an isssuer’’ and any monies

given for the payment of debt incurred

in connection with the election in this

instance is not subject to rule G–37. If

the incumbent still holds her issuer

official position at the time she is

soliciting money to pay for the election

debt, then, if a municipal finance

professional contributed $250 to her

during the general election, the

municipal finance professional would

not be able to make any contributions

for the payment of debt without causing

a prohibition on municipal securities

business with the issuer. If a municipal

finance professional made no

contributions to the incumbent prior to

the election, then the municipal finance

professional may, if entitled to vote for

the candidate, contribute up to $250 for

the payment of debt incurred in

connection with the election while the

incumbent is still in office without

causing a prohibition on municipal

securities business. A dealer may not

contribute any monies towards the

payment of debt while the incumbent is

still in office without causing a

prohibition on municipal securities

business with the issuer.

Definitions of Municipal Finance

Professional and Executive Officer

3. Q: In making the determination of

which associated persons of a dealer

meet the definitions of municipal

finance professional and executive

officer, is it correct to designate all the

executives of the dealer (e.g., President,

Executive Vice Presidents) under the

category of executive officers?

A: No. In making the determination of

whether someone is a municipal finance

professional or executive officer, one

must review the activities of the

individual and not his or her title.

Rule G–37(g)(iv) defines the term

‘‘municipal finance professional’’ as:

(A) any associated person primarily

engaged in municipal securities

representative activities, as defined in rule

G–3(a)(i);

(B) any associated person who solicits

municipal securities business, as defined

paragraph (vii);

(C) any associated person who is both (i)

a municipal securities principal or a

municipal securities sales principal and (ii)

a supervisor of any persons described in

subparagraphs (A) or (B);

(D) any associated person who is a

supervisor of any person described in

subparagraph (C) up through and including,

in the case of a broker, dealer or municipal

securities dealer other than a bank dealer, the

Chief Executive Officer or similarly situated

official and, in the case of a bank dealer, the

officer or officers designated by the board of

directors of the bank as responsible for the

day-to-day conduct of the bank’s municipal

securities dealer activities, as required

pursuant to rule G–1(a); or

(E) any associated person who is a member

of the broker, dealer or municipal securities

dealer (or, in the case of a bank dealer, the

separately identifiable department or

division of the bank, as defined in rule G–

1) executive or management committee or
49718 Federal Register / Vol. 62, No. 184 / Tuesday, September 23, 1997 / Notices

1Securities Exchange Act Release No. 33868

(April 7, 1994), 59 FR 17621 (April 13, 1994). The

rule applies to contributions made on and after

April 25, 1994.

2See Securities Exchange Act Release No. 34161

(June 6, 1994), 59 FR 30379 (June 14, 1994);

Securities Act Release No. 34603 (Aug. 25, 1994),

59 FR 45049 (Aug. 31, 1994); Securities Exchange

Act Release No. 35128 (Dec. 20, 1994), 59 FR 66989

(Dec. 28, 1994); Securities Exchange Act Release

No. 35544 (March 28, 1995), 60 FR 16896 (April 3,

1995); Securities Exchange Act Release No. 35879

(June 21, 1995), 60 FR 33447 (June 28, 1995);

Securities Exchange Act Release No. 36857 (Feb. 16,

1996), 61 FR 7034 (Feb. 23, 1996); Securities

Exchange Act Release No. 37675 (Sept. 12, 1996),

61 FR 49368 (Sept. 18, 1996).

See MSRB Reports, Vol. 14, No. 3 (June 1994) at

11–16; Vol. 14, No. 4 (August 1994) at 27–31; Vol.

14, No. 5 (December 1994) at 8; Vol. 15, No. 1 (April

1995) at 21; Vol. 15, No. 2 (July 1995) at 3–4; Vol.

16, No. 1 (January 1996) at 31; and Vol. 16, No. 3

(September 1996) at 35–36. See also CCH Manual

paragraph 3681.

3See Securities Exchange Act Release No. 34161

(June 6, 1994), 59 FR 30379 (June 13, 1994) (SR–

MSRB–94–06) and Securities Exchange Act Release

No. 34603 (August 25, 1994), 59 FR 45049 (August

31, 1994) (SR–MSRB–94–15).

