Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13921

26See Amex Rule 590(h). Although Amex Rule

590 states that the Committee ‘‘may’’ impose a fine,

the Commission believes the use of such

‘‘prosecutorial discretion’’ to issue a cautionary

letter in lieu of a fine for ‘‘nonsubstantive’’

violations of this rule should be exercised only in

extraordinary circumstances. This position is

bolstered by the fact that the specialist, at a

minimum, already would have received such a

letter from the Amex’s staff in connection with its

first ‘‘nonsubstantive’’ violation of this rule within

the last twelve months.

In addition, each instance of noncompliance

should be addressed individually. Although

instances of noncompliance by a specialist that

occur between regularly scheduled meetings of the

Committee may be presented as a single bundle,

each infraction should be considered a separate

offense for calculating the appropriate fine. For

example, if a specialist fails to properly obtain Floor

Official approval 15 times during a 5 month period,

that specialist should be fined for 15 violations,

instead of the minimum amount for a first offense

simply because all 15 violations were presented to

the Committee at the same meeting.

27See Securities Exchange Act Release No. 31797

(Jan. 29, 1993), 58 FR 7277 (approving File No. SR–

NYSE–92–20).

28 15 U.S.C. 78f, 78k, and 78s(b)(2).

29 15 U.S.C. 78s(b)(2).

30 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

2Securities Exchange Act Release No. 36783 (Jan.

29, 1996), 61 FR 3955 (Feb. 2, 1996).

3The Commission notes that the proposal

requires that the securities be physically present in

a depository to qualify for this exception. Simply

being ‘‘eligible for deposit’’ in a depository is not

enough.

permanent approval, the Commission

expects, at a minimum, that the

Exchange’s staff will issue a cautionary

letter to a specialist for an initial

‘‘nonsubstantive’’ violation during a

rolling twelve-month period and to refer

any subsequent ‘‘nonsubstantive’’

violations by the same specialist during

this period to the Minor Floor Violation

Disciplinary Committee (‘‘Committee’’)

for a fine pursuant to the Amex’s Minor

Rule Plan (‘‘MRP’’).26

The Commission finds good cause for

approving the proposed rule change,

including Amendment No. 1, prior to

the thirtieth day after the date of

publication of notice of filing thereof.

The Exchange will continue to use the

identical procedures contained in the

pilot program. These procedures have

been published in the Federal Register

on several occasions for the full

comment period, and no comments

have ever been received. Furthermore,

the Commission approved a similar rule

change for the NYSE, also without

receiving comments on that proposal.27

For these reasons, the Commission finds

that accelerating approval of the

proposed rule change is consistent with

Section 6, Section 11, and Section

19(b)(2) of the Act.28

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,29 that the

proposed rule change (SR–Amex–97–

12), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.30

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7342 Filed 3–21–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38398; File No. SR–NASD–

97–05]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc., Relating to the Transfer

of Limited Partnership Securities

March 13, 1997.

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

Securities Exchange Act of 1934

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

January 29, 1997 the NASD Regulation,

Inc. (‘‘NASD Regulation’’) 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

NASD Regulation is proposing to

amend Rules 11580 and 11870 of the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

to expand the current exceptions to the

requirement that members use the

Limited Partnership Transfer Forms for

the transfer of limited partnership

securities and require that the Forms be

used by members in account transfers of

limited partnerships.

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 January 29, 1996, the Commission

approved new NASD Rule 11580

(formerly, Section 73) to the NASD’s

Uniform Practice Code requiring

members to use Standardized Transfer

Forms when transferring limited

partnership securities.2 Use of the forms

became mandatory for NASD members

on May 15, 1996. NASD Regulation is

proposing two amendments related to

the use of the Standardized Transfer

Forms. The first is an amendment to

NASD Rule 11580 to expand the current

exceptions to include limited

partnerships that trade in the nonNasdaq over-the-counter market that are

in a depository. The second amendment

is to NASD Rule 11870 (formerly,

Section 65) to require that the

Standardized Transfer Forms be used by

members in account transfers of limited

partnerships.

