19778 Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices

31Artemis.

32Smith Barney.

33BMA, GFOA, Newman, Rauscher Pierce, Smith

Barney and Wachovia.

34BMA.

35 Goldman Sachs.

36Artemis.

37Newman and Wachovia.

38BMA.

39Artemis, BMA, Edward Jones, Goldman Sachs,

Newman, Rauscher Pierce, Smith Barney and

Wachovia.

40BMA.

41 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

considerably reduce the prevalence of

this problem and help to ensure that

syndicate members receive the full

designation credit they have earned.’’ 31

Another commentator opposes the

draft amendment in its entirety.32 It

believes that the designation

information ‘‘would potentially be used

to promote further fixed economics in

the municipal bond industry, through

the use of set-asides or similar methods

of allocation * * * the industry must

allow the market system to allocate the

economics if dealers are to efficiently

allocate their resources.’’ It further

stated that ‘‘those firms that provide

services to investors, such as research,

liquidity and analysis, profit by being

compensated by those investors in the

form of designations’’ and fixed

economics would provide a deterrent to

‘‘firms from providing services to

investors and the market at large.’’ It

also noted that it opposes the draft

amendment because, for senior

managers to be in compliance with any

timeframe contained within the rule,

they would have to rely on buyers

making their designations within that

timeframe. This commentator stated

that, if the Board determines to go

forward with the draft amendment, it

would support BMA’s comment to

disclose designations ‘‘upon the later of

three days after notice from the buyer or

ten days after the date of sale.’’

The Board has determined to propose

the draft amendment because it believes

all syndicate members have the right to

the disclosure of all designation

information. The Board does not believe

the proposed rule change will be used

to promote ‘‘fixed economics’’ in the

municipal securities industry. The

Board did decide, however, to change

the timeframe to require disclosure to

syndicate members of all available

designation information within 10

business days following the date of sale

and all information with the sending of

the designation checks. The Board

believes almost all of the information

will be available within 10 business

days, but the additional time is

provided to receive any late

information.

Rule G–11(g): Require the senior manager

to disclose to members of the syndicate, in

writing, within 10 business days following

the date of sale, the amount of any portion

of the take-down that is directed to each

member of the syndicate by the issuer.

Six commentators33 support this draft

amendment with one commentator

noting ‘‘this part of the take-down

should be disclosed to syndicate

members in the same manner as

customer designations.’’ 34 One

commentator is opposed to the

amendment noting that it would

provide a means for syndicate members

to challenge senior managers about their

decisions.35 Another commentator

believes that the disclosure of a dealer’s

take-down should be made only to that

dealer.36 Two commentators suggested

that the timeframe be changed to 15

days following the date of sale.37 One

commentator suggested that the

timeframe be changed to the later of 15

business days following the date of sale,

or three business days following receipt

by the senior manager of notification of

such set-asides.38

The Board has determined to propose

the draft amendment because it believes

all syndicate members have the right to

the disclosure of all take-down

information. The Board did decide,

however, to change the timeframe to the

later of 15 business days following the

date of sale or three business days

following receipt by the managing

underwriter of notification of such set

asides.

Rule G–12(k): Move the deadline for

payment of designations from 30 business

days following delivery of the securities to

the customer to 30 calendar days after the

issuer delivers the securities to the syndicate.

Eight commentators support this draft

amendment.39 One commentator stated

that the amendment ‘‘will greatly

streamline the underwriting process.’’ 40

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 self-regulatory

organization 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 is 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. 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 the filing will also be

available for inspection and copying at

the Board’s principal offices. All

submissions should refer to File No.

SR–MSRB–97–15 and should be

submitted by May 12, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.41

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10506 Filed 4–20–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39866; File No. SR–NASD–

98–31]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. To Implement the

Effective Date of Recently-Approved

Amendments to Rules 3010 and 3110

April 14, 1998.

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 April 7,

1998, the NASD Regulation, Inc.

(‘‘NASDR’’) 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 NASDR. The NASDR
Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices 19779

3 15 U.S.C. 78s(b)(3)(A)(i).

4The proposed rule change (SR–NASD–97–24)

was published for comment in the Federal Register

on May 2, 1997. See Securities Exchange Act

Release No. 38548 (April 25, 1997) 62 FR 24147.

5See Letter from Mary N. Revell, Associate

General Counsel, NASDR, to Katherine A. England,

Assistant Director, Division of Market Regulation,

Commission, dated December 1, 1997

(‘‘Amendment No. 1’’).

