Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31255

2Securities and Exchange Act Release No. 39641

(February 10, 1998), 63 FR 8241 (February 18,

1998). Nasdaq’s current reduced fee structure was

approved for a 90-day trial period, commencing the

day that proposal was published in the Federal

Register and would lapse on May 18, 1998, if not

extended by this filing.

3 15 U.S.C. 78o–3(b)(5).

4 15 U.S.C. 78s(b)(3)(A) and 17 CFR 240.19b–

4(e)(2).

5 In reviewing the proposal, the Commission has

considered the proposal’s impact on efficiency,

competition, and capital formation. see 15 U.S.C.

78c(f).

6 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) (1994).

2 17 CFR 240.19b–4 (1997).

3This proposal rule change replaces proposed

rule change File No. SR–NASD–98–30 which has

been withdrawn. Letter from John M. Ramsay, Vice

President and Deputy General Counsel, NASD

Regulation, to Katherine A. England, Assistant

Director, Division of Market Regulation, SEC, dated

May 7, 1998. The proposed rule change was

originally filed on May 7, 1998, but required a

technical amendment to clarify the effective date.

Letter from John M. Ransay, Vice President and

Deputy General Counsel, NASD Regulation to

Katherine A. England, Assistant Director, Division

of Market Regulation, SEC, dated May 14, 1998.

4Pub. L. No. 104–290, 110 Stat. 3416 (1996).

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

Nasdaq is proposing to extend its

current SelectNet fees. The reasons for

Nasdaq’s prevailing SelectNet fee

structure were fully explained in its

original fee structure proposal filed with

the Commission in February of this

year.2 Since then, SelectNet usage has

continued at significantly elevated

levels, averaging over 100,000 daily

executions in both February and March

of 1998. As such, Nasdaq believes that

an extension of these reduced fees,

through August 31, 1998, is warranted.

Under the proposed extension,

SelectNet fees would continue to be

assessed in the following manner: (1)

$1.00 will be charged for each SelectNet

order entered and directed to one

particular market participant that is

subsequently executed in whole or in

part; (2) no fee will be charged to a

member who receives and executes a

directed SelectNet order; (3) the existing

$2.50 fee will remain in effect for both

sides of executed SelectNet orders that

result from broadcast messages; and (4)

a $0.25 fee will remain in effect for any

member who cancels a SelectNet order.

Nasdaq will continue to monitor and

review SelectNet activity to determine if

future changes to its SelectNet fee

structure are appropriate. If no further

action is taken, SelectNet fees will

revert to their original $2.50 per-side

level on September 1, 1998.

For the reason set forth above, Nasdaq

believes that the proposed rule change

is consistent with Section 15A(b)(5) of

the Act,3 which requires that the rules

of the NASD provide for the equitable

allocation of reasonable dues, fees and

other charges among members and

issuers and other persons using any

facility or system which the NASD

operates or controls.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the proposed

rule change will not result in 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

Comments were neither solicited or

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

This filing applies to the assessment

of SelectNet fees to NASD members, and

thus the proposed rule change is

effective immediately upon filing

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

Act and subparagraph (e)(2) of Rule

19b–4 thereunder 4 because the proposal

is establishing or changing a due, fee or

other charge. At any time within 60

days of the proposed 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.5

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposal 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 such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to the File No.

SR–NASD–98–37 and should be

submitted by June 29, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15078 Filed 6–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40048; File No. SR–NASD–

98–35]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change of Proposed Rule Change

by National Association of Securities

Dealers., Inc, Concerning Books and

Records Requirements

May 29, 1998.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 2 thereunder,

notice is hereby given that on May 14,

1998, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

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

(‘‘NASD Regulation’’).3 The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons and to grant

accelerated approval of the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend Rule 3110 (the ‘‘Books and

Records Rule’’) of the Conduct Rules of

the NASD to: (1) amend the definition

of ‘‘institutional account’’ to include the

accounts of investment advisers that

under the National Securities Markets

Improvements Act of 1996 4 and new

rules adopted by the SEC, are now
31256 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

5Pub. L. 104–290, 110 Stat. 3416 (1996). 6 15 U.S.C. 80b (1994).

required to register with the states; and

(2) exclude certain customer accounts

from the requirement to obtain certain

tax and employment information from

the customer. Below is the text of the

proposed rule change. Proposed new

language is italicized; proposed

deletions are bracketed.

3100. BOOKS AND RECORDS, AND

FINANCIAL CONDITION

3110. Books and Records

(a) Requirements

Each member shall keep and preserve

books, accounts, records, memoranda,

and correspondence in conformity with

all applicable laws, rules, regulations

and statements of policy promulgated

thereunder and with the Rules of this

statements of policy promulgated

thereunder and with the Rules of this

Association.

