Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Notices 67341

1Exchange Act Release No. 42222.

2A broker-dealer may comply with this

requirement by: (a) delivering the statements to its

customers in paper copy form or (b) transmitting

the statements to its customers electronically.

Fund to acquire securities of a

Securities Affiliate within the limits of

rule 12d3–1. The requested exemption

would apply only where a Securities

Affiliate is deemed to be an affiliated

person or a second-tier affiliate of an

Unaffiliated Portion within the meaning

of Rule 12d3–1(c) solely because an

Affiliated Adviser is the Adviser to

another portion of the same MultiAdvised Fund.

3. Applicants state that their proposal

does not raise the conflicts of interest

that rule 12d3–1(c) was designed to

address because of the nature of the

affiliation between a Securities Affiliate

and the Unaffiliated Portion. Applicants

submit that each Subadviser acts

independently of the other Subadvisers

in making investment decisions for the

assets allocated to its portion of the

Multi-Advised Fund. Further,

applicants submit that prohibiting the

Unaffiliated Portions from purchasing

securities issued by Securities Affiliates

could harm the interests of a Fund’s

shareholders by preventing the

Unaffiliated Subadviser from achieving

optimal investment results.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. Each Multi-Advised Fund relying

on the requested order will be advised

by an Affiliated Subadviser and at least

one Unaffiliated Subadviser and will be

operated in the manner described in the

application.

2. No Affiliated Subadviser, Affiliated

Broker-Dealer, Securities Affiliate or

Affiliated Underwriter (except by virtue

of serving as Subadviser to a discrete

portion of a Multi-Advised Fund) will

be an affiliated person or a second-tier

affiliate of: (a) Equitable or any

Equitable Affiliate; (b) any Unaffiliated

Subadviser; (c) any principal

underwriter or promoter of a MultiAdvised Fund; or (d) any officer, trustee

or employee of a Multi-Advised Fund.

3. No Affiliated Subadviser will

directly or indirectly consult with any

Unaffiliated Subadviser concerning

allocation of principal or brokerage

transactions.

4. No Affiliated Subadviser will

participate in any arrangement whereby

the amount of its subadvisory fees will

be affected by the investment

performance of an Unaffiliated

Subadviser.

5. With respect to purchases of

securities by an Affiliated Portion

during the existence of any

underwriting or selling syndicate a

principal underwriter of which is an

Affiliated Underwriter, the conditions of

rule 10f–3 will be satisfied except that

paragraph (b)(7) will not require the

aggregation of purchases by the

Affiliated Portion with purchases by

Unaffiliated Portions.

6. With respect to purchases by an

Unaffiliated Portion of securities issued

by a Securities Affiliate, the conditions

of rule 12d3–1 will be satisfied except

for paragraph (c) to the extent such

paragraph is applicable solely because

such issuer is an Affiliated Adviser or

an affiliated person of an Affiliated

Adviser.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–31916 Filed 12–27–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Securities Exchange Act of 1934, Release

No. 45179/December 20, 2001]

Secutities Industry Association 1401

Eye Street, NW., Washington, DC

20005–2225; Order Extending BrokerDealer Exemption From Sending

Financial Information to Customers

The Securities and Exchange

Commission (‘‘Commission’’) is

extending its temporary Order issued

December 10, 19991 under Section 17(e)

of the Securities Exchange Act of 1934

(‘‘Exchange Act’’) exempting brokerdealers from Exchange Act Section

17(e)(1)(B) and Rule 17a–5(c). These

sections require a broker-dealer to send

each of its customers semi-annually its

balance sheet with appropriate footnotes

prepared in accordance with generally

accepted accounting principles

(‘‘GAAP’’) and a footnote disclosing the

firm’s net capital and required net

capital. To take advantage of the

exemption, a broker-dealer must semiannually send the net capital footnote to

its customers, must send its balance

sheet and appropriate footnotes to

customers upon request via a toll-free

number, and must place its balance

sheet and appropriate footnotes on its

Web site.

