59240 Federal Register / Vol. 65, No. 193 / Wednesday, October 4, 2000 / Notices

24See supra note 6 (approving SR–Amex–00–14);

Securities Exchange Act Release No. 42542 (March

17, 2000), 65 FR 16437 (March 28, 2000) (noticing

SR–Amex–00–14).

25 15 U.S.C. 78s(b)(5).

26 15 U.S.C. 78s(b)(2).

27 17 U.S.C. 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3On September 11, 2000, NASD Regulation filed

Amendment No. 1 to the proposal. See letter from

Alden S. Adkins, Senior Vice President and General

Counsel, NASD Regulation, to Katherine A.

England, Assistant Director, Division of Market

Regulation, Commission, dated September 11, 2000

(‘‘Amendment No. 1’’). In Amendment No. 1, NASD

Regulation amended proposed NASD Rule 0116 to:

(1) delete a reference to NASD Rule 2300; (2)

replace a reference in proposed NASD Rule 0116 to

IM–2520 with a reference to IM–2522; and (3) add

references to NASD Rules 8110, 8120, 8210, 8221,

8222, 8223, 8224, 8225, 8226, 8227, 8310, IM–

8310–1, IM–8310–2, 8230. In addition, Amendment

No. 1 clarifies that the non-cash compensation

provisions in NASD Rule 2820 will appear in NASD

Rule 2820(g) rather than NASD Rule 2820(h) as a

result of a rule change approved in October 1999

that deleted paragraph (c) of NASD Rule 2820. See

Securities Exchange Act Release No. 4204 (October

20, 1999), 64 FR 58112 (October 28, 1999) (order

approving File No. SR–NASD–98–14).

4 In its proposal, NASD Regulation asked the

Commission to approve the proposal on an

accelerated basis. The Commission received two

comment letters asking the Commission not to

approve the proposal on an accelerated basis. See

letter from Carl B. Wilkerson, Chief Counsel,

Securities, American Council of Life Insurers, to

Jonathan G. Katz, Secretary, Commission, dated

August 4, 2000; and letter from David A. Winston,

Vice President, Government Affairs, National

Association of Insurance and Financial Advisors,

dated August 30, 2000. The Commission is

publishing the proposal for comment with a 15-day

comment period.

Creation Units, approximately 100,000

shares, will be required to be

outstanding at the start of trading. The

Commission believes this minimum

number is sufficient to help to ensure

that a minimum level of liquidity will

exist at the start of trading. Furthermore,

the Commission finds that registering

the Fund shares in book-entry form

through DTC, managing the distribution

of dividends from net investment

income, if any, and permitting

beneficial owners of the Funds to offer

the DTC book-entry Dividend

Reinvestment Service are characteristics

of the Fund that are consistent with the

Act and should allow for the

maintenance of fair and orderly markets

and perfect the mechanism of a free and

open market.

Further, the Commission believes that

the Exchange’s proposal to trade the

Fund in minimum fractional increments

of 1⁄64 of $1.00 is consistent with the

Act. The Commission believes that such

trading should enhance market

liquidity, and should promote more

accurate pricing, tighter quotations, and

reduced price fluctuations. The

Commission also believes that such

trading should allow customers to

receive the best possible execution of

their transactions in the Fund.

Additionally, the Commission believes

that the proposed original listing fee of

$5,000 is reasonable as is the proposed

method for calculating the annual fee.

D. Dissemination of Information and

Regarding the Fund

The Commission believes that the

Values and figures that the Exchange

proposes to have disseminated for the

Fund will provide investors with timely

and useful information concerning the

value of the Fund. The Exchange

represents that the Value information

will be disseminated, every 15 seconds

during regular Amex trading hours,

through the facilities of the CTA and

will reflect currently-available

information concerning the value for

Shares of the Fund. On a daily basis, the

Exchange represents that it will

disseminate the Shares outstanding, the

cash amount per Creation Unit

Aggregation, and the net asset value.

The Exchange represents that the

closing prices of the Fund’s Deposit

Securities are readily available from, as

applicable, the relevant exchanges,

automated quotation systems, or on-line

information services such as Bloomberg

or Reuters. The intra-day value of the

Underlying Index will be available from

Dow.

