61012 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

5 15 U.S.C. 78o–3(b)(6). 6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The NASD filed its proposed rule change on

March 31, 2000. On April 4, 2000, the NASD filed

Amendment No. 1 that entirely replaced the

original rule filing. 4See Letter from Rober E. Aber, General Counsel

and Senior Vice President, Nasdaq, to Katherine A.

England, Assistant Director, Division of Market

Regulation (‘‘Division’’), Commission (May 16,

2000). Amendment No. 2 corrected a typographical

error that appeared in the proposed rule language

and clarified that the Mutual Fund Quotation

Service includes only 73.8% of the total open-end

and closed-end fund population. 5Securities Exchange Act Release No. 42831 (May

25, 2000), 65 FR 35693. 6See Letter from Edward S. Knight, General

Counsel and Senior Vice President, Nasdaq, to

Katherine A. England, Assistant Director, Division,

Commission (September 29, 2000). Amendment No.

3 amended the language of proposed NASD Rule

6800(d)(3) to replace the phrase ‘‘investment

management firm managing the fund’’ with

‘‘investment adviser’’ and make other technical

corrections.

The proposed Interpretative Material

identifies a number of factors that will

be considered when determining

whether an offering is a ‘‘public

offering,’’ including: the type of offering;

the marketing of the offering; the extent

of the offering’s distribution; the

offering price; and the extent to which

the issuer controls the offering and its

distribution.

(b) Statutory Basis

The NASD believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(6) 5 of the

Act, which requires, among other

things, that the Association’s rules be

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest. The

Interpretative Material is designed to

educate issuers and other interested

parties as to how Nasdaq defines a

‘‘public offering’’ in order to ensure that

issuers are aware as to which

transactions require shareholder

approval under the NASD’s rules, thus

promoting just and equitable principles

of trade and protecting investors and the

public interest.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD 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.

(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 NASD 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, NW.,

Washington DC 20549–0609. 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–00–50 and should be

submitted by November 3, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26381 Filed 10–12–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43417; File No. SR–NASD–

00–16]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 3 to Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to Amendments

to Minimum Listing Requirements for

the Inclusion and Maintenance of Open

and Closed-End Funds in Nasdaq’s

Mutual Fund Quotation Service

October 5, 2000.

I. Introduction

On April 4, 2000, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’) through its wholly owned

subsidiary The Nasdaq Stock Market,

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

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), 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 amendments to the minimum

listing requirements for the inclusion

and maintenance of open and closedend funds in Nasdaq’s Mutual Fund

Quotation Service (‘‘MFQS’’ or

‘‘Service’’).3 On May 16, 2000, the

Nasdaq submitted Amendment No. 2 to

the proposed rule change.4 The

proposed rule change was published in

the Federal Register on June 5, 2000.5

On September 29, 2000, the Nasdaq

submitted Amendment No. 3 to the

proposed rule change.6 No comments

were received on the proposal. This

order approves the proposed rule

change, as amended. Also, Amendment

No. 3 is approved on an accelerated

basis.

II. Description of the Proposal

Nasdaq proposes to amend NASD

Rule 6800 regarding the minimum

listing requirements for the inclusion

and maintenance of open and closedend funds in Nasdaq’s Mutual Fund

Quotation Service (‘‘MFQS’’). Proposed

new language is in italics; proposed

deletions are in brackets.

* * * * *

6800. MUTUAL FUND QUOTATION

SERVICE

(a)–(b) No Change.

(c) News Media Lists.

(1)(A) An eligible open end fund shall be

authorized for inclusion in the News Media

List released by the Association if it has at

least 1,000 shareholders or $25 million in net

assets.

(B) An eligible closed-end fund shall be

authorized for inclusion in the News Media

List released by the Association if it has at

least $60 [100] million in net assets.

(C) Compliance with subparagraphs (1)(A)

and (B) shall be certified by the fund to the

Association at the time of initial application

for inclusion in the List.

Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices 61013

7See Securities Exchange Act Release No. 22264

(July 23, 1985), 50 FR 30899 (July 29, 1985).

8See NASD Rule 6800.

9See id.

10See NASD Rule 7010.

11See NASD Rule 7090.

12 In approving this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

13 15 U.S.C. 78o–3(b)(6).

14 15 U.S.C. 78k–1(a)(1)(C).

15See supra n. 6.

16 15 U.S.C. 80b–2(a)(11).

(2)(A) An authorized open-end fund shall

remain included in the New Media List if it

has either 750 shareholders or $15 million in

net assets.

(B) An authorized closed-end fund shall

remain included in the News Media List if

it has $30 [60] million in net assets.

(C) Compliance with subparagraphs (2)(A)

and (B) shall be certified to the Association

upon written request by the Association.

(d) Supplemental List.

An eligible open-end or closed-end fund

shall be authorized for inclusion in the

Supplemental List released to vendors of

Nasdaq Level 1 Service if it meets one of the

criteria set out in subparagraph (1),

subparagraph (2), or subparagraph (3) below:

(1) The fund has net assets of $10 million

or more; or

(2) The fund has had two full years of

operation; or

(3) The fund’s investment adviser:

(A) Is the investment adviser of at least one

other fund that is listed on the Mutual Fund

Quotation Service and that has net assets of

$10 million or more; and

(B) Has at least $15 million in total assets

of open-end and closed-end funds under

management.

