64086 Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Notices

5Specifically, when the 250- and 400-point

circuit breakers were implemented in October 1988,

a 250-point move in the DJIA was approximately

11.7 percent of the Index and a 400-point move was

approximately 18.7 percent of the Index. However,

given the expansion and growth of U.S. equity

markets since 1988, 250- and 400-point movements

in the NASD now represent a much smaller

percentage move in the Index. Specifically, with the

NASD at 5,000, a 250-point move represents 5

percent of the Index and a 400-point move

represents 8 percent of the Index.

6The Commission reaffirms its request that the

NASD implement its Policy Statement by

implementing a trading halt as quickly as

practicable whenever the New York Stock Exchange

and other equity markets have suspended trading.

See Securities Exchange Act Release No. 27370,

supra note 4.

7 17 U.S.C. 78s(b)(2) (1988).

8 17 CFR 200.30–3(a)(12) (1994).

adopted in 1988. Given the growth of

U.S. equity markets since 1988,

however, the NASD increasingly is

concerned that circuit breakers may be

activated based on smaller percentage

moves in the Dow Jones Industrial

Average (‘‘DJIA’’).5 Accordingly, it is the

intention of the NASD to reevaluate

whether the 250- and 400-point

thresholds contained in the circuit

breakers are appropriate. Nevertheless,

the NASD believes it is appropriate at

this time to extend the effectiveness of

the Policy Statement.

The NASD believes the proposed rule

change is consistent with Section

15A(b)(6) of the Act. Section 15A(b)(6)

requires that the rules of a national

securities association be designed to

prevent fraudulent and manipulative

acts and practices, to promote just and

equitable principles of trade, to foster

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating transactions

in securities, to remove impediments to

and perfect the mechanism of a free and

open market and a national market

system and, in general, to protect

investors and the public interest.

Specifically, by extending the

effectiveness of the Policy Statement,

market participants will be afforded a

reasonable opportunity to assess and

rationally react to extreme market

conditions. In addition, extension of the

Policy Statement will help to ensure

that circuit breakers are coordinated

across all equity and equity-related

markets.

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

The NASD requests that the

Commission find good cause to

accelerate the effectiveness of the

proposed rule change pursuant to

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

effectiveness of the Policy Statement

can continue uninterrupted. The NASD

notes that its other proposals to extend

the Statement have been subject to the

full notice and comment period and that

the Commission has received no adverse

comments on the Statement.

Accordingly, because the NASD

believes that there are no changes to the

Policy Statement that would necessitate

the solicitation of public comment prior

to Commission approval, because no

adverse comments have been received

in response to prior extensions of the

Statement, and because the Policy will

otherwise expire on December 31, 1995,

the NASD requests that the Commission

accelerate the effectiveness of the

proposed rule change prior to the 30th

day after its publication in the Federal

Register.

IV. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to the NASD, and, in

particular, the requirements of Section

15A and the rules and regulations

thereunder. Since the Commission

approved the NASD’s proposal in 1988,

the Dow Jones Industrial Average has

not experienced a one day market

decline that would trigger a market halt.

Nevertheless, the Commission continues

to believe that circuit breaker

procedures are desirable to deal with

potential strains that may develop

during periods of extreme market

volatility, and accordingly, the

Commission believes that the pilot

program should be extended. The

Commission also believes that circuit

breakers represent a reasonable means

to retard a rapid one day market decline

that could have a destabilizing effect on

the nation’s financial markets and

participants in these markets. Finally,

the Commission believes that the

proposed changes to the Policy

Statement are minor and not of a nature

to affect its operation.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of filing thereof

in the Federal Register because there

are no material changes being made to

the current provisions, which originally

were subject to the full notice and

comment procedures, and accelerated

approval would enable Policy Statement

to continue uninterrupted. The

Commission believes, therefore, that

granting accelerated approval of the

proposed rule change is appropriate and

consistent with Sections 15A and 19(b)

of the Act.6

V. 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 NW.,

Washington, DC 20549. Copies of the

submissions, 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 January 3, 1996.

VI. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change (SR–NASD–95–

57) is hereby approved until December

31, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–30355 Filed 12–12–95; 8:45 am]

BILLING CODE 8010–01–M
Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Notices 64087

1 15 U.S.C. 78s(b)(1) (1988).