i. Amendment to Rule 11580. This

rule includes an exception for limited

partnership securities that are listed on

an exchange or the Nasdaq Stock

Market. The exception does not cover

those limited partnership securities that

are quoted on the OTC Bulletin Board

that trade with such frequency that use

of the Standardized Transfer Forms

would not be appropriate. In order to

broaden the exception, NASD

Regulation is proposing to amend

subparagraph (a) of NASD Rule 11580 to

except from the requirements of the rule

those limited partnership securities that

are in a depository and that settle

regular way.3 It is believed that the

proposed criteria of depository

eligibility and regular way settlement

identify that group of non-Nasdaq overthe-counter limited partnership

securities that do not need the

Standardized Transfer Forms to

facilitate settlement. The Forms were

specifically adopted to address

problems associated with the settlement

of limited partnership interests that are

generally illiquid and where the transfer

requirements contained in the General

Partnership Agreement vary widely as

to the type of information and

documents necessary for a valid transfer

of a interest.
13922 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

4The Commission notes that use of the Forms

will supplement, rather than replace, the current

forms utilized by members, when effecting an

account transfer. NASD Regulation represents that

the use of the Forms is necessary because these

securities are held in the member’s name for the

benefit of the investor. Thus, it is necessary to

notify the general partner of the ‘‘change in

ownership’’ when an investor transfers its account

to a different member so the general partner may

adjust its records accordingly. Telephone

conversation between Suzanne E. Rothwell,

Dorothy Kennedy, NASD Regulation, and Anthony

P. Pecora, Division of Market Regulation, SEC (Mar.

7, 1997).

5 15 U.S.C. 78o–3.

6 17 C.F.R. 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from James E. Buck, Senior Vice

President and Secretary, NYSE, to Jonathan G. Katz,

Secretary, SEC, dated February 10, 1997 (‘‘NYSE

Letter’’).

4See letter from James E. Buck, Senior Vice

President and Secretary, NYSE, to Jonathan G. Katz,

Secretary, SEC, dated March 5, 1997. In

Amendment No. 1, the NYSE changes the proposal

to a one-year pilot and represents that, following

the 1997 proxy season, a certified public accounting

firm will audit the results of the pilot period. The

NYSE states that the independent accountant will

report to the Commission and the NYSE no later

than October 31, 1997. As discussed below, the

independent accounting firm must conduct an audit

of the results of operations of ADP Investor

Communication Services, the division of Automatic

Data Processing, Inc. (‘‘ADP’’) that performs proxy

intermediary services for approximately 200 NYSE

member firms.

5Street ownership encompasses shares purchased

through a broker or bank (referred to as a nominee).

The shares are then registered in the name of that

nominee, or in the nominee name of a depository

such as The Depository Trust Company (‘‘DTC’’).

According to a recent NYSE analysis, on average,

approximately 70 to 80 percent of all outstanding

shares are held in street name.

ii. Amendment to Rule 11870. Since

the adoption of NASD Rue 11580,

members have inquired as to whether

the Standardized Transfer Forms can be

used to accomplish account transfers

under NASD Rule 11870. In order to

clarify this issue, NASD Regulation is

proposing to amend Rule 11870 to

provide that in the case of limited

partnership securities, members must

use the Standardized Transfer Forms

unless exempted by that rule.4

2. Statutory Basis

NASD Regulation believes the

proposed rule change is consistent with

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

the Act 5 in that the proposed rule

change is designed 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, to protect the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation believes the

proposed rule change will not impose

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

NASD Regulation has neither

solicited nor received written

comments.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the 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 the 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 at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Also, copies of

such filing will be available for

inspection and copying at the principal

office of NASD. All submissions should

refer to File No. SR–NASD–97–05 and

should be submitted by April 14, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7281 Filed 3–21–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38406; File No. SR–NYSE–

96–36]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change and Notice of Filing and Order

Granting Accelerated Approval to

Amendment No. 1 to Proposed Rule

Change Relating to a One-Year Pilot

Program for Transmission of Proxy

and Other Shareholder Communication

March 14, 1997.

I. Introduction

On December 6, 1996, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) submitted to 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 to

amend NYSE Rules 451 and 465, which

establish guidelines for the

reimbursement of expenses by issuers to

NYSE member organizations for the

processing of proxy materials and other

issuer communications to security

holders whose securities are held in

street name.

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 38058 (Dec.

18, 1996), 61 FR 68082 (Dec. 26, 1996).

Thirty-nine comment letters were

received on the proposal, which include

a letter submitted by the NYSE in

response to the Commission’s request

for comment.3 On March 7, 1997, the

NYSE submitted Amendment No. 1 to

the proposed rule change.4 This order

approves, on a one-year pilot basis, the

proposed rule change, as amended, and

Amendment No. 1 on an accelerated

basis.

II. Background

NYSE member organizations holding

securities in street name solicit proxies

and deliver communications to and

from beneficial owners of securities on

behalf of issuers.5 For this service,

issuers reimburse member organizations

for out-of-pocket, reasonable clerical,

postage and other expenses incurred for

a particular distribution. NYSE Rules

451 and 465 provide guidelines for the

reimbursement of these expenses.

Since the late 1960’s, NYSE member

firms increasingly have used an outside

contractor for these types of services