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
Federal Register / Vol. 62, No. 73 / Wednesday, April 16, 1997 / Notices 18667

7See Securities Exchange Act Release No. 38009

(Dec. 2, 1996).

8See Securities Exchange Act Release No. 38053

(Dec. 16, 1996).

9Section 3(d)(1)(B) of the Telemarketing Act

provides that, if the Commission determines that no

additional rulemaking is required, it ‘‘shall publish

in the Federal Register its determination with the

reasons for it.’’ 15 U.S.C. 6102(d)(1)(B) (1996).

10NYSE Rule 440A; NASD Rule 3110(g); CBOE

Rule 9.24; AMEX Rule 428; PSE Rule 9.20(b).

11MSRB rule G–8(a)(xix)(A).

12 Virtually all registered broker-dealers that

conduct a public business (i.e., those that

potentially may engage in telemarketing activities)

are NASD members or municipal securities dealers,

and accordingly are subject either to the NASD Rule

or the MSRB Rule.

13NASD Rule 2211(a); MSRB rule G–39(a).

14NASD Rule 2211(b); MSRB rule G–39(b).

15See NASD Notice to Members 96–44 (July

1996) (conduct inconsistent with NASD Rule 2110);

MSRB Reports, Vol. 16, No. 3 (September 1996)

(conduct inconsistent with MSRB rule G–17).

NASD rule on December 2, 1996,7 and

the MSRB Rule on December 16, 1996.8

As discussed below, the Commission

finds that the Securities Exchange Act of

1934 (the ‘‘Exchange Act’’) and the

Investment Advisers Act of 1940 (the

‘‘Advisers Act’’), the rules thereunder,

and the other rules of the SROs

(including the NASD Rule and the

MSRB Rule), satisfy the requirements of

the Telemarketing Act because the

applicable provisions of such laws and

rules are substantially similar to the

FTC Rules, except for those FTC Rules

that involve areas already extensively

regulated by existing securities laws or

regulations, or activities inapplicable to

securities transactions. Accordingly, the

Commission has determined that no

additional rulemaking is required by it

under the Telemarketing Act. In

accordance with Section 3(d)(1)(B) of

the Telemarketing Act, the Commission

is publishing this determination in the

Federal Register, together with the

reasons therefor.9

B. Discussion

The FTC Rules address three areas: (1)

Abusive telemarketing acts or practices,

which are addressed through a

requirement to maintain a do-not-call

list, calling time restrictions, required

oral disclosures, and proscriptions

against the use of threats, intimidation,

profane or obscene language, and

certain repetitive calling patterns; (2)

deceptive telemarketing acts or

practices, which are addressed

primarily through required disclosures

about the goods or services being offered

and prohibitions against

misrepresentations with respect thereto;

and (3) recordkeeping requirements

relating to various aspects of

telemarketing transactions.

1. Abusive Telemarketing Acts or

Practices

Section 310.4 of the FTC Rules

proscribes a number of ‘‘abusive

telemarketing acts or practices’’ by

telemarketers. First, the FTC Rules

effectively require the maintenance of

do-not-call lists by telemarketers.

Second, time-of-day restrictions prohibit

cold-calls prior to 8 a.m. or after 9 p.m.

local time at the called person’s

location. Third, telemarketers are

required to disclose orally to the called

person the caller’s identity, that the

purpose of the call is to sell goods or

services, the nature of the goods or

services being offered, and, if a prize

promotion is involved, that no purchase

is necessary to participate therein.

Fourth, telemarketers are prohibited

from using threats or intimidation,

profane or obscene language, or certain

repetitive calling patterns, in connection

with telemarketing transactions. Finally,

the FTC Rules prohibit a telemarketer

from receiving payment in advance from

a consumer for (1) Cleansing a credit

report, (2) Obtaining a refund or goods

promised with respect to a prior

telemarketing transaction, or (3)

Arranging a loan or other extension of

credit.

