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FINRA Manual
Corporate Organization Notices
1995
95-104 Expanded Sign-In Procedures At The PROCTOR Centers, Effective February 1, 1996; And PROCTOR Adds Remote Delivery Sites
95-103 SEC Approves A Policy That Delegates Authority To The NASD Staff And The NASD Fixed Income Committee To Review Member Requests For Exemptions From MSRB Rule G-37(b)
95-101 Mail Vote—NASD Solicits Member Vote On Amendments To The NASD By-Laws To Reconfigure The NASD Board And Establish A National Nominating Committee;
95-88 Treasury Delays Effective Date Of Wire Transfer Recordkeeping Requirements Until April 1, 1996; Proposes Clarifying Amendments
95-85 Clarification Of NASD Notice to Members 95-16 And NYSE Information Memorandum 95-16: Content And Enforcement Of Provisions In Customer Agreements And Predispute Arbitration Clauses
95-83 SEC Approves Rules Permitting Arbitration Participants To Seek Injunctive Relief From Arbitrators
95-81 SEC Approves Rules For Reporting Customer Complaint Information; Special NASD Notices to Members
95-80 NASD Further Explains Members Obligations And Responsibilities Regarding Mutual Funds Sales Practices
95-76 SEC Permits NASD To Discipline Members And Associated Persons Who Fail To Honor Arbitration Or Mediation Settlement Agreements
95-73 NASD Requests Comment On Member Obligations To File Certain Exchange Offers That Result In Public Distributions;
95-69 Treasury Amends Bank Secrecy Act; Requires Additional Recordkeeping Requirements For Wire Transfers
95-64 SEC Approves Amendments To Article III, Section 34 Of The NASD Rules Of Fair Practice And Part I Of Schedule D To The NASD By-Laws Relating To Limited Partnership Rollup Transactions
95-63 SEC Approves Amendments To Article III, Section 34 Of The NASD Rules Of Fair Practice Relating To Freely Tradeable Direct Participation Program Securities
95-61 Mail Vote—NASD Solicits Member Vote On Amendments To The By-Laws To Include Statutory Disqualification Provisions Adopted By Congress;
95-56 NASD Files With The SEC Proposals Related To Non-Cash Incentive Programs, Disclosure Of Cash Compensation, And Direct Payments To Associated Persons
95-54 SEC Approves Amendments To Article III, Section 21 Of The NASD Rules Of Fair Practice Relating To Cold-Calling Requirements
95-50 Availability Of New Qualification Examination For Registered Options Limited Representative (Series 42)
95-47 SEC Approves NASD Proposal To Raise Position Limits For Certain Equity Securities Not Subject To Standardized Options Trading
95-45 SEC Approves Amendments To NASD Interpretation Of Forwarding Of Proxy And Other Materials Under Article III, Section 1 Of The Rules Of Fair Practice
95-44 Request For Comments On Proposed Amendments To The Exception To The Qualified Independent Underwriter Requirement In Schedule E To The NASD By-Laws;
95-37 SEC Approves NASD Proposal Amending The Foreign-Associate Provisions Of Schedule C To The NASD By-Laws
95-36 SEC Approves T+3-Related Amendments To The NASD Uniform Practice Code And Rules Of Fair Practice
95-33 Mail Vote—NASD Solicits Member Vote On Measures To Discipline Members And Registered Persons For Failing To Honor Arbitration And Mediation Settlement Agreements; Last Voting Date: June 15, 1995
95-29 Treasury Approves Amendments To Capital Requirements Under The Government Securities Act Of 1986
95-28 Treasury Provides Government Securities Broker/Dealers With Exemptive Relief In Calculating Haircuts For Options On Certain Mortgage-Backed Securities
95-24 SEC Approves Recordkeeping And Reporting Requirements For Trading Systems Operated By Broker/Dealers
95-22 SEC Approves Amendments To Article III, Section 44 Of The NASD Rules Of Fair Practice About Filing Requirements For Modified Guaranteed Annuity And Life Insurance Contracts
95-21 Request For Comments On Proposed Suitability Obligations To Institutional Customers Interpretation;
95-20 NASD Solicits Member Comment On Proposals For Comprehensive Improvements To The Regulation And Operation Of The Nasdaq Stock Market;
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95-55 SEC Approves Depository Eligibility Requirements For Nasdaq Securities
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Executive Summary
On June 1, 1995, the Securities and Exchange Commission (SEC) approved amendments to Part II, Section 1(c) of Schedule D to the NASD By-Laws and Section 11 of the NASD's Uniform Practice Code.1 The amendments require that for a domestic security2 to be eligible for inclusion in Nasdaq it must have a CUSIP number that is included in the file of eligible securities maintained by a securities depository that is registered as a clearing agency under the Securities Exchange Act of 1934. The rule change took effect June 7, 1995.
