Federal Register / Vol. 61, No. 105 / Thursday, May 30, 1996 / Notices 27123

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3CVRs are unsecured obligations of an issuer that

provide for a possible cash payment upon maturity

depending upon the price performance of an

affiliate’s equity security.

4ELDS are intermediate-term (two to seven

years), non-convertible, hybrid securities, the value

of which is based, at least in part, on the value of

another issuer’s common stock or other equity

security. ELDS may pay periodic interest or may be

issued as zero-coupon instruments with no

payments to holders prior to maturity. Moreover,

ELDS may be subject to a ‘‘cap’’ on the maximum

principal amount to be repaid to holders upon

maturity and, additionally, may feature a ‘‘floor’’ on

the minimum principal amount to be repaid to

holders upon maturity.

5There are additional standards for several of

these securities. For example, ELDS relating to any

underlying U.S. security may not exceed five

percent of the total outstanding shares of such

underlying security.

Market Portfolio and 0.57% for the

Capital Growth Portfolio) is less than

the 0.70% sum of the investment

management fee and the deduction for

other expenses currently imposed

against the assets of the three

corresponding Sub-Accounts of the

Separate Account.

20. The application states that a

Special Meeting of Separate Account

Voters was held on March 12, 1996. The

proposed transactions were approved at

the Special Meeting by the vote of a

majority of the outstanding voting

securities with respect to each SubAccount of the Separate Account.

Applicants state that on September 22,

1995, a registration statement was filed

on Form N–14 in connection with the

Reorganization.

Applicants’ Legal Analysis

1. Section 6(c) of the 1940 Act

authorizes the Commission to grant an

exemption from any provision, rule or

regulation of the 1940 Act to the extent

necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the 1940 Act. Sections

26(a)(2)(C) and 27(c)(2) of the 1940 Act,

in relevant part, prohibit a registered

unit investment trust, its depositor or

principal underwriter, from selling

periodic payment plan certificates

unless the proceeds of all payments,

other than sales loads, are deposited

with a qualified bank and held under

arrangements which prohibit any

payment to the depositor or principal

underwriter except a reasonable fee, as

the Commission may prescribe, for

performing bookkeeping and other

administrative duties normally

performed by the bank itself.

2. Applicants request exemptions

from Sections 26(a)(2)(C) and 27(a)(2) of

the 1940 Act to the extent necessary to

permit the deduction of the 0.80%

mortality risk charge from the assets of

the Continuing Separate Account.

Applicants represent that the annuity

rate guarantee charge under the

Contracts is within the range of industry

practice for comparable annuity

contracts issued by other insurance

companies. This representation is based

upon Washington National’s analysis of

publicly available information about

such other contracts, taking into

consideration the particular annuity

features of the comparable contracts,

including such factors as current charge

levels, charge level or annuity rate

guarantees, the manner in which the

charges are imposed and the markets in

which the contracts have been offered.

Applicants state that Washington

National will maintain a memorandum,

available to the Commission upon

request, setting forth in detail the

products analyzed in the course of, and

the methodology and results of, its

review.

3. Applicants state that amounts

derived from the annuity rate guarantee

charge that exceed the expenses that the

deductions were designed to cover will

be offset by aggregate expenses of

Washington National, which will

include any distribution expenses not

reimbursed by the contingent deferred

sales charge. In such circumstances, a

portion of the annuity rate guarantee

charge could be viewed as providing for

a portion of the costs relating to

distribution of the Contracts.

4. Applicants state that there is

currently no distribution financing

arrangement for the Contracts because

no new Contracts are being distributed.

Nevertheless, Applicants represent that

there is a reasonable likelihood that the

distribution financing arrangement for

the Continuing Separate Account (to the

extent that such an arrangement may be

deemed to exist) will benefit the

Continuing Separate Account and the

Contract owners. Applicants state that

Washington National will maintain a

memorandum, available to the

Commission upon request, setting forth

in detail the basis for this conclusion.

5. Washington National represents

that the assets of the Continuing

Separate Account will be invested only

in a management investment company

which undertakes, in the event it should

adopt a plan for financing distribution

expenses pursuant to Rule 12b–1 under

the 1940 Act, to have such plan

formulated and approved by a board of

directors, the majority of whom are not

‘‘interested persons’’ of the management

investment company within the

meaning of Section 2(a)(19) of the 1940

Act.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested are necessary and

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–13457 Filed 5–29–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37238, File No. SR–NYSE–

96–06]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change Relating to Continued Listing

Standards for Specialized Securities

May 22, 1996.

On March 18, 1996, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

establish continued listing criteria for

certain specialized securities.

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 37056 (Apr.

1, 1996), 61 FR 15547 (Apr. 8, 1996). No

comments were received on the

proposal.

Currently, the NYSE has listing

standards for certain specialized

securities: stock warrants, foreign

currency warrants and currency index

warrants, stock index warrants,

contingent value rights (‘‘CVRs’’) 3 other

securities, and equity-linked debt

securities (‘‘ELDS’’).4 The uniform

listing standards for specialized

securities require one million shares

outstanding, 400 holders, $4 million

aggregate market value and a minimum

life of one year.5

With this rule proposal, the Exchange

proposes to establish uniform continued

listing criteria for these specialized

securities in paragraphs 801 and 802 of

the Exchange’s Listed Company Manual

(‘‘Manual’’) to correspond to the initial

listing standards. The NYSE would

consider delisting these specialized

securities when the number of publiclyheld shares is less than 100,000, the
27124 Federal Register / Vol. 61, No. 105 / Thursday, May 30, 1996 / Notices

6Section 3 (Corporate Responsibility) includes,

among others, policies concerning voting rights,

quorums, and shareholder approval.

