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For Your Information

NASD Imposes $200 Fee for Form 211 Applications

On January 2, 1992, the SEC approved a proposed rule change by the NASD relating to a fee for Form 211 applications filed with the NASD pursuant to Schedule H, Section 4 of the NASD By-Laws. The rule change is effective immediately and, as a result, a $200 filing fee will be required together with each Form 211 application received on or after January 20, 1992. The fee is not refundable in the event that the member cannot satisfy the requirements of Schedule H, Section 4 or SEC Rule 15c2-11. Members are reminded that this fee, along with any other costs associated with making a market, must be paid by the member and cannot be passed along to the issuer or other parties.

In connection with this rule change, and consistent with Schedule H, Section 4 of the By-Laws, the NASD will no longer require that members submit a Form 211 to the NASD prior to entering a quotation in the National Quotation Bureau "Pink Sheets" when a valid exception to SEC Rule 15c2-11 is available. For further information, please refer to SEC Release No. 34-30145, Notice to Members 90-40, or call the NNOTC Compliance Unit at (202) 728-8149.

NASD Mails New Edition of Guide to Information and Services

With this issue of Notices to Members, NASD members are receiving the January 1992 edition of the NASD Guide to Information and Services. This publication, updated semiannually, is arranged by subject and includes names and phone numbers of persons whom members may call for information and assistance. A new feature of the guide, found on the inside front cover, is answers to five questions often asked by members.

California Increases Agent Registration and Transfer Fees

Effective January 1, 1992, California increased its agent fees. Agent registration and transfer fees rose from $10 to $25. If you have any questions regarding these changes, call NASD Information Services at (301) 590-6500.

Procedures, Fees Change for Unclassifiable (Illegible) Fingerprint Card Submissions

Effective January 2, 1992, the Identification Division of the Federal Bureau of Investigation (FBI) began charging a $23.50 processing fee for a third fingerprint card submission for an individual whose previous cards were returned as illegible.

Please make sure that the second submission for an individual includes the new and the returned illegible card to avoid a full $23.50 charge. But do not attach previously processed cards to the third submission because they will be rejected by the FBI.

The following fingerprint processing fees became effective January 2, 1992:

Filing Type

Document Requirements

Charge Per Card

Initial submission

Original card

$23.50

Second submission

New and illegible card

$1.50

Third submission

New card

$23.50

If you have any questions about this new procedure, contact the Member Services Phone Center at (301) 590-6500.

Three PLATO Development Centers Move to New Locations

Effective immediately, the Charlotte, North Carolina PLATO Professional Development Center has relocated to 5600 77 Center Drive, Suite 370, Charlotte, NC 28217. The telephone number has not changed.

Effective March 2, 1992, the Bellevue, Washington PLATO Professional Development Center will relocate to 11400 Southeast 8th Street, Suite 270, Bellevue, WA 98004. The telephone number will be (206) 451-9883. The center will close at noon on Thursday, February 27 and all day Friday, February 28.

Effective March 16, 1992, the Milwaukee, Wisconsin PLATO Professional Development Center will relocate to 10400 West North Avenue, Suite 340, Wauwatosa, WI 53226. The telephone number will remain the same. The center will close at noon on Thursday, March 12 and all day Friday, March 13.

In the January 1-March 31, 1992, PLATO Brochure, the area code for the Birmingham, Alabama PLATO Professional Development Center is incorrect. The correct area code is 205.

Tokyo Examination Session Rescheduled in April

The April 18, 1992, session in Tokyo, Japan has been rescheduled to April 25.

Paper and Pencil Examination Center Location, Dates Change

In Las Vegas, Nevada the testing room has been changed to Room 112. In Great Falls, Montana the May 2, 1992, session has been rescheduled to May 9. All centers' July 4, 1992, sessions have been rescheduled to June 27, and all September 5, 1992, sessions have been rescheduled to August 29.

Revised Series 26 Study Outline Becomes Available Through NASD

The revised study outline for the Investment Company Products/Variable Contracts Limited Principal Examination (Series 26) is available through the NASD Member Services Phone Center at (301) 590-6500. The cost of this outline is $10.

The revised examination will be implemented effective April 1, 1992. Questions regarding this revised examination program may be directed to Mark Costley, Qualifications Analyst, at (301) 590-6697.

NASD Service Fee for Second Fingerprint Submission Rises

The NASD service charge of $1.50 for the second fingerprint submission has increased to $2.50, effective February 5, 1992.

The current fingerprint processing fees appear at the right

If you have any questions about this new procedure, contact the Member Services Phone Center at (301) 590-6500.