Background And Description
The Legal and Regulatory Subgroup3 of the U.S. Working Committee, Group of Thirty Clearance and Settlement Project4 has been engaged in continuing efforts to improve the system for the clearance and settlement of securities. In response to a recommendation by the U.S. Working Committee, the NASD and the national securities exchanges adopted rules in 1993 requiring members to use the facilities of a securities depository for the book-entry settlement of all transactions in depository-eligible securities with another member. The NASD's rule is in Section 11 of the Uniform Practice Code (UPC).
Recently, the Subgroup developed a proposed amendment to the listing requirements of The Nasdaq Stock MarketSM and the national securities exchanges to require the securities of a domestic issuer5 seeking listing to be depository eligible.6 The rule change requires that for a security to be eligible for inclusion in Nasdaq it must have a CUSIP number that is included in the file of eligible securities maintained by a securities depository that is registered as a clearing agency under the Securities Exchange Act of 1934. This requirement will not apply to a security if the terms of such security cannot be reasonably modified to meet the criteria for depository eligibility at all securities depositories.
The new rule sets forth additional requirements that must be met before a security will be deemed to be "depository eligible." The new rule specifies different requirements for depository eligibility depending on whether a new issue is distributed by an underwriting syndicate before or after the date a securities depository system is available for monitoring repurchases of the distributed shares by syndicate members (flipping tracking system). Before the availability of a flipping tracking system, the managing underwriter may delay the date a security is deemed "depository eligible" for up to three months after trading begins in the security. After the availability of a flipping tracking system, a new issue will be deemed to be depository eligible when trading on Nasdaq begins.
Questions about this Notice may be directed to Elliott R. Curzon, Assistant General Counsel, Office of General Counsel, at (202) 728-8451.
1 SEC Release No. 34-35798 (6/1/95); 60 F.R. 30909 (6/12/95).
2 Section 1 of Part II of Schedule D applies only to domestic and Canadian securities, and the new Subsection 1(c)(23) excludes Canadian securities. Thus, the new requirement applies only to domestic securities.
3 The rule was developed through the efforts of the Legal and Regulatory Subgroup of the U.S. Working Committee, which included representatives of the National Association of Securities Dealers, Inc., the New York Stock Exchange, Inc., the American Stock Exchange, Inc., the Philadelphia Stock Exchange, the Chicago Stock Exchange Incorporated, the Pacific Stock Exchange, the Boston Stock Exchange, the National Securities Clearing Corporation, the Depository Trust Company, the Municipal Securities Rulemaking Board, and the Commission's Division of Market Regulation.
4 The Group of Thirty is an independent, non-partisan, non-profit organization established in 1978. In 1988, the Group of Thirty initiated a project to improve the state of risk, efficiency, and cost in the world's clearance and settlement systems. See, Implementing the Group of Thirty Recommendations in the United States I-1 (November 1990).
5 The proposed amendment to the Nasdaq listing requirements is being added to Section 1(c) of Part II of Schedule D. Section 1 of Part II of Schedule D applies only to domestic and Canadian securities, and the new Subsection 1(c)(23) excludes Canadian securities. Thus, the new requirement applies only to domestic securities.
6 Although the exchanges and Nasdaq are adopting substantially the same rule language, in the NASD's case the proposed rule must appear in Section 11 of the UPC, as well as in the Nasdaq rules, because the NASD's depository settlement rule in the UPC applies to all NASD members regardless of where the securities are listed. In comparison, the depository settlement rule of the exchanges only applies to transactions in the securities listed on the exchange.
Text Of Amendments
(Note: New text is underlined; deletions are bracketed.)
Schedule D To The NASD By-Laws
Part II
Qualification Requirements For Nasdaq Stock Market Securities
Sec. 1. Qualification Requirements for Domestic and Canadian Securities
* * *
To qualify for inclusion in Nasdaq, a security of a domestic or Canadian issuer shall satisfy all applicable requirements contained in Subsections (a) or (b), and (c) herein.
Uniform Practice Code
Delivery Of Securities
Book-Entry Settlement
Sec. 11.
