Federal Register / Vol. 63, No. 123 / Friday, June 26, 1998 / Notices 34951

to Heidi Pilpel, Special Counsel, Division of Market

Regulation, on May 12, 1998.

10 15 U.S.C. 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Section 15C of the Act, 15 U.S.C. 78o–5, governs

the registration of government securities broker/

dealers. Since 1986, when Section 15C was adopted

as part of the Government Securities Act,

government securities broker/dealers have been

required to become members of an exchange or the

NASD.

4Section 15B of the Act, 15 U.S.C. 78o–4, governs

the registration of municipal securities dealers.

Municipal securities dealers are not required to

become members of an exchange or the NASD.

Nevertheless, some NASD members which are

engaged in a general securities business are

registered as municipal securities dealers, and some

firms which are exclusively municipal securities

dealers have become members of the NASD.

5The NASD previously asked claimants in these

cases if they wanted the claim referred to the

Municipal Securities Rulemaking Board (‘‘MSRB’’)

for arbitration. However, the Commission recently

approved an MSRB proposed rule change

terminating the MSRB’s arbitration program and

requiring the financial institutions that are subject

to its rules to submit to arbitration in the NASD’s

forum as if they were NASD members. See

Securities Exchange Act Release No. 39378

(December 1, 1997), 62 FR 64417 (December 5,

1997). The Commission believes that compelling

NASD members to arbitrate municipal securities

claims would be consistent with the intent of the

MSRB’s rule filing eliminating its arbitration

program and sending its arbitration cases to the

NASD. The Commission notes that NASD members

engaged in municipal securities transactions

already are required to arbitrate their claims

because they are either general securities broker/

dealers that are otherwise required to arbitrate all

of their other claims, or because they voluntarily

became NASD members. The Commission notes

that this filing does not affect the arbitration of

municipal securities.

6The NASD is still barred from establishing

regulations covering the municipal securities

activities of broker/dealers; that authority is

reserved to the MSRB.

the proposed rule change permits the

approval of research reports by a

supervisory analyst approved pursuant

to NYSE Rule 344 in limited

circumstances and according to

standards comparable to current NASD

requirements, the Commission believes

that the proposed rule change preserves

the investor protection goals of the

NASD principal review requirement

rules and eliminates duplicative

regulatory requirements.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 10 that the

proposed rule change (SR–NASD–98–

28) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17080 Filed 6–25–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40103; File No. SR–NASD–

98–04]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Granting Approval

to Proposed Rule Change Relating to

Mandatory Arbitration of Claims

Involving Exempted Securities.

June 19, 1998.

I. Introduction

On January 27, 1998, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) submitted

to the Securities and Exchange

Commission (‘‘Commission’’), pursuant

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule

19b–4 thereunder,2 a proposed rule

change to amend the interpretation of

the NASD’s Code of Arbitration

Procedure (‘‘Code’’) such that all claims

relating to transactions in exempted

securities, including government and

municipal securities, may be submitted

to the Office of Dispute Resolution

(‘‘Office’’) for arbitration under the Code

without limitation. Accordingly, when

such claims arise involving public

customers, Rule 10301 of the code will

require member firms and associated

persons to arbitrate them at the request

of the customer. In addition, when such

claims arise between members and other

members or associated persons, Rule

10201 (which governs intra-industry

disputes) will require them to be

arbitrated at the request of one of the

parties. Finally, when such claims arise

between a member firm and a customer,

customers can be required under the

terms of a predispute arbitration

agreement to arbitrate the claims.

Notice of the proposed rule change,

together with the substance of the

proposal, was published for comment in

Securities Exchange Act Release No.

39880 (April 16, 1998), 63 FR 20230

(April 23, 1998). No comments were

received on the proposal.

II. Description

Since at least 1989, the Office had

declined to accept claims for mandatory

arbitration involving transactions in

government securities naming member

firms that were registered solely under

Section 15C of the Act as government

securities broker/dealers.3 By contrast, if

a claim involves a government securities

transaction by a general securities

broker/dealer member firm, the Office

will accept the claim for mandatory

arbitration. If the claim involves a

municipal securities transaction by a

member firm,4 the Office will accept the

claim for arbitration.5 In addition, the

Office will accept claims where both

parties agree to submit the claim to

arbitration.

