Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices 7613

52 15 U.S.C. 78s(b)(2) (1988).

53The Commission notes that prior to listing

Index options or Index LEAPS, the CBOE will be

required to review the then most recent semiannual

reports filed with the Commission by each of the

closed-end funds represented in the Index to ensure

that the closed-end fund securities comprising the

Index, as well as the holdings of each of the closedend funds represented in the Index, satisfy, at the

time of listing, the listing criteria discussed above.

54 17 CFR 200.30–3(a)(12) (1994).

1Securities Exchange Act Release No. 27975 (May

1, 1990), 55 FR 19124 (May 8, 1990).

2With the Commission’s January 1994 approval

of File No. SR–NASD–93–24, the universe of

securities eligible for quotation in the OTCBB now

includes certain equities listed on regional stock

exchanges that do not qualify for dissemination of

transaction reports via the facilities of the

Consolidated Tape Association. Securities

Exchange Act Release No. 33507 (January 24, 1994),

59 FR 4300 (order approving File No. SR–NASD–

93–24).

3Securities Exchange Act Release No. 35172

(December 28, 1994), 60 FR 1820.

4The Commission notes that the NASD has filed

with the Commission Amendment Nos. 1 and 2 to

File No. SR–NASD–92–07, concerning the

eligibility of unregistered foreign securities and

American Depositary Receipts for inclusion in the

OTCBB. The amendments were published in the

Federal Register for comment on November 18,

1994. See Securities Exchange Act Release No.

34956 (November 9, 1994), 59 FR 59808.

Commission believes that reducing the

number of component funds in the

Index by two is not a material change

that raises regulatory concerns not

already addressed by the proposal.

Accordingly, the Commission believes it

is consistent with Sections 6(b)(5) and

19(b)(2) of the Act to approve

Amendment No. 2 to the proposed rule

change on an accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street NW.,

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

Section, 450 Fifth Street NW.,

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to the File Number SR–CBOE–94–

19 and should be submitted by March

1, 1995.

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,52 that the

proposed rule change (SR–CBOE–94–

19), as amended, is approved.53

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.54

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3037 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35316; File No. SR–NASD–

95–03]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the National

Association of Securities Dealers, Inc.,

Relating to an Interim Extension of the

OTC Bulletin Board  Service Through

April 28, 1995

February 1, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on January 25, 1995,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’) filed with the

Securities and Exchange Commission

(‘‘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 and is

simultaneously approving the proposal.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

On June 1, 1990, the NASD, through

a subsidiary corporation, initiated

operation of the OTC Bulletin Board

Service (‘‘OTCBB Service’’ or ‘‘Service’’)

in accord with the Commission’s

approval of File No. SR–NASD–88–19,

as amended.1 The OTCBB Service

provides a real-time quotation medium

that NASD member firms can elect to

use to enter, update, and retrieve

quotation information (including

unpriced indications of interest) for

securities traded over-the-counter that

are neither listed on The Nasdaq Stock

Market SM nor on a primary national

securities exchange (collectively

referred to as ‘‘OTC Equities’’).2

Essentially, the Service supports NASD

members’ market making in OTC

Equities through authorized Nasdaq

Workstation units. Real-time access to

quotation information captured in the

Service is available to subscribers of

Level 2⁄3 Nasdaq service as well as

subscribers of vendor-sponsored

services that now carry OTCBB Service

data. The Service is currently operating

under interim approval that was

scheduled to expire on January 31,

1995.3

The NASD hereby files this proposed

rule change, pursuant to Section

19(b)(1) of the Act and Rule 19b–4

thereunder, to obtain authorization for

an interim extension of the Service

through April 28, 1995. During this

interval, there will be no material

change in the OTCBB Service’s

operational features, absent Commission

approval of a corresponding Rule 19b–

4 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, the

NASD included statements concerning

the purpose of and basis for the

proposed rule change and discussed and

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

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. Purpose

The purpose of this filing is to ensure

continuity in the operation of the

OTCBB Service while the Commission

considers an earlier NASD rule filing

(File No. SR–NASD–92–7) that

requested permanent approval of the

Service.4 For the month ending

November 30, 1994, the Service

reflected the market making positions of

411 NASD member firms displaying

quotations/indications of interest in

approximately 5,229 OTC Equities.

During the proposed extension,

foreign securities and American

Depositary Receipts (collectively,

‘‘foreign/ADR issues’’) will remain

subject to the twice-daily, update

limitation that traces back to the

Commission’s original approval of the

OTCBB Service’s operation. As a result,

all priced bids/offers displayed in the
7614 Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices

5On November 24, 1992, the NASD filed an

application with the Commission for interim

designation of the Service as an automated

quotation system pursuant to Section 17B(b) of the

Act. On December 30, 1992, the Commission

granted Qualifying Electronic Quotation System

(‘‘QEQS’’) status for the Service for purposes of

certain penny stock rules that became effective on

January 1, 1993. On August 26, 1993, the

Commission granted the NASD’s request for an

extension of QEQS status until such time as the

OTCBB meets the statutory requirements of Section

17B(b)(2). Finally, on May 13, 1994, the NASD filed

an application with the Commission for permanent

designation of the Service as an automated

quotations system for penny stocks pursuant to

Section 17B(b).

