33750 Federal Register / Vol. 63, No. 118 / Friday, June 19, 1998 / Notices

22 15 U.S.C. 78s(b)(2).

23 17 CFR 200.30–3(a)(12) (1994).

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

2The Commission has modified the text of the

summaries prepared by NSCC.

3Proposed Addendum T sets forth three

categories where changes may warrant

reconsideration: (1) material changes in ownership,

control of management, (2) material changes in

business lines, including but not limited to, new

business lines undertaken, or (3) participation as a

defendant in litigation which could reasonably have

a direct negative impact on the participant’s

business. Proposed Addendum T states that these

categories are listed as examples and should not be

viewed as exclusive in the process.

with the Act. Persons making written

submissions 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 at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–NASD–98–23 and should be

submitted July 10, 1998.

IV. Conclusion

For the foregoing reasons, the

Commission finds that NASD

Regulation’s proposal, as amended, is

consistent with the requirements of the

Act and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,22 that the

proposed rule change (SR–NASD–98–

23) is approved, as amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.23

Jonathan G. Katz,

Secretary.

[FR Doc. 98–16351 Filed 6–18–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40086; File No. SR–NSCC–

98–4]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of a

Proposed Rule Change Adopting an

Interpretation of the Board of Directors

Regarding NSCC’s Obligation to

Continuously Review Participants to

Determine if Participants Are Required

to Reapply for Membership Due to a

Material Change in Conditions

June 12, 1998.

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

Securities Exchange Act of 1934

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

April 24, 1998, the National Securities

Clearing Corporation (‘‘NSCC’’) filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change (File No. SR–

NSCC–98–4) as described in Items I, II,

and II below, which items have been

prepare 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 would add

Addendum T to NSCC’s Rules and

Procedures regarding NSCC’s obligation

to continuously review participants to

determine if they are required to reapply

for membership due to a material

change in conditions. A copy of

proposed Addendum T is attached as

Exhibit A to the rule filing.

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

Under the proposed rule change,

NSCC will be permitted to (i) reexamine

a participant who has undergone a

material change in circumstances,3 (ii)

reconsider the participant’s continuing

status as a participant as if such entity

was initially applying for membership

when conditions originally in existence

at the time a participant was accepted

for membership have materially

changed, and (iii) require the participant

to satisfy any concerns NSCC may have

as to the participant’s ongoing

membership in NSCC as part of such

reevaluation. In addition, Addendum T

explicitly states that participants have

the affirmative obligation to advise

NSCC if such material change occurs.

Under the Act and the rules and

regulations thereunder, NSCC is

obligated to safeguard securities and

funds in the possession and control.

NSCC believes that this obligation,

coupled with the fact that NSCC is the

guarantor of participants’ transaction

submitted to it for clearance and

settlement, require that NSCC have

flexibility to consider material changes

pertaining to such participants and have

the ability to take appropriate steps in

light of such changes.

When a material change occurs with

respect to an existing participant’s

ownership, control or management, mix

of business, use of third party service

provides, or regulatory history, among

other areas, NSCC is faced with a

different risk perspective than that

which it faced at the time it approved

such participant’s application for

membership. The NSCC board has

concluded that it is in the best interests

of NSCC and its membership as a whole

that NSCC address these types of

changes, including the ability to require

the participants to reapply for

membership, as if the participant was

not already a participant.

NSCC believes that participants

change their business mix as their focus

in the financial industry change.

According to NSCC, enter new

businesses, discontinue old ones,

change management, change risk

policies, or take other actions or steps

which could result in an entirely

different entity (other than changing the

corporate name of such entity) from the

one which was approved for NSCC

membership. NSCC believes that if it

did not have the ability to continually

reexamine participants’ status, the

purpose behind scrutinizing

applications and the comfort level

provided by such process, would be

undermined.

NSCC believes that the proposed rule

change is consistent with the

requirements of the Act and the rules

and regulations thereunder because it

will clarify the rules of NSCC relating to

the continuing standards required for

membership and NSCC’s obligation to

safeguard securities and fund within its

control.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will impact or

impose a burden on competition that is
Federal Register / Vol. 63, No. 118 / Friday, June 19, 1998 / Notices 33751

4 17 CFR 200.30–3(a)(12).

not necessary to 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

No written comments have been

solicited or received. NSCC will notify

the Commission of any written

comments received by NSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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

ninety 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 NSCC 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, 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of NSCC. All submissions should

refer to File No. SR–NSCC–98–3 and

should be submitted by July 10, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.4

Jonathan G. Katz,

Secretary.

BILLING CODE 8010–01–M
33752 Federal Register / Vol. 63, No. 118 / Friday, June 19, 1998 / Notices
Federal Register / Vol. 63, No. 118 / Friday, June 19, 1998 / Notices 33753

[FR Doc. 98–16350 Filed 6–18–98; 8:45 am]

BILLING CODE 8010–01–C