Initial Submission (original card)

$23.50 per card

Second Submission (new and illegible card)

$2.50 per card

Third Submission (new card only)

$23.50 per card

New Format Designed for SRR's Letters to Members

Effective March 16, 1992, the Special Registration Review (SRR) department will begin using a new format when generating Advisory Messages to member firms concerning Forms U-4 and U-5 for registration and termination of brokers. Through software enhancements, the old style of free-form text has been replaced by more concise, prestructured sentences that resemble the Disclosure Reporting Page (DRP) format.

The top portion of the Advisory Message will identify the respective individual and inform the member of both the type of filing reviewed and the problems or deficiencies noted (i.e., missing data, omitted disclosure, erroneous combining of multiple events on a single DRP, etc.). Following a blank line, sentences will appear that serve to instruct the member in correction of the noted problem. These sentences will specify what type of filing or document is required to be submitted and what information is needed. The new style of letters is created based on the review of all reportable events appearing within a broker's Central Registration Depository (CRD) record. In cases where letters must be created for multiple events, each set of messages will be separated by a partial row of asterisks.

The new software offers additional abilities such as on-line review by Firm Access Query System (FAQS) subscribers, duplication of letters by SRR on request, and the automatic 30-day tracking and regeneration of outstanding letters up to a 120-day period. At 120 days, purge notices would be sent to the firm on any outstanding deficient filings. Comments or questions concerning the new letters may be addressed to Daphne Smith, Manager, Special Registration Review, at (301) 590-6842.

NASD Sponsors Full-Day CRD Conference in Maryland May 1

The NASD is sponsoring an all-day CRD Conference Friday, May 1, at the Holiday Inn, Crown Plaza, in Rockville, Maryland. There is limited space, so make your reservations early. The registration fee is $75 per person and includes seminars, workshops and training sessions, continental breakfast, and lunch. Registrants are responsible for their own transportation, hotel costs, and reservations. For hotel reservations, call the hotel directly at l-(800) 492-1331. Please identify yourself as with the National Association of Securities Dealers, Group #8702, to ensure obtaining the group rate of $85 per person per night. For your registration form and additional information, please call the Member Services Phone. Center at (301) 590-6500.

New Versions of Forms U-4 and U-5 Become Only Ones Accepted

The Uniform Application for Securities Industry Registration or Transfer (Form U-4) and the Uniform Termination Notice for Securities Industry Registration (Form U-5) have been changed. The new versions of the forms dated 11/91 became the only versions accepted by the NASD after February 21, 1992. After that date, all earlier versions of the forms are being sent back to the firm. Copies of the new forms were mailed to member firms in November 1991. If you did not receive copies or need additional copies, please call the NASD Member Services Phone Center at (301) 590-6500 to order a sufficient supply.

NASD to Host Major Securities Industry Conference in Florida May 20-22

The NASD's 1992 Eastern Regional Securities Conference, sponsored by Districts 5, 7, 8, 9, 10, and 11, will be held at The Peabody in Orlando, Florida, May 20-22. The program will begin with a state-of-the-NASD address by NASD President and Chief Executive Officer Joseph R. Hardiman, followed by a general session panel on the "Outlook for the Economy, Markets, and the Securities Industry." A second general session panel entitled "New Developments in Securities Regulation" will feature discussions of significant rules and regulations recently adopted, pending approval, or under development at the SEC, NASD, and state level and their potential impact on members.

During the workshop portion of the program, participants will be able to choose from among 12 sessions at which the following topics will be discussed: advertising rules and recent interpretations; compliance and supervision issues; continuing education and assessment for industry professionals; corporate financing matters; dealing with the problem registered representative; fair dealings with customers in terms of markups and pricing; regulation of financial planners, investment advisors, and insurance broker/dealers; new initiatives in the fixed income market; market services and market surveillance; new products/derivatives and related regulatory considerations; and financing small businesses. There will also be a full-day training session for NASD arbitrators.

Conference registration is limited and costs $335 per person for the full conference, $125 for the arbitrators training session, or $425 for both sessions. To request a conference brochure, which includes a full agenda and registration information, please FAX your name, firm, and address to Elisabeth Owen at (202) 728-6952.

New Phone Number Listed for Wauwatosa PLATO Center

The telephone number for the recently relocated Wauwatosa, Wisconsin PLATO Professional Development Center was omitted from the PLATO brochure. The correct number is (414) 774-1378.

Fidelity Bonding Coverage of Certain Employees

All financial institution fidelity bonds, including the bond used in the NASD Group Buying Program, contain a clause (usually in Section 12 of the bond) that terminates coverage of an employee when principals of the insured firm first become aware that, at some time in the past, whether in the employ of the firm or not, an employee committed a fraudulent or dishonest act.

If a member has knowledge that any of its employees has engaged in fraudulent or dishonest activity, there is a distinct possibility that, if the employee engages currently in similar activity causing a loss to the member, the member's subsequent claim on the insurance carrier for indemnification will be denied.