The Commission’s temporary Order

established a pilot program which

expires on December 31, 2001. During

the pilot program, a broker-dealer taking

advantage of the exemption was

required, among other things, to report

to the Commission the number of times

its balance sheet was viewed on its Web

site and the number of requests for

paper copies received via its toll-free

number. In a letter dated December 11,

2001, the Securities Industry

Association (‘‘SIA’’) stated that it

supported an extension of the

exemption.

The Commission has determined, on

the basis of information set forth in the

SIA’s letter and information reported by

broker-dealers taking advantage of the

exemption, that extending the

exemption for one year is consistent

with the public interest and the

protection of investors. The Commission

intends to propose a rule amendment

shortly which would make the relief

permanent.

A broker-dealer exempted under this

Order must comply with each of the

following requirements:

(1) The broker-dealer semi-annually

sends its customers, at the times it

otherwise would have sent its customers

its balance sheet in accordance with

Rule 17a–5(c), a statement which

includes: (a) The amount of the brokerdealer’s net capital and its required net

capital in accordance with Rule 15c3–1,

(b) to the extent required under Rule

17a–5(c)(2)(ii), a description of the effect

on the broker-dealer’s net capital and

required net capital of subsidiaries

consolidated pursuant to Appendix C of

Rule 15c3–1 (jointly the ‘‘Net Capital

Disclosure’’), and (c) any statements

otherwise required by Rule 17a–

5(c)(2)(iii)–(iv).2

(2) The above statement is given

prominence in the materials sent to its

customers and includes an appropriate

caption stating that customers may

obtain the broker-dealer’s balance sheet

(in the case of the annual balance sheet,

audited and with the auditor’s

certification) at no cost, by accessing the

broker-dealer’s Web site or calling the

broker-dealer’s stated toll-free number.

The statement must provide the specific

Internet Universal Research Locator

(URL) at which the broker-dealer’s

balance sheet is located.

(3) The broker-dealer publishes a

balance sheet prepared in accordance

with GAAP, including footnotes and the

Net Capital Disclosure, accessible

through each of the following Internet

locations:

(a) The broker-dealer’s Website

homepage, containing a hyperlink

providing a direct link to the brokerdealer’s balance sheet;

(b) Each page at which a customer can

log-on to the broker-dealer’s Website,

containing a hyperlink providing a

67342 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Notices

3This Order exempts certain firms from the

delivery requirement under Rule 17a–5(c), in part,

based on the protections afforded by the

Commission’s financial responsibility rules. The

condition that a broker-dealer makes its balance

sheet available on its Website is not an alternative

method of delivering this information to customers

under Rule 17a–5(c).

1 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b–4

thereunder.

2 Italics indicates additions; brackets denote

deletions.

direct link to the broker-dealer’s balance

sheet; and

(c) If the Websites for two or more

broker-dealers can be accessed from the

same home page, a hyperlink directing

the Internet user to the home page of

each broker-dealer. Upon reaching the

broker-dealer’s home page, the home

page contains a hyperlink providing a

direct link to the particular brokerdealer’s balance sheet.

Each of the above hyperlinks is placed

on the broker-dealer’s Website, in either

textual or button format, as a separate,

prominent link, in a manner that is

clearly visible.3

(4) The broker-dealer maintains a tollfree number that customers can call to

request a paper or electronic copy of its

balance sheet.

(5) If a customer requests a paper or

electronic copy of the broker-dealer’s

balance sheet, the firm sends it

promptly at no cost to the customer.

(6) If the broker-dealer’s net capital

falls below the early warning levels of

Rule 17a–11 and the broker-dealer fails

to cure the relevant deficiency within 24

hours, or if the broker-dealer’s auditors

determine that a material inadequacy

exists with regard to any of the financial

disclosures contained in the audited

financial statements or in the brokerdealer’s internal controls, the firm

returns to sending its balance sheet as

required under Rule 17a–5(c), including

footnotes, by the next date that financial

disclosures are required, until the

deficiency or material inadequacy is

cured.

