9418 Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Notices

3 MASD Manual, Schedules to the By-Laws,

Schedule C, Parts VI and X, (CCH) ¶¶ 1787, 1791.

4NASD Manual, By Laws, Article II, Sec. 4, (CCH)

¶ 1124.

5Supra, note 3.

6Securities Exchange Act Release No. 34941

(November 4, 1994).

7 59 FR 56102 (November 10, 1994).

8Letter from Craig L. Landauer, Associate General

Counsel, NASD, to Mark P. Barracca, Branch Chief,

SEC, (Feb. 8, 1995).

9 Id.

10 15 U.S.C. Section 78o–3(b)(6).

11Supra, note 3.

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1) (1988).

2For a description of the amendment to OCC’s

Restated Certificate of Incorporation providing for

public directors on OCC’s board of directors, refer

to Securities Exchange Act Release No. 30449

(March 6, 1992), 57 FR 8949 [File No. 92–02] (order

approving proposed rule change).

the NASD By-Laws 3 relating to foreign

finders and foreign associates.

Under the rule as amended, member

firms and persons associated with a

member will be permitted to pay

transaction-related compensation to

non-registered foreign persons based

upon the business of customers such

persons direct to member firms. The

following conditions must be met in

order for the ‘‘foreign finder’’ exemption

to apply: (1) the member firm must

assure itself that the non-registered

foreign person who will receive the

compensation (the finder) is not

required to register in the U.S. as a

broker/dealer nor is subject to a

disqualification as defined in Article II,

Section 4 of the NASD By-Laws;4 (2) the

member firm must further assure itself

that the compensation arrangement does

not violate applicable foreign law; (3)

the finder must be a foreign national or

a foreign entity domiciled abroad; (4)

the customers directed to the member

firm by the finder must be foreign

nationals or foreign entities domiciled

abroad transacting business in either

foreign or U.S. securities; (5) the

customers must receive a descriptive

document that discloses the

compensation being paid to the finder;

(6) the customers must provide written

acknowledgement of the existence of the

compensation arrangement to the

member firm and such

acknowledgement must be retained and

available for inspection by the

Association; (7) records reflecting

payments to the finder must be

maintained on the member firm’s books

and the actual agreement between the

member firm and the finder must be

available for inspection by the

Association; and (8) the confirmation of

each transaction must indicate that a

finder’s fee is being paid pursuant to a

compensation arrangement.

The amendment also will change the

requirements with respect to foreign

associates. Those persons designated as

foreign associates pursuant to Part X of

Schedule C of the NASD By-Laws 5 now

will be subject to U–4 registration but

still will not be required to pass a

qualification examination.

Notice of the proposed rule change,

together with its terms of substance was

provided by issuance of a Commission

release 6 and by publication in the

Federal Register.7 No comments were

received in response to the notice. This

order approves the proposed rule

change.

As the NASD indicated in its rule

filing, the scope of permissible business

activities and the associated regulatory

requirements differ between foreign

finders and foreign associates. The

NASD clarified these differences in a

letter to the Commission.8 The NASD

states that, ‘‘[t]he foreign associate will

be registered with the NASD and will be

deemed an associated person or

employee of the member. The foreign

associate would therefore be allowed to

act in any registered capacity on behalf

of the member [consistent with its

designation as a foreign associate]. This

could include acting as a trader or being

the registered person responsible for

servicing the accounts of [a] foreign

national. The foreign finder would not

be considered an associated person of

the member and [its] activities would,

therefore, be limited to those discussed

in the rule filing.9 Under the rule as

amended, the sole involvement of a

foreign finder in the business of a

member firm will be the initial referral

of non-U.S. customers to the firm.

The Commission has determined to

approve the NASD’s proposal. The

Commission finds that the rule change

is consistent with the requirements of

the Act and the rules and regulations

promulgated thereunder applicable to

the NASD, including the requirements

of Section 15A(b)(6) of the Act.10

Section 15A(b)(6) requires, in part that

the rules of a national securities

association be designated 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 a national market system, and, in

general, to protect investors and the

public interest.

The Commission finds that the

amendments to Parts VI and X of

Schedule C to the NASD By-Laws 11 are

consistent with the foregoing statutory

provision. The addition of Part VI,

Section 2 will allow member firms to

use foreign finders to expand overseas

business opportunities while requiring

the maintenance of necessary safeguards

for investor protection. Further, the

changes to Part X of Schedule C will

improve regulatory oversight of member

firms and their foreign associates.

Although foreign associates will

continue to be free of the requirement of

taking a qualification examination, the

amendment will require foreign

associates to be subject to U–4

registration.

