67338 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Notices

procedures have been fully

implemented, and that such procedures

are reasonable and appropriate to

prevent persons subject to a statutory

disqualification from becoming

affiliated with Baird in the future.

4. Baird’s general counsel or chief

executive officer will certify on an

annual basis that Baird and Mr. Gaspar

have complied with the conditions to

the requested order.

5. The certifications and procedures

required by the conditions to the

requested order will be maintained as

part of the records of Baird and will be

available for inspection by the

Commission and its staff at any

reasonable time.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–31915 Filed 12–27–01; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

25323; 812–12348]

AXA Premier Funds Trust, et al.; Notice

of Application

December 20, 2001.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of application under: (a)

Section 6(c) of the Investment Company

Act of 1940 (the ‘‘Act’’) requesting an

exemption from sections 12(d)(3) and

17(e) of the Act and rule 17e–1 under

the Act; (b) sections 6(c) and 17(b) of the

Act requesting an exemption from

section 17(a) of the Act; and (c) section

10(f) of the Act requesting an exemption

from section 10(f) of the Act.

SUMMARY OF THE APPLICATION:

Applicants request an order to permit

certain registered open-end management

investment companies advised by

several investment advisers to engage in

principal and brokerage transactions

with a broker-dealer affiliated with one

of the investment advisers and to

purchase securities in certain

underwritings. The transactions would

be between a broker-dealer and a

portion of the investment company’s

portfolio not advised by the adviser

affiliated with that broker-dealer. The

order also would permit these

investment companies not to aggregate

certain purchases from an underwriting

syndicate in which an affiliated person

of one of the investment advisers is a

principal underwriter. Further,

applicants request relief to permit a

portion of an investment company’s

portfolio to purchase securities issued

by a broker-dealer which is an affiliated

person of an investment adviser to

another portion, subject to the limits in

rule 12d3–1 under the Act.

APPLICANTS: AXA Premier Funds Trust,

AXA Premier VIP Trust, EQ Advisors

Trust (collectively, the ‘‘Trusts’’) and

The Equitable Life Assurance Society of

the United States (‘‘Equitable’’ or the

‘‘Manager’’).

FILING DATES: The application was filed

on December 6, 2000, and amended on

December 19, 2001.

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 applicants 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 15, 2002, and should be

accompanied by proof of service on

applicants 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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW, Washington, DC 20549–

0609. Applicants, 1290 Avenue of the

Americas, New York, NY 10104.

FOR FURTHER INFORMATION CONTACT:

Bruce R. MacNeil, Senior Counsel, at

(202) 942–0634, or Mary Kay Frech,

Branch Chief, at (202) 942–0564 (Office

of Investment Company Regulation,

Division of Investment Management).

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, 450 Fifth

Street, NW, Washington, DC 20549–

0102 (telephone (202) 942–8090).

Applicants’ Representations

1. The Trusts, each a Delaware

business trust, are registered under the

Act as open-end management

investment companies and are

comprised of multiple series (each

series of the Trusts, a ‘‘Fund’’). Shares

of the Funds of EQ Advisors Trust and

AXA Premier VIP Trust are only offered

for sale to insurance companies to fund

variable insurance products and

employee investment plans.

2. The Manager is registered under the

Investment Advisers Act of 1940

(‘‘Advisers Act’’) and serves as

investment adviser to each of the Funds.

The assets of certain Funds (‘‘MultiAdvised Funds’’) are allocated by the

Manager among two or more

subadvisers (‘‘Subadvisers’’). Each

Subadviser is registered under the

Advisers Act or is exempt from

registration. Each Subadviser has

discretion to purchase and sell

securities for a discrete portion of a

Multi-Advised Fund’s assets. The

Manager pays each Subadviser a fee out

of the advisory fee received by the

Manager from the Multi-Advised Fund.

Equitable or a Subadviser controlling,

controlled by, or under common control

with Equitable (an ‘‘Equitable Affiliate’’)

may directly advise a discrete portion of

a Multi-Advised Fund.