(7) The broker-dealer submits to the

Commission, addressed to Division of

Market Regulation, United States

Securities and Exchange Commission,

450 5th Street, NW., Washington, DC

20549–1001, no later than 60 days after

each distribution of its published

statement containing the Net Capital

Disclosure:

(a) A report on the number of requests

that the broker-dealer has received for

copies of its balance sheet via its tollfree number and the number of times its

balance sheet has been viewed on its

Website. The report contains the

number of requests received in the

month following its Website publishing

of its recent balance sheet and, except

in the case of the first Website

publishing, in the preceding six months;

and

(b) Written investor complaints

regarding the exemption received by the

broker-dealer in the preceding six

months.

Accordingly,

It is ordered, under Exchange Act

Section 17(e)(1)(C) and Rule 17a–5(l)(3),

that the exemption from Exchange Act

Section 17(e)(1)(B) and Rule 17a–5(c)

granted in Exchange Act Release No.

42222 is extended to December 31,

2002.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–31918 Filed 12–27–01; 8:45 am]

BILLING CODE 8010–01–U

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–45174; File No. SR–MSRB–

2001–07]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Municipal Securities Rulemaking

Board Relating to Minimum

Denominations

December 19, 2001.

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

Securities Exchange Act of 1934 (the

‘‘Exchange Act’’) and Rule 19b–4

thereunder,1 notice is hereby given that

on October 16, 2001, Municipal

Securities Rulemaking Board (‘‘MSRB’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change (File No. SR–

MSRB–2001–07) (the ‘‘proposed rule

change’’) described in Items I, II, and III

below, which Items have been prepared

by the MSRB. 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

The MSRB is filing a proposed rule

change concerning minimum

denominations consisting of an

amendment to its rule G–15, on

confirmation, clearance and settlement

of transactions with customers, an

amendment to its rule G–8, on books

and records to be made by brokers,

dealers and municipal securities

dealers, and an interpretation of its rule

G–17, on conduct of municipal

securities activities.

The text of the proposed rule change

follows.2

G–15 Confirmation, Clearance, [and]

Settlement [of] and Other Uniform

Practice Requirements with Respect to

Transactions with Customers

(a) through (e) No change.

(f) Minimum Denominations

(i) Except as provided in this section

(f), a broker, dealer or municipal

securities dealer shall not effect a

customer transaction in municipal

securities issued after June 1, 2002 in an

amount lower than the minimum

denomination of the issue.

(ii) The prohibition in subsection (f)(i)

of this rule shall not apply to the

purchase of securities from a customer

in an amount below the minimum

denomination if the broker, dealer or

municipal securities dealer determines

that the customer’s position in the issue

already is below the minimum

denomination and that the entire

position would be liquidated by the

transaction. In determining whether this

is the case, a broker, dealer or

municipal securities dealer may rely

either upon customer account

information in its possession or upon a

written statement by the customer as to

its position in an issue.

(iii) The prohibition in subsection

(f)(i) of this rule shall not apply to the

sale of securities to a customer in an

amount below the minimum

denomination if the broker, dealer or

municipal securities dealer determines

that the securities position being sold is

the result of a customer liquidating a

position below the minimum

denomination, as described in

subsection (f)(ii) of this rule. In

determining whether this is the case, a

broker, dealer or municipal securities

dealer may rely upon customer account

records in its possession or upon a

written statement provided by the party

from which the securities are

purchased. A broker, dealer or

municipal securities dealer effecting a

sale to a customer under this subsection

(iii) shall at or before the completion of

the transaction, give or send to the

customer a written statement informing

the customer that the quantity of

securities being sold is below the

minimum denomination for the issue

and that this may adversely affect the

liquidity of the position unless the

customer has other securities from the

issue that can be combined to reach the

minimum denomination. Such written

statement may be included on the

customer’s confirmation or may be