There is also the question of member compliance with the provisions of the NASD fidelity bonding rule (Article III, Section 32, NASD Rules of Fair Practice). These provisions require that all persons associated with a member firm be covered under a member's fidelity bond.

When a member learns that an employee has engaged in fraudulent or dishonest activity in the past, it should immediately contact its insurance carrier and disclose the nature and extent of the conduct. The carrier then will review the information and decide whether to provide coverage of the employee. In many situations, particularly if the activity occurred many years ago and the employee's conduct has since been exemplary, the carrier may be willing to provide coverage. If not, the employee cannot continue to be employed by a member firm.

A similar situation exists when a member is in the process of hiring a new employee. Any past evidence of fraudulent or dishonest conduct should be disclosed to the insurance carrier for its decision whether to provide coverage.

We are bringing this matter to the attention of members at this time because we believe that many members may not be aware of the employee termination clause in their fidelity bonds. In a recent case a claim by a member for almost $500,000 was denied by an insurance carrier because the member knew that in the early 1980s the registered representative, who was the cause of the current loss, violated an NASD rule that the insurance carrier considers involved dishonest conduct.

NASD Member Voting Results

As a member service, the NASD is now publishing the final result of member votes on issues presented to them for approval in the monthly Notices to Members. These tallies will appear in the "For Your Information" section of the Notices.

Thus far in 1992, members have voted on the following issues:

  • Notice to Members 92-1 — Proposed Amendment to Article VI, Section 3 of the By-Laws to Extend the NASD's Summary Suspension Procedures to Situations Where Members or Associated Persons Fail to Comply With Arbitration Awards. Voting Deadline: February 18, 1992. Ballots For 2,070; Against 204; and Unsigned 9.

  • Notice to Members 92-8 — Proposed Amendment to Rules of Fair Practice, Article III, New Section 46: Short-Sale Rule for Nasdaq/NMS Securities and New Section 47: Primary Nasdaq Market Makers. Voting Deadline: March 13, 1992. Ballots For 1,779; Against 445; and Unsigned 15.

Application of the Free-Riding and Withholding Interpretation to Investment Partnerships

The NASD has recently received numerous inquiries asking if an investment partnership that has restricted persons as partners may invest in "hot issues" under the NASD's Free-Riding and Withholding Interpretation if the partnership is structured to preclude the restricted persons from benefiting from the hot-issue purchases.1 This issue was presented to the NASD Corporate Financing Committee and to the National Business Conduct Committee for their consideration. Both committees affirmed the position — which the NASD staff has taken since at least 1980 — that regardless of whether the partnership internally allocates profits and losses from hot-issue transactions away from restricted persons, a member may not sell a hot issue to an investment partnership if restricted persons have a beneficial interest in such partnership unless the sale complies with the provisions of the Interpretation.

Therefore, a partnership that has persons associated with a broker/dealer as partners would be unable to purchase hot issues because such persons are absolutely restricted by the Interpretation. Partnerships that have other categories of conditionally restricted persons as partners would only be able to purchase hot issues if the partnerships were able to demonstrate compliance with the "investment history," "insubstantial," and "not disproportionate" tests of paragraph 5 of the Interpretation.

The staff has taken this position because the NASD has no jurisdiction over investment partnerships or similar entities and has no way to verify whether such restrictions or allocations are being followed. This position also considers the fact that the Interpretation provides for granting exemptions in only one area (i.e., issuer-directed securities) with such exemptions available only in very limited circumstances, not related to investment partnerships.

In response to the interpretative issues raised and to a request by the NASD's Advisory Council, the Board of Governors has authorized the creation of a committee composed of members of the Corporate Financing, National Business Conduct, and Insurance-Affiliated Broker/Dealer Committees to conduct a general review of interpretative issues regarding the Free-Riding and Withholding Interpretation, including the treatment of restricted persons in investment partnerships. This committee will report its recommendations for consideration and/or action by the Board of Governors.


1 The Interpretation includes a provision relating to Investment Partnerships and Corporations that was amended in 1988 (see NASD Manual p. 2047, Notice to Members 88-93).

Last Call to Register for NASD's Eastern Regional Securities Conference To Be Held May 21 and 22 in Orlando

The NASD's Eastern Regional Conference, sponsored by Districts 5, 7, 8, 9, 10, and 11, will be held at The Peabody on May 21-22 in Orlando, Florida. The program will include a state-of-the-NASD address by NASD President and CEO Joseph R. Hardiman and a luncheon address by J. Carter Beese, the newest SEC Commissioner. The program will also feature a general session with panels on the "Outlook for the Economy, Markets, and the Securities Industry" and "New Developments in Securities Regulation."

