15854 Federal Register / Vol. 64, No. 62 /Thursday, April 1, 1999 / Notices

1Letter from Anthony H. Davidson, Managing

Director and General Counsel, MBSCC (March 11,

1999).

2 15 U.S.C. 78s(a).

3 15 U.S.C. 78q–1.

4 15 U.S.C. 78q–1(b).

5 15 U.S.C. 78s(a)(1).

6 17 CFR 240.17Ab2–1(c).

7Securities Exchange Act Release No. 24046

(February 2, 1987), 52 FR 4218.

8Securities Exchange Act Release Nos. 25957

(August 2, 1988), 53 FR 29537; 27079 (July 31,

1989), 54 FR 34212; 28492 (September 28, 1990), 55

FR 41148; 29751 (September 27, 1991), 56 FR

50602; 31750 (January 21, 1993), 58 FR 6424; 33348

(December 15, 1993), 58 FR 68183; 35132

(December 21, 1994), 59 FR 67743; 37372 (June 26,

1996), 61 FR 35281; 38784 (June 27, 1997) 62 FR

36587; and 39776 (March 20, 1998) 63 FR 14740.

9Securities Exchange Act Release No. 39747

(March 13, 1999), 63 FR 13712 [File No. FR–

MBSCC–97–10].

10Securities Exchange Act Release No. 41104

(December 5, 1997), 62 FR 65466 [File No. FR–

MBSCC–98–03].

11 15 U.S.C. 78q–1.

Van Kampen Small Capitalization Fund

[File No. 811–6421]

Summary: Applicant seeks an order

declaring that it has ceased to be an

investment company. On February 12,

1999, applicant made a liquidating

distribution to its sole shareholder.

Expenses of approximately $450

incurred in connection with the

liquidation were paid by Van Kampen

Investments Inc., the holding company

of applicant’s adviser.

Filing Dates: The application was

filed on March 4, 1999. Applicant has

agreed to file an amendment during the

notice period.

Applicant’s Address: 1 Parkview

Plaza, P.O. Box 5555, Oakbrook Terrace,

Illinois 60181.

The Cardinal Group [File No. 811–

7588]

Summary: Applicant seeks an order

declaring that it has ceased to be an

investment company. On September 19,

1998, applicant transferred the assets

and liabilities of its six series to

corresponding series of Fountain Square

Funds in exchange for shares of the

corresponding acquiring fund based on

net asset value. Expenses of

approximately $550,000 were incurred

in connection with the reorganization

and were paid by Fifth Third Bank, the

investment adviser to the acquiring

funds.

Filing Dates: The application was

filed on March 5, 1999. Applicant has

agreed to file an amendment during the

notice period.

Applicant’s Address: 155 East Broad

Street, Columbus, Ohio 43215.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 99–8063 Filed 3–31–99; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–41211; File No. 600–22]

Self-Regulatory Organizations; MBS

Clearing Corporation; Notice of Filing

and Order Granting Approval of

Extension of Temporary Registration

as a Clearing Agency

Marach 24, 1999.

On March 11, 1999, the MBS Clearing

Corporation (‘‘MBSCC’’) filed1 with the

Securities and Exchange Commission

(‘‘Commission’’) an application

pursuant to Section 19(a) of the

Securities Exchange Act of 1934

(‘‘Act’’)2 requesting that the Commission

grant MBSCC permanent registration as

a clearing agency under Section 17A of

the Act or in the alternative extend

MBSCC’s temporary registration until

permanent registration is granted.3

Because MBSCC’s current temporary

registration expires on March 31, 1999,

the Commission is extending MBSCC’s

temporary registration as a clearing

agency through March 31, 2000, while

the Commission completes its review of

MBSCC’s application for permanent

registration. The Commission is

publishing this notice and order to

solicit comments from interested

persons and to extend MBSCC’s

temporary registration as a clearing

agency through March 31, 2000.