It is therefore ordered, pursuant to

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

proposed rule change, SR–NASD–94–51

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–4045 Filed 2–16–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35362; File No. SR–OCC–

94–13]

Self-Regulatory Organizations; The

Options Clearing Corporation, Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change Amending

the Stockholders Agreement

February 13, 1995.

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

Securities Exchange Act of 1934

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

December 28, 1994, 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.

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

OCC proposes to amend Section 2 of

its Stockholders Agreement to extend

the voting agreement contained therein

for a term coextensive with the term of

the Stockholders Agreement and to

conform the Stockholders Agreement to

an amendment made to OCC’s Restated

Certificate of Incorporation providing

for public directors on OCC’s board of

directors.2 OCC also proposes to amend

its address and that of the Chicago

Board Options Exchange, Inc. as they

appear in the Stockholders Agreement.
Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Notices 9419

3Supra note 2.

4 15 U.S.C. § 78q(b)(3)(C) (1988).

5 15 U.S.C. § 78s(b)(3)(A)(iii) (1988).

6 17 CFR 240.19b–4(e)(3) (1994). 7 17 CFR 200.30–3(a)(12) (1994).

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.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

OCC proposes to amend Section 2 of

its Stockholders Agreement to extend

the voting agreement for a term

coextensive with the term of the

Stockholders Agreement. OCC also

proposes to amend the Stockholders

Agreement so it conforms to an

amendment made to OCC’s Restated

Certificate of Incorporation providing

for public directors on the board of

directors, which was approved by the

Commission on March 6, 1992.3 In

addition, OCC proposes to amend its

address and that of the CBOE as they

appear in the Stockholders Agreement.

OCC, the American Stock Exchange,

the Chicago Board Options Exchange,

the New York Stock Exchange, the

Pacific Stock Exchange, and the

Philadelphia Stock Exchange are parties

to a Stockholders Agreement dated

January 3, 1975, as amended. Pursuant

to Section 13 of the Stockholders

Agreement, the voting agreement

contained in Section 2 of the

Stockholders Agreement will expire on

January 3, 1995, unless extended.

In the past, Delaware law required

that voting agreements among

stockholders be limited to a term of ten

years or less. However, a recent

amendment to Delaware law eliminated

the ten year limitation. Accordingly, the

proposed amendment to the

Stockholders Agreement would extend

the voting agreement contained in

Section 2 for a term coextensive with

the term of the Stockholders Agreement

which is effective until terminated by

the mutual agreement of OCC and each

stockholder.

OCC also proposes to amend the

Stockholders Agreement to conform it to

an amendment made to OCC’s Restated

Certificate of Incorporation providing

for public directors. OCC proposes to:

(1) define public director in the same

manner as defined in OCC’s Certificate

of Incorporation and By-Laws; (2) to

include public directors in Section 2,

Voting Shares of Stock; and (3) to add

language to Section 3, Clause (ii)

regarding the election of public

directors. OCC also proposes to amend

the addresses of OCC and the CBOE as

they appear in Section 15 (a) and (b) of

the Stockholders Agreement,

respectively.

The Commission believes that the

proposed rule change to OCC’s

Stockholder’s Agreement is consistent

with Section 17A of the Act and

specifically with Section 17A(b)(3)(C).4

Section 17A(b)(3)(C) requires that a

clearing agency assure fair

representation of its shareholders or

members and participants in the

selection of its directors and

administration of its affairs. The

proposed rule change provides fair

representation to stockholders by

extending their voting rights to a term

coextensive with the term of the

Stockholders Agreement. The proposed

rule change also assures fair

representation in the selection of its

directors and administration of its

affairs by providing for public directors

in conformity with OCC’s Restated

Certificate of Incorporation.

B. Self—Regulatory Organization’s

Statement on Burden on Competition

OCC does not believe that the

proposed rule change would 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

to the proposed rule change, and none

have been received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(iii) 5 of the Act and pursuant

to Rule 19b–4(e)(3) 6 promulgated

thereunder, because the proposal is

concerned solely with the

administration of OCC. At any time

within sixty days of the filing of such

rule change, the Commission may

summarily abrogate such rule change if

it appears to the Commission that such

action is necessary or appropriate in the

public interest, for the protection of

investors, or otherwise in furtherance of

the purposes of the Act.

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to File No. SR–OCC–94–13 and

should be submitted by March 10, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–4046 Filed 2–16–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 35–26231]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

February 10, 1995.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated thereunder. All interested

persons are referred to the application(s)

and/or declaration(s) for complete

statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendments thereto is/are available

for public inspection through the

Commission’s Office of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by