Workshops, a major part of the program, will cover advertising rules and recent interpretations; compliance and supervision issues; continuing education and assessment for industry professionals; corporate financing matters; dealing with the problem RR; fair dealing with customers in terms of markups and pricing; regulation of financial planners, investment advisors, and insurance broker/dealers; new initiatives in the fixed-income market; market services and market surveillance; new products/derivatives and related regulatory considerations; and financing small businesses. There will also be a full-day training session for NASD arbitrators on May 20.

Conference registration is limited and costs $335 per person for the full conference, $125 for the arbitrators training session, or $425 for both sessions. To make reservations, call Elisabeth Owen at (202) 728-8005.

Vermont Increases Agent, Broker/Dealer Fees Effective July 1

Effective July 1, 1992, Vermont will increase its agent and broker/dealer fees. Agent registration, transfer, and renewal fees will rise from $30 to $45. Broker/dealer registration and renewal fees will go from $200 to $250. If you have any questions regarding these changes, call the NASD Member Services Phone Center at (301) 590-6500.

NAIC's "Own Your Share of America" Campaign Gets Underway

To increase direct individual investment, the National Association of Investors Corporation (NAIC) is conducting an "Own Your Share of America" campaign. This promotional effort is intended to encourage people to become direct owners of the common stock of publicly traded companies. The campaign will run every June for five years beginning this month.

The NASD supports NAIC's efforts because The Nasdaq Stock Market™ is the market of individual investors — they own 60 percent of Nasdaq® securities by market value, and their participation in this market is growing. According to recent survey data, between 1985 and 1990 the number of individual investors in Nasdaq securities jumped from 8.3 to 11.1 million, an increase of 32.4 percent.

If you or your firm would like more information on the program, call or write to: NAIC, P.O. Box 220, Royal Oak, MI 48068, (313) 543-0612.

Louisiana Raises Agent Fees

Effective June 10, 1992, Louisiana raised its agent fees for registration, transfer, and renewal from $50 to $60.

If you have any questions regarding these changes, call NASD Member Services Phone Center at (301) 590-6500.

Major Medical Insurance Brochures Mailed to Registered Reps

In June, insurance administrators for the NASD began mailing major medical coverage brochures to registered representatives of those firms that have given their consent for such direct contact.

This coverage, insured by National Casualty Company, features cost-saving deductibles of up to $2,000, good-health and spouse discounts, and rates that are generally competitive. Interested registered representatives may obtain detailed information by contacting Benefits Administrators, Inc., at 1-800-336-0883.

NASD Member Voting Results

As a member service, the NASD publishes the final result of member votes on issues presented to them for approval in the monthly Notice to Members. Most recently, members voted on the following issue:

  • Notice to Members 92-25 — Proposed Amendment to Article III, Section 15 of the NASD Rules of Fair Practice Re: Exemption for Negative-Response Letters Used to Facilitate Certain Bulk Exchanges of Money Market Mutual Funds. Voting Deadline: June 22, 1992. Ballots For 1,890; Against 133; and Unsigned 19.

New FDIC Regulations Issued for Brokered Deposits

Members who engage in the practice of brokered deposits with federally insured depository institutions must now notify the Federal Deposit Insurance Corporation (FDIC) in writing that they are acting as deposit brokers.

The regulation defines a deposit broker as: (A) Any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions, or the business of placing deposits with insured depository institutions for the purpose of selling interests in those deposits to third parties; and (B) An agent or trustee who establishes a deposit account to facilitate a business arrangement with an insured depository institution to use the proceeds of the account to fund a prearranged loan.

Under this new regulation, a deposit broker must register with the FDIC before it may solicit or place deposits with an insured depository institution. In addition, a deposit broker must keep certain records and on request file written reports with the FDIC.

The regulation was published in the June 5, 1992, Federal Register Volume 57, Number 109, at pages 23933-44. For further information, contact William G. Hrindac, Examination Specialist, Division of Supervision, (202) 898-6892 or Valerie Jean Best, Counsel, Legal Division, (202) 898-3812, or write to FDIC, 550 17th Street, N.W., Washington, DC 20429.

Minnesota Increases Agent Transfer Fee

Effective August 1, 1992, Minnesota increased its agent transfer fee from $20 to $25. The state agent registration fee remains $50.

If you have any questions regarding this change, call NASD Member Services Phone Center at (301) 590-6500.

NASD Membership Department Schedules CRD Conference October 22-23

The second Central Registration Depository (CRD) Conference in 1992 will take place October 22-23, 1992. Additional details will appear in future Notices To Members and the CRD banner pages. For further information, call Rick Sheridan at (301) 590-6523.