On February 2, 1987, the Commission

granted MBSCC’s application for

registration as a clearing agency

pursuant to Sections 17A(b)4 and

19(a)(1)5 of the Act and Rule 17Ab2–

1(c)6 thereunder for a period of eighteen

months.7 Subsequently, the Commission

has extended MBSCC’s temporary

registration as a clearing agency several

times with the most current extension

extending MBSCC’s temporary

registration through March 31, 1999.8

As discussed in detail in the original

order granting MBSCC ’s registration,

one of the primary reasons for MBSCC’s

registration was to enable it to provide

for the safe and efficient clearance and

settlement of transactions in mortgagebacked securities. Since its original

temporary registration order, MBSCC

has implemented many improvements

and continues to work towards

enhancing the safety and efficiency of

its operations. For example, during the

past year, MBSCC modified its rules to

strengthen its processes for liquidating

open trades when MBSCC ceases to act

for a participant.9 In addition, MBSCC

increased the number of directors on its

board of directors from thirteen to

fifteen, which allows two additional

participants to be represented MBSCC’s

board.10

MBSCC has functioned effectively as

a registered clearing agency for over ten

years. Accordingly, in light of MBSCC’s

past performance and the need for

continuity of the services MBSCC

provides to its participants, the

Commission believes that it is necessary

and appropriate in the public interest

and for the prompt and accurate

clearance and settlement of securities

transactions to extend MBSCC’s

temporary registration through March

31, 2000. During this temporary

registration period, the Commission

anticipates that it will act on MBSCC’s

application for permanent registration.

Any comments received during

MBSCC’s temporary registration will be

considered in conjunction with the

Commission’s review of MBSCC’s

request for permanent registration as a

clearing agency under Section 17A of

the Act.11

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 request for

permanent registration as a clearing

agency that are filed with the

Commission, and all written

communications relating to the

extension 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, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of MBSCC. All submissions

should refer to File No. 600–22.

Conclusion

On the basis of the foregoing, the

Commission finds the extending

MBSCC’s temporary registration as a

clearing agency is consistent with the
Federal Register / Vol. 64, No. 62 /Thursday, April 1, 1999 / Notices 15855

12 15 U.S.C. 78q–1.

13 17 CFR 200.30–3(a)(50)(i).

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

2 17 CFR 240.19b-4.

3Amendment No. 1 made certain technical

changes are revised statements concerning

comments received on the draft amendment

published by the Board for comment from its

members.

4After discussion with Commission staff, the

MSRB filed Amendment No. 2 to revise the

language of Rule G–23 to address certain disclosure

and consent issues raised by the proposed rule

change.

5See Exchange Act Release No. 41053 (Feb. 12,

1999, 64 FR 8894.

6Letter from Robert E. Donovan, Executive

Director, Rhode Island Health and Educational

Building Corporation, to Secretary, SEC, dated

March 15, 1999.

7Letter from Ronald W. Smith, Senior Legal

Associate, MSRB, to Sonia Patton, Attorney, SEC,

dated March 22, 1999.

8 MSRB Manual, General Rules, Rule G–23 (CCH)

¶3611.

9See supra note 8.

10See supra note 4.

11 In reviewing this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. The

proposed rule change should improve efficiency

and competition because it prevents all municipal

securities dealers from acting as both financial

advisor and remarketing agent with respect to a new

issue of securities without first obtaining the

issuer’s consent. 15 U.S.C. 78f(b)(7).

12 15 U.S.C. 78o–4(b)(2)(C).

Act and in particular with Section 17A

of the Act.12

It is therefore ordered, pursuant to

Section 19(a) of the Act, that MBSCC’s

temporary registration as a clearing

agency (File No. 600–22) be, and hereby

is, extended through March 31, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Dos. 99–8064 Filed 3–31–99; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–41217; File No. SR–MSRB–

97–16]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Municipal Securities Rulemaking

Board Relating to Activities of

Financial Advisors

March 26, 1999.