E. Accelerated Approval

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register pursuant to Section

19(b)(2) of the Act. The Commission

notes that the proposed rule change is

based on the listing and trading

standards in Amex Rule 1000A et seq.

(Index Fund Shares), which the

Commission previously approved after

soliciting public comment on the

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

the Act.24 The Commission does not

believe that the proposed rule change

raises novel regulatory issues that were

not addressed in the Amex filing.

Accordingly, the Commission believes it

is appropriate to permit investors to

benefit from the flexibility afforded by

this new instrument by trading them as

soon as possible. Accordingly, the

Commission finds that there is good

cause, consistent with Section 6(b)(5) of

the Act,25 to approve the proposal on an

accelerated basis.

V. Conclusion

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,26 that the

proposed rule change (SR–Amex–00–

53), is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25438 Filed 10–3–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43370; File No. SR–NASD–

00–38]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 to the Proposed

Rule Change by the National

Association of Securities Dealers, Inc.

Relating to the Application of NASD

Rules and Interpretive Materials to

Certain Exempted Securities

September 27, 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 June 16,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary, NASD Regulation,

filed with the Securities and Exchange

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

the proposed rule change as described

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

have been prepared by NASD

Regulation.3 The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.4

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The NASD proposes to amend its

rules to: (1) Codify an NASD staff

interpretation that the non-cash

compensation provisions set forth in

paragraph (g) of NASD Rule 2820,

‘‘Variable Contracts of an Insurance

Company,’’ apply to group variable

contracts that are exempted securities;

and (2) adopt new NASD Rule 0116,

‘‘Application of Rules of the Association

to Exempted Securities,’’ to enumerate

the NASD rules and interpretive

materials that apply to exempted

securities, including government

securities, other than municipal

securities. The text of the proposed rule

Federal Register / Vol. 65, No. 193 / Wednesday, October 4, 2000 / Notices 59241

5See Amendment No. 1, supra note 30. 6 Government Securities Act Amendments of

1993, Pub. L. No. 103–202, § 1(a), 107 Stat. 2344

(1993). 7The terms exempted securities, government

securities, and municipal securities are defined in

Sections 3(a)(12), 3(a)(42), and 3(a)(29) of the Act,

respectively. Rules for municipal securities are

promulgated by the Municipal Securities

Rulemaking Board.

8See Securities Exchange Act Release No. 37588

(August 20, 1996), 61 FR 44100 (August 27, 1996)

(order approving File No. SR–NASD–95–39) (‘‘1996

Order’’). 9Specifically, NASD Regulation notes that the

1996 Order and Notice to Members 96–66 indicate

that the following NASD rules and interpretative

materials are applicable to transactions and

business activities relating to exempted securities

(other than municipal securities) conducted by

NASD members and associated persons: 2110, 2120,

2210, IM–2210–1, IM–2210–2, IM–2210––3, 2250,

2270, 2300, 2310, IM–2310–2, IM–2310–3, 2320,

2330, IM–2330, 2340, 2430, 2450, 2510, 2520, IM–

2520, 2770, 2780, 2910, 3010, 3020, 3030, 3040,

3050, 3060, 3070, 3110, IM–3110, 3120, 3130, IM–

3130, 3131, 3140, 3230, 3310, IM–3310, 3320, IM–

3320 and 3330. 10See Amendment No. 1, supra note 3. The 1996

Order indicated that various NASD rules in the

8000 Series applied to exempted securities,

including government securities, other than

municipal securities. The Commission

subsequently approved amendments to the 8000

Series that adopted NASD Rules 8221 through 8227.

See Securities Exchange Act Release No. 38908

(August 7, 1997), 62 FR 43385 (August 13, 1997)

(order approving File No. SR–NASD–97–28) (‘‘1997

Order’’). As indicated above, proposed NASD Rule

0116 includes NASD Rules 8221 through 8227 in

its list of NASD rules that are applicable to

exempted securities, including government

securities, other than municipal securities.

11See Amendment No. 1, supra note 3.

12Section 3(a)(12)(A)(iv) of the Act includes as an

exempted security ‘‘* * * any security arising out

of a contract issued by an insurance company,

which * * * security is issued in connection with

a qualified plan as defined in subparagraph (C) of

this paragraph.’’