3. Applicants request relief to permit:

(a) A broker-dealer registered under the

Securities Exchange Act of 1934 that

serves as a Subadviser or is an affiliated

person of a Subadviser (the brokerdealer, an ‘‘Affiliated broker-Dealer’’ the

Subadivser, and ‘‘Affiliated

Subadviser’’) to engage in principal

transactions with a discrete portion of a

Multi-Advised Fund that is advised by

another Subadviser that is not an

affiliated person of the Affiliated

Broker-Dealer or Affiliated Subadviser

(the discrete portion, an ‘‘Unaffiliated

Portion,’’ the Subadviser, and

‘‘Unaffiliated Subadviser’’); (b) an

Affiliated Broker-Dealer to provide

brokerage services to an Unaffiliated

Portion, and the Unaffiliated Portion to

utilize such brokerage services, without

complying with rule 17e–1(b) and (d)

under the Act; (c) an Unaffiliated

Portion to purchase securities during

the existence of an underwriting

syndicate, a principal underwriter of

which is an Affiliated Subadviser, or a

person of which an Affiliated

Subadviser is an affiliated person

(‘‘Affiliated Underwriter’’); (d) a discrete

portion of the Multi-Advised Fund

advised by an Affiliated Subadviser

(‘‘Affiliated Portion’’) to purchase

securities during the existence of an

underwriting syndicate, a principal

underwriter of which is an Affiliated

Underwriter, in accordance with the

conditions of rule 10f–3, except that

paragraph (b)(7) of the rule would not

require the aggregation of purchases by

the Affiliated Portion with purchases by

an Unaffiliated Portion; and (e) an

Unaffiliated Portion to purchase

securities issued by an Affiliated

Subadviser, or an affiliated person of an

Affiliated Subadviser, that is involved

in securities-related activities

Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Notices 67339

1The terms ‘‘Unaffiliated Subadviser,’’

‘‘Subadviser’’ and ‘‘Unaffiliated Portion’’ include

Equitable or an Equitable Affiliate and the discrete

portion of a Multi-Advised Fund directly advised

by Equitable or an Equitable Affiliate, respectively,

provided that Equitable or the Equitable Affiliate

manages its portion of the Multi-Advised Fund

independently of the portions managed by the other

Subdvisers to the Multi-Advised Fund, and

Equitable or the Equitable Affiliate does not control

or influence any other Subadviser’s investment

decisions for its portion of the Multi-Advised Fund.

[FN3, p.6]

(‘‘Securities Affiliate’’), subject to the

limits in rule 12d3–1 under the Act.1

4. Applicants request that the

exemptive relief apply to the Trusts and

any existing or future registered openend management investment company

or series thereof that is (a) advised by

Equitable or an Equitable Affiliate and

(b) advised by more than one

Subadviser. The relief also would apply

to any existing or future entity that

serves as an Affiliated Subadviser,

Affiliated Broker-Dealer, or Affiliated

Underwriter to a Multi-Advised Fund.

Any investment company that currently

intends to rely on the order is named as

an applicant. Any other existing or

future entity that relies on the order will

comply with the terms and conditions

of the application.

Applicants’ Legal Analysis

A. Principal Transactions Between an

Unaffiliated Portion and an Affiliated

Broker-Dealer

1. Section 17(a) of the Act generally

prohibits sales or purchases of securities

between a registered investment

company and an affiliated person of,

promotor of, or principal underwriter

for such company, or any affiliated

person of an affiliated person, promoter,

or principal underwriter (‘‘second-tier

affiliate’’). Section 2(a)(3)(E) of the Act

defines an affiliated person to be any

investment adviser of an investment

company, and section 2(a)(3)(C) of the

Act defines an affiliated person of

another person to include any person

directly or indirectly controlling,

controlled by, or under common control

with such person. Applicants state that

an Affiliated Subadviser would be an

affiliated person of a Multi-Advised

Fund, and an Affiliated Broker-Dealer

would be either an Affiliated Subadviser

or an affiliated person of the Affiliated

Subadviser, and thus a second-tier

affiliate of a Multi-Advised Fund,

including the Unaffiliated Portion.