(e) No Change.

* * * * *

The MFQS was created to collect

daily price and related data for mutual

funds and money market funds and to

disseminate that information to the

news media and market data vendors.7

Currently, the MFQS disseminates the

valuation data for over 11,000 funds.

This information dissemination process

is facilitated by the use of web browserbased technology, which enables funds

included in the Service, or the pricing

agents designated by such funds, to

transmit directly to Nasdaq a multitude

of pricing information, including

information about a fund’s net asset

value, offer price, and closing market

price.

Funds must meet minimum eligibility

criteria in order to be included in the

MFQS.8 The MFQS has two ‘‘lists’’ in

which a fund may be included—the

News Media List and the supplemental

List—and each list has its own initial

inclusion requirements.9 The News

Media List also has maintenance/

continued inclusion requirements. If a

fund qualifies for the News Media List,

pricing information about the fund is

eligible for inclusion in the fund tables

of newspapers and is also eligible for

dissemination over Nasdaq’s Level 1

Service, which is distributed by market

data vendors.10 If a fund qualifies for the

Supplemental List, the pricing

information about that fund generally is

not included in newspaper fund tables,

but is disseminated over Nasdaq’s Level

1 Service. The Supplemental List thus

provides significant visibility for funds

that do not otherwise qualify for

inclusion in the News Media List. Each

fund incurs an annual fee for inclusion

in the Service.11

Nasdaq proposes to amend the MFQS

inclusion criteria for both the

Supplemental and News Media List by

expanding the universe of funds that are

eligible for inclusion in the Service. The

proposal lowers both the initial and

maintenance requirements for closedend funds to participate in the News

Media List. Currently, in order to

qualify initially for inclusion in the

News Media List, a closed-end fund

must have at least $100 million in net

assets. To remain in the News Media

List, a closed-end fund must maintain at

least $60 million in net assets. The

proposal would lower the net asset

requirement for a closed-end fund to

qualify initially for inclusion in the

News Media List to at least $60 million

in net assets. The net asset requirement

for a closed-end fund to remain

included in the News Media List would

be lowered to at least $30 million.

Nasdaq also proposes to amend the

inclusion criteria for the Supplemental

List by providing an alternative means

for a fund to be included in the Service.

Under this alternative, a fund would

qualify for the MFQS if the investment

adviser is the investment adviser of at

least one other fund listed on MFQS

that has $10 million in net assets. In

addition, the firm must have at least $15

million from open-end and closed-end

funds under management. Nasdaq notes

that manages assets from other

sources—such as pension funds—would

not be included for purposes of

determining whether the investment

firm meets the requirement that it

manage at least $15 million in fundrelated assets.

III. Decision

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

association,12 and in particular, the

requirements of Section 15A(b)(6) 13 of

the Act, because it is designed to foster

cooperation and coordination with

persons engaged in processing

information with respect to securities, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

The Commission believes that the

proposal will protest investors and the

public interest by promoting better

processing of fund pricing information.

Specifically, the Commission notes that

in Section 11A(a)(1)(C),14 Congress

found that it is in the public interest and

appropriate for the protection of

investors and the maintenance of fair

and orderly markets to assure the

availability to brokers, dealers, and

investors of information with respect to

quotations and transactions in

securities. The Commission also

believes that the proposed new listing

criteria will provide greater

transparency to the markets by

providing pricing information for a

broader base of funds for which there is

significant investor interest. Further, by

providing listed status to investment

companies with a sufficient investor

base and trading interest, the proposed

new listing standards will continue to

serve as a means for the marketplace to

screen issuers and maintain fair and

orderly markets.

The Commission also finds good

cause for approving proposed

Amendment No. 3 prior to the thirtieth

day after the date of publication of

notice of filing thereof in the Federal

Register. Proposed Amendment No. 3

provides clarity to the rule.15 It replaces

the term ‘‘investment management firm

and managing the fund’’ in NASD Rule

6800(d)(3) with ‘‘investment adviser,’’ a

term which is defined in the Investment

Advisers Act of 1940.16

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

3. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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 other person, other

than those that may be withheld from

the public in accordance with the

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

61014 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

17 15 U.S.C. 78s(b)(2).

18 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

available for inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Association.

All submissions should refer to the File

No. SR–NASD–00–16 and should be

submitted by November 3, 2000.

V. Conclusion

For the reasons discussed above, the

Commission finds that the proposal is

consistent with the Act and the rules

and regulations thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,17 that the

proposed rule change, SR–NASD–00–

16, as amended, be and hereby is

approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26281 Filed 10–12–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43415; File No. SR–PHLX–

00–52]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to Review of Decisions of the

Exchange’s Business Conduct

Committee

October 4, 2000.

