Federal Register / Vol. 62, No. 39 / Thursday, February 27, 1997 / Notices 9009

1 15 U.S.C. § 78s(b)(1).

2The proposed rule change was originally filed

on January 29, 1997. The NASD subsequently

submitted Amendment No. 1 that removed certain

unnecessary text. This document provides notice of

the proposed rule change as amended. Letter from

Suzanne E. Rothwell, Associate General Counsel,

NASD Regulation, to Katherine A. England,

Assistant Director, Division of Market Regulation,

SEC, dated February 20, 1997.

management contracts will be to reduce

fees from Controlled Companies by

approximately 56%. Applicant expects,

however, a corresponding reduction of

costs due to the restructuring that

occurred. The immediate net effect of

the change was the payment to

applicant of termination fees under the

agreements, which fees are included in

extraordinary income as described

above. While revenues from applicant’s

Direct Subsidiaries, Direct Assets,

service agreements and other

operations, and dividends from

Controlled Companies’ stock are a

substantial portion of applicant’s total

revenue, they account for a significantly

smaller portion of applicant’s net

income. This largely reflects (a) the

strategy of applicant and its Controlled

Companies to retain earnings for future

operations and growth, rather than to

distribute earnings to shareholders in

the form of dividends, (b) the fact that

gold sales made directly by applicant

are relatively small in relation to

applicant’s total activities, which

consist largely of exploration properties,

and (c) the fact that virtually all of

applicant’s expenses relate to the

activities of its Direct Subsidiaries and

its Direct Assets.

8. In the alternative to exemptive

relief under section 3(b)(2), applicant

requests an order under section 6(c)

exempting applicant from all provisions

of the Act and the rules and regulations

thereunder. Section 6(c) authorizes the

Commission to issue a conditional or

unconditional exemption from any

provision of the Act or rule thereunder

if the exemption is ‘‘necessary or

appropriate in the public interest’’ and

is ‘‘consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

[the Act].’’ Applicant states that it was

structured for valid economic and legal

reasons and not with the Act in mind.

Consequently, applicant believes that it

would be inappropriate and detrimental

to applicant and its shareholders to be

treated as an investment company and

made subject to the Act. Furthermore,

applicant believes that it is not the type

of company and does not engage in the

activities the Act was designed to

regulate. Accordingly, applicant submits

that the requested exemption is

necessary and appropriate in the public

interest, is consistent with the

protection of investors, and is consistent

with the purposes of the Act.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4860 Filed 2–26–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–83821; File No. SR–NASD–

97–06]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to the Scope of

the Uniform Practice Code

February 21, 1997.

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

Securities Exchange Act of 1934

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

February 20, 1997, the NASD

Regulation, Inc. (‘‘NASD Regulation’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by NASD

Regulation.2 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

NASD Regulation is proposing to

amend Rule 11100 of the Uniform

Practice Code (‘‘Code’’) of the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), to clarify

the scope of the Code and the exception

for transactions settled through a

clearing agency. Below is the text of the

proposed rule change. Proposed new

language is in italics.

11100. Scope of Uniform Practice Code

(a) All over-the-counter secondary

market transactions in securities

(including restricted securities, as

defined in Rule 144(a)(3) under the

Securities Act of 1933) between

members, including the rights and

liabilities of the members participating

in the transaction, and those

operational procedures that affect the

day-to-day business of members shall be

subject to the provisions of this Code

except:

(1) transactions in securities between

members which are compared, cleared

or settled through the facilities of a

registered clearing agency, except to the

extent that the rules of the clearing

agency provide that rules of other

organizations shall apply.

* * * * *

II. Self-Regulatory Organizations

Statement of the Purpose of and

Statutory Basis for, the proposed Rule

Change

In its filing with the Commission,

NASD Regulation 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.

NASD Regulation 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

(a) The Code provides detailed

requirements for many procedures and

practices related to the operational

aspects of members’ securities business,

including requirements for deliveries,

payments, dividends, rights, interest,

exchange of confirmations, assignments,

powers of substitution, computation of

interest, due bills, transfer fees, ‘‘when,

as and if issued’’ trading, ‘‘when, as and

if distributed’’ trading, market to

market, buy-ins, close-outs, accounts

transfers, settlement of syndicate

accounts, etc.

The introductory language in

paragraph (a) of Rule 11100 states the

general standard that ‘‘all over-thecounter secondary market transactions

in securities between members shall be

subject to the provisions of this Code.

