[Federal Register Volume 60, Number 105 (Thursday, June 1, 1995)]
[Notices]
[Pages 28639-28640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13307]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35761; File No. SR-NASD-95-19]


Self-Regulatory Organizations: Notice of Filing of Proposed Rule 
change by National Association of Securities Dealers, Inc. Relating to 
Limited Partnership Rollup Transactions

May 24, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on May 
4, 1995 the National Association of Securities Dealers, Inc. (``NASD'' 
or ``Association'') 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 the NASD. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the terms of Substance 
of the Proposed Rule Change

    The NASD is herewith filing a proposed rule change to add new 
paragraph 7 to Subsection (b)(2)(B)(vii)d. of Article III, Section 34 
of the Rules of Fair Practice and to add new paragraph (vii) to 
Subsection (14)(D) to Part I of Schedule D to the By-Laws to exclude 
investment companies and business development companies from the 
definition of ``limited partnership rollup transaction.'' The specific 
text of the rule change would apply to ``a transaction involving only 
[[Page 28640]] entities registered under the Investment Company Act of 
1940 or any Business Development Company as defined in Section 2(a)(48) 
of that Act.''

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. The NASD has prepared summaries, set forth in Section 
(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

    Federal legislation regulating limited partnership rollups 
(``Rollup Reform Act'') was signed into law on December 17, 1993, and 
contained a mandate for the NASD to adopt its own rollup rule. The 
NASD's rule regulating rollups (``Rollup Rule'') was approved by the 
SEC on August 15, 1994 \1\ and amended Article III, Section 34 of the 
NASD Rules of Fair Practice to prohibit NASD members and associated 
persons from participating in a ``limited partnership rollup 
transaction'' unless the transaction includes specified provisions to 
protect the rights of limited partners. The Rollup Rule further amended 
Part III of Schedule D to the By-Laws to prohibit the authorization for 
quotation on the Nasdaq National Market of any security resulting from 
a ``limited partnership rollup transaction'' unless the transaction is 
conducted in accordance with certain specified procedures designed to 
protect the rights of dissenting limited partners. The NASD Roll Up 
Rule was designed to conform to the federal roll up legislation.

    \1\ See, Securities Exchange Act Release No. 34533 (August 15, 
1994); 59 FR 43147 (August 22, 1994).
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    Subsequent to approving the NASA's Rollup Rule, the SEC adopted new 
Rule 3b-11 to exclude from the definition of ``limited partnership 
rollup transaction,'' among other things, transactions involving 
entities registered under the Investment Company Act of 1940 (the 
``1940 Act'') or any Business Development Company as defined in Section 
2(a)(48) of the 1940 Act.\2\ In its adopting release, the SEC stated 
that it was adopting the new Rule in order to define related terms used 
in the federal rollup definition ``. . . for purposes of, among other 
things, the SRO rules.''

    \2\ See, Securities Act Release No. 7113; Securities Exchange 
Act Release No. 35036 (December 2, 1994); 59 JR 63676 (December 8, 
1994).
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    The SEC has requested that the NASD amend the Rollup Rule to 
conform the NASD's definition of ``limited partnership rollup 
transaction'' to the definition adopted by the SEC. The proposed rule 
change amends the Rollup Rule by adding as an exclusion for investment 
companies and business development companies to the definition of 
``limited partnership rollup transaction''new paragraph 7 to Subsection 
(b)(2)(B)(vii)d. to Article III, Section 34 of the Rules of Fair 
Practice and new paragraph (vii) to Subsection 14(D) to Part I of 
Schedule D. Thus, if the proposed rule change is adopted, investment 
companies and business development companies would be excluded from the 
purview of the Rollup Rule. Investment Companies and Business 
Development Companies are already subject to extensive regulation under 
the 1940 Act and have not been perceived as entities connected with the 
types of abusive limited partnership rollup transactions for which 
investor protection provisions of the rollup rules were sought.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act,\3\ which require that 
the rules of the association be designed to prevent fraudulent and 
manipulative acts and promote just and equitable principles of trade in 
that the proposed rule change provides for regulatory consistency in 
the definition of ``limited partnership rollup transaction'' and 
appropriately excludes investment companies and business development 
companies from unnecessary, and potentially burdensome, additional 
regulation.

    \3\ 15 U.S.C. Sec. 78o-3.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The NASD does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received from Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 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 90 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 the self-regulatory organization 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. 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 Room. Copies of such filing will also be 
available for inspection and copying at a principal office of the NASD. 
All submissions should refer to File No. SR-NASD-95-19 and should be 
submitted by June 22, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-13307 Filed 5-31-95; 8:45 am]
BILLLING CODE 8010-01-M