Rule 10101 of the Code provides that

disputes ‘‘arising out of or in connection

with the business of any member’’ are

eligible for submission to arbitration

under the Code. The definition of

‘‘investment banking or securities

business’’ in Article I, paragraph (l) of

the By-Laws means ‘‘the business

carried on by a broker, dealer, or

municipal securities dealer * * *.’’

Rule 10301(a) provides that eligible

disputes ‘‘arising in connection with the

business of [a] member or in connection

with the activities of [an] associated

person’’ must be arbitrated pursuant to

any enforceable arbitration agreement or

upon the demand of a customer. While

these rules (and the definition) sweep in

a very broad range of disputes, Rule

10301(b) permits the Office to decline to

arbitrate certain matters.

In reliance on Rule 10301(b), and the

NASD’s limited regulatory jurisdiction

over government securities-only

member firms the Office has for many

years declined to accept for arbitration

claims that involved transactions in

government securities by member firms

engaged only in activities involving

government securities unless both

parties voluntarily agreed to submit the

claim. The Office’s position means that

these claims cannot be compelled into

arbitration under either a demand for

arbitration or a presidpute arbitration

agreement. The Office’s decision to

decline to mandate arbitration of

government securities claims was based

on the following rationale: (1) the NASD

only regulated the exempted securities

activities of member firms to the limited

extent permitted in Section 15A(f)(2) of

the Act; and, (2) the subject matter

jurisdiction of the arbitration forum

should not be significantly different

from the NASD’s regulatory jurisdiction

over its members and associated

persons.

In response to the passage of the

Government Securities Act

Amendments of 1993, which amended

Section 15A(f)(2) of the Act and granted

the NASD the authority to regulate

broadly the business practices of

members with respect to government

securities,6 NASD Regulation amended

its rules to consolidate the Government

Securities Rules it had adopted

pursuant to Section 15A(f)(2) of the Act

with its more generally applicable
34952 Federal Register / Vol. 63, No. 123 / Friday, June 26, 1998 / Notices

7NASD Regulation notes that few government

securities claims involving public customers have

been filed or attempted to be filed with the Office.

Most of the claims involving government securities

have involved member-to-member claims.

8NASD Regulation proposed an amendment to

Rule 10304, rule filing SR–NASD–97–44, pending

approval with the SEC. Under the proposed rule

change all claims are presumed to be eligible;

however, the presumption could be overcome if the

respondent challenges the claim on the basis that

more than six years have elapsed since the act or

occurrence giving rise to the claim.

9 15 U.S.C. 78o–3.

10 In Notice to Members 96–66, published in

October 1996, the NASD announced the

consolidation of its Government Securities Rules

into the Conduct Rules, ending the regulatory

distinction between the activities of general

securities broker/dealers and government securities

broker/dealers. See Securities Exchange Act Release

No. 37588 (August 20, 1996) 61 FR 44100 (August

27, 1996).

11As noted above, general securities broker/

dealers are already required to arbitrate all their

claims, including those involving government

securities.

12As required by Section 19(b)(5) of the Act, the

Commission has consulted with the Treasury

Department on this proposal.

13 15 U.S.C. 78s(b)(2).

14 17 CFR 200.30–3(a)(12).

Conduct Rules. NASD Regulation now

regulates the activities of members

engaged in government securities

activities that are both general securities

broker/dealers and limited purpose

government securities broker/dealers.

Under the new policy, a member that

is registered solely as a government

securities broker/dealer and that has a

dispute with a customer over a

transaction in exempted securities shall

be required to submit the dispute to

arbitration upon the demand of the

customer.7 Such disputes also may be

compelled to arbitration pursuant to a

valid predispute arbitration agreement.

Intra-industry disputes involving

exempted securities also will be subject

to mandatory arbitration upon the

request of one of the parties.