* * *’’ The focus of the language only

on ‘‘transactions in securities’’ does not

encompass those provisions of the

current Code that address the rights and

liabilities of the members participating

in the transaction and provide

procedures that are not related to

securities transactions, e.g., the setting

of ex-dates and the transfer of customer

accounts. In addition, the exception in

subparagraph (a)(1) of Rule 11100 for

securities transactions cleared through a

registered clearing agency does not

address the situation where the rules of

the clearing agency require compliance

with the rules of the applicable market.

In this latter case, the clearing agency

exception is technically not available

since the clearing agency requires that
9010 Federal Register / Vol. 62, No. 39 / Thursday, February 27, 1997 / Notices

3This language is drawn from Article XV, Section

1 of the NASD By-Laws which authorizes the

Association to adopt the Uniform Practice Code

which states that the adoption of such a Code is for

the purpose that ‘‘the transaction of day-to-day

business by members may be simplified and

facilitated * * * .’’ 4 15 U.S.C. § 78o–3. 5 17 CFR 200.30–3(a)(12).

the Code or the rules of the relevant

market apply to the transaction. Finally,

since the SEC’s adoption of Rule 144A

in 1991, members have inquired as to

whether the Code is applicable to

transactions in restricted securities.

In order to provide clarity on the

applicability of the Code, NASD

Regulation is proposing to amend the

Code to expand the introductory

language of paragraph (a) of Rule 11100

to state that:

(i) the application of the Code to

secondary market transactions in

securities includes the regulation of the

‘‘rights and liabilities of the members

participating in the transaction’’;

(ii) the Code also applies to ‘‘those

operational procedures that affect the

day-to-day business of members’’;3 and

(iii) the securities transactions

covered by the Code include

transactions in ‘‘restricted securities, as

defined in Rule 144(a)(3) under the

Securities Act of 1933.’’

As a result of this change, secondary

market transactions in restricted

securities that are not in a depository

will be required to comply with the

Code’s operational procedures. In this

connection, NASD Regulation is also

clarifying the securities sold offshore

pursuant to the exemption from

registration provided by Regulation S

are considered to be subject to the

requirements of the Code when those

securities are traded in the U.S. after the

expiration of the restricted period. It is

not believed any change to the Code is

necessary with respect to this

clarification, as the Code clearly applies

to all registered and unregistered

secondary securities market transactions

between members, which would

include securities formerly sold in a

Regulation S transaction.

In addition, NASD Regulation is

proposing to amend subparagraph (a)(1)

of Rule 11100 to clarify that the

exception for transactions in securities

between members that are compared,

cleared or settled through the facilities

of a registered clearing agency does not

apply where the rules of the clearing

agency provide that the rules of other

organizations shall apply.

NASD Regulation believes that these

changes will make clear the broad scope

and applicability of the Code and permit

members to look to the Code for

guidance regarding transactions settled

through a clearing agency, where the

clearing agency has adopted a rule

directing that the rules of the governing

market apply to the transaction.

(b) NASD Regulation believes that the

proposed rule change is consistent with

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

the Act 4 in that the proposed rule

change clarifies the application of the

Uniform Practice Code to establishing

the liabilities of parties to a transaction,

to restricted securities, to the

operational procedures that affect the

day-to-day business of members, and to

transactions settled through a clearing

agency where the rules of the clearing

agency direct that the rules of the

governing market apply to the

transaction. NASD Regulation believes

the proposed rule change is consistent

with the Association’s obligations to

foster cooperation and coordination

with persons engaged in regulating,

clearing, settling, processing

information with respect to, and

facilitating transactions in securities

and, in general, in the public interest.

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 purposes 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 in 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 No.

SR–NASD–97–06 and should be

submitted by March 20, 1997.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4862 Filed 2–26–97; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster Loan Area #2925;

Amendment #2]

California; Declaration of Disaster

Loan Area

In accordance with a notice from the

Federal Emergency Management

Agency, dated February 14, 1997, the

above-numbered Declaration is hereby

amended to include Kings and San Luis

Obispo Counties in the State of

California as a disaster area due to

damages caused by severe storms,

flooding, and mud and landslides

beginning on December 28, 1996 and

continuing.

In addition, applications for economic

injury loans from small businesses

located in the contiguous county of

Santa Barbara in the State of California

may be filed until the specified date at

the previously designated location. Any

counties contiguous to the above-named

counties and not listed herein have been

previously declared.

All other information remains the

same, i.e., the termination date for filing

applications for physical damage is

March 5, 1997, and for loans for

economic injury the deadline is October

6, 1997.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)