Federal Register / Vol. 61, No. 91 / Thursday, May 9, 1996 / Notices 21217

5The substance of this portion of the proposed

rule change has been adopted by the New York

Stock Exchange and American Stock Exchange. See

NYSE Company Manual Rule 203.02 and American

Stock Exchange Company Guide Section 623.

6The securities of Nasdaq issuers are ‘‘included

in’’ The Nasdaq Stock Market; they are not ‘‘listed

on’’ the Nasdaq Stock Market. However, for

purposes of this filing, the term ‘‘listed’’ will apply

to Nasdaq, as well as exchange-listed securities.

7See supra note 5.

8See supra note 5.

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

2Letters from Julie Beyers, Associate Counsel,

NSCC, to Christine Sibille, Division of Market

Regulation, Commission (February 7 and 15, 1996).

3Securities Exchange Act Release No. 36907

(February 29, 1996), 61 FR 8997.

4A CNS security is a cleared security eligible for

transfer on the books of each qualified securities

depository (e.g., The Depository Trust Company, or

the Philadelphia Depository Trust Company), and

Continued

distribute such reports to shareholders

of record 5 and encouraging issuers to

utilize communications technology to

communicate to shareholders in a

timely manner.

Notice of the proposed rule change,

together with the substance of the

proposal, was provided by issuance of a

Commission release (Securities

Exchange Act Release No. 37010, March

21, 1996) and by publication in the

Federal Register (61 FR 13909, March

28, 1996). No comment letters were

received. This order approves the

proposed rule change.

The rule change approved today adds

new Section 1(d) to Part II of Schedule

D recommending that Nasdaq issuers

distribute interim reports to both

shareholders of record and beneficial

shareholders if they distribute such

reports to shareholders of record. The

rule change also adds new Section 2(f)

of Part II to Schedule D regarding the

qualification requirements for issuers of

non-Canadian foreign securities and

American Depositary Receipts that are

included in The Nasdaq Stock Market.

Such issuers also are recommended to

distribute interim reports to both

shareholders of record and beneficial

shareholders if they distribute such

reports to shareholders of record. The

rule change will apply to both the

Nasdaq National Market and The

Nasdaq SmallCap Market tiers of The

Nasdaq Stock Market.

The rule change is the product of a

review by various industry groups,

including the American Society of

Corporate Secretaries and the Securities

Industry Association, of listed 6

companies’ dissemination of interim

earnings reports to shareholders. The

industry groups have been attempting to

achieve some uniformity among listed

companies in the handling of interim

earning reports. Presently, some listed

companies distribute interim reports to

both record and beneficial shareholders,

some listed companies send interim

reports to shareholders of record only,

and some do not send interim reports to

any shareholders. The portion of the

proposed rule change recommending

that Nasdaq issuers distribute interim

reports to both shareholders of record

and beneficial shareholders to

shareholders if they distribute such

reports to shareholders of record is

consistent with voluntary provisions

adopted by the New York Stock

Exchange and the American Stock

Exchange 7 and, therefore, would

provide uniformity among these markets

regarding the handling of listed

company interim earnings reports.

New Sections 1(d) and 2(f) to Part II

of Schedule D also encourage Nasdaq

issuers to consider additional

technological methods to communicate

such information to shareholders in a

timely and less costly manner as such

technology becomes available. This

provision is intended to encourage

Nasdaq issuers to utilize new

communications technology available to

many but not all beneficial

shareholders. The NASD stated in its

filing that Nasdaq issuers should

consider this provision of the rule

change as a supplement to the first

provision of the proposed rule change

recommending that Nasdaq issuers

distribute interim reports to both

shareholders of record and beneficial

shareholders to shareholders if they

distribute such reports to shareholders

of record.

The rule change is precatory and does

not impose new requirements on

issuers. Nasdaq issuers that distribute

interim reports to shareholders of record

only would not be subject to Nasdaq

actions for non-compliance with Nasdaq

listing requirements.

