Federal Register / Vol. 62, No. 48 / Wednesday, March 12, 1997 / Notices 11511

10The Commission notes that the correct time

period suggested by the NASD was 5–9 years for he

medium time period and that a mistake was made

in the Notice, which reads ‘‘5–5 years.’’

11 15 U.S.C. 78o–3

12See Notice and NASDR letter.

13See NASDR letter.

14The Commission believes that the concern

about risk-based rankings is not relevant to this

proposed rule change because this filing does not

deal with the method of calculating the

performance-based rankings themselves, other than

the length of time over which the rankings must be

calculated. The Commission also believes that the

suggestion that performance should be measured

over rising and falling market conditions is not

relevant to this proposed rule filing because this

filing is concerned with the length of the time

period for measuring performance.

15For example, if a one-year ranking is used that

coincides with the tenure at the firm of a particular

fund manager, the fact that the fund manager has

changed could be relevant. Similarly, if a three-year

ranking is used that encompasses a change in fund

managers at the firm, the fact that the ranking

covers a period with more than one fund manager

could be relevant.

16NASD Conduct Rule 2210(d)(1)(A) states that

‘‘[a]ll member communications with the public

should provide a sound basis for evaluating the

facts in regard to any particular security * * *. No

material fact or qualification may be omitted if the

omission * * * would cause the advertising or

sales literature to be misleading.’’ NASD Conduct

Rule 2210(d)(1)(B) further states that ‘‘[e]xaggerated,

unwarranted or misleading statements or claims are

prohibited in all public communications of

members.’’

17See Amendment #1, filed November 21, 1996

and NASDR letter.

18 15 U.S.C. 78s(b)(2).

19 17 CFR 200.30–3(a)(12).

although in support of the proposed rule

change, has two comments on the

content of the filing. The ICI states that

is does not believe that the NASDR’s

suggestions of 1–4 years, 5–9 years and

10 years or more 10 are intended as

definitions of short, medium and long,

but rather as an interpretation by the

NASDR staff of the relative lengths of

time for each period. In addition, ICI

states that the rule change does not

explicitly address whether a NASD

member could use a short or medium

term ranking for a fund that has been in

existence for at least one or at least five

years and for which rankings for the

specified time periods are not published

by the ranking entity, but it supports

that result.

IV. Discussion

The Commission finds that the

proposed rule change is consistent with

Section 15A(b) of the Act and the rules

and regulations thereunder, and, in

particular, with the requirements of

Section 15A(b)(6)11 that the rules of an

association be designed to promote just

and equitable principles of trade, to

prevent fraudulent and manipulative

acts, and, in general, to protect investors

and the public. The rule change

provides a flexible framework within

which ranking entities using different

methodologies can provide useful

information to investors in a way that is

not harmful or misleading and that still

prevents selectivity of time periods. The

Commission believes that performanceadjusted rankings which use different

time periods than those prescribed by

the Guidelines can help investment

company investors make informed

investment decisions if presented in a

way that is not misleading.

The Commission believes that a

concern about selectivity of time

periods is adequately addressed by the

rule change. The Commission notes that

under the proposed rule change, short,

medium and long-term rankings can

only be used if one, five and ten year

rankings are not available. The

Commission also notes that short,

medium and long term rankings are still

uniform in nature and do not allow

Ranking Entities to randomly choose

any time periods they want.

Lipper raises a valid concern about

only comparing similar funds, but the

Commission believes that concern is

addressed by the proposed rule change.

The rule change clarifies language in the

rule by stating that rankings for

prescribed time periods must be ‘‘* * *

by the same Ranking Entity, relating to

the same investment category, and

based on the same time period.’’ The

NASD, further clarifying the ‘‘relating to

the same investment category’’

language, stated that rankings for the

prescribed time period must be for the

same investment category or

subcategory as the total return ranking

that is being accompanied by the

prescribed ranking.12

The Commission notes Lipper’s

concern that a one year performance

ranking is important to investors who

want to know the short-term

performance of a fund. The Commission

believes that this concern is adequately

addressed by the requirement that one,

five and ten year time periods must be

used if they are published by the

ranking entity.13 The Commission also

believes that Lipper’s concern that

different mutual fund participants have

different time requirements is addressed

by the proposed rule change in that it

now permits the use of time periods

other than one, five and ten years in

certain instances.14

The Commission also realizes that

there may be instances where nondisclosure of certain factors could cause

the use of a ranking to be misleading,

notwithstanding that the ranking is in

technical compliance with the Ranking

Guidelines.15 NASD recognized these

concerns and stressed that NASD rules

governing communications with the

public require that all advertising and

sales literature submitted for review not

be misleading,16 and that those rules

give the NASDR broad authority to

prohibit the use of the misleading

ranking.17

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,18 that the

proposed rule change (SR–NASD–96–

39) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.19

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–6197 Filed 3–11–97; 8:45 am]

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DEPARTMENT OF STATE

[Public Notice 2516]

Advisory Committee on Historical

Diplomatic Documentation; Notice of

Meeting

The Advisory Committee on

Historical Diplomatic documentation

will meet in the Department of State,

March 18–19, 1997 in Conference

Rooms 1205 and 1406.

The Committee will meet in open

session from 1:00 p.m. on the afternoon

of Tuesday, March 18, 1997, until 5:00

p.m. The remainder of the Committee’s

sessions from 9:00 a.m.—5:00 p.m. on

March 19, 1997, will be closed in

accordance with Section 10(d) of the

Federal Advisory Committee Act (P.L.

92–463). It has been determined that

discussions during these portions of the

meeting will involve consideration of

matters not subject to public disclosure

under 5 U.S.C. 552b(c)(1), and that the

public interest requires that such

activities will be withheld from

disclosure.

Questions concerning the meeting

should be directed to William Z. Slany,

Executive Secretary, Advisory

Committee on Historical Diplomatic

Documentation, Department of State,

Office of the Historian, Washington, DC

20520, telephone (202) 663–1123, (email histoff@ix.netcom.com).

Dated: February 20, 1997.

William Z. Slany,

Executive Secretary.

[FR Doc. 97–6228 Filed 3–11–97; 8:45 am]

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