4Section 15B(b)(2)(C) states in pertinent part that

the rules of the Board ‘‘shall be designed to prevent

fraudulent and manipulative acts and practices, 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 municipal securities, to remove

impediments to and perfect the mechanism of a free

and open market in municipal securities, and, in

general, to protect investors and the public

interest.’’

similarly situated officials, if any; provided,

however, that, if the only associated persons

meeting the definition of municipal finance

professional are those described in this

subparagraph (E), the broker, dealer or

municipal securities dealer shall be deemed

to have no municipal finance professionals.

Rule G–37(g)(v) defines the term

‘‘executive officer’’ as:

An associated person in charge of a

principal business unit, division or function

or any other person who performs similar

policy making functions for the broker,

dealer or municipal securities dealer (or, in

the case of a bank dealer, the separately

identifiable department or division of the

bank, as defined in rule G–1), but does not

include any municipal finance professional,

as defined in paragraph (iv) of this section

(g); provided, however, that, if no associated

person of the broker, dealer or municipal

securities dealer meets the definition of

municipal finance professional, the broker,

dealer or municipal securities dealer shall be

deemed to have no executive officers.

[emphasis added].

Dealers should first review the

activities of their associated persons to

determine whether they are municipal

finance professionals, and then once

that list of individuals has been

established, conduct a review of the

remaining associated persons to

determine whether they are executive

officers. Dealers should pay close

attention to those associated persons

who are soliciting municipal securities

business and, thus, will be considered

municipal finance professionals. The

Board has previously stated that

solicitation activities may include, but

are not limited to, responding to issuer

Requests for Proposals, making

presentations of public finance and/or

municipal marketing capabilities to

issuer officials, and engaging in other

activities calculated to appeal to issuer

officials for municipal securities

business, or which effectively do so.

(See ‘‘Additional Rule G–37 Questions &

Answers,’’ MSRB Reports, Vol. 14, No.

5 (December 1994) at 8).

Reporting by Syndicate Members

4. Q: Rule G–37(e) requires, among

other things, that dealers submit

information to the Board on Form G–37/

G–38 about the municipal securities

business in which they engaged. Is

information about the municipal

securities business engaged in required

to be submitted by all syndicate and

selling group members, or is it only the

responsibility of the manager(s) to

submit such information on behalf of

the syndicate?

A: All manager(s) and syndicate

members (excluding selling group

members) must separately report the

municipal securities business in which

they engaged.

* * * * *

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

Board 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 texts of these

statements may be examined at the

places specified in Item IV below. The

Board 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 April 7, 1994, the Commission

approved Board rule G–37, concerning

political contributions and prohibitions

on municipal securities business.1 Since

that time, the Board has received

numerous inquiries concerning the

application of the rule. In order to assist

the municipal securities industry and,

in particular, brokers, dealers and

municipal securities dealers in

understanding and complying with the

provisions of the rule, the Board

published seven prior notices of

interpretation which set forth, in

question-and-answer format, general

guidance on rule G–37.2 In prior filings

with the Commission, the Board stated

that it will continue to monitor the

application of rule G–37, and, from to

time, will publish additional notices of

interpretations, as necessary.3 In light of

questions recently received from market

participants concerning the

applicability of the rule to transition

and inaugural expenses, the definition

of issuer official, the definitions of

municipal finance professional and

executive officer, and reporting by

syndicate members, the Board has

determined that it is necessary to

provide further guidance to the

municipal industry. Accordingly, the

Board is publishing this eighth set of

questions and answers.

The Board believes the proposed rule

change is consistent with Section

15B(b)(2)(C) of the Act.4

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Board does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Act, because it would

apply equally to all brokers, dealers and

municipal securities dealers.

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 Board has designated this

proposal as constituting a stated policy,

practice, or interpretation with respect

to the meaning, administration, or

enforcement of an existing rule of the

Board under Section 19(b)(3)(A) of the

Act, which renders the proposal

effective upon receipt of this filing by

the Commission.

At any time within sixty days of the

filing of this proposed rule change, the

Commission may summarily abrogate

such 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

purpose of the Act.
Federal Register / Vol. 62, No. 184 / Tuesday, September 23, 1997 / Notices 49719

5 17 CFR 200.30–3(a)(12).