NASD Mails Insurance Brochures to Associated Persons

In August, the NASD will mail brochures to associated persons describing the NASD's Individual Term Life Insurance Plan designed for NASD employees, registered representatives, and employees of member firms. Only those eligible associated persons whose member firms have authorized the NASD to contact them directly will receive these brochures.

The coverage described in the brochures serves to supplement whatever life insurance the member firm may already provide. The insurance amounts range from $25,000 to $250,000 and the insurance includes optional spouse and child coverage. Waiver of premium for disability of the primary insured applies to these optional family coverages.

Please be assured that all information used for this mailing is strictly confidential and will not be used for any other purpose. Any individual interested in more detailed information may obtain it by contacting Benefits Administrators, Inc., at (800) 336-0883.

Application of the Free-Riding and Withholding Interpretation to Investment Partnerships Managed by Entities or Persons Not Associated With NASD Members

In the May 1992 Notices to Members, the NASD reiterated a staff position of long standing that regardless of whether an investment partnership internally allocates profits and losses from hot issue transactions away from restricted persons, a member may not sell a "hot issue" to an investment partnership if restricted persons have a beneficial interest in such partnership unless the sale complies with the provisions of the NASD's Free-Riding and Withholding Interpretation (Interpretation). Thus a partnership having persons associated with a broker/dealer as partners could not purchase hot issues because such persons are absolutely restricted by the Interpretation. Furthermore, partnerships with other categories of conditionally restricted persons as partners could only purchase hot issues to the extent the partnership demonstrated compliance with the "investment history," "insubstantial," and "not disproportionate" tests of paragraph 5 of the Interpretation. The May Notice stated that the National Business Conduct Committee (NBCC) was creating a committee to review the Interpretation.

The May Notice had resulted from an inquiry considered by the NASD's NBCC and Corporate Financing Committee in which an NASD member and its associated persons had been involved in the management and distribution of the interests in partnership.

After publication of this Notice, the NASD received several requests for clarification of the position as it would relate to partnerships managed by third party, non-broker/dealer affiliated entities in which restricted persons may be passive investors. These requests sought interim relief from the restrictions described in the Notice pending the overall review of the Interpretation by the NBCC Subcommittee. These requests stated that for many years partnerships have been operated with "carve out" provisions in the partnership agreement that prevent restricted persons from participating in the hot-issue purchases. The partnerships relied on opinion-of-counsel letters which concluded that sales to these partnerships would comply with the provisions of Part B of the Investment Partnership section of the Interpretation. Under Part B, the member executing the transaction for investment partnership must receive an opinion of counsel that states no restricted persons have a beneficial interest in the account. The opinion-of-counsel letters had concluded no beneficial interest existed because of the carve-out provisions.

The NASD's NBCC and Corporate Financing committees reviewed these requests. The committees determined that, pending review of the entire Interpretation, it was appropriate to grant limited interim relief to investment partnerships having restricted persons as limited partners under certain conditions. Such partnerships must be managed by third-party general partners either corporate or individual who are not affiliated with NASD members, and such partnerships must internally allocate profits and losses from hot-issues transactions away from the restricted persons. In reaching this conclusion, the committees distinguished such third-party partnerships from the managed partnerships previously reviewed.

To obtain such interim relief, the investment partnership must establish the following policing mechanisms:

1. The investment partnerships will establish a separate brokerage account, with a separate identification number, for its new-issue purchases. At the end of each fiscal year, the general partners will certify in writing to its independent public accountants that: (a) all hot issues purchased by the partnership were placed in this new-issue account; and (b) the partners participating in the new-issue account are not restricted persons under the Interpretation. Said independent public accountants must be members of the American Institute of Certified Public Accountants (AICPA).
2. Prior to the execution of the initial hot-issue transaction, the partnership's outside legal counsel will render an opinion that complies with paragraph B of the section of the Interpretation entitled "Investment Partnerships and Corporations."
3. As part of its audit procedure for the partnership, the independent certified public accountant (who is a member of the AICPA) will confirm in writing to the partnership that all allocations for the new-issues account were made in accordance with the provisions of the applicable partnership agreement that restricts participation in hot-issue purchases.
4. The partnership will maintain in its files copies of the certifications, representations, and confirmations referred to in paragraphs (1) – (3) above for at least three years following the last purchase of a hot issue for the new-issue account.
5. The partnership will accept investment funds from other partnerships if such other partner ships provide the same documentation and assurances described in paragraphs (1) – (4) that restricted persons will not participate in the purchase of hot issues.
6. The certifications and documents required in paragraphs (1) – (3) shall be provided to the member holding such account at such time as these certifications and documents are filed with the partnership and its independent certified public accountant.

To qualify for the interim relief described in this Notice, a member executing a hot-issue transaction for an investment partnership with restricted persons as limited partners must receive, prior to the initial transaction, the certification from the general partner described in paragraph 1 and the opinion-of-counsel letter described in paragraph 2. The certification from the independent public accountant described in paragraph 3 above shall be obtained at the partnership's next audit.