The Commission finds that the rule

change is consistent with the provisions

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

change is 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 a national market system, and, in

general, to protect investors and the

public interest by, among other things,

encouraging Nasdaq issuers to distribute

interim reports to both shareholders of

record and beneficial shareholders to

shareholders if they distribute such

reports to shareholders of record. This

provision of the proposed rule change is

consistent with provisions adopted by

the New York Stock Exchange and the

American Stock Exchange 8 and,

therefore, will provide uniformity

among these markets regarding the

handling of listed company interim

earnings reports. The rule change also

encourages Nasdaq issuers to consider

new technological means to

communicate the information contained

in their interim reports to shareholders

in a timely and less costly manner.

These provisions are intended to

enhance shareholder communications

in The Nasdaq Stock Market.

It is Therefore Ordered, pursuant to

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

proposed rule change SR–NASD–96–09

be, and hereby is, approved.

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. 96–11536 Filed 5–7–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37162; File No. SR–NSCC–

96–01]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Order Approving a

Proposed Rule Change Establishing

Standard Prices for Transfers of NonContinuous Net Settlement Assets

through the Automated Customer

Account Transfer Service

May 2, 1996.

On January 5, 1996, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

a proposed rule change (File No. SR–

NSCC–96–01) pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 to establish standard

prices for certain assets transferred

through NSCC’s Automated Customer

Account Transfer (‘‘ACAT’’) service. On

February 8 and 20, 1996, NSCC filed

amendments to the proposed rule

change.2 Notice of the proposal was

published on March 6, 1996, in the

Federal Register to solicit comments on

the proposed rule change.3 No comment

letters were received. For the reasons

discussed below, the Commission is

approving the proposed rule change.

I. Description

NSCC’s proposed rule change

modifies NSCC’s rules to coincide with

its practice of establishing systemized,

standard default prices based on asset

type for assets which are not eligible for

NSCC’s Continuous Net Settlement

(‘‘CNS’’) 4 system and which are
21218 Federal Register / Vol. 61, No. 91 / Thursday, May 9, 1996 / Notices

identified as such on a list of such securities at

NSCC.

5For a complete description of the ACAT service,

refer to NSCC Rule 50 and to Securities Exchange

Act Release No. 34879 (October 21, 1994), 59 FR

54229 [File No. SR–NSCC–94–13] (order approving

a proposed rule change modifying the ACAT

service).

6NSCC will use the following pricing services

(listed in order of preference). Equities: The New

York Stock Exchange, the American Stock

Exchange, NASDAQ, Vancouver Stock Exchange,

average OTC comparison system price, Interactive

Data Financial Times information, previous day’s

system price, or last available price in system.

Bonds: Average Price in the Bond Comparison

System for trades compared on T or T+1, average

price in the Bond Comparison System for trades

compared on T+2, average price in the Bond

Comparison System for trades compared on T+3 or

older, Interactive Data Financial Times information,

previous day’s system price, last available price in

system, or for municipal bonds only the price

obtained from J.J. Kenny S&P if the last available

system price is five days old or older.

7The default matrix was developed in

conjunction with the New York Stock Exchange, the

Securities Industry Association Account Transfer

Division, and the National Association of Securities

Dealers.

8 15 U.S.C. 78q-1(b)(3) (A) and (F) (1988). 9 17 CFR 200.30-3(a)(12) (1995).

submitted by members for transfer

through NSCC’s ACAT service.5

Through its ACAT service, NSCC

provides an automated and

standardized service for the transfer of

assets in a customer account from one

brokerage firm to another.

When a customer wants to transfer

her account to a new broker-dealer

(‘‘receiving broker-dealer’’), the

receiving broker-dealer submits through

NSCC a transfer initiation request form

to the broker-dealer holding the

customer’s assets (‘‘delivering brokerdealer’’). Within three business days,

the delivering broker-dealer must

submit to NSCC a list of the customer’s

assets it holds. The list must include

prices assigned to the assets not eligible

for CNS. Unless there are discrepancies

between the receiving broker-dealer’s

list of the customer’s assets and the

delivering broker-dealer’s list, transfer

of the account generally takes place four

business days later.