Accordingly, applicants state that any

principal transactions to be effected by

an Unaffiliated Subadviser on behalf of

an Unaffiliated Portion of a MultiAdvised Fund with an Affiliated BrokerDealer are subject to the prohibitions of

section 17(a).

2. Applicants seek relief under

sections 6(c) and 17(b) to exempt

principal transactions prohibited by

section 17(a) because an Affiliated

Broker-Dealer is deemed to be an

affiliated person or a second-tier affiliate

of an Unaffiliated Portion soley because

an Affiliated Subadviser is the

Subadviser to another discrete portion

of the same Multi-Advised Fund. The

requested relief would not be available

if the Affiliated Broker-Dealer (except by

virtue of serving as a Subadviser) is an

affiliated person or a second-tier affiliate

of (a) Equitable; (b) the Unaffiliated

Subadviser making the investment

decision with respect to the Unaffiliated

Portion of the Multi-Advised Fund; (c)

any principal underwriter or promoter

of the Multi-Advised Fund; or (d) any

officer, trustee or employee of the MultiAdvised Fund.

3. Section 17(b) of the Act authorizes

the SEC to grant an order permitting a

transaction otherwise prohibited by

section 17(a) if it finds that the terms of

the proposed transaction are fair and

reasonable and do not involve

overreaching on the part of any person

concerned, and the proposed

transaction is consistent with the policy

of each registered investment company

and the general purposes of the Act.

Section 6(c) of the Act permits the SEC

to exempt any person or transaction

from any provision of the Act if the

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policies

and provisions of the Act.

4. Applicants contend that section

17(a) is intended to prevent persons

who have the power to control an

investment company from using that

power to the person’s own pecuniary

advantage. Applicants assert that when

the person acting on behalf of an

investment company has no direct or

indirect pecuniary interest in a party to

a principal transaction, the abuses that

section 17(a) is designed to prevent are

not present. Applicants state that if an

Unaffiliated Subadviser purchases

securities on behalf of an Unaffiliated

Portion in a principal transaction with

an Affiliated Broker-Dealer, any benefit

that might inure to the Affiliated BrokerDealer would not be shared by the

Unaffiliated Subadviser. In addition,

applicants state that Subadvisers are

paid on the basis of a percentage of the

value of the assets allocated to their

management. The execution of a

transaction to the disadvantage of the

Unaffiliated Portion would disadvantage

the Unaffiliated Subadviser to the extent

that it diminishes the value of the

Unaffiliated Portion. Applicants further

submit that the Manager’s power to

dismiss Subadvisers or to change the

portion of a Multi-Advised Fund

allocated to each Subadviser reinforces

a Subadviser’s incentive to maximize

the investment performance of its

discrete portion of a Multi-Advised

Fund.

5. Applicants state that each

Subadviser’s contract assigns it

responsibility to manage a discrete

portion of a Multi-Advised Fund. Each

Subadviser is responsible for making

independent investment and brokerage

allocation decisions. Applicants

represent that the Manager will not

dictate brokerage allocation or

investment decisions to any MultiAdvised Fund advised by a Subadviser

nor will it have the contractual right to

do so, except with respect to any

portion of a Multi-Advised Fund that

the Manager may advise directly.

Applicants contend that, in managing a

discrete portion of a Multi-Advised

Fund, each Subadviser acts for all

practical purposes as though it is

managing a separate investment

company.

