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  • 1995

    • For Your Information

      SEC Approves Amendment To Section 65 Of Uniform Practice Code

      On November 30, 1994, the SEC approved an amendment to Section 65 of the Uniform Practice Code relating to customer account transfers. The NASD filed the amendments along with other amendments to the NASD's rules designed to implement the SEC's mandate to move to T+3 settlement of securities transactions. Although the SEC continues to consider the remaining NASD T+3 rule changes, the amendments to Section 65 were approved on an accelerated basis to permit the implementation of changes to the Automated Customer Account Transfer System (ACATS).

      The amendments to Section 65, among other things: (1) require members to validate or object to a transfer within three days; (2) require members to complete the transfer within four days of validation; (3) place more limits on the ability of a member to object to a transfer; (4) resolve discrepancies within five days; (5) mandate the use of ACATS for partial account transfers and transfers of mutual fund shares; and (6) mandate the transfer of residual credit balances for six months. To coincide with the implementation of changes to the ACATS system, the amendments to the NASD's rules and other self-regulatory organizations took effect on December 2, 1994, except for the requirement to transfer residual credit balances for six months, which will take effect on March 3, 1995.

      NASD Free-Riding And Withholding Interpretation Changed

      On December 7, 1994, in Release No. 34-35059, File No. SR-NASD-94-15, the SEC approved amendments relating to the NASD's Free-Riding and Withholding Interpretation (Interpretation), an Interpretation of the Board of Governors under Article III, Section 1 of the Rules of Fair Practice. The changes to the Interpretation affect stand-by purchase arrangements by restricted persons; the definition of immediate family members, public offerings, and associated persons; the use of the "carve out" mechanism for restricted persons in Investment Partnerships and Corporations; issuer-directed securities; and other provisions of the Interpretation. The NASD will be publishing a Notice To Members in February 1995 that will contain a detailed discussion of these changes.

      Reuters New York financial news bureau moved on January 16, 1995. As of this date, the corporate news reporting desk, industry specialist correspondents, and stock market reporting team will be located at:

      166 Water Street
      New York, NY 10038
      Telephone: (212) 859-1700
      Fax: (212) 859-1717.

      SEC Approves Extension Of "Interim SOES Rules"

      In January, the Securities and Exchange Commission (SEC) approved the extension of the Interim Small Order Execution System (SOESSM) rules until March 27, 1995. These Interim SOES Rules, which the SEC approved in late 1993 on a pilot basis until January 25, 1995, provide for:

      • a reduction in the maximum size order eligible for execution through SOES from 1,000 shares to 500 shares;

      • a reduction in the minimum exposure limit for "unpreferenced" SOES orders from five times the maximum order size to two times the maximum order size, and for the elimination of exposure limits for "preferenced orders";

      • implementation of an automated function for updating market-maker quotations when the market maker's exposure limit has been exhausted; and

      • the prohibition of short sales through SOES.

      Given that the NASD now has a short-sale rule, all of the Interim SOES Rules were extended, except the provision that prohibits short sales through SOES.

      Members are reminded, however, that short-sale orders in Nasdaq National Market® securities entered into SOES will be executed in accordance with the NASD short-sale rule. Thus, if the current inside bid in Nasdaq® at the time of execution is lower than the previous inside bid, market orders to sell short entered into SOES and marketable limit orders to sell short entered into SOES will not be immediately executed. SOES will not execute such short sales until the inside bid is an "up" bid.

      Direct any questions concerning this issue to Nasdaq Market Operations at (203) 378-0284.

      Members Must Annotate Affirmative Determinations

      In January, the NASD filed a proposal with the SEC to change the effective date of one provision of a previously approved rule change that amended the Interpretation of the Board of Governors—Prompt Receipt and Delivery of Securities (Interpretation). Effective January 9, 1995, absent an exemption, members must annotate their affirmative determinations as to stock availability when effecting short sales for their own proprietary accounts or the account of a customer. In making their affirmative determinations, however, members may rely on daily fax sheets and other "blanket" or standing assurances to satisfy the new annotation requirement until August 1, 1995. After August 1, 1995, absent further action by the NASD, members will not be permitted to rely on daily fax sheets. The new annotation requirement for short sales does not modify any exemptions from the affirmative determination requirements that are presently in the Interpretation (such as, the market-maker exemption).

      As originally approved, the new annotation requirement specifically stated that an affirmative determination and annotation of that affirmative determination must be made for each and every transaction. A "blanket" or standing assurance that securities would be available for borrowing, would not be acceptable to satisfy the requirement. Thus, by requiring firms to annotate each and every affirmative determination, the amendment made clear the NASD's policy that firms cannot rely on daily fax sheets of "borrowable stocks" to satisfy the Interpretation's requirements. However, with its January 1995 proposal to the SEC, the NASD extended the use of these standard assurances to give the NASD and its members ample time to consider whether to retain this provision or modify it to better reflect industry practice.

      Chronology Of The Rule Change

      In May 1994, the NASD filed with the SEC the proposed rule change for Article III, Section 1 of the NASD Rules of Fair Practice. The SEC approved the proposal in September 1994; and the NASD announced in Notice to Members 94-80 (October 1994) a November 30, 1994, effective date for the Interpretation.

      In response to Notice to Members 94-80, many NASD members raised concerns about their ability to comply with the changes to the Interpretation by November 30, 1994, because they needed to make a variety of operational adjustments. On November 29, 1994, the NASD announced a January 9, 1995, effective date to give members enough time to prepare for the rule change. The NASD sent a reminder to members in early January that the rule change would go into effect on January 9, and noted the one provision prohibiting the use of standard assurances that securities are available for borrowing would not go into effect until August 1, 1995.