2The original filing required that dividends or

distributions (i) not exceed ten percent of the

market value of the underlying security and (ii) be

paid on a regular basis in order to be deemed

‘‘ordinary.’’ OCC amended its proposal with respect

to cash dividends by eliminating the requirement

that cash dividends of less than ten percent be paid

on a regular basis in order to be deemed ordinary

for purposes of determining whether to adjust the

option. OCC also amended the proposal to require

that stock dividends of less than ten percent of the

market value of the underlying security be paid on

a quarterly basis, as opposed to regularly, in order

to be deemed ordinary. Letter from Jacqueline R.

Luthringshausen, OCC, to Jerry W. Carpenter,

Associate Director, Division of Market Regulation,

Commission (October 11, 1995).

3The Commission has modified the text of the

summaries prepared by OCC. 4 15 U.S.C. 78.q–1 (1988).

[Release No. 34–36558; File No. SR–OCC–

95–13]

Self-Regulatory Organizations; the

Options Clearing Corporation; Notice

of Filing of Proposed Rule Change

Relating to Adjustments of Options for

Ordinary Stock Dividends

December 6, 1995.

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

Securities Exchange Act of 1934

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

September 19, 1995, The Options

Clearing Corporation (‘‘OCC’’) 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 primarily by OCC.

On October 16, 1995, OCC filed an

amendment to the proposed rule

change.2 The Commission is publishing

this notice to solicit comments from

interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will revise

OCC’s By-Laws to adopt a general rule

of not adjusting options for ordinary

stock dividends or distributions on the

underlying security and will delete

references to the review by the

Commission of options adjustment

decisions made by an OCC adjustment

panel.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

OCC 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. OCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Under the proposed rule change, OCC

will amend Article VI, Section 11 of its

By-Laws governing adjustments on

options for ordinary stock dividends

declared on the underlying security.

Article VI, Section 11 sets forth general

rules concerning adjustment that OCC

may make to the standardized terms of

option contracts when certain events

occur. A specific adjustment is

determined by the vote of an adjustment

panel comprised of two designated

representatives of each exchange that

lists such option and the designee of

OCC’s Chairman. OCC’s designee only

votes in the case of a tie.

Currently, Article VI, Section 11(d)

contains a general rule requiring that

equity option contracts be adjusted in

the case of a stock dividend, stock

distribution, or stock split where one or

more whole shares of the underlying

security is issued with respect to each

outstanding share. The adjustment is

made by reducing the strike price and

increasing each option contract by the

same number of additional option

contracts as the number of shares issued

with respect to each outstanding share.

The unit of trading stays the same.

However, Section 11(c) states that there

will be no adjustment for ordinary cash

dividends. This is because ordinary

cash dividends generally are paid on a

quarterly basis and adjusting

outstanding options each time a

dividend is paid could create a massive

proliferation of option series that would

dilute market liquidity and would

overtax price reporting and other

systems.

Article VI, Section 11(j) grants

authority to the adjustment panel to

make such exceptions to any of the

general adjustment rules as it deems to

be appropriate. Recently, two

adjustment panels exercised their

exception authority and determined not

to adjust outstanding option contracts to

reflect a stock dividend. In both

instances, the issuer evidenced a pattern

of declaring a small stock dividend in

conjunction with a quarterly cash

dividend. In determining not to adjust

the options, each adjustment panel

considered the provision in the Options

Disclosure Document that states a stock

dividend may be treated as an ordinary

cash dividend by an adjustment panel if

the issuer of the underlying security

announces or exhibits a policy of

declaring regular stock dividends that

do not individually exceed 10% of the

market value of the underlying security.

The adjustment panels involved in

making the two recent adjustments have

requested that OCC amend its By-Laws

to provide for a general rule that no

adjustment will be made to reflect

ordinary stock dividends. As a result,

OCC is proposing to define in its ByLaws ordinary stock dividends as

dividends that are paid on a quarterly

basis by the issuer of the underlying

security and that do not individually

exceed ten percent of the market value

of the underlying security. Because the

proposed change only will apply to

recurrent stock dividends, OCC

anticipates that it will apply only in a

small number of cases. OCC believes

that formalizing a policy of not

adjusting for recurrent stock dividends

will eliminate potential problems

associated with the creation of an

undesirable proliferation of options

series as well as eliminate the need to

convene adjustment panels to make

discretionary determinations for such

dividends on a case-by-case basis.