Service for foreign/ADR issues will

remain indicative.

In conjunction with the start-up of the

Service in 1990, the NASD implemented

a filing requirement (under Section 4 of

Schedule H to the NASD By-Laws) and

review procedures to verify member

firms’ compliance with Rule 15c2–11

under the Act. During the proposed

extension, this review process will

continue to be an important component

of the NASD’s oversight of brokerdealers’ market making in OTC Equities.

The NASD also expects to work closely

with the Commission staff in developing

further enhancements to the Service to

fulfill the market structure requirements

mandated by the Securities Enforcement

Remedies and Penny Stock Reform Act

of 1990, particularly Section 17B of the

Act.5 The NASD notes that

implementation of the Reform Act

entails Commission rulemaking in

several areas, including the

development of mechanisms for

gathering and disseminating reliable

quotation/transaction information for

‘‘penny stocks.’’

2. Statutory Basis

The NASD believes that the proposed

rule change is consistent with Sections

11A(a)(1), 15A(b) (6) and (11), and

Section 17B of the Act. Section

11A(a)(1) sets forth the Congressional

findings and policy goals respecting

operational enhancements to the

securities markets. Basically, the

Congress found that new data

processing and communications

techniques should be applied to

improve the efficiency of market

operations, broaden the distribution of

market information, and foster

competition among market participants.

Section 15A(b)(6) requires, among other

things, that the NASD’s rules promote

just and equitable principles of trade,

facilitate securities transactions, and

protect public investors. Subsection (11)

thereunder authorizes the NASD to

adopt rules governing the form and

content of quotations for securities

traded over-the-counter for the purposes

of producing fair and informative

quotations, preventing misleading

quotations, and promoting orderly

procedures for collecting and

disseminating quotations. Finally,

Section 17B contains Congressional

findings and directives respecting the

collection and distribution of quotation

information on low-priced equity

securities that are neither Nasdaq nor

exchange-listed.

The NASD believes that extension of

the Service through April 28, 1995, is

fully consistent with the foregoing

provisions of the Act.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the 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

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The NASD requests that the

Commission find good cause, pursuant

to Section 19(b)(2) of the Act, for

approving the proposed rule change

prior to the 30th day after its

publication in the Federal Register to

avoid any interruption of the Service.

The current authorization for the

Service was scheduled to extend

through January 31, 1995. Hence it is

imperative that the Commission

approve the instant filing on or before

that date. Otherwise, the NASD will be

required to suspend operation of the

Service pending Commission action on

the proposed extension.

The NASD believes that accelerated

approval is appropriate to ensure

continuity in the Service’s operation

pending a determination on permanent

status for the Service, as requested in

File No. SR–NASD–92–7. Continued

operation of the Service will ensure the

availability of an electronic quotation

medium to support member firms’

market making in approximately 5,229

OTC Equities and the widespread

dissemination of quotation information

on these securities. The Service’s

operation also expedites price discovery

and facilitates the execution of customer

orders at the best available price. From

a regulatory standpoint, the NASD’s

capture of quotation data from

participating market makers

supplements the price and volume data

reported by member firms pursuant to

Part XII of Schedule D to the NASD ByLaws.

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

the principal office of the NASD. All

submissions should refer to the file

number in the caption above and should

be submitted by March 1, 1995.

V. Commission’s Findings and Order

Granting Accelerated Approval

The Commission finds that approval

of the proposed rule change is

consistent with the Act and the rules

and regulations thereunder, and, in

particular, with the requirements of

Section 15A(b)(11) of the Act, which

provides that the rules of the NASD

relating to quotations must be designed

to produce fair and informative

quotations, prevent fictitious or

misleading quotations, and promote

orderly procedures for collecting,

distributing, and publishing quotations.

The Commission finds good cause for

approving the proposed rule change

prior to the 30th day after the date of

publishing notice of the filing thereof.

Accelerated approval of the NASD’s

proposal is appropriate to ensure

continuity in the Service’s operation as

an electronic quotation medium that

supports NASD members’ market

making in these securities and that

facilitates price discovery and the

execution of customers’ orders at the

best available price. Additionally,

continued operation of the Service will

materially assist the NASD’s

surveillance of its members trading in

OTC Equities that are eligible and

quoted in the Service, and in non-Tape

B securities that are listed on regional
Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices 7615

1Cityfed Financial Corp., Investment Company

Act Release Nos. 20074 (Feb. 15, 1994) (notice) and

20135 (Mar. 15, 1994) (order).

exchanges and quoted in the OTCBB by

NASD members.

It Is Therefore Ordered, pursuant to

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

proposed rule change be, and hereby is,

approved for an interim period through

April 28, 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. 95–3036 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20877; 812–9378]

Cityfed Financial Corp.; Notice of

Application

February 2, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Cityfed Financial Corp.