With respect to the do-not-call list

requirement, the New York Stock

Exchange (‘‘NYSE’’), the NASD, the

Chicago Board Options Exchange

(‘‘CBOE’’), the American Stock

Exchange (‘‘AMEX’’), and the Pacific

Stock Exchange (‘‘PSE’’) have each

adopted rules that require all members

to make and maintain a centralized donot-call list.10 Further, the MSRB Rule

includes a provision requiring

municipal securities brokers and dealers

to maintain a do-not-call list.11

Certain other abusive telemarketing

acts or practices proscribed by the FTC

Rules, which are addressed by the

calling time restrictions and required

oral disclosures, are covered by the

NASD Rule and the MSRB Rule.12 Both

the NASD Rule and the MSRB Rule,

with certain limited exceptions, (a)

prohibit cold-calls at any time other

than between 8 a.m. and 9 p.m. local

time at the called person’s location,

without the prior consent of the called

person,13 and (b) require the cold-caller

to identify himself and his firm, provide

a name or address at which the caller

may be contacted, and state that the

purpose of the call is to sell securities.14

A third group of abusive

telemarketing acts or practices

proscribed by the FTC Rules, namely

the use of threats, intimidation, profane

or obscene language, and certain

repetitive calling patterns, are

prohibited specifically by recent NASD

and MSRB interpretations. The NASD

and MSRB have each issued an

interpretation of their general rule

proscribing conduct inconsistent with

just and equitable principles of trade or

fair dealing, clarifying that such

proscribed conduct includes (a) Threats,

intimidation, and the use of profane or

obscene language, and (b) calling a

person repeatedly with intent to annoy,

abuse, or harass the called party.15

Finally, certain specific abusive

telemarketing acts or practices

addressed by the FTC Rules do not

appear applicable to securities

transactions. The FTC Rules addressing

the receipt of payment in advance for

cleansing a credit report, obtaining

refunds, or arranging a loan, are

included in this category.

2. Deceptive Telemarketing Acts or

Practices

Section 310.3 of the FTC Rules

prohibits a number of ‘‘deceptive

telemarketing acts or practices’’ by

telemarketers, and primarily requires

specified disclosures and prohibits

misrepresentations. First, the

telemarketer must disclose the following

information, in a clear and conspicuous

manner, prior to payment by a customer

for the goods or services offered: (1) The

quantity of goods or services involved

and the total cost thereof; (2) All

material restrictions, limitations, or

conditions with respect thereto; (3) All

material terms and conditions of the

seller’s refund, cancellation, exchange,

or repurchase policy, or the lack thereof;

(4) In a prize promotion, the odds of

receiving the prize, that no purchase or

payment is required to participate, and

instructions on how to participate; and

(5) in a prize promotion, all material

costs or conditions to redeem the prize

that is the subject thereof. Second, a

telemarketer may not make any false or

misleading statement to induce any

person to pay for goods or services, and

misrepresentation by a telemarketer,

directly or by implication, specifically is

prohibited with respect to (1) Any of the

required disclosure items described

above; (2) Any material aspect of the

performance, efficacy, nature, or central

characteristics of the goods or services

offered; (3) Any material aspect of an

investment opportunity including, but

not limited to, risk, liquidity, earnings

potential, or profitability; and (4) A

seller’s or telemarketer’s affiliation with,

or endorsement by, any government or

third-party organization. Third, a

telemarketer may not obtain or submit

for payment a check, draft, or other form
18668 Federal Register / Vol. 62, No. 73 / Wednesday, April 16, 1997 / Notices

16NASD Rule 3110(g)(2); MSRB rule G–

8(a)(xix)(B).

17Section 9(a)(4) of the Exchange Act prohibits a

broker or dealer, in connection with the purchase

or sale of any security registered on a national

securities exchange, from making ‘‘any statement

which was at the time and in the light of the

circumstances under which it was made, false or

misleading with respect to any material fact, and

which he knew or had reasonable ground to believe

was so false or misleading.’’

18Section 10(b) of the Exchange Act proscribes

the use, in connection with the purchase or sale of

any security, of ‘‘any manipulative or deceptive

device or contrivance’’ in contravention of the rules

and regulations promulgated by the Commission.

Rule 10b–5 under the Exchange Act, for example,

makes it unlawful for ‘‘any person, directly or

indirectly, . . . (a) to employ any device, scheme,

or artifice to defraud, (b) to make any untrue

statement of a material fact or to omit to state a

material fact necessary to make the statements

made, in light of the circumstances under which

they were made, not misleading, or (c) to engage in

any act, practice, or course of business which

operates or would operate as a fraud or deceit upon

any person, in connection with the purchase or sale

of any security.’’ In addition, Rule 10b–10 under the

Exchange Act generally requires a broker-dealer to

give or send to its customer, at or before the

completion of a securities transaction, a written

notification disclosing, among other things, the date

of the transaction, the identity, price, and number

of shares or units (or principal amount) of the

security purchased or sold, whether the brokerdealer acted as principal or agent in the transaction,

and the fees paid to, or markup received by, the

broker-dealer in connection therewith.