6See Securities Exchange Act Release No. 39510

(December 31, 1997) 63 FR 1131 (January 8, 1998)

(‘‘Release No. 39510’’).

7See Letters from Carl B. Wilkerson, American

Council of Life Insurance, to Jonathan G. Katz,

Secretary, SEC, dated January 9, 1998 and January

29, 1998; Beverly A. Byre, BenefitsCorp Equities,

Inc., to Jonathan G. Katz, Secretary, SEC, dated

January 26, 1998; Michael S. Martin, The Equitable

Life Assurance Society of the United States, to

Jonathan G. Katz, SEC, dated January 29, 1998; Janet

G. McCallen, International Association for Financial

Planning, to Jonathan G. Katz, Secretary, SEC, dated

February 13, 1998; W. Thomas Boulter, Jefferson

Pilot Financial, to Jonathan G. Katz, Secretary, SEC,

dated January 28, 1998; Leonard M. Bakal,

Metropolitan Life Insurance Company and MetLife

Securities, Inc., to Jonathan G. Katz, Secretary, SEC,

dated January 28, 1998; Michael L. Kerley, MML

Investors Services, Inc. to Secretary, SEC, dated

January 26, 1998; Mark D. Johnson, The National

Association of Life Underwriters, to Jonathan G.

Katz, Secretary, SEC, dated February 5, 1998;

Theodore Mathas, NYLIFE Securities, to Jonathan

G. Katz, Secretary, SEC, dated January 16, 1998 and

January 29, 1998; Beverly A. Byrne, One Orchard

Equities, Inc., to Jonathan G. Katz, Secretary, SEC,

dated January 26, 1998; Dodie Kent, Pruco

Securities Corporation, to Jonathan G. Katz,

Secretary, SEC, dated January 29, 1998; and James

T. Bruce, Wiley, Rein & Fielding, on behalf of the

Electronic Messaging Association, to Jonathan G.

Katz, Secretary, SEC, dated January 30, 1998.

8The proposed rule change (SR–NASD–98–10)

became effective on filing. See Securities Exchange

Act Release No. 39665 (February 13, 1998) 63 FR

9032 (February 23, 1998).

has designated this proposal as one

constituting a stated policy, practice, or

interpretation with respect to the

meaning of an existing rule under

Section 19(b)(3)(A)(i) of the Act,3 which

renders the rule effective upon the

Commission’s receipt of this filing. 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 NASDR is proposing to

implement the effective date of recentlyapproved amendments to the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) Rules 3010,

‘‘Supervision,’’ and 3110, ‘‘Books and

Records.’’

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

NASDR 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 NASDR 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

A proposed rule change to amend

NASD Rules 3010 and 3110 was filed

with the Commission on April 11,

1997.4 The purpose of the amendments

was to allow firms to develop flexible

procedures for the review of

correspondence with the public. In that

filing, the NASDR stated that it would

make the proposed rule change effective

within 45 days of Commission approval.

Amendment No. 1, containing a draft

Notice to Members to be issued

following approval of the proposed rule

change, was filed with the Commission

on December 1, 1997.5 The Notice to

Members described the new rules and

provided guidance to NASD members

on the implementation of the new rules.

The Commission approved the proposed

rule change and Amendment No. 1 to

the proposed rule change on December

31, 1997.6 Notice to Members 98–11

announced approval of the proposed

rule change and stated that the

amendments to Rules 3010 and 3110

would be effective on February 15,

1998.

Subsequent to approval of the

proposed rule change by the SEC,

several commenters filed letters with

the SEC raising issues regarding

Amendment No. 1 to the proposed rule

change and its accompanying Notice to

Members.7 The NASDR, believing that

the letters raise important issues that

should be fully addressed before the

effectiveness of the rule change, filed a

proposed rule change to postpone the

effective date of the amendments to

Rules 3010 and 3110 approved in

Release No. 39510.8

The concerns raised by the

commenters include issues concerning

the effect of the rules on the review of

incoming correspondence and the scope

of the obligation of member firms to

control the use of electronic

communications systems that registered

persons use to communicate with their

customers. After considering these

issues, the NASDR proposes to

implement the amendments to Rules

3010 and 3110 approved in Release No.

39510 immediately, including the

requirements set forth in Notice to

Members 98–11, with the exception of

the provision in the Notice stating that

members must review ‘‘all incoming

correspondence received in nonelectronic format directed to registered

representatives and related to a

member’s investment banking or

securities business.’’ The NASDR

proposes to delay the effective date of

this provision until July 7, 1998.