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

Securities Exchange Act of 1934

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

notice is hereby given that on August

18, 2000, the Philadelphia Stock

Exchange Inc. (‘‘PHLX’’ or ‘‘Exchange’’)

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 the Exchange.

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 Phlx proposes to amend the text

of Phlx Rule 960.9 to incorporate

procedures for the hearing of appeals in

disciplinary matters. Specifically, the

procedures would be divided into four

categories: (a) Petition by Respondent;

(b) Conduct of Review, (c) Review on

Motion by Board of Governors; and (d)

Petition by Enforcement Staff.

First, with respect to petitions by a

Respondent, the proposed rule provides

that a Respondent’s petition for appeal

must be in writing and filed with the

Secretary of the Exchange within 10

days after service of notice and a copy

of the decision of the Business Conduct

Committee, and that it specify the

findings and conclusions that are the

subject of the petition along with the

reasons for review thereof. Exchange

Enforcement Staff will then have 15

days to file a written response, with the

Respondent receiving 15 days after

service of the Enforcement Staff’s

response to file a response thereto.

Second, paragraph (b) of the proposed

rule, ‘‘Conduct of Review,’’ provides

that the review is to be conducted by the

Exchange’s Board of Governors

(‘‘Board’’), or an Advisory Committee

made up of three Governors, with at

least one being a non-industry Governor

appointed by the Chairman of the

Board. No Governor who was a member

of the hearing panel below may

participate in the hearing on review.

The review shall be based solely on the

record below, unless the Board of

Governors or Advisory Committee

hearing the review allows oral argument

after receiving a written request for one.

If an Advisory committee hears the

review, it is to submit a written report

to the Board.

The proposed rule sets forth

guidelines that the Board or an Advisory

committee must follow in making the

decision on review. The decision of the

business Conduct Committee can be

affirmed, reversed or modified, in whole

or in part. A modification may include

an increase or decrease of the sanction.

The findings, conclusions, and decision

of the Business Conduct Committee may

not be reversed, or modified, in whole

or in part, if the factual conclusions in

the decision are supported by

substantial evidence, and such decision

is not arbitrary, capricious or an abuse

of discretion. The Board must serve its

written decision on the petitioner.

Paragraph (c) of the proposed rule

includes procedures for a review by the

Board of Governors on its own

initiative. The review would follow the

previously described procedure.

Finally, paragraph (d) of the proposed

rule sets forth procedures by which the

Exchange’s Enforcement Staff, within 10

days after service of notice and a copy

of the decision of the Business Conduct

Committee, may petition the Board for

permission to appeal, by presenting to

the Board a petition specifying the

findings and conclusions that are

subject of the petition, along with the

reasons the staff is petitioning for

review. Should the Board grant

permission, Exchange Enforcement Staff

shall serve a copy of the petition on the

Respondent within 5 days. Respondent

then has 15 days to file a written

response with the Board, and Exchange

Enforcement Staff then has 15 days to

file a reply.

The proposed rule language follows.

Additions are italicized; deletions are

bracketed.

Rule 960.9. Review

(a) Petition by Respondent. A Respondent

shall have 10 days after service of notice and

a copy of a decision made pursuant to Rules

960.6(c) and 960.8 to appeal such decision to

the Board of Governors in accordance with

By-Law Article XI, Section [11–1] 11–3. Such

petition shall be in writing and shall specify

the findings and conclusions of the Business

Conduct Committee which is the subject of

the petition, together with the reasons that

Respondent petitions for review of these

findings and conclusions. Any objections to

a decision not specified in the petition for

review shall be thereafter waived. Within 15

days after a Respondent’s petition for review

has been filed with the Secretary of the

Exchange pursuant By-Law Article XI,

Section 11–1(a), Enforcement staff may

submit to the Secretary a written response to

the petition. A copy of the response must be

served upon the Respondent. A Respondent

has 15 days from the service of the response

to file a reply with the Secretary and the

Enforcement staff.

(b) Conduct of Review.

(i) The review shall be conducted by the

Board of Governors or an Advisory

Committee thereof pursuant to By-Law

Article XI, Section 11–3. If an Advisory

Committee is appointed to conduct the

review, it shall be composed pursuant to ByLaw Article XI, Section 11–2. Any Board

member who participated in a matter before

the Business Conduct Committed may not

participate in any review of that matter by

the Board of Governors or an Advisory

Committee. Unless the Board of Governors or

the Advisory Committee shall decide to hear

oral argument, such review shall be based

solely upon the record and the written

exceptions filed by the parties. The review

shall be heard as soon as practicable.

(ii) Should the Board of Governors conduct

the review, then based upon such review, the

Board of Governors by a majority vote of its

members, shall decide to affirm, reverse or

modify, in whole or in part the decision of

the Business Conduct Committee. Such

modification may include any increase or

decrease of the sanction. The Board of

Governors may not reverse, or modify, in

whole or in part, the findings, conclusions

and decision of the Business Conduct

Committee if the factual conclusions in the

decision are supported by substantial

evidence and such decision is not arbitrary,

capricious or an abuse of discretion. The

decision of the Board shall be in writing,