As previously discussed, the NBCC has created a committee to review the Interpretation and the NBCC invites the membership to provide to this committee any comments or topics on the Interpretation for the committee's consideration. Such comments or topics should be directed to T. Grant Callery, Vice President and Deputy General Counsel, NASD, 1735 K Street, NW, Washington, DC 20006-1506. Any questions concerning this Notice should be directed to T. Grant Callery at (202) 728-8285 or Craig L. Landauer, Assistant General Counsel, at (202) 728-8291.

NASD Member Voting Results

As a member service, the NASD publishes the final result of member votes on issues presented to them for approval in the monthly Notices to Members. Most recently, members voted on the following issue:

  • Notice to Members 92-30 — Proposed Amendment to Rules of Fair Practice to Require Members to Send Periodic Statements of Account to Customers; Last Voting Date: July 22, 1992. Ballots For 1,827; Against 329; and Unsigned 18.

North Carolina to Increase Agent Fees

Effective January 1, 1993, North Carolina will increase its agent fees. Agent registration, transfer, and renewal fees will rise from $45 to $55. The higher renewal fee will be reflected in the annual renewal invoice sent to firms in November 1992. Broker/dealer registration and renewal fees will remain at $200 each.

If you have any questions regarding these changes, call NASD Member Services Phone Center at (301) 590-6500.

NASD Member Voting Result

As a member service, the NASD publishes the final result of member votes on issues presented to them for approval in the monthly Notices to Members. Most recently, members voted on the following issue:

  • Notice to Members 92-36 — Proposed Amendment to Article III, Section 35 of the NASD's Rules of Fair Practice and Section 8 of the NASD's Government Securities Rules to Require Members to Prefile Advertisements for Collateralized Mortgage Obligations; Last Voting Date: August 21, 1992. Ballots For 1,810; Against 298; and Unsigned 33.

SEC Solicits Public Comment on Its Electronic Filing and Retrieval System, EDGAR

The Securities and Exchange Commission (SEC) has requested public comment on proposed rules to implement the operational phase of its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The proposed rules will apply to electronic submissions (generally by the issuers of securities) processed by the Division of Corporate Finance, and in some cases, to those processed by the Division of Investment Management. The proposals will also affect paper filings in limited circumstances. Separate releases contain additional proposed rules relating to electronic submissions processed by the Division of Investment Management and to payment of fees into the SEC's lock-box depository.

In its release, the SEC noted a number of benefits that will accrue to filers from the submission of documents in electronic format. First, time saved by direct transmission of filings will provide filers greater opportunity to meet market windows and eliminate the uncertainty and delay of mail or messenger delivery. Second, the improved dissemination of information resulting from the system will increase public information about all companies, particularly mid-sized and smaller companies, and should increase their visibility and market following.

Third, the SEC's hours for receipt of directly transmitted submissions will be extended to 10 p.m. Eastern Time. Fourth, use of modular submissions and segmented filings will save transmission time and eliminate duplicative transmission of information by permitting a filer to submit data, such as financial statements, and then use the data in subsequent submissions. Fifth, the EDGAR electronic mail/bulletin board service will provide prompt filer notification of acceptance or suspension of submissions.

In addition, EDGAR will allow the SEC to store, process, and disseminate information more efficiently, and will make the staff review process more efficient. Computerization also will provide a foundation for future development of one-stop filing via EDGAR and EDGAR-compatible systems with the North American Securities Administrators Association for the states and with the self-regulatory organizations, namely the National Association of Securities Dealers, Inc., and the stock exchanges.

All comments on these releases are due by October 6, 1992, and should be submitted in triplicate to:

Jonathan G. Katz, Secretary
SEC
Mail Stop 6-9
450 Fifth Street, N.W.
Washington, D.C. 20549.

In announcing its EDGAR proposals, the SEC issued four separate releases which were published on Friday, August 7, 1992, in the Federal Register, Volume 57, No. 153.

For information on Rulemaking for EDGAR System [Release Nos.: 33-6944; 34-30951; 35-25587; 39-2285; IC-18862; File No. S7-21-92] contact: Barbara C. Smith Jacobs or James R. Budge, at (202) 272-2589, Office of Disclosure Policy, Division of Corporate Finance, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.

For information on Rulemaking for EDGAR System; Investment Companies and Institutional Investment Managers [Release Nos. 33-6945; 34-30952; IC-18863; File No. S7-22-92] contact: Anthony A. Vertuno, Senior Special Counsel, EDGAR IM Project, (202) 272-7716, Kenneth J. Berman, Special Counsel, (202) 272-2107, or Ruth Armfield Sanders, Staff Attorney, (202) 272-7714, Division of Investment Management, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.

