FINRA Manual: Contents
|View Whole Section||Text only||Print Manager||Link|
91-51 Request for Comments on Proposed Changes to Schedule C to the NASD By-Laws Regarding the Sale of Partnership Debt by Direct Participation Programs Representatives and Principals; Last Date for Comments: September 25, 1991
The NASD requests comments on proposed amendments to Schedule C to the NASD By-Laws that would permit Direct Participation Programs Representatives and Principals to sell partnership debt. The text of the amendments follows this notice.
Since the implementation of the direct participation programs registration categories in the early 1980s, the NASD has consistently interpreted the relevant provisions of Schedule C to apply only to the sale of equity interests in direct participation programs as this term is defined in Part II, Section 2(e)(ii) of Schedule C to the By-Laws. In recent years, however, partnership syndicators have begun to issue debt securities of direct participation programs, usually promissory notes, for sale to "qualified plans" as that term is defined under the Employee Retirement Income Security Act (ERISA) regulations.
The principal reason for issuing the security as a debt instrument is to avoid the receipt of unrelated business taxable income (UBTI) as part of the distribution to debtholders. The NASD believes that these debt instruments are equivalent to equity interests in a partnership and would be offered as equity if not for the adverse tax consequences that would occur.
The NASD is proposing amendments to Schedule C that would permit the sale of partnership debt by direct participation registrants. The NASD believes this to be a reasonable response to the evolution noted above in the syndication business that does not compromise the limited scope of the direct participation registration categories. Since this change would replace past interpretations of the direct participation programs registration provisions, the NASD requests comment from members and other interested parties before the amendments are presented to the NASD Board of Governors for adoption.
Questions may be directed to Carole Hartzog in the Qualifications Department at (301) 590-6696 or Craig Landauer in the Office of General Counsel at (202) 728-8291.
Written comments should be forwarded to Stephen Hickman, Office of the Secretary, National Association of Securities Dealers, Inc., 1735 K Street, NW, Washington, DC 20006-1506. Comments should be received by September 25, 1991.
TEXT OF PROPOSED SCHEDULE C CHANGES
(Note: New language is underlined.)
Part II, Section (2)(e)(i)a Of Schedule C to the NASD By-Laws
REGISTRATION OF PRINCIPALS
Part III, Section (2)(c)(i)a Of Schedule C to the NASD By-Laws
REGISTRATION OF REPRESENTATIVES