Federal Register / Vol. 62, No. 73 / Wednesday, April 16, 1997 / Notices 18665

1 15 U.S.C. § 78s(B)(1)(1988).

2The proposed rule change was originally

submitted on January 29, 1997. The NASD

subsequently submitted Amendment No. 1 that

removed certain unnecessary text. Letter from

Suzanne E. Rothwell, Associate General Counsel,

NASD Regulation, to Katherine A. England,

Assistant Director, Division of Market Regulations,

SEC, dated February 20, 1997.

raised as to the propriety of the trustee

disbursing these charges to the Sponsor,

applicants request an exemption from

section 26(a)(2) to the extent necessary

to permit the trustee to collect these

deductions and disburse them to the

Sponsor as contemplated by the

deferred sales charge program.

7. Section 11(c) prohibits any type of

offers of exchange of the securities of a

registered unit investment trusts for

securities of any other investment

company unless the terms of the offer

have been approved by the SEC.

Applicants assert that certain savings in

sales related expenses involving repeat

investors may appropriately be passed

along to such investors, which savings

will be recognized by a reduction in the

sales charge of the unit exchanged into.

Applicants maintain that the reduction

in the sales charge paid for units of the

Series exchanged into is consistent with

the provisions of the Act whether the

sales charge on the units exchanged into

is collected up-front and/or on a

deferred basis.

8. Applicants represent that holders

will not be induced or encouraged to

participate in the Revised Exchange and

Conversion Privilege or Rollover

Privilege through an active advertising

or sales campaign. The Sponsor

recognizes its responsibility to its

customers against generating excessive

commissions through churning and

represents that the sales charge

collected will not be a significant

economic incentive to salesmen to

promote inappropriately the Revised

Exchange and Conversion Privilege or

Rollover Privilege. The Sponsor also

believes that the operation and

implementation of the DSC program

will be adequately disclosed and

explained to potential investors as well

as unitholders.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. Applicants agree that whenever the

Revised Exchange and Conversion

Privilege or Rollover Privilege is to be

terminated or its terms are to be

amended materially, any holder of a

security subject to that privilege will be

given prominent notice of the

impending termination or amendment

at least 60 days prior to the date of

termination or the effective date of the

amendment, provided that: (a) no notice

need be given if the only material effect

of an amendment is to reduce or

eliminate the sales charge payable at the

time of an exchange, to add one or more

new Series eligible for the Revised

Exchange and Conversion Privilege or

the Rollover Privilege, or to delete a

Series which has terminated; and (b) no

notice need be given if, under

extraordinary circumstances, either (i)

there is a suspension of the redemption

of Units of an Exchange, Conversion or

Rollover Trust under section 22(e) of the

Act and the rules and regulations

promulgated thereunder, or (ii) an

Exchange, Conversion or Rollover Trust

temporarily delays or ceases the sale of

its Units because it is unable to invest

amounts effectively in accordance with

applicable investment objectives,

policies and restrictions.

2. An investor who purchases Units

under the Revised Exchange and

Conversion Privilege or Rollover

Privilege will pay a lower sales charge

than that which would be paid for the

Units by a new investor. The reduced

sales charge will be reasonably related

to the expense of providing such

service, and may include an amount

that will fairly and adequately

compensate the Sponsor.

3. Applicants agree that the

prospectus of each Series and any sales

literature or advertising that mentions

the existence of the Revised Exchange

and Conversion Privilege or the Rollover

Privilege will disclose that they are

subject to termination and that their

terms are subject to change.

4. Each Series offering Units subject to

a DSC will include in its prospectus the

table required by Item 2 of Form N–1A

(modified as appropriate to reflect the

differences between unit investment

trusts and open-end management

investment companies) and a schedule

setting forth the number and date of

each installment payment.