* * * * *

(c) Customer Account Information

Each member shall maintain accounts

opened after January 1, 1991 as follows:

(1) for each account, each member

shall maintain the following

information:

(A) customer’s name and residence;

(B) whether customer is of legal age;

(C) signature of the registered

representative introducing the account

and signature of the member or partner,

officer, or manager who accepts the

account; and

(D) if the customer is a corporation,

partnership, or other legal entity, the

names of any persons authorized to

transact business on behalf of the entity;

(2) for each account, other than an

institutional account, and accounts in

which investments are limited to

transactions in [money market funds]

open-end investment company shares

that are not recommended by the

member or its associated persons, each

member shall also make reasonable

efforts to obtain, prior to the settlement

of the initial transaction in the account,

the following information to the extent

it is applicable to the account:

(A) customer’s tax identification or

Social Security number;

(B) occupation of customer and name

and address of employer; and

(C) whether customer is an associated

person of another member;

(3) for discretionary accounts, in

addition to compliance with

subparagraphs (1) and (2) above, and

Rule 2510(b) of these Rules, the member

shall:

(A) obtain the signature of each

person authorized to exercise discretion

in the account;

(B) record the date such discretion is

granted; and

(C) in connection with exempted

securities other than municipals, record

the age or approximate age of the

customer; and

(4) for purposes of this Rule and Rule

2310 the term ‘‘institutional account’’

shall mean the account of:

(A) a bank, savings and loan

association, insurance company, or

registered investment company;

(B) an investment adviser registered

either with the Securities and Exchange

Commission under Section 203 of the

Investment Advisers Act of 1940 or with

a state securities commission (or any

agency or office performing like

functions); or

(C) any other entity (whether a natural

person, corporation, partnership, trust

or otherwise) with total assets of at least

$50 million.

* * * * *

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

NASD 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. NASD Regulation 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. Background

The Books and Records Rule requires

members to obtain certain information

for all accounts. In addition, the Rule

requires that for accounts other than

institutional accounts and accounts

limited to money market funds members

must make reasonable attempts to

obtain: (i) a customer’s tax identification

or social security number; (ii) a

customer’s occupation and the name

and address of the employer; and (iii)

information about whether the customer

is an associated person of another

member (‘‘Retail Customer

Information’’). An ‘‘institutional

account’’ is defined in the Rule to

include the account of an investment

adviser registered with the SEC.

a. Accounts of Registered Investment

Advisers. The National Securities

Markets Improvement Act of 1996 5 and

new rules recently adopted by the SEC

under the Investment Advisers Act of

1940 (‘‘Advisers Act’’) 6 allocate

regulatory oversight of investment

advisers between the SEC and the states.

Under the new rules, investment

advisers to registered investment

companies and investment advisers

with assets under management of at

least $25 million generally will register

exclusively with the SEC. Most other

investment advisers will register

exclusively with the states.

The Books and Records Rule provides

that for purposes of both the Books and

Records Rule and NASD Conduct Rule

2310 (‘‘Suitability Rule’’), the term

‘‘institutional account’’ includes the

account of an investment adviser

registered with the SEC.

Consequently, advisory accounts that

were considered to be ‘‘institutional

accounts’’ when the Retail Customer

Information provision in the Books and

Records Rule was adopted now are

technically excluded from the definition

because they have migrated to state

regulation.

b. Accounts Limited to Mutual Fund

Shares. At its meeting on February 23,

1998, the Investment Companies

Committee, a standing committee of the

NASD Regulation Board of Directors,

considered a proposal by the NASD

Regulation staff to amend the Books and

Records Rule to exclude directly

marketed mutual funds from the

obligation to obtain Retail Customer

Information. The Committee concurred

with the NASD Regulation staff’s

conclusion that the requirement to

obtain Retail Customer Information is

burdensome and largely unnecessary as

it applies to members who distribute

directly marketed mutual funds and

other unsolicited accounts that are

limited to mutual fund shares and for

which no recommendations are made. A

primary purpose of obtaining Retail

Customer Information is to help a

member evaluate the suitability of a

recommendation. Consequently, the

same regulatory requirement does not

apply with respect to accounts that are

limited to mutual funds and for which

no recommendations are made.

Members would continue to be required

to make reasonable efforts to obtain

Retail Customer Information for retail

accounts that are not subject to these

limitations. At its meeting on March 19,

1998, the NASD Regulation Board of

Directors approved proposed changes to

amend NASD Conduct Rule 3110 and

authorized the filing of the proposed

rule change with the SEC.
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31257

7 If a customer refuses to provide tax

identification, IRS rules require a fund to withhold

31% of all redemptions or distributions.