13Because Rule 2820(g) applies only to

transactions in variable products, the proposed rule

change would result in Rule 2820(g) expressly

applying to all variable products, including variable

products that are exempted securities, such as

group variable or similar products. NASD

Regulation is not at this time recommending that

other provisions of Rule NASD Rule 2820 apply to

exempted securities.

change appears below. Proposed new

language is in italics.

* * * * *

0100. GENERAL PROVISIONS

0110. Adoption and Application of Rules

0116. Application of Rules of the Association

to Exempted Securities

(a) For purposes of this Rule, the terms

‘‘exempted securities’’ and ‘‘municipal

securities’’ shall have the meanings specified

in Sections 3(a)(12) and 3(a)(29) of the Act,

respectively.

(b) Unless otherwise indicated within a

particular provision, the following Rules of

the Association and Interpretative Materials

thereunder are applicable to transactions

and business activities relating to exempted

securities, except municipal securities,

conducted by members and associated

persons: 2110, 2120, 2210, IM–2210–1, IM–

2210–2, IM–2210–3, 2250, 2270, 2300, 2310,

IM–2310–2, IM–2310–3, 2320, 2330, IM–2330,

2340, 2430, 2450, 2510, 2520, IM–2520, 2770,

2780, 2820(g), 2910, 3010, 3020, 3030, 3040,

3050, 3060, 3070, 3110, IM–3110, 3120, 3130,

IM–3130, 3131, 3140, 3230, 3310, IM–3310,

3320, IM–3320, 3330, 8110, 8120, 8210, 8221,

8222, 8223, 8224, 8225, 8226, 8227, 8310,

IM–8310, IM–8310–1, IM–8310–2, 8320, and

8330.5

* * * * *

II. Self-Regulatory Organization’s

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

(1) Purpose

The Government Securities Act

Amendments of 1993 (‘‘GSAA’’) 6

eliminated the statutory limitations on

the NASD’s authority to apply salespractice rules to members’ transactions

in exempted securities, including

government securities, other than

municipal securities.7 To implement the

expanded sales practice authority

granted to it pursuant to the GSAA, the

NASD in 1995 submitted a proposal to

the Commission to apply various NASD

rules to exempted securities, including

government securities, other than

municipal securities. The Commission

approved the NASD’s proposal.8 The

1996 Order and NASD Notice to

Members 96–66 (October 1996) list the

NASD rules that apply to members’

transactions in exempted securities

other than municipal securities.9

However, this list was not incorporated

into a specific NASD rule and does not

currently appear in the NASD Manual.

The proposal will codify in proposed

NASD Rule 0116 the list of NASD rules

and interpretative materials applicable

to exempted securities, including

government securities, other than

municipal securities, and, as discussed

more fully below, will add NASD Rule

2820(g) to the list. NASD Regulation

believes that codifying this information

in an NASD rule will enable members

and other interested parties to identify

the rules applicable to exempted

securities, other than municipal

securities, in a more efficient manner.

In Amendment No. 1, NASD

Regulation proposes to add NASD Rules

8110, 8120, 8210, 8221, 8222, 8223,

8224, 8225, 8226, 8227, 8310, IM–8310,

IM–8310–1, IM–8310–2, 8320, and 8330

to proposed NASD Rule 0116.

According to NASD Regulation, the

8000 Series rules were excluded

inadvertently from the original proposal

and should be included in proposed

NASD Rule 0116 because they are

applicable to transactions and business

activities relating to exempted

securities.10

NASD Regulation notes that at the

time the NASD identified the NASD

rules that would apply to exempted

securities other than municipal

securities, the NASD had not adopted

NASD Rule 2820(g).11 Accordingly,

NASD Rule 2820(g) was not listed as

one of the provisions applicable to

exempted securities. NASD Rule

2820(g), the non-cash compensation

rule, limits the manner in which

members may pay or accept non-cash

compensation in connection with the

sale or distribution of variable contracts.