6. Applicants state that the proposed

transactions will be consistent with the

policies of the Multi-Advised Fund,

since each Unaffiliated Subadviser is

required to manage the Unaffiliated

Portion in accordance with the

investment objectives and related

investment policies of the MultiAdvised Fund as described in its

registration statement. Applicants also

assert that permitting the transactions

will be consistent with the general

purposes of the Act and in the public

interest because the ability to engage in

the transactions increases the likelihood

of a Multi-Advised Fund achieving best

price and execution on its principal

transactions, while giving rise to none of

the abuses that section 17(a) was

designed to prevent.

B. Payment of Brokerage Compensation

by an Unaffiliated Portion to an

Affiliated Broker-Dealer

1. Section 17(d)(2) of the Act prohibits

an affiliated person or a second-tier

affiliate of a registered investment

company from receiving compensation

for acting as broker in connection with

the sale of securities to or by the

investment company if the

compensation exceeds the limits

prescribed by the section unless

otherwise permitted by rule 17e–1

under the Act. Rule 17e–1 sets forth the

conditions under which an affiliated

person or a second-tier affiliate of an

investment company may receive a

commission which would not exceed

the ‘‘usual and customary broker’s

67340 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Notices

commission’’ for purposes of section

17(d)(2). Rule 17e–1(b) requires the

investment company’s board of

directors, including a majority of the

directors who are not interested persons

under section 2(a)(19) of the Act, to

adopt certain procedures and to

determine at least quarterly that all

transactions effected in reliance on the

rule compiled with the procedures. Rule

17e–1(d) specifies the records that must

be maintained by each investment

company with respect to any transaction

effected pursuant to rule 17e–1.

2. As discussed above, applicants

state that an Affiliated Broker-Dealer is

either an affiliated person (as

Subadviser to another discrete portion

of a Multi-Advised Fund) or a secondtier affiliate of an Unaffiliated Portion

and thus subject to section 17(e).

Applicants request an exemption under

section 6(c) from section 17(e) and rule

17e–1 to the extent necessary to permit

an Unaffiliated Portion to pay brokerage

compensation to an Affiliated BrokerDealer acting as broker in the ordinary

course of business in connection with

the sale of securities to or by such

Unaffiliated Portion, without complying

with the requirements of rule 17e–1(b)

and (d). The requested exemption

would apply only where an Affiliated

Broker-Dealer is deemed to be an

affiliated person or a second-tier affiliate

of an Unaffiliated Portion solely because

an Affiliated Subadviser is the

Subadviser to another discrete portion

of the same Multi-Advised Fund. The

requested relief would not be available

if the Affiliated Broker-Dealer (except by

virtue of serving as a Subadviser) is an

affiliated person or a second-tier affiliate

of (a) Equitable; (b) the Unaffiliated

Subadviser making the investment

decision with respect to the Unaffiliated

Portion of the Multi-Advised Fund; (c)

any principal underwriter or promoter

of the Multi-Advised Fund; or (d) any

officer, trustee or employee of the MultiAdvised Fund.

3. Applicants believe that the

proposal brokerage transactions involve

no conflicts of interest or possibility of

self-dealing and will meet the standards

of section 6(c). Applicants assert that

the interests of an Unaffiliated

Subadviser are directly aligned with the

interests of the Unaffiliated Portion it

advises, and an Unaffiliated Subadviser

will enter into brokerage transactions

with Affiliated Broker-Dealers only if

the fees charged are reasonable and fair

as required by rule 17e–1(a). Applicants

also note that an Unaffiliated

Subadviser has a fiduciary duty to

obtain best price and execution for the

Unaffiliated Portion.

C. Purchases of Securities From

Offerings With Affiliated Underwriters

1. Section 10(f) of the Act, in relevant

part, prohibits a registered investment

company from knowingly purchasing or

otherwise acquiring, during the

existence of any underwriting or selling

syndicate, any security (except a

security of which the company is the

issuer) a principal underwriter of which

is an officer, director, member of an

advisory board, investment adviser or

employee of the company, or an

affiliated person of any of these persons.