5. Applicants agree to continue to

comply with all of the conditions

contained in the Prior Order, except that

condition 2 of the Prior Order is

amended by condition 2 above.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–9802 Filed 4–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38491; File No. SR–NASD–

97–06]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

National Association of Securities

Dealers, Inc., Relating to the Scope of

the Uniform Practice Code

April 9, 1997.

On February 20, 1997, the NASD

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

filed with the Securities and Exchange

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

the proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’) 1 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.2 No comment letters

were received. The Commission is

approving the proposed rule change.

I. Background

The introductory language in

paragraph (a) of Rule 11100 states the

general standard that ‘‘all over-thecounter secondary market transaction in

securities between members shall be

subject to the provisions of this Code.

* * *’’ According to NASD Regulations,

that introductory language does not

encompass those provisions of the Code

that address the rights and liabilities of

the members participating in the

transaction or provide procedures that

are not related to securities transactions,

e.g., the setting of ex-dates and the

transfer of customer accounts. In

addition, subparagraph (a)(1) of the Rule

11100 of the Code excludes securities

transactions compared, cleared or

settled through a registered clearing

agency from the provisions of the Code.

NASD Regulation believes that

exception is technically not available

when the rules of the clearing agency

require that the Code or the rules of

other relevant markets apply to the

transaction. Finally, since the SEC’s

adoption of Rule 144A in 1991, NASD

Regulation believes that members were

uncertain as to whether the Code is

applicable to transactions in restricted
18666 Federal Register / Vol. 62, No. 73 / Wednesday, April 16, 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 Code is for

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

business by members may be simplified and

facilitated. . . .’’

4 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 6101–08 (1996).

2Section 3(d)(1)(a) of the Telemarketing Act

provides that ‘‘not later than 6 months after the

effective date of the rules promulgated by the

Federal Trade Commission under subsection (a) [of

Section 3 of the Telemarketing Act], the Securities

and Exchange Commission shall promulgate, or

require any national securities exchange or

registered securities association to promulgate,

rules substantially similar to such rules to prohibit

deceptive and other abusive telemarketing acts or

practices described in paragraph (2) [of Section

3(d)].’’ 15 U.S.C. 6102(d)(1)(a) (1996). The FTC

adopted the FTC Rules on August 23, 1995, with

an effective date of December 31, 1995. 60 FR 43842

(codified at 16 CFR 310.1–310.8 (1996)). The

proposed NASD Rule was filed with the

Commission on June 28, 1996. See Securities

Exchange Act Release No. 37475 (July 30, 1996).

3Section 3(d)(2)(A) of the Telemarketing Act

provides that ‘‘[t]he rules promulgated by the

Securities and Exchange Commission under

paragraph (1)(a) shall apply to a broker, dealer,

transfer agent, municipal securities dealer,

municipal securities broker, government securities

broker, government securities dealer, investment

adviser or investment company, or any individual

associated with [any of the foregoing].’’ 15 U.S.C.

6102(d)(2)(A) (1996). The Telemarketing Act

defines such terms by reference to the Securities

Exchange Act of 1934, the Investment Advisers Act

of 1940, and the Investment Company Act of 1940,

and explicitly states that the FTC Rules shall not

apply to such persons.

4Section 3(d)(1)(B) of the Telemarketing Act

provides that ‘‘[t]he Securities and Exchange

Commission is not required to promulgate a rule

under [Section 3(d)(1)(A)] if it determines that—(i)

Federal securities laws or rules adopted by the

Securities and Exchange Commission thereunder

provide protection from deceptive and other

abusive telemarketing by persons described in

[Section 3(d)(2)] substantially similar to that

provided by rules promulgated by the Federal Trade

Commission under [Section 3(a)]; or (ii) such a rule

promulgated by the Securities and Exchange

Commission is not necessary or appropriate in the

public interest, or for the protection of investors, or

would be inconsistent with the maintenance of fair

and orderly markets.’’ 15 U.S.C. 6102(d)(1)(B)

(1996).