(‘‘Cityfed’’).

RELEVANT ACT SECTIONS: Order requested

under sections 6(c) and 6(e) of the Act.

SUMMARY OF APPLICATION: Applicant

requests an order that would exempt it

from all provisions of the Act, except

sections 9, 17(a) (modified as discussed

herein), 17(d) (modified as discussed

herein), 17(e), 17(f), 36 through 45, and

47 through 51 of the Act and the rules

thereunder until the earlier of one year

from the date of the requested order or

such time as Cityfed would no longer be

required to register as an investment

company under the Act. The requested

exemption would extend an exemption

originally granted until March 15, 1995.

FILING DATE: The application was filed

on December 20, 1994.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

February 27, 1995, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549.

Applicant, 4 Young’s Way, P.O. Box

3126, Nantucket, MA 02584.

FOR FURTHER INFORMATION CONTACT:

James M. Curtis, Senior Counsel, at

(202) 942–0563, or Robert A. Robertson,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicant’s Representations

1. Cityfed was a savings and loan

holding company that conducted its

savings and loan operations through its

wholly-owned subsidiary, City Federal

Savings Bank (‘‘City Federal’’). City

Federal was the source of substantially

all of Cityfed’s revenues and income. As

a result of substantial losses in its

mortgage banking and real estate

operations, City Federal was unable to

meet its regulatory capital requirements.

Accordingly, on December 7, 1989, the

Office of Thrift Supervision (the ‘‘OTS’’)

placed City Federal into receivership

and appointed the Resolution Trust

Corporation (the ‘‘RTC’’) as City

Federal’s receiver. City Federal’s

deposits and substantially all of its

assets and liabilities were acquired by a

newly created federal mutual savings

bank, City Savings Bank, F.S.B., whose

deposits, assets, and liabilities in turn

were acquired by City Savings, F.S.B.

(‘‘City Savings’’). The OTS appointed

the RTC as receiver of City Savings.

2. Once City Federal was placed into

receivership, Cityfed no longer

conducted savings and loan operations

through any subsidiary and

substantially all of its assets consisted of

cash that has been invested in money

market instruments with a maturity of

one year or less and money market

mutual funds. As of September 30,

1994, Cityfed held cash and securities of

approximately $9.03 million. Because of

Cityfed’s asset composition, it may be

an investment company under the Act.

Rule 3a–2 under the Act provides a oneyear safe harbor to issuers that meet the

definition of an investment company

but intend to engage in a business other

than investing in securities. Because of

various claims against Cityfed and

certain Cityfed officers and directors,

Cityfed could not acquire an operating

company within the one year safe

harbor. The expiration of the safe harbor

period necessitated the filing of an

application for exemption from all

provisions of the Act, with certain

exceptions. In 1994, Cityfed was granted

conditional relief from all provisions of

the Act until March 15, 1995.1

3. While Cityfed’s board of directors

has considered from time to time

whether to engage in an operating

business, the board has determined not

to engage in an operating business at the

present time because of the claims filed

against Cityfed, whose liability

thereunder cannot be reasonably

estimated and may exceed its assets.

4. On June 2, 1994, the OTS issued a

Notice of Charges and Hearing for Cease

and Desist Order to Direct Restitution

and Other Appropriate Relief and

Notice of Assessment of Civil Money

Penalties (‘‘Notice of Charges’’) against

Cityfed and certain current or former

directors and, in some cases, officers of

Cityfed and City Federal. The Notice of

Charges requests that an order be

entered by the Director of the OTS

requiring Cityfed to make restitution,

reimburse, indemnify or guarantee the

OTS against loss in an amount not less

than $118.4 million, which the OTS

alleges represents the regulatory capital

deficiency reported by City Federal in

the fall of 1989. The Notice of Charges

provides that a hearing will be held

before an administrative law judge on

the question of whether a final cease

and desist order should be issued

against Cityfed. As of the date of the

filing of the application, no date has

been set for such hearing.

5. Also on June 2, 1994, the OTS

issued a Temporary Order to Cease and

Desist (‘‘Temporary Order’’) against

Cityfed. The Temporary Order required

Cityfed to post $9.0 million as security

for the payment of the amount sought by

the OTS in its Notice of Charges. Cityfed

unsuccessfully petitioned the district

court for an injunction against the

Temporary Order. Cityfed has appealed

to the Court of Appeals. On October 26,

1994, Cityfed and the OTS entered into

an Escrow Agreement (‘‘Escrow

Agreement’’) with CoreStates Bank, N.A.

(‘‘CoreStates’’) pursuant to which

Cityfed transferred substantially all of

its assets to CoreStates for deposits into

an escrow account to be maintained by

CoreStates. Cityfed’s assets in the

escrow account continue to be invested

in money market instruments with a

maturity of one year or less and money

market mutual funds. Withdrawals or

disbursements from the escrow account

are not permitted without the written

authorization of the OTS, other than for

(a) monthly transfer to Cityfed in the

amount of $15,000 for operating

expenses, (b) the disbursement of funds