Section 10(f) also provides that the SEC

may exempt by order any transaction or

classes of transactions from any of the

provisions of section 10(f), if and to the

extent that such exemption is consistent

with the protection of investors. Rule

10f–3 under the Act exempts certain

transactions from the prohibitions of

section 10(f) if specified conditions are

met. Paragraph (b)(7) of rule 10f–3 limits

the securities purchased by the

investment company, or by two or more

investment companies having the same

investment adviser, to 25% of the

principal amount of the offering of the

class of securites.

2. Applicants state that each

Subadviser, although under contract to

manage only a discrete portion of a

Multi-Advised Fund, is considered an

investment adviser to the entire MultiAdvised Fund. As a result, applicants

believe that all purchases of securities

by an Unaffiliated Portion from an

underwriting syndicate a principle

underwriter of which is an Affiliated

Underwriter would be subject to section

10(f).

3. Applicants request relief under

section 10(f) from that section to permit

an Unaffiliated Portion to purchase

securities during the existence of an

underwriting or selling syndicate, a

principal underwriter of which is an

Affiliated Underwriter. Applicants

request relief from section 10(f) only to

the extent those provisions apply solely

because an Affiliated Subadviser is an

investment adviser to the Multi-Advised

Fund. The requested relief would not be

available if the Affiliated Underwriter

(except by virtue of serving as a

Subadviser) is an affiliated person or a

second-tier affiliate of (a) Equitable; (b)

the Unaffiliated Subadviser making the

investment decision with respect to the

Unaffiliated Portion of the MultiAdvised Fund; (c) any principal

underwriter or promoter to the MultiAdvised Fund; or (d) any officer, trustee

or employee of the Multi-Advised Fund.

Applicants also seek relief from section

10(f) to permit an Affiliated Portion to

purchase securities during the existence

of an underwriting syndicate, a

principal underwriter of which is an

Affiliated Underwriter, provided that

the purchase will be in accordance with

the conditions of rule 10f–3, except that

paragraph (b)(7) of the rule will not

require the aggregation of purchases by

the Affiliated Portion with purchases by

an Unaffiliated Portion.

4. Applicants state that section 10(f)

was adopted in response to concerns

about the ‘‘dumping’’ of otherwise

unmarketable securities on investment

companies, either by forcing the

investment company to purchase

unmarketable securities from its

underwriting affiliate, or by forcing or

encouraging the investment company to

purchase the securities from another

member of the syndicate. Applicants

submit that these abuses are not present

in the context of the Multi-Advised

Funds because a decision by an

Unaffiliated Subadviser to purchase

securities from an underwriting

syndicate, a principal underwriter of

which is an Affiliated Underwriter,

involves no potential for ‘‘dumping.’’ In

addition, applicants assert that

aggregating purchases would serve no

purpose because there is no

collaboration among Subadvisers, and

any common purchases by an Affiliated

Subadviser and an Unaffiliated

Subadviser would be coincidence.

D. Purchases of Securities Issued by

Securities Affiliates

1. Section 12(d)(3) of the Act, in

relevant part, generally prohibits a

registered investment company from

acquiring any security issued by any

person who is a broker, dealer,

investment adviser, or engaged in the

business of underwriting (collectively,

‘‘securities-related activities’’). Rule

12d3–1 under the Act exempts certain

transactions from the prohibitions of

section 12(d)(3) if specified conditions

are met. One of these conditions,

paragraph (c) of rule 12d3–1, generally

provides that the exemption provided

by the rule is not available when the

issuer of the securities is the investment

company’s investment adviser,

promoter, or principal underwriter, or

an affiliated person of the investment

company’s investment adviser,

promoter, or principal underwriter.

2. Applicants state that each

Subadviser is considered to be an

affiliated person of an entire MultiAdvised Fund. Thus, an Unaffiliated

Portion may not purchase securities of

a Securities Affiliate in reliance on rule

12d3–1 because of paragraph (c).

Applicants request relief under section

6(c) from section 12(d)(3) to permit an

Unaffiliated Portion of a Multi-Advised

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