For information on Rulemaking for EDGAR System Public Utility Holding Companies [Release Nos. 33-6946; 34-30953; 35-25588; File No. S7-23-92] contact: Richard T. Miller, Staff Attorney, (202) 504-2268, Office of Public Utility Regulation, Division of Investment Management, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.

For information on Instructions for Filing Fees [Release Nos. 33-6947; 34-30954; 35-25589; 39-2286; IC-18864; File No. S7-24-92] contact: Jessica L. Kole, Special Counsel (202) 272-2700, Office of the Executive Director, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.

NASD® Adds New Member Service to NASDnetSM Electronic FOCUS System

The NASD® is offering a new service which gives member/designees the ability to provide clearing corporations and clearing firms with copies of FOCUS reports electronically. This service is available through the NASDnetSM electronic filing system currently used by all NASD member/designees to file FOCUS reports with the NASD.

Using NASDnet to collect FOCUS information will ensure that third parties receive FOCUS reports from members/correspondents promptly without risk of the filings being "lost in the mail." Because of the rigorous edits contained in the PC FOCUSSM/NASDnet system, the FOCUS data received will be accurate and complete. Electronic receipt of FOCUS data means that third parties will no longer have to rekey the information. Using the NASD system to receive FOCUS data from correspondents will enhance risk management capabilities by enabling third parties to analyze correspondents' data much sooner and without any need to verify any of the information provided.

The cost for this new service will be $100 a year for each firm forwarding FOCUS reports through NASDnet. This fee will cover telecommunications costs and will provide unlimited support for third parties and member/designees from our Customer Support Staff. The NASD will bill this amount to third parties at the beginning of each calendar year.

For more information, please contact Elizabeth Wollin at (301) 590-6887.

NASD Member Voting Result

As a member service, the NASD publishes the final result of member votes on issues presented to them for approval in the monthly Notices to Members. Most recently, members voted on the following issue:

  • Notice to Members 92-37 — Proposed Amendment to Article III, Section 21 of the Rules of Fair Practice to Require Predispute Arbitration Agreements to Include a Notice That Class-Action Matters May Not Be Arbitrated; Last Voting Date: August 21, 1992. Ballots For: 1,716; Against 365; and Unsigned 47.

NASD Conference in New York

The NASD is sponsoring a one-day educational seminar at the New York Vista Hotel in New York on Wednesday, November 4, 1992. Distinguished speakers will discuss topics such as markups; supervision; trading of U.S. government, high-yield, and municipal securities; derivatives; collateralized mortgage obligations (CMOs); wrap-fee programs; arbitration; and compliance issues facing today's compliance officers and securities attorneys. Featured speakers include Joseph R. Hardiman, NASD President and CEO, and Congressman Charles Schumer, Chairman of the House Judiciary Subcommittee on Crime and Criminal Justice.

For a conference brochure and further information, call Rosalie Tardi at (212) 858-4178 or fax your request to (212) 858-4189.

NASD Announces Early Closing for Nasdaq and SelectNetSM on November 27 and December 24, 1992

The Nasdaq Stock MarketSM and SelectNetSM will close two hours early on the day after Thanksgiving, Friday, November 27, and Christmas Eve, Thursday, December 24. This means that The Nasdaq Stock Market will close at 2 p.m., instead of the regular closing time of 4 p.m., on those days and that SelectNet will stop accepting orders at 3:15 p.m. instead of the regular 5:15 p.m. closing time.

The Automated Confirmation Transaction (ACT) service and the Mutual Fund System, as well as all other postclosing activities, will occur two hours earlier than the normal daily processing time.

Any questions concerning these closing times should be directed to New York Market Operations at(800)635-6485.

1992 Economic Census Will Count Millions of Business Firms

More than 3.5 million American businesses will receive 1992 Economic Census questionnaires from the U.S. Census Bureau in December. Should your firm receive one, please note that the due date for returning it is February 15 and that firms receiving census forms are required by law to respond.

This is the most comprehensive Economic Census ever undertaken. For the first time, the census will measure activity in finance, insurance, and real estate along with the sectors traditionally covered: retail and wholesale trade, service industries, transportation, manufacturing, mining, and construction industries.

Taken every five years, the Economic Census identifies trends in business activity that are vital to measuring and encouraging growth in the American economy. The federal government uses census data to measure economic change. State and local agencies use the Economic Census in regional planning and economic development as well as to attract and keep business activity in their areas.

Businesses can use the data generated by the census to develop business plans, calculate market share, and compare themselves to industry averages. The Economic Census also is important for business-to-business marketing: results frequently influence the location of retail outlets and the design of distribution systems.