NASD Regulation also believes the

policy should permit any claim

involving exempted securities to be

submitted for arbitration without regard

to when the transaction occurred;

however, if more than six years have

elapsed from the transaction,

occurrence, or event giving rise to the

claim, under Rule 10304 of the Code,

the claim will not be eligible for

submission to arbitration.8 All claims

involving general securities broker/

dealers will continue to be accepted for

arbitration consistent with past practice.

Claims previously submitted that the

Office has already declined to arbitrate

under the old policy cannot be

resubmitted under the new policy.

III. Discussion

The Commission believes that the

proposed rule change is consistent with

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

the Act 9 in that eliminating a barrier to

the arbitration of disputes involving

exempted securities will allow public

customers and members access to the

arbitration forum for the resolution of

such disputes. The Commission believes

it is reasonable, given the broadening of

NASD Regulation’s regulatory

jurisdiction over government securities

and the recent adoption of amendments

to the NASD’s rules in recognition of the

broader jurisdiction,10 for NASD

Regulation to amend its arbitration

policy to include claims involving

government securities by members

engaged exclusively in exempted

securities activities 11 within the scope

of those claims that are subject to

mandatory arbitration under the Code.12

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,13 that the

proposed rule change (SR–NASD–98–

04) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17083 Filed 6–25–98; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF STATE

[Public Notice #2843]

Determination on Export-Import Bank

Support for the Sale to Venezuela of

Defense Articles or Services To Be

Used Primarily for Counter-Narcotics

Purposes

Pursuant to section 2(b)(6) of the

Export-Import Bank Act of 1945, as

amended, and Executive Order 11958 of

January 18, 1977, as amended by

Executive Order 12680 of July 5, 1989,

I hereby determine that:

(1) The defense articles and services

for which the Government of Venezuela

has requested Export-Import Bank

financial guarantees, parts and services

for the refurbishment of seventeen (17)

OV–10 aircraft, are being sold primarily

for anti-narcotics purposes;

(2) the sale of such defense articles

and services would be in the national

interest of the United States;

(3) The requirement for a

determination that the Government of

Venezuela has complied with all

restrictions imposed by the United

States on the end-use of defense articles

or services for which the Export-Import

Bank has provided guarantees or

insurance under section 2(b)(6) of the

Export-Import Bank Act is inapplicable

because the pending financing will be

the first Ex-Im Bank transaction with

Venezuela made under section 2(b)(6) of

the Act;

(4) the requirement for a

determination that the Government of

Venezuela has not used defense articles

or services for which the Export-Import

Bank has provided guarantees or

insurance under section 2(b)(6) of the

Export-Import Bank Act to engage in a

consistent pattern of gross violations of

internationally recognized human rights

is inapplicable because the pending

transaction will be the first Ex-Im Bank

transaction with Venezuela made under

section 2(b)(6) of the Act.

The determination shall be reported

to Congress and shall be published in

the Federal Register.

Dated: June 12, 1998.

Strobe Talbott,

Acting Secretary of State.

[FR Doc. 98–17021 Filed 6–25–98; 8:45 am]

BILLING CODE 4710–19–M

DEPARTMENT OF STATE

[Public Notice No. 2842]

United States International

Telecommunications Advisory

Committee (ITAC) Development Sector

(ITAC–D); Notice of Meeting

The Department of State announces a

meeting, under the International

Telecommunications Advisory

Committee (ITAC), of Study Groups 1

and 2 of the Telecommunications

Development Sector (ITAC–D). The

meeting will be held on Wednesday,

July 8, 1998, 10:00 a.m.–12:00 noon, in

Room 1207 of the Department of State,

2201 ‘‘C’’ Street, NW., Washington, DC.

The purpose of ITAC is to advise the

Department on policy, technical and

operational matters and to provide

strategic planning recommendations,

with respect to international

telecommunications and information

issues. The purpose of this meeting is to

develop U.S. positions for the upcoming

ITU–D meetings. The meeting agenda

will include preparation for planned

ITU–D meetings of Study Group 1

(Telecommunications & Development

Strategies and Policies) and Study

Group 2 (Development, Harmonization,

Management and Maintenance of

Telecommunication Networks and

Services, including Spectrum

Management). Questions regarding the

agenda or ITAC–D Sector activities in

general may be directed to Doreen