19Sections 15(c)(1) and 15(c)(2) of the Exchange

Act, among other things, prohibit brokers, dealers,

municipal securities dealers, and government

securities brokers and dealers from effecting

transactions in, or inducing or attempting to induce

the purchase or sale of, securities by means of any

manipulative, deceptive, or other fraudulent device

or contrivance. With respect to non-municipal or

non-government securities brokers or dealers, the

foregoing is limited to transactions otherwise than

on a national securities exchange of which such

broker or dealer is a member (in which case Section

9(a)(4) of the Exchange Act would apply). The rules

promulgated by the Commission pursuant thereto

define the prohibited activities in more detail. For

example, Rule 15c1–2 under the Exchange Act

defines these proscribed activities as including

‘‘any act, practice, or course of business which

operates or would operate as a fraud or deceit upon

any person’’ and ‘‘any untrue statement of a

material fact and any omission to state a material

fact necessary in order to make the statements

made, in light of the circumstances under which

they were made, not misleading, which statement

or omission is made with knowledge or reasonable

grounds to believe it is untrue or misleading.’’ Rule

15c2–8 sets forth certain prospectus delivery

requirements for brokers and dealers participating

in certain distributions of securities with respect to

which a registration statement has been filed under

the Securities Act of 1933. Section 15(g) of the

Exchange Act and Rules 15g–2 and 15g–9

thereunder, among other things, prohibit a broker

or dealer from effecting certain transactions in

‘‘penny stocks’’ (generally, securities with a price of

less than $5 per share or unit that are not traded

on an exchange or on NASDAQ) unless the broker

or dealer first (1) has delivered a risk disclosure

document to the customer, (2) has made certain

suitability determinations and delivered to the

customer a written statement setting forth the basis

therefore, and (3) has received from the customer

the customer’s written agreement to the transaction.

20E.g., NASD Rule 2120; NYSE Rule 476; MSRB

rule G–17.

21NASD Rule 3110(g)(3); MSRB rule G–9(b)(xii).

22For example, Rule 17a–3(a)(1) under the

Exchange Act provides that broker-dealers shall

make and keep current ‘‘[b]lotters (or other records

of original entry) containing an itemized daily

record of all purchases and sales of securities, all

receipts and deliveries of securities (including

certificate numbers), all receipts and disbursements

of cash and all other debts and credits. Such records

shall show the account for which each such

transaction was effected, the name and amount of

securities, the unit and aggregate purchase or sale

price (if any), the trade date, and the name or other

designation of the person from whom purchased or

received or to whom sold or delivered.’’ Rule 17a–

3(a)(12) requires broker-dealers to maintain detailed

information with respect to each associated person

(which includes any salesman or employee

soliciting transactions or accounts) of such brokerdealer.

23Telemarketing scripts expressly are included

within the definitions of ‘‘sales literature’’ or

‘‘advertisement’’ in both the NASD and MSRB

rules. See NASD Rule 2210(a)(2); MSRB rule G–

21(a).

24See, e.g., NASD Rules 2210 and 3110; NYSE

Rules 410 and 472.

of negotiable paper drawn on a

customer’s bank or other account

without the customer’s express

verifiable authorization, and credit card

laundering (i.e., having a third party

present a credit card sales draft) is

prohibited in connection with a

telemarketing transaction. Finally, no

person may provide substantial and

knowing assistance with respect to a

violation of any of the FTC Rules.

One of the deceptive telemarketing

acts or practices proscribed by the FTC

Rules, namely the unauthorized use of

demand drafts, specifically is addressed

by the NASD Rule and the MSRB Rule.

Both the NASD Rule and the MSRB

Rule prohibit the cold-caller from

utilizing a demand draft without the

customer’s express verifiable

authorization.16

Certain of the deceptive telemarketing

acts or practices proscribed by the FTC

Rules, namely those addressing prize

promotions and credit card laundering,

are not applicable to securities

transactions.

The remaining deceptive

telemarketing acts or practices

proscribed by the FTC Rules involve

areas already extensively regulated by

existing securities laws and regulations.