5 the NASD Rule, SR–NASD–96–28, initially was

filed with the Commission on June 28, 1996, and

subsequently was amended by the NASD on July

18, 1996, July 24, 1996, and October 18, 1996. See

Securities Exchange Act Release No. 37475 (July 24,

1996).

6The MSRB filed the MSRB Rule, SR–MSRB–96–

6, with the Commission for approval on July 30,

1996. See Securities Exchange Act Release No.

37626 (Aug. 30, 1996). The MSRB amended its rule

filing on November 1, 1996.

securities. Thus, NASD Regulation

proposes to amend the Code to expand

the language of paragraph (a) of Rule

11100 to state that the Code applies to

all secondary market transactions in

securities including: (i) The ‘‘rights and

liabilities of the members participating

in the transaction’’; (ii) ‘‘those

operational procedures that affect the

day-to-day business of members’’,3 (iii)

securities transactions compared,

cleared or settled through a registered

clearing agency when the rules of the

clearing agency require that the Code or

the rules of other relevant markets apply

to the transaction; and (iv) securities

transactions in ‘‘restricted securities, as

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

Securities Act of 1933.’’ According to

NASD Regulations, 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.

NASD Regulation is also clarifying that

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.

II. Discussion

The Commission believes the

proposed rule change is consistent with

the Association’s obligations under

Section 15A(b)(6) to foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in securities

because the proposed rule change

clarifies that the Code applies to the

liabilities of parties to a transaction,

transactions in restricted securities, the

operational procedures that affect the

day-to-day business of members and

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. The Commission believes

the proposed rule change should clarify

the broad scope and applicability of the

Code, simplify the transaction of day-today business by NASD members and

guide NASD members regarding the

application of the Code to transactions

settled through a clearing agency.

The Commission also believes the

proposed rule change is consistent with

the NADA’s obligations under Section

15A(b)(2) to enforce compliance by its

members with the provisions of the Act,

the rules and regulations thereunder

and the rules of the NASD in that the

proposed rule change applies the Code

to the liabilities of NASD members that

are parties to a securities transaction,

the operational procedures that affect

the day-to-day business of NASD

members, transactions in restricted

securities and transactions settled

through a clearing agency, when the

rules of the clearing agency direct that

the rules of the governing market apply

to the transaction.

It is therefore ordered, pursuant to

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

proposed rule change SR–NASD–97–06

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–9715 Filed 4–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38480]

Telemarketing and Consumer Fraud

and Abuse Prevention Act;

Determination that No Additional

Rulemaking Required

April 7, 1997.

A. Background

The Telemarketing and Consumer

Fraud and Abuse Prevention Act (the

‘‘Telemarketing Act’’) 1 requires the

Commission to promulgate, or require

the securities industry self-regulatory

organizations (‘‘SROs’’) to promulgate,

rules substantially similar to the rules

adopted by the Federal Trade

Commission (‘‘FTC’’) pursuant to the

Telemarketing Act (the ‘‘FTC’’).2 The

purpose of these rules is to prohibit

deceptive and other abusive

telemarketing acts or practices by

brokers, dealers, and other securities

industry professionals.3 the

Telemarketing Act provides that the

Commission may elect not to

promulgate such rules only if it

determines that existing rules provide

protection against deceptive and

abusive practices in securities

transactions that is substantially similar

to that provided by the FTC Rules, or

that additional rules are not necessary

or appropriate in the public interest.4

In early 1996, members of the staff of

the Division of Market Regulation

conducted a series of meetings and

conferences with representatives of the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) and other major

SROs to discuss the requirements of the

Telemarketing Act. As a result, the

NASD filed a proposed rule change (the

‘‘NASD Rule’’) 5 with the Commission

for approval. Shortly thereafter, the

Municipal Securities Rulemaking Board

(‘‘MSRB’’) filed a substantially similar

proposed rule change (the ‘‘MSRB

Rule’’) 6 with the Commission. The staff,

by delegated authority, approved the