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

2 15 U.S.C. 78q–1.

3Securities Exchange Act Release No. 35038

(December 1, 1994), 59 FR 63652 (Concept Release

discussing direct registration).

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

submissions, 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 with held from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of the filing will also be

available for inspection and copying at

the Board’s principal offices. All

submissions should refer to File No.

SR–MSRB–97–5 and should be

submitted by October 14, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25217 Filed 9–22–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No: 34–39082; File No. SR–NASD–

97–51]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Notice of Filing of

Proposed Rule Change Regarding the

Transfer of Securities of Issuers Listed

on the Nasdaq Stock Market That Are

Held Pursuant to a Direct Registration

Program

September 16, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

July 16, 1997, The Nasdaq Stock Market,

Inc. (‘‘Nasdaq’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which items have been

prepared primarily by Nasdaq. The

Commission is publishing this notice to

solicit comments from interested

persons on the proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is proposing to amend Rules

4200, 4310, 4320, and 4460 of the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) to require

Nasdaq issuers that elect to offer a direct

registration program to shareholders to

participate in an electronic link, either

directly or through the issuer’s transfer

agent, with a securities depository

registered under Section 17A of the

Act.2

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Nasdaq 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 Item IV below. Nasdaq 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

The purpose of the proposed rule

change is to facilitate the clearance and

settlement of securities held in bookentry form in the context of recent

developments concerning the direct

registration concept. Over the past

twelve years, regulators, representatives

of private industry, and the transfer

agent community have worked together

to explore alternatives to maintaining

ownership interest in securities without

certificates. In 1990, the Commission

held a Roundtable on Clearance and

Settlement to discuss recommendations

of the Group of Thirty U.S. Working

Committee which, among other things,

discussed ways in which investors

could obtain benefits of a direct

registration system (‘‘DRS’’). The

Commission has been promoting the

DRS concept, and in 1994 requested that

the industry work to develop DRS in

order to provide investors with

additional options to holding their

securities in certificate form.3 A basic

structure for DRS has been developed

and agreed to by a joint committee of

representatives of the Securities

Industry Association, the Securities

Transfer Association, the Corporate

Transfer Agents Association, and

registered securities depositories.

The concept of DRS is modeled after

systems used in dividend reinvestment

and stock purchase programs, which are

currently offered by many issuers or

transfer agents. It is being considered by

issuers in connection with the move to

a faster settlement cycle and reflects

investor trends away from physical

certificates. DRS promotes investor

choice, while encouraging efficient

clearance and settlement procedures.

Specifically, DRS offers shareholders

the ability to: (1) receive an account

statement instead of a negotiable

certificate; (2) get a certificate upon

demand; and (3) direct the book-entry

transfer of the underlying position to a

broker-dealer upon request.

A key component of DRS has been the

initiation of an electronic

communication system linking issuers

or their transfer agents with registered

securities depositories. Assuming an

issuer and its transfer agent elect to offer

direct registration services, this link

would permit a broker-dealer to deliver

to a transfer agent a customer’s request

that the securities be registered on the

books of the issuer in book-entry form.

Such a system also will allow the

transfer agent to send an electronic

acknowledgment to the broker-dealer

that the securities have been registered

in the customer’s name on the books of

the issuer in book-entry form. thus, DRS

helps promote efficiencies in the

prompt and accurate clearance and

settlement of securities transactions by

providing individual investors that do

not want to have broker-dealers hold

their securities for them in street name

the option of holding in book-entry form

on the books of the issuers and most

importantly, the ability to subsequently

have such positions transferred

electronically to banks or broker-dealers

in connection with the sales or

disposition of the securities.

Recently, The Depository Trust Co.

(‘‘DTC’’) received Commission approval

to establish the procedures and the

necessary electronic link to implement

DRS. Under this system, an investor will

have the right at any time to transfer its

DRS position from the issuer to a

broker-dealer through the facilities of

DTC in order to sell or pledge the

security. Alternatively, an investor will

have the right at any time to request a

certificate. Under DTC’s rule change, to

participate in DRS, a transfer agent