The FTC Rules that proscribe deceptive

telemarketing acts or practices primarily

(1) Require the disclosure of certain

information with respect to the goods or

services being offered, and (2) prohibit

misrepresentations with respect thereto.

However, Section 9(a) of the Exchange

Act,17 section 10(b) of the Exchange Act

and the rules promulgated thereunder,18

Sections 15(c) and 15(g) of the Exchange

Act and the rules promulgated

thereunder,19 and the related antifraud

rules of the SROs,20 extensively regulate

disclosure and prohibit

misrepresentations in connection with

the offer and sale of securities.

Therefore, the more limited regulations

addressing required disclosures and

prohibited misrepresentations set forth

in the FTC Rules and applicable to nonsecurities transactions are unnecessary

or inappropriate in the securities

context in light of the more extensive

existing regulatory framework.

3. Recordkeeping Requirements

The FTC Rules require that the

following records be kept by

telemarketers with respect to their

telemarketing activities for a period of

24 months: (1) Copies of all

substantially different advertising,

brochures, telemarketing scripts, and

promotional materials; (2) the name and

address of each customer, the product or

service purchased, the price paid, and

the date shipped or provided; (3) the

name, address, telephone number, and

job title of each current and former

employee directly involved in telephone

sales; (4) the name and address of each

recipient of a prize with a value of at

least $25, and a description of such

prize; and (5) all verifiable

authorizations required in connection

with the submission of any demand

drafts described above.

Both the NASD Rule and the MSRB

Rule require the retention of any express

verifiable authorization obtained in

connection with the use of a demand

draft for a period of three years.21 As

noted above, the FTC Rules addressing

prize promotions are not applicable to

securities transactions.

The remaining recordkeeping

requirements of the FTC Rules are

unnecessary in the securities context

given the more extensive recordkeeping

requirements imposed upon brokerdealers by the Exchange Act and

existing SRO rules. Rule 17a–3 under

the Exchange Act requires a brokerdealer to maintain certain records,

including detailed records of all

transactions in securities effected by,

and all salespersons employed by, such

broker-dealer.22 Rule 17a–4 under the

Exchange Act requires, among other

things, such records, as well as copies

of all communications sent by a brokerdealer relating to its business (which

would include advertisements and sales

literature),23 to be retained by the

broker-dealer for varying periods, but in

no case less than three years. Existing

rules of the SROs, in general, also

contain comparable recordkeeping

requirements.24
Federal Register / Vol. 62, No. 73 / Wednesday, April 16, 1997 / Notices 18669

25Rule 3a4–1 provides an exclusion from the

definition of ‘‘broker’’ for certain persons associated

with issuers of securities. Self-distributed

investment companies operate without NASD

membership pursuant to this rule. Rule 3a4–

1(a)(4)(iii) prohibits ‘‘oral solicitations’’ of

‘‘potential purchasers.’’ Investment company

personnel may respond, however, ‘‘to inquiries of

a potential purchaser in a communication initiated

by the potential purchaser in a communication

initiated by the potential purchaser’’ as long as the

response is limited to information contained in the

investment company’s prospectus.

26Rule 204–3 does not require a disclosure

statement for a ‘‘contract for impersonal advisory

services’’ involving a payment of less than $200.

Impersonal advisory services include (1) general

information or recommendations not tailored for a

specific client, and 92) statistical information that

does not make a recommendation regarding a

particular security. Neither the Division of

Investment Management nor the Office of

Compliance Inspections and Examinations is aware

of any instances in which impersonal advisory

services have been sold to consumers through

unsolicited telemarketing.

27The Commission finds that such laws and rules

provide protection from deceptive and other

abusive telemarketing acts and practices by persons

described in Section 3(d)(2) of the Telemarketing

Act substantially similar to that provided by the

FTC Rules. See Section 3(d)(1)(B)(i) of the

Telemarketing Act, 15 U.S.C. 6102(d)(1)(B)(i)

(1996).

28With respect to those FTC Rules that involve

areas already extensively regulated by existing

securities laws or regulations, or activities

inapplicable to securities transactions, the

Commission finds that the promulgation of

substantially similar rules is not necessary or

appropriate in the public interest. See Section

3(d)(1)(B)(ii) of the Telemarketing Act, 15 U.S.C.

6102(d)(1)(B)(ii) (1996).

4. Investment Companies and

Investment Advisers

Most investment company securities

are sold through registered brokerdealers that are required by the

Exchange Act to be members of the

NASD and are subject to NASD rules.

