64034 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

7 15 U.S.C. § 780–3.

8 17 CFR 200.30–3(a)(12).

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

2New section (j) of NASD Rule 4200 defines a

direct registration program as any program by an

issuer, directly or through its transfer agent

whereby a shareholder may have securities

registered in the shareholder’s name on the books

of the issuer or its transfer agent without the need

for a physical certificate to evidence ownership.

3 15 U.S.C. 78q–1.

4Securities Exchange Act Release No. 39082

(September 16, 1997), 62 FR 49719.

recently adopted Rule 9600 Series.

Currently, the exemptive authority

under Rule 4615, Rule 5107, and Rule

6730 is a generalized authority vested in

the Association.

In addition, to eliminate delays in

processing a request for an exemption,

the Association proposes to modify Rule

9610. Proposed Rule 9610 requires a

person seeking exemptive relief to file a

written application with ‘‘the

appropriate department or staff of the

Association, and provide a copy of the

application to the Office of General

Counsel of NASD Regulation,’’ rather

than filing the application only with the

Office of the General Counsel of NASD

Regulation. The same change is

proposed in Rule 9630(a), which deals

with filing a notice of an appeal of a

decision regarding exemptive relief.

2. Statutory Basis

(a) The Association is requesting that

the proposed rule change be effective

within 45 days of SEC approval, but not

later than January 1, 1998.

(b) The Association believes that the

proposed rule change is consistent with

Section 15A(b)(6), (7), and (8) of the

Act.7 The proposed rule change is

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

Act in that it will promote just and

equitable principles of trade by

providing fair procedures and standards

for membership admission, and fair

procedures and consistent treatment for

requesting information from members or

other persons who are obligated to

provide the Association with

information. The proposed rule change

is consistent with Section 15A(b)(7) in

that it furthers the statutory mandate

that the Association establish rules

providing that its members and persons

associated with its members shall be

appropriately disciplined for violation

of any provision of this title, the rules

or regulations thereunder, the rules of

the Municipal Securities Rulemaking

Board, or the rules of the association, by

expulsion, suspension, limitation of

activities, functions, and operations,

fine, censure, being suspended or barred

from being associated with a member, or

any other fitting sanction. The rule

change is consistent with Section

15A(b)(8) in that it furthers the statutory

goals of providing a fair procedure for

disciplining members and persons

associated with members, fair

procedures for admitting or denying

membership to any person seeking

membership to the Association, fair

procedures for barring any person from

becoming associated with a member of

the Association, and fair procedures for

prohibiting or limiting the association of

any person with respect to access to

services offered by the Association or a

member thereof.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the proposes of the Act, as amended.

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

Within 35 days of the date of

publication of this notice if the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

A. by order approve such proposed

rule change, or

B. institute proceedings to determine

whether the proposed rule change

should be disapproved.

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

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 in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to file number

SR–NASD–97–81 and should be

submitted by December 18, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31523 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39369; File No. SR–NASD–

97–51]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving a

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

November 26, 1997.

I. Introduction

On July 16, 1997, The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–NASD–97–51) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 The rule

change will 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 2 to shareholders to participate,

either directly or through the issuer’s

transfer agent, in an electronic link with

a securities depository registered under

Section 17A of the Act.3 Notice of the

proposal was published in the Federal

Register on September 23, 1997.4 No

comment letters were received. For the

reasons discussed below, the

Commission is approving the proposed

rule change.

II. Description of the Proposal

In 1994, the Commission requested

comments on the establishment of a

transfer agent operated direct

registration system (‘‘DRS’’) for

securities which would allow investors

to have their securities registered in

book-entry form directly on the books of
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64035

5Securities Exchange Act Release No. 35038

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

Release’’).

6Securities Exchange Act Release No. 37931

(November 7, 1996), 61 FR 58600 [File No. SR–

DTC–96–15].

7According to DTC, a party wishing to be a

‘‘limited participant’’ must: (1) be registered as a

transfer agent with the SEC; (2) participate as a

transfer agent in DTC’s Fast Automated Securities

Transfer (‘‘FAST’’) program; (3) provide ‘‘direct

mail service’’ on transfers; and (4) communicate

with DTC through a computer-to-computer interface

using DTC’s CCF platforms. Id. The Philadelphia

Depository Trust Company has received

Commission approval of similar DRS procedures.