8 In reviewing this proposal, the Commission has

considered the proposed rule change’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

2. Purpose

a. Institutional Account Definition.

The Books and Records Rule requires

members to maintain certain

information for all retail and

institutional customer accounts. For

retail accounts that are not limited to

money market funds, members also

must make reasonable efforts to obtain

Retail Customer Information. Members

do not have to seek this information

with respect to their institutional

accounts.

Similarly, the Suitability Rule

requires members to make reasonable

efforts to obtain certain information,

such as the customer’s financial status

and investment objectives, from retail

customers prior to the execution of a

transaction. IM–2310–3 describes

members’ suitability obligation in

making recommendations to

institutional customers. The primary

considerations under IM–2310–3

include the customer’s capability to

evaluate risk independently and the

extent to which individual judgment is

exercised when making investment

decisions.

The proposed rule change would

continue to treat the state-regulated

advisory accounts as ‘‘institutional

accounts’’ for purposes of the Books and

Records Rule and the Suitability Rule.

The proposed rule change also would

amend the Books and Records Rule to

take into account the bifurcation of

investment advisers regulation between

the SEC and the states by changing the

definition of ‘‘institutional account’’ to

include both investment advisers

required to register with the SEC and

those required to register with the states.

b. Accounts Limited to Transactions

in Mutual Fund Shares. The

requirement in the Books and Records

Rule to obtain customer employment

information was designed to assist

members in making suitable

recommendations. This information is

unnecessary for those accounts that are

limited to mutual fund transactions that

are not recommended by the member or

its associated persons. With regard to

the requirement in the Books and

Records Rule to obtain a customer’s tax

identification or social security number,

the tax laws already impose obligations

on funds to obtain this information.7

Finally, the requirement to determine

whether a customer is an associated

person of another member also is

unnecessary because NASD Conduct

Rule 3050, which provides the

obligations of executing members when

the member knows that a person

associated with an employing member

has an interest in an account, expressly

excludes accounts that are limited to

transactions in mutual fund shares.

Of course members would be free to

request Retail Customer Information

from their customers to meet any other

regulatory obligations that may exist.

3. Basis

NASD Regulations believes that the

proposed rule change is consistent with

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

the Act, which require, among other

things, that the Association’s rules be

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, remove impediments to and

perfect the mechanism of a free and

open market, and, in general, to protect

investors and the public interest. NASD

Regulation believes the proposed

amendments to the Books and Records

Rule that eliminate requirements to

obtain Retail Customer Information for

institutional accounts and accounts that

are limited to mutual fund shares and

for which no recommendations are

made are consistent with these

principles.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the proposed

rule change will not result in 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

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

NASD Regulation has requested that

the Commission find good cause

pursuant to Section 19(b)(2) for

approving the proposed rule change

prior to the 30th day after publication in

the Federal Register.

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.8

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 this filing will also be

available for inspection and copying at

the NASD. All submissions should refer

to File No. SR–NASD–98–35 and should

be submitted June 29, 1998.

V. Commission’s Findings and Order

Granting Accelerated Approval of the

Proposed Rule Change

The Commission finds that the

proposed rule change is consistent with

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

the Act and the rules and regulations

thereunder which require, among other

things, that the Association’s rules be

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities, to

remove impediments to and perfect the

mechanism of a free and open market,

and, in general, to protect investors and

the public interest. The Commission

believes that the proposed rule change

is consistent with the Act in that the

proposed rule change protects investors

and the public interest by preserving the

current operation of the Books and

Records Rule with respect to

institutional accounts registered with

the states. The proposed rule change

also facilitates transactions in securities

by eliminating requirements to obtain

Retail Customer Information for

institutional accounts and accounts that

are limited to mutual fund shares for

which no recommendations are made.

The Commission also finds good

cause for approving the proposed rule

change prior to the 30th day after

publication of notice of filing thereof to

ensure that the proposed rule change

appropriately preserves the current

operation of the Books and Records Rule

and the Suitability Rule with respect to

institutional accounts. The Commission

believes, therefore, that granting

accelerated approval of the proposed
31258 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

9 17 CFR 200.30–3(a)(12) (1997).

rule change is appropriate and

consistent with the Act.

It is therefore ordered, pursuant to

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

proposed rule change, SR–NASD–97–35

be, and hereby is, approved on an

accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15079 Filed 6–5–98; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3082]

State of Kentucky; (Amendment #2)

In accordance with a notice from the

Federal Emergency Management Agency

dated May 13, 1998, the abovenumbered Declaration is hereby

amended to include Pike County in the

State of Kentucky as a disaster area due

to damages caused by severe storms,

tornadoes, and flooding beginning on

April 16, 1998 and continuing through

May 10, 1998.