On settlement date, NSCC

automatically debits the delivering

broker’s settlement account at NSCC

with the market value of the assets being

transferred through the ACAT service

and credits the receiving broker’s

settlement account with the same

amount. The resulting settlement

obligations appear on the members’

initial settlement statements issued in

the afternoon. When the assets which

are not CNS eligible assets are delivered

through NSCC’s envelope delivery

service, NSCC credits the delivering

broker’s settlement account with the

value of those assets and debits a

corresponding amount from the

receiving broker’s settlement account.

Because assets delivered through

NSCC’s envelope delivery service must

be submitted by 11:30 a.m., the

delivering broker’s initial settlement

statement will reflect both the debit

from the initial ACAT request and the

corresponding credit from the delivery

of assets resulting in no change to such

member’s overall settlement obligations.

If the assets are not delivered, the

delivering broker’s settlement bank

would be debited the assigned value of

the assets at the end-of-day settlement.

These funds will be credited to the

delivering broker when it delivers the

customer’s assets.

CNS assets submitted for transfer

through the ACAT system are

systematically priced. Because assets

not eligible for CNS (e.g., limited

partnerships, mortgaged backed

securities, zero coupon bonds, foreign

securities, U.S. government and U.S.

agency securities, and thinly traded

municipal bonds) typically do not have

a system price, NSCC must assign an

asset value to any such assets submitted

for transfer through the ACAT service.

NSCC ascribes assets not eligible for

CNS a value by using a pricing service.6

If there is no price available from a

pricing service, NSCC assigns a value

based on the higher of (i) the price

submitted by the delivering broker or

(ii) the price indicated by an industry

defined default price matrix.7 The

default price matrix employs security

category indicators and specifies a

default price for each identified security

category. For example, domestic stocks

are valued at $1.00 per share and

domestic corporate bonds and

municipal bonds are valued at $85 per

$100 principle amount. Once the default

value is established, changes by

participants are not permitted.

II. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder and

particularly with the requirements of

Sections 17A(b)(3) (A) and (F).8 Sections

17A(b)(3) (A) and (F) require that the

rules of a clearing agency be designed to

promote the prompt and accurate

clearance and settlement of securities

transactions and to foster cooperation

and coordination with person engaged

in the clearance and settlement of

securities transactions. The Commission

believes that NSCC’s rule change meets

these standards because establishment

of systemized standard default prices for

assets not eligible for CNS which are

transferred through the ACAT service

provides an incentive for broker-dealers

holding customer assets to promptly

deliver such securities. The proposed

rule change also should foster

cooperation and coordination between

brokerage firms and NSCC by

establishing a standard method by

which such assets are priced in the

ACAT service. This method of pricing

should decrease discrepancies with

respect to asset valuation and should

reduce the delivering broker’s exposure

from overvaluation of assets and the

receiving broker’s exposure from

undervaluation of assets.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with Sections

17A(b)(3) (A) and (F) of the Act and the

rules and regulations thereunder.

It is Therefore Ordered, pursuant to

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

proposed rule change (File No. SR–

NSCC–96–01) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–11537 Filed 5–8–96; 8:45 am]

BILLING CODE 8010–01–M

[File No. 500–1]

Lanstar Semiconductor, Inc.; Order

Directing Suspension of Trading

May 3, 1996.

It appears to the Securities and

Exchange Commission that there is a

lack of adequate current information

concerning the securities of Lanstar

Semiconductor, Inc., a Utah corporation

with executive offices in Arlington,

Texas, and that questions have been

raised regarding the adequacy and

accuracy of publicly disseminated

information concerning, among other

things, unusual market activity and the

tradeability of shares.

Therefore, it is Ordered, pursuant to

Section 12(k) of the Securities Exchange

Act of 1934, that trading in the

securities of Lanstar Semiconductor,

Inc., over-the-counter or otherwise, is

suspended for the period from 9:30 a.m.

(EDT) on May 6, 1996, through 11:59

p.m. (EDT) on May 17, 1996.