Extension of the effective date for this

provision will allow the NASDR a

further opportunity to consider

comments on this issue. Prior to this

effective date, however, members will

be required to review and report

customer complaints as required by

Rule 3070(a)(2); keep and preserve all

written customer complaints as required

by Rule 3110(d); and establish

procedures for the review of incoming

and outgoing written and electronic

correspondence consistent with new

Rules 3010(d)(1) and (2).

Among other things, the NASDR

proposes to make effective immediately

that portion of the Notice of Members

that states that members’ supervisory

policies and procedures must:

prohibit registered representatives and other

employees’ use of electronic correspondence

to the public unless such communications

are subject to supervisory and review

procedures developed by the firm. For

example, NASDR would expect members to

prohibit correspondence with customers

from employees’ home computers or through

third party systems unless the firm is capable

of monitoring such communications.

In response to comments received

regarding this provision in the Notice,

the NASDR wishes to point out that the

Notice to Members does not establish

any new obligation that is not already

encompassed by Rule 3010’s

requirement that firms supervise the

activities of their associated persons and

registered representatives to ensure

compliance with applicable securities

laws and regulations and NASD rules

and merely provides guidance to

members on how they can comply with

Rule 3010. Furthermore, the Notice to

Members does not prohibit the use of

such systems or dictate the use of a

particular system. The Notice only

points out that firms should prohibit

correspondence with customers through

electronic communication systems

unless the firm is capable of supervising

the communications. In developing

procedures for the review of

correspondence, each firm must

determine how it will review different

types of correspondence, including

electronic correspondence. If the firm

determines that it can subject

correspondence to customers through
19780 Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices

9 15 U.S.C. 78o–3(b)(6).

10 15 U.S.C. 78s(b)(3)(A).

11 17 CFR 19b–4(e).

12 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by NSCC.

electronic communication systems to

appropriate supervision and review, the

firm can allow employees to correspond

with customers through such systems.

2. Statutory Basis

The NASDR believes the proposed

rule change is consistent with Section

15A(b)(6) of the Act,9 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. The NASD believes that

implementing the effective date of the

new rules with the exception of the

requirement to review all incoming nonelectronic correspondence is consistent

with these requirements.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASDR does not believe that the

proposed rule change will impose a

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participation or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change constitutes

a stated policy, practice, or

interpretation with respect to the

meaning, administration or enforcement

of an existing rule of the Association

and, therefore, has become effective

pursuant to Section 19(b)(3)(A) of the

Act 10 and subparagraph (e) of rule 19b–

4 thereunder.11

At any time within 60 days of the

filing of such rule change, the

Commission may summarily abrogate

such rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submission

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 in

the Commission’s Public Reference

Room, 450 Fifth Street, N.W.,

Washington, D.C. Copies of such filing

also will be available for inspection and

copying at the NASD. All submissions

should refer to File No. SR–NASD–98–

31 and should be submitted by May 12,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10420 Filed 4–20–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39863; File No. SR–NSCC–

98–1]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing and

Immediate Effectiveness of Proposed

Rule Change Relating to Fees and

Charges

April 14, 1998.

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

Securities Exchange Act of 1934

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

February 12, 1998, the National

Securities Clearing Corporation

(‘‘NSCC’’) 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 primarily by NSCC.

The Commission is publishing this

notice to solicit comments from

interested persons on the proposed rule

change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change reduces

certain fees, lowers certain caps on fees,

and implements one new cap on certain

fees.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

NSCC’s fees are based in part on the

expected volume of transactions

submitted to NSCC for processing.

Because the volume of transactions

submitted to NSCC for processing has

increased over the past few years, NSCC

has determined that it is appropriate to

reduce certain fees, to lower certain

caps on certain fees, and to implement

one new cap. The proposed changes are

as follows:

(1) Trade Comparison Fee

Currently, the trade comparison fee

for each side of each stock, warrant, or

right trade submitted is $.018 per 100

shares with a minimum fee of $.072 and

a maximum fee of $1.35. This rule

change reduces this maximum fee from

$1.35 to $1.08.

(2) Trade Recording Fee

At present, the trade recording fee for

each side of each stock, warrant, or right

item originally compared by other

parties but cleared through NSCC is

$.012 per 100 shares with a minimum

fee of $.048 and a maximum fee of $.90.

This rule change reduces the trade

recording fee of such items to $.008 per

100 shares with a minimum fee of $.032

and a maximum fee of $.48.

(3) Trade Clearance Fees

Current trade clearance fees are as

follows: $.50 per issue received from

NSCC’s continuous net settlement

(‘‘CNS’’) system to satisfy a long valued