In addition, applications for economic

injury loans from small businesses

located in the following contiguous

counties may be filed until the specified

date at the previously designated

location: McDowell and Mingo Counties

in West Virginia, and Buchanon,

Dickenson, and Wise Counties in

Virginia. Any counties contiguous to the

above-name primary county and not

listed herein have been previously

declared.

All other information remains the

same, i.e., the deadline for filing

applications for physical damage is June

28, 1998 and for economic injury the

termination date is January 29, 1999.

The economic injury number for West

Virginia is 987600 and for Virginia the

economic injury number is 987700.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: May 21, 1998.

Bernard Kulik,

Associate Administrator for Disaster

Assistance.

[FR Doc. 98–15170 Filed 6–5–98; 8:45 am]

BILLING CODE 8025–01–U

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3078]

State of Tennessee; (Amendment #3)

In accordance with a notice from the

Federal Emergency Management Agency

dated May 18, 1998, the abovenumbered Declaration is hereby

amended to establish the incident

period for this disaster as beginning on

April 16, 1998 and continuing through

May 18, 1998.

All other information remains the

same, i.e., the deadline for filing

applications for physical damage is June

19, 1998 and for economic injury the

termination date is January 20, 1999.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: May 21, 1998.

Bernard Kulik,

Associate Administrator for Disaster

Assistance.

[FR Doc. 98–15169 Filed 6–5–98; 8:45 am]

BILLING CODE 8025–01–U

DEPARTMENT OF TRANSPORTATION

Aviation Proceedings, Agreements

Filed During the Week Ending May 29,

1998

The following Agreements were filed

with the Department of Transportation

under the provisions of 49 U.S.C.

Sections 412 and 414. Answers may be

filed within 21 days of date of filing.

Docket Number: OST–98–3889.

Date Filed: May 28, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC12 Telex Mail Vote 942,

Zimbabwe-US/Canada/Mexico fare

adjustment, r1-First/Intermediate fares,

r2-Normal economy/special fares,

Intended effective date: July 1, 1998.

Docket Number: OST–98–3890.

Date Filed: May 28, 1998.

Parties: Members of the International

Air Transport Association.

Subject: COMP Telex Mail Vote 941

Reso 010L, Zimbabwe fares—(excluding

US/Canada/Mexico), Intended effective

date: July 1, 1998.

Dorothy W. Walker.

Federal Register Liaison.

[FR Doc. 98–15151 Filed 6–5–98; 8:45 am]

BILLING CODE 4910–62–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

[USCG–1998–3897]

Merchant Marine Personnel Advisory

Committee; Vacancies

AGENCY: Coast Guard, DOT.

ACTION: Request for applications.

SUMMARY: The Coast Guard seeks

applications for appointment to

membership on the Merchant Marine

Personnel Advisory Committee

(MERPAC). MERPAC provides advice

and makes recommendations to the

Coast Guard on matters related to the

training, qualification, licensing,

certification, and fitness of seamen

serving in the U.S. merchant marine.

DATES: Applications must reach the

Coast Guard on or before August 1,

1998.

ADDRESSES: You may request an

application form by writing to

Commandant (G–MSO–1), U.S. Coast

Guard, 2100 Second Street, SW.,

Washington, DC 20593–0001; by calling

202–267–0229; or by faxing 202–267–

4570. Submit application forms to the

same address. This notice is available

on the Internet at http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT:

For questions on this notice, contact

Commander Steven J. Boyle, Executive

Director of MERPAC, or Mr. Mark C.

Gould, Assistant to the Executive

Director, telephone 202–267–6890, fax

202–267–4570. For questions on this

docket, contact Carol Kelly, Coast Guard

Dockets Team Leader, or Paulette

Twine, Chief, Documentary Services

Division, U.S. Department of

Transportation, 202–366–9329.

SUPPLEMENTARY INFORMATION: MERPAC

is chartered under the Federal Advisory

Committee Act, 5 U.S.C. App. 2. It

provides advice and makes

recommendations to the Assistant

Commandant for Marine Safety and

Environmental Protection, on merchant

marine personnel issues such as

implementation of the International

Convention on Standards of Training,

Certification and Watchkeeping for

Seafarers, 1978, types of marine

simulation utilized in lieu of sea service

for marine licenses, and regional

examination center activities.

MERPAC meets at least twice a year,

once at Coast Guard Headquarters,

Washington, DC, and once elsewhere in

the country. Its subcommittees and

working groups may also meet to

consider specific problems as required.

The Coast Guard will consider

applications for six positions that expire