NASD Regulations states that because

certain group variable contracts are

exempted securities under the Act,

questions have arisen regarding whether

NASD Rule 2820(g) applies to group

variable contracts.12 According to NASD

Regulation, NASD Regulation staff have

interpreted NASD Rule 2820(g) to apply

to group variable contracts that are

exempted securities since the adoption

of NASD Rule 2820(g). To clarify the

application of NASD Rule 2820(g) to

group variable contracts that are

exempted securities, NASD Regulation

proposes to codify the current staff

interpretation by including NASD Rule

2820(g) in proposed NASD Rule 0116.13

(2) Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

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

the Act, which requires, among other

things, that the Association’s rules must

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. NASD

Regulation believes that the proposed

rule change will assist members and

associated persons in more easily

identifying those NASD rules applicable

to transactions and business activities

relating to exempted securities (other

than municipal securities).

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

59242 Federal Register / Vol. 65, No. 193 / Wednesday, October 4, 2000 / Notices

14See letter from Mark J. Mackey, President and

Chief Executive Officer, NAVA, to John M. Ramsay,

Vice President and Deputy General Counsel, Office

of General Counsel, NASD Regulation, dated April

16, 1999. 15NASD Rule 2820(a) states ‘‘[t]his Rule shall

apply exclusively (and in lieu of Rule 2830) to the

activities of members in connection with variable

contracts, to the extent such activities are subject

to regulation under the federal securities laws.’’ 16 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange made

technical corrections to the rule language and made

non-substantive changes to the purpose section of

the filing for clarity. See letter from Cindy L. Sink,

Senior Attorney, Regulatory Policy, PCX to Jennifer

L. Colihan, Division of Market Regulation,

Commission, dated September 20, 2000.

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 not solicited.

However, NASD Regulation received a

letter from the National Association for

Variable Annuities (‘‘NAVA’’), which

argues that the non-cash compensation

rules do not apply to sales of group

variable annuities for several reasons.14

First, NAVA contends that the specific

language of NASD Rule 2820 limits its

application to activities of members in

connection with variable contracts, to

the extent such activities are subject to

regulation under the federal securities

laws.15 However, although certain

provisions of the federal securities laws

do not apply to exempted securities,

other provisions of the federal securities

laws do apply, including the anti-fraud

provisions. Therefore, NASD Rule

2820(a) does not restrict the application

of NASD Rule 2820(g) to group variable

activities.

Second, NAVA argues that because

NASD Rule 2820(g) was not specifically

included in the 1996 Order’s list of

NASD rules applicable to exempted

securities, the non-cash compensation

provisions do not apply to sales of

group variables. As described above,

NASD Rule 2820(g) had not been

adopted at the time the NASD identified

the NASD rules that would apply to

exempted securities, other than

municipal securities. Accordingly,

NASD Rule 2820(g) was not listed as

one of the provisions applicable to

exempted securities.

Third, NAVA argues that if the noncash compensation rules do apply to

group variables, separate contests

should be permissible for group variable

products given their different design,

cost structures and commission payouts.

With respect to the allowance of

separate contests for group variable

products, NASD Regulation staff has

stated in Question #22 of Notice to

Member 99–55 (July 1999) that a

member may structure a non-cash

arrangement that is limited only to a

specific division of the firm. Therefore,

if a separate sales force or division sells

group variable contracts, as the NAVA

letter indicates often occurs, then a

separate contest may be appropriate.

However, where the same salesperson

sells both group variable products and

individual variable annuities, separate

contests would not be permissible, i.e.,

the contest must be based on the entire

universe of products within a specific

product category that the individual

sells.

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 Exchange 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,

including whether the proposed rule

change and Amendment No. 1 are

consistent with the Act. 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 number

SR–NASD–00–38 and should be

submitted by October 19, 2000.16

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25441 Filed 10–3–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43342; File No. SR–PCX–

00–08]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the

Pacific Stock Exchange, Inc. Relating

to the Dissolution of the Appointments

Committee

September 26, 2000.

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

Securities Exchange Act of 1934

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

notice is hereby given that on March 20,

2000, the Pacific Stock Exchange, Inc.

(‘‘PCX’’ or the ‘‘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.

On September 21, 2000, the Exchange

filed Amendment No. 1 to the

proposal.3 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 Exchange has filed with the

Commission a proposed rule change to

dissolve the Options Appointments

Committee and to transfer all powers of

the Options Appointments Committee

to the Options Allocation Committee.

The text of the proposed rule change is

available at the Office of the Secretary,

the PCX and at the Commission.

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

PCX 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 PCX has prepared

summaries, set forth in Sections A, B,

and C below, of the most significant

aspects of such statements.