OCC also proposes to amend its ByLaws to clarify when cash dividends

will be considered ordinary. Under the

proposal, cash dividends that do not

exceed ten percent of the market value

of the underlying security will be

deemed to be ordinary whether or not

they are paid on an ordinary basis.

Finally, pursuant to a request from

Commission staff, OCC proposes to

delete language from Article VI, Section

11 that provides for Commission review

of the determinations made by an OCC

adjustment panel.

OCC believes the proposed rule

change is consistent with the

requirements of Section 17A of the Act 4

and the rules and regulations

thereunder because the proposal will

provide for the prompt and accurate

settlement of options transactions and

will provide for the safeguarding of

related securities and funds.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

OCC does not believe that the

proposed rule change will impose any

burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members Participants or Others

Written comments were not and are

not intended to be solicited with respect
64088 Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Notices

5 17 CFR 200.30–3(a)(12) (1994).

1Rule 17a–7 exempts purchase or sales

transactions between an investment company and

other affiliated investment companies provided that

certain conditions are met.

to the proposed rule change and none

were received.

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 OCC 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 submission

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submissions, 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, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filings will also be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to the file number SR–OCC–95–13

and should be submitted by January 3,

1996.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–30299 Filed 12–12–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21571; 811–7105]

CUNA Mutual Funds, Inc.; Notice of

Application

December 6, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: CUNA Mutual funds, Inc.

RELEVANT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

FILING DATE: The application was filed

on July 28, 1995 and amended on

October 27, 1995, and December 1,

1995.

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

January 2, 1996, 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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street, N.W., Washington, D.C. 20549.

Applicant, 100 East Pratt Street,

Baltimore, MD 21202.

FOR FURTHER INFORMATION CONTACT:

Elaine M. Boggs, Staff Attorney, at (202)

942–0572, or Alison E. Baur, 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. Applicant is an open-end

diversified management investment

company that was organized under the

laws of Maryland. Applicant consists of

three portfolios, CUNA Mutual U.S.

Government Income Fund, CUNA

Mutual Cornerstone Fund, and Mutual

Tax-Free Intermediate-Term Fund. On

October 8, 1993, applicant registered

under the Act as an investment

company, and filed a registration

statement to register its shares under the

Securities Act of 1933. The registration

statement was declared effective on

December 30, 1993 and applicant began

a public offering thereafter.

2. On March 27, 1995, applicant’s

board of directors approved the

liquidation and dissolution of applicant.

The board of directors approved the

liquidation because, among other things,

they did not expect assets under

management to rise to a level that would

allow applicant to operate productively.

At all times, affiliated persons of

applicant held a majority of the

outstanding shares of each portfolio.

3. Between March 17 and March 30,

1995, letters were sent to all public

shareholders notifying them of

applicant’s intent to liquidate all

accounts effective May 12, 1995. On

May 12, 1995, the remaining public

shareholders of each portfolio received

cash distributions equal to the net asset

value of their accounts as of the close of

business on that day. CMC–T.Rowe

Price Management, LLC (‘‘CMC’’),

applicant’s administrator and a

shareholder of applicant, made the

decision to absorb all the expenses and

costs of the liquidation and winding up

of the business of applicant.

Accordingly, applicant’s affiliated

persons received their distributions after

the public shareholders to ensure that

all costs and expenses of the liquidation

(such as brokerage, taxes, etc.) would be

absorbed by the affiliated parties and

not the public shareholders. CMC was

the sole remaining shareholder on May

26, 1995, and did in fact bear all

expenses and costs of winding up the

business of applicant. CMC also paid all

of applicant’s organizational expenses.

4. The liquidation was approved by

CMC, the sole remaining shareholder of

applicant’s stock, on May 26, 1995. On

that date, CMC redeemed its shares at

net asset value and received applicant’s

remaining assets.

5. With one exception, all portfolio

securities were sold in the usual course.

A total of $2,071.17 in brokerage

commissions was incurred. The one

exception involved a cross transaction

with an affiliated mutual fund which

followed the procedures set forth in rule

17a–7 under the Act.1

6. Applicant has no debts or other

liabilities that remain outstanding.

Applicant is not a party to any litigation

or administrative proceeding.

7. On June 30, 1995, applicant filed

articles of dissolution with Maryland

authorities.

8. Applicant is not now engaged, nor

does it propose to engage, in any

business activities other than those

necessary for the winding up of its

affairs.