The information provided in the census is absolutely confidential. By law, only sworn Census Bureau employees may see individual responses, which are also exempt from the Freedom of Information Act. Statistics from the 1992 Economic Census will be published in more than 500 printed reports and in formats for computers, including compact discs (CD-ROMs). Both printed reports and CD-ROMs will be available in hundreds of libraries across the nation, or may be purchased inexpensively from the Government Printing Office. If you have any questions about the census, call Robert Marske at (301) 763-7356 or FAX (301) 763-2324.

NASD to Publish Back Notices to Members in Bound Volumes

In response to increasing interest from members, the NASD will release bound-volume versions of past years of its Notices to Members monthly newsletter. Notices for years 1987 through 1991 are available for member purchase this month.

The bound volume series includes each year's table of contents as well as a subject index cross-referenced to volumes. The Notices bound volumes will assist analysts, researchers, and legal staff in responding to compliance and regulation questions.

The five-year series costs $600, and individual years are $150 per volume. For more information regarding these Notices to Members bound volumes, call NASD Corporate Communications at (202) 728-6900. Credit card orders may be placed at NASD MediaSourceSM at (301) 590-6578, Monday through Friday, 7 a.m. to 5 p.m, Eastern Time.

Corrections to October 1992 Notices to Members

In Notice to Members 92-52, which concerned broker/dealer and agent renewals for 1992-93, an important piece of information was omitted. Under the section titled "Filing Forms BDW," Alabama should have been listed as one of the seven jurisdictions that do not participate in the CRD Phase II program. The NASD will collect both broker/dealer and agent renewal fees from those firms that are registered in Alabama.

Due to an error in Notice to Members 92-53, the last entry in the table, Total Underwriting Compensation, on page 373 read: 50 or more 6.89 5.00 25.57. It should have read: 50 or more 6.89 5.02 5.57.

For your convenience, a corrected page 373 has been included in this edition of the Notices to Members on the opposite page.

Important Information for Those Individuals Who Are Participating in the NASD Health Guard Plus Major Medical Program

As we all know, medical care costs have been increasing nationally at a 20 percent plus rate. However, our plan has not had an increase in rates since April 1992, although our carrier, National Casualty, has the right to adjust rates on April 1 and October 1 each year. Since the Company did not exercise that right this October, it appears likely that some increase can reasonably be expected as of next April 1993. However, premiums already paid on existing policies are guaranteed against an-increase. For example, an insured whose premium due date falls in December and who pays a six-month premium is protected until June 1993; likewise, payment of a full annual premium would protect that premium against an increase until December 1993, "locking in" the current rates for a full 12 months.

Coming in April 1993: an increase in the maximum limit of benefits from $ 1 million to $2 million a new optional $5,000 deductible, and greater discounts for insureds who have been claim-free.

TOTAL UNDERWRITING COMPENSATION1

Gross Dollar Amount of Offering (millions)

Firm Commitment Initial Offerings (%)

Firm Commitment Secondary Offerings (%)

Best Efforts Offerings (%)

$1

15.80%

14.57%

11.83%

2

14.31

12.91

10.72

3

13.44

11.94

10.07

4

12.82

11.26

9.61

5

12.34

10.72

9.26

6

11.95

9.56

8.96

7

11.62

9.12

8.72

8

11.33

8.76

8.50

9

11.08

8.45

8.32

10

10.65

8.18

8.15

11

9.90

7.95

8.04

12

9.18

7.74

7.86

13

8.49

7.56

7.73

14

7.82

7.39

7.61

15

7.59

7.24

7.50

16

7.55

7.10

7.40

17

7.52

6.97

7.30

18

7.48

6.85

7.21

19

7.45

6.74

7.12

20

7.42

6.63

7.04

25

7.29

6.20

6.68

30

7.19

5.86

6.39

35

7.10

5.60

6.14

40

7.02

5.37

5.93

45

6.95

5.19

5.74

50 or more

6.89

5.02

5.57

1 This table contains the results of a regression analysis of an overall population and not mathematical averages for each category. This data should be considered only in connection with the explanation of methodology contained in the attached Notice.

Correction to Notice to Members 92-59 Regarding Prefiling of Advertisements for Collateralized Mortgage Requirements

Please note that there is an error in the rule language reprinted on page 415 of Notice to Members 92-59 (November 1992). The language contained in Article III, Section 35(c)(2) of the Rules of Fair Practice (17th line in column 1) and Section 8(c)(l)(B) of the Government Securities Rules (19th line in column 2) that reads ". . . until the advertisement or sales literature has been refiled for. . . " should instead read "... until the advertisement has been refiled for . . . ." Collateralized mortgage obligations sales literature is not subject to NASD prefiling requirements. Also, this prefiling requirement will apply until November 15, 1993, not November 15, 1992, as was erroneously reported in the Notice.


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