Separate rulemaking under the

Investment Company Act of 1940

covering the telemarketing of

investment company securities by

NASD members would be largely

duplicative of the NASD Rule and

would not provide additional

protections to consumers.

A small minority of investment

companies are ‘‘self-distributed’’ (i.e.,

the investment company sells its share

to the public directly and not through a

registered broker-dealer). The sale of

these companies’ securities are not

covered by NASD rules. Under

Exchange Act Rule 3a4–1, however,

unsolicited telemarketing by selfdistributed investment companies

generally is prohibited.25 Because

telemarketing by self-distributed

investment companies is already

restricted by Rule 3a4–1, additional

rulemaking appears unnecessary.

Investment advisers infrequently

employ telemarketing to obtain advisory

clients. Unlike the sale of a single

security or other products and services,

the service provided by an investment

adviser typically involves an ongoing

personal relationship that cannot easily

be established over the telephone.

Moreover, the Advisers Act and

Commission rules thereunder provide

procedural safeguards that have the

effect of deterring abusive telemarketing

by advisers. For example, Rule 204–3

generally requires a registered

investment adviser to provide to a

prospective client a written disclosure

statement containing specified

information concerning its personnel,

investment strategies and methods, the

services provided and the fees charged

(1) At least 48 hours before entering into

an investment advisory contract, or (2)

At the time the contract is entered into,

if the client has the right to terminate

the contract without penalty within five

business days.26

Unsolicited telemarketing is not,

however, prohibited by the Advisers Act

or the rules thereunder. Although the

Commission does not believe that

specific rules are warranted at this time,

it will monitor the implementation and

effectiveness of the NASD Rule and

consider whether similar rules are

necessary to deter the development of

abusive telemarketing practices by the

investment advisory industry.

C. Conclusion

The Commission finds that the NASD

Rule and MSRB Rule, together with the

Exchange Act and the Advisers Act, the

rules thereunder, and the other rules of

the SROs, satisfy the requirements of the

Telemarketing Act, because the

applicable provisions of such laws and

rules are substantially similar to the

FTC Rules,27 except for those FTC Rules

that involve areas already extensively

regulated by existing securities laws or

regulations or activities inapplicable to

securities transactions.28 Accordingly,

the Commission has determined that no

additional rulemaking is required by it

under the Telemarketing Act.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–9712 Filed 4–15–97; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

[Summary Notice No. PE–97–20]

Petitions for Exemption; Summary of

Petitions Received; Dispositions of

Petitions Issued

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of petitions for

exemption received and of dispositions

of prior petitions.

SUMMARY: Pursuant to FAA’s rulemaking

provisions governing the application,

processing, and disposition of petitions

for exemption (14 CFR Part 11), this

notice contains a summary of certain

petitions seeking relief from specified

requirements of the Federal Aviation

Regulations (14 CFR Chapter I),

dispositions of certain petitions

previously received, and corrections.

The purpose of this notice is to improve

the public’s awareness of, and

participation in, this aspect of FAA’s

regulatory activities. Neither publication

of this notice nor the inclusion or

omission of information in the summary

is intended to affect the legal status of

any petition or its final disposition.

DATES: Comments on petitions received

must identify the petition docket

number involved and must be received

on or before April 24, 1997.

ADDRESSES: Send comments on any

petition in triplicate to: Federal

Aviation Administration, Office of the

Chief Counsel, Attn: Rule docket (AGC–

200), Petition Docket No. 28890, 800

Independence Avenue, SW.,

Washington, D.C. 20591.

Comments may also be sent

electronically to the following internet

address: 9–NPRM–CMNTS@faa.dot.gov.

The petition, any comments received,

and a copy of any final disposition are

filed in the assigned regulatory docket

and are available for examination in the

Rules Docket (AGC–200), Room 915G,

FAA Headquarters Building (FOB 10A),

800 Independence Avenue, SW.,

Washington, D.C. 20591; telephone

(202) 267–3132.

FOR FURTHER INFORMATION CONTACT: Fred

Haynes (202) 267–3939 or Angela

Anderson (202) 267–9681 Office of

Rulemaking (ARM–1), Federal Aviation

Administration, 800 Independence

Avenue, SW., Washington, DC 20591.

This notice is published pursuant to

paragraphs (c), (e), and (g) of § 11.27 of

Part 11 of the Federal Aviation

Regulations (14 CFR Part 11).