Securities Exchange Act Release No. 37933

(November 8, 1997), 61 FR 59269 [File No. SR–

Philadep–96–14]

8 15 U.S.C. 78o–3(b)(6).

9 17 CFR 200.30–3(a)(12).

1See letter from Jeffrey S. Norris, Manager,

Regulatory Development, PCX, to Heather Seidel,

Attorney, Market Regulation, Commission, dated

November 24, 1997 (‘‘Amendment No. 1’’). The

substance of Amendment No. 1 is incorporated into

the notice.

2See Securities Exchange Act Release No. 38712

(June 3, 1997), 62 FR 17941 (July 8, 1997).

the issuer and to receive a statement of

ownership instead of a certificate.5

Since issuance of the Concept Release,

a basic structure for DRS has been

developed and implemented by a joint

committee of representatives of the

Securities Industry Association, the

Securities Transfer Association, the

Corporate Transfer Agents Association,

and the registered securities

depositories. Using DRS, investors have

a new way, in addition to holding a

certificate or holding in street name at

a broker-dealer, to hold their securities

positions.

A key component of DRS is the

electronic linkage of issuers or their

transfer agents with broker-dealers

through registered securities

depositories. Assuming an issuer and its

transfer agent participate in DRS, this

link allows a broker-dealer to deliver to

a transfer agent on customer’s request

that his purchased securities be

registered on the books of the issuer in

book-entry form. The linkage also

provides for the book-entry movement

between broker-dealers and issuers of

customers’ existing positions.

The Depository Trust Company

(‘‘DTC’’) has received Commission

approval of its procedures

implementing DRS.6 Under DTC’s

procedures, to participate in DRS a

transfer agent needs to become a DRS

‘‘limited participant’’ at DTC.7

Therefore, Nasdaq proposed to amend

NASD’s rules to establish a qualification

requirement for all securities to be

included in Nasdaq that if the issuer

establishes a direct registration program

it shall participate in an electronic link

with a securities depository in order to

facilitate the electronic transfer of

securities held pursuant to the direct

registration program. The electronic link

may be direct or through the issuer’s

transfer agent.

III. Discussion

Section 15A(b)(6) of the Act 8 requires

that the rules of a national securities

association be designed to foster

cooperation with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities.

The Commission believes that the

proposed rule change is consistent with

Section 15A(b)(6) because it requires

Nasdaq issuers participating in DRS to

establish a link with a registered

securities depository before operating

DRS services. This requirement should

increase cooperation among Nasdaq

issuers, their transfer agents, brokerdealers, and DTC.

IV. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

NASD–97–51) be, and hereby is,

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31684 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39358; File No. SR–PCX–

97–43]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

an Extension of the Exchange’s

Specialist Evaluation Pilot Program

November 25, 1997.

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 November 17,

1997,1 the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) 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 by the self-regulatory

organization. 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

PCX is proposing to extend its pilot

program regarding the evaluation of its

equity specialists until January 1, 1999.

In addition, the Exchange is proposing

to implement certain changes to the

pilot program.

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

self-regulatory organization 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.

The self-regulatory organization 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

On June 3, 1997, the Commission

approved a six-month extension of the

pilot program for the evaluation of

equity specialists.2 The reason for the

extension was to allow the PCX more

time to evaluate the impact of the SEC’s

new order handling rules on the

performance criteria and to determine

an appropriate overall passing score and

individual passing scores for each

criterion. The Exchange now is

proposing to extend the pilot program

until January 1, 1999. The PCX has

established an overall passing score and

individual passing scores for each

criterion and has determined when

specialists that do not attain the

minimum passing scores should meet

with the Equity Allocation Committee

(‘‘EAC’’). The Exchange is also

proposing to replace the ‘‘Bettering the

Quote’’ criterion with Price

Improvement and to lower the

weighting of the Specialist Evaluation

Questionnaire from 15% to 10% so that

Price Improvement can be given a

weight of 10%. Since the Bettering the

Quote criterion is now measured against

the NBBO instead of the primary

market, the PCX believes it is no longer