I. Introduction

On December 23, 1997, the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB’’), submitted to the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’), 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 relating to activities of financial

advisors. The Board filed Amendments

No. 1 3 and No. 2 4 to the proposed rule

change on April 16, 1998 and January

14, 1999, respectively. The proposed

rule change, as amended, was published

for comment in the Federal Register on

February 23, 1999.5

The Commission received one

comment letter on the proposal.6 the

commenter objected to the proposed

rule change because it does not require

the financial advisor to inform the

issuer of its intent to act as remarketing

agent on an issue of securities prior to

beginning work on that issue. In

response, the MSRB stated that financial

advisors may not know at the beginning

stage of work on an issue whether the

issue will be long or short term and

whether it will be available to act as a

remarketing agent for the issue when it

is remarketed.7 The Commission

believes the proposal provides the

issuer with sufficient information and

time to select a suitable remarketing

agent. For these reasons and those set

forth below, this order approves the

proposed rule change, as amended.

II. Description of the Proposal

Rule G–23,8 on activities of financial

advisors, establishes disclosure and

other requirements for dealers that act

as financial advisors to issuers of

municipal securities. The rule is

designed principally to minimize the

prima facie conflict of interest that

exists when a dealer acts as both

financial advisor and underwriter with

respect to the same issue of municipal

securities. Specifically, Rule G–23

requires a financial advisor to alert the

issuer to the potential conflict of interest

that might lead the dealer to act in its

own best interest as underwriter rather

than the issuer’s best interest.9

In certain instances, some financial

advisors also have acted as remarketing

agents for issues on which they advised

the issuer. To address this situation and

its potential conflict of interest, a

proposed rule change was filed to

require a financial advisor, prior to

entering into a remarketing agreement

for an issue on which it advised the

issuer, to disclose in writing to the

issuer the terms of the remuneration the

financial advisor could earn as

remarketing agent on such issue and

that there may be a conflict of interest

in changing from the capacity of

financial advisor to remarketing agent.

The proposed rule change also required

that the financial advisor receive the

issuer’s acknowledgment in writing of

receipt of such disclosures. Under the

proposal, when these requirements are

met, a dealer acting as financial advisor

for an issue also could serve as

remarketing agent for that issue.

Commission staff requested that the

proposed rule change be revised to

include a provision requiring issuer

consent to the dealer’s dual role, along

with certain other technical language

changes.10 amendment No. 2 revises this

proposal to require that a dealer that has

a financial advisory relationship with an

issuer with respect to a new issue of

municipal securities, prior to acting as

a remarketing agent for that issue,

disclose in writing to the issuer that

there may be a conflict of interest in

acting as both financial advisor and

remarketing agent for the securities with

respect to which the financial advisory

relationship exists and disclose the

source and basis of the remuneration the

dealer could earn as remarketing agent

on such issue. This written disclosure to

the issuer can be in a separate writing

provided to the issuer prior to the

execution of the remarketing agreement

or the disclosure can be in the

remarketing agreement. The issuer must

expressly acknowledge in writing to the

broker, dealer, or municipal securities

dealer receipt of such disclosure and

consent to the financial advisor acting

in both capacities and to the source and

basis of the remuneration. If the

disclosure is made prior to the

execution of the remarketing agreement,

the amount of the specific fee paid by

the issuer to the remarketing agent still

may be negotiated in the remarketing

agreement. If the disclosure is made in

the remarketing agreement, the dealer

will have negotiated the amount of its

fee with the issuer.

III. Discussion

The Commission believes that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder.11 In

particular, the Commission finds that

the proposed rule change is consistent

with Section 15B(b)(2)(C) 12 of the Act.

Section 15B(b)(2)(C) of the Act requires,

among other things, that the rules of the

Board be designed to prevent fraudulent

and manipulative acts and practices, to

promote just and equitable principles of

trade, to remove impediments to and

perfect the mechanism of a free and

open market, and, in general, to protect

investors and the public interest.

Specifically, the Commission believes

the proposed rule change will prevent

fraudulent and manipulative acts and

practices and promote just and equitable

principles of trade by requiring a dealer

that has a financial advisory