7 15 U.S.C. § 78f(b). 8See supra note 6 and accompanying text.

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12).

number of holders is less than 100, and

the aggregate market value of shares

outstanding is less than $1,000,000.

Moreover, the Exchange is proposing

additional requirements for securities

that are related to other securities. For

stock warrants and CVRs, the NYSE

would require that the related security

remain listed. For ELDS, the issuer of

the linked security must remain subject

to the reporting obligations of the Act

and the linked security must remain

trading in a market in which there is last

sale reporting. The Exchange also will

require the issuer of specialized debt

securities to be able to meet its

obligations on such debt. For all

specialized securities listed pursuant to

paragraph 703 of the Manual, the

Exchange will delist any specialized

securities if the related or linked

securities are delisted for violation of

the Exchange’s ‘‘Corporate

Responsibility’’ criteria in Section 3 of

the Manual.6

The proposed rule change also

eliminates the delisting criteria relating

to creation of a class of non-voting

common stock. The Exchange believes

that these criteria are no longer

appropriate because the Exchange

currently has listing criteria specifically

addressing non-voting common stock.

Finally, the proposed rule change would

delete the current warrant continued

listing criteria and include stock, foreign

currency and currency index, and stock

index warrants within the new uniform

continued listing criteria. The Exchange

believes that the continued listing

criteria for warrants do not conform to

the current warrant listing standards.

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, with the

requirements of Section 6(b).7

Specifically, the Commission believes

the proposal is consistent with the

Section 6(b)(5) requirements that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts, and, in general, to

protect investors and the public interest;

and are not designed to permit unfair

discrimination between issuers.

The Commission believes that the

development and enforcement of

adequate standards governing the listing

of securities on an exchange is an

activity of critical importance to

exchange markets and to the investing

public. Listing standards serve as a

means for the self-regulatory

organizations (‘‘SROs’’) to screen issuers

and to provide listed status only to bona

fide companies with substantial float,

investor base, and trading interest to

ensure sufficient liquidity for fair and

orderly markets. Listing standards also

enable an exchange to assure itself of

the bona fides of the company and its

past trading history. In this regard, over

the past several years the Exchange has

proposed, and the Commission has

approved, uniform initial listing

standards for specialized securities.

With this rule proposal, the Exchange

proposes uniform continued listing

criteria to correspond to the initial

listing standards adopted for specialized

securities. The Commission believes

that adequate maintenance standards

are of equal importance to the

development of adequate standards for

initial inclusion on an exchange. The

Commission notes that once an issue

has been initially approved for listing,

the Exchange must monitor continually

the status and trading characteristics of

that issue to endure that it continues to

meet exchange standards for trading

depth and liquidity.

In this regard, the Commission

believes that the quantitative continuing

listing standards for specialized

securities will ensure that there is

sufficient public float and investor

interest in the securities to support

continued trading consistent with fair

and orderly markets. Further, the

additional requirements for specialized

securities that are related to other

securities should ensure, among other

things, that these securities cannot,

through continued listing, become a

surrogate for trading a security that has

been delisted due to corporate

responsibility violations.8 As described

above, for continued listing of stock

warrants and CVRs, the Exchange will

require that the related security be, and

remain, a NYSE listed security. For

ELDS, the issuer of the linked security

must remain subject to the reporting

obligations of the Act and the linked

security must remain subject to last sale

reporting. The Commission believes that

these standards are appropriate under

the Act and will ensure that the linked

or related securities have adequate

transparency and information available

and meet certain minimum

requirements. With respect to CVRs and

stock warrants, the additional

requirements should also help to

address concerns that such securities

will not become a surrogate for trading

other securities not eligible for NYSE

listing.

In summary, the Commission believes

that the maintenance criteria,

established by the rule proposal, should

help to ensure the stability of the

marketplace, as well as protect

investors, by subjecting the securities of

an issuer to delisting if the listed

security fails to meet the new

maintenance standards.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposed rule change (SR–NYSE–96–

06) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–13459 Filed 5–29–96; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[License No. 03/03–0205]

Eastern Virginia Small Business

Investment Corporation; Notice of

Issuance of a Small Business

Investment Company License

On July 31, 1995, an application was

filed by Eastern Virginia Small Business

Investment Corporation, 2101 Parks

Avenue, Suite 803, Virginia Beach,

Virginia, with the Small Business

Administration (SBA) pursuant to

Section 107.102 of the Regulations

governing small business investment

companies (13 C.F.R. 107.102 (1996)) for

a license to operate as a small business

investment company.

Notice is hereby given that, pursuant

to Section 301(c) of the Small Business

Investment Act of 1958, as amended,

after having considered the application

and all other pertinent information, SBA

issued License No. 03/03–0205 on May

14, 1996, to Eastern Virginia SBIC to

operate as a small business investment

company.

(Catalog of Federal Domestic Assistance

Program No. 59.011, Small Business

Investment Companies)

Dated: May 21, 1996.

Don A. Christensen,

Associate Administrator for Investment.

[FR Doc. 96–13501 Filed 5–29–96; 8:45 am]

BILLING CODE 8025–01–P