      Affirmative-Determination Requirements

      Effective January 9, 1995, the new rule required members to annotate, on the trade ticket or on some other record they maintain for that purpose, the following:

      • if a customer assures delivery, the member must annotate that conversation, noting the present location of the securities; whether the securities are in good deliverable form; and whether they will be delivered to the firm within time for settlement; or

      • if the member locates the stock, the member must annotate the identity of the individual and firm contacted who offered assurance that the shares would be delivered or were available for borrowing by settlement date; and the number of shares needed to cover the short sale.

      For details on this rule change, see Notice to Members 94-80 (October 1994), or direct your questions about the affirmative-determination Interpretation to Tom Gira, Assistant General Counsel, at (202) 728-8957.

      Alabama Joins Phase II

      Effective January 16, 1995, the state of Alabama joined the Phase II program of the Central Registration Depository (CRD). By participating in Phase II, Alabama allows NASD member firms to apply for registration with that state by submitting a Form BD to the CRD requesting Alabama and depositing the BD registration fee of $200 in the firm's CRD account.

      If you have any questions regarding these changes, please call the NASD Member Services Phone Center at (301) 590-6500 or your firm's assigned Quality and Service Team.

      Testing Center Changes

      Effective immediately, two new automated testing centers have been added to the testing center locations:

      • American College Testing
        River Tree Court
        701 N. Milwaukee Avenue Vernon Hills, IL 60061
        (708) 247-4218

      • PROCTOR® Certification Testing
        5540 Centerview Drive, Suite 307
        Raleigh, NC 27606
        (919) 859-2240

      Effective immediately, the following PROCTOR Certification Testing Centers are closed:

      • Norfolk, VA; and

      • Roanoke, VA.

      Please note the following changes to the schedule of paper and pencil domestic testing locations:

      • The room number in Boise, ID, is 102A.

      • The May session in Great Falls, MT, will be held on May 13.

      • The July, September, and October sessions at all locations will be held on July 8, September 9, and October 14.

      Please note the following changes to the schedule of paper and pencil foreign testing locations:

      • Paris, France—April 1, June 24, October 14.

      • Heidelberg, Germany—June 10, August 12, October 14.

      • Geneva, Switzerland—April 8.

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

      SEC Adopts Rule 11 Ac1-3 And Amendments To Rule 10b-10

      Effective April 3, 1995, the SEC is adopting new Rule 11Ac1-3 and amendments to Rule 10b-10 concerning payment-for-order-flow practices. These changes require:

      • Broker/dealers to inform customers in writing, when a new account is opened, about its policies regarding the receipt of payment for order flow, including whether payment for order flow is received and a detailed description of the nature of the compensation received.

      • Broker/dealers to provide information in account opening documents about order-routing decisions, including an explanation of the extent to which unpriced orders can be executed at prices superior to the national best bid or best offer (NBBO) at the time the order is received.

      • Broker/dealers to update this information and to provide this information annually to all customers.

      • Broker/dealers to indicate on confirmations whether the broker/dealer receives payment for order flow, and the availability of further information on request.

      These changes apply to Nasdaq National Market® securities, The Nasdaq Small Cap MarketSM securities, and OTC Bulletin Board® securities. For additional information, members may refer to the November 2, 1994, Federal Register.

      Appointment Of A SIPC Trustee

      On February 27, 1995, the U.S. District Court for the Southern District of New York appointed a Securities Investor Protection Corporation (SIPC) Trustee for:
      Adler, Coleman Clearing Corporation
      20 Broad Street,
      16th Floor
      New York, NY 10005
      (212) 225-2000

      Questions regarding the firm should be directed to SIPC Trustee:
      Edwin B. Mishkin, Esq.
      Cleary, Gottlieb, Steen & Hamilton
      One Liberty Plaza
      New York, NY 10006
      (212) 225-2000

      Members may use the "immediate close out" procedures as provided in Section 59(i) of the NASD's Uniform Practice Code to close out open over-the-counter contracts. Also, Municipal Securities Rulemaking Board Rule G-12(h) provides that members may use the above procedures to close out transactions in municipal securities.

      NASD Spring Securities Conference

      The NASD Spring Securities Conference is scheduled for May 17-19 at The Peabody Hotel in Orlando, Florida. As in the past, the Arbitrator Skills Training Program will be held May 17, just prior to the start of the conference. Watch your mail for more information about these important events.

      SEC Delays Requirements For Disclosure Of Payment-For-Order-Flow Practices From April 3 To October 2, 1995

      On March 10, 1995, the SEC determined to delay, until October 2, 1995, the effective date of Rule 11Ac1-3 and certain amendments to Rule 10b-10 concerning disclosure of payment-for-order-flow practices. These changes originally were scheduled to go into effect on April 3, 1995.

      In addition, the SEC is postponing an amendment to Rule 10b-10 requiring a broker/dealer that is excluded from membership in SIPC to make a disclosure of its non-SIPC status on customer confirmations. This amendment now is scheduled to take effect on October 2, 1995.

      Although the SEC is delaying the effective date of these changes, the SEC staff has advised that it will not object if members begin complying with the new requirements before October 2.

      SEC Approves Extension Of Two Of The Interim SOES Rules

      On March 27, 1995, the SEC approved the NASD's proposal to extend, through October 2, 1995, the effectiveness of two of the Interim SOESSM Rules—the SOES Minimum Exposure Limit Rule and the SOES Automated Quotation Update Feature. The SOES Minimum Exposure Limit Rule provides for a reduction in the minimum exposure limit for unpreferenced SOES orders from five times the maximum order size to two times the maximum order size, and for the elimination of exposure limits for preferenced orders. The SOES Automated Quotation Update Feature permits market makers to automatically update their quotes when the market maker's exposure limit has been exhausted.

      Effective March 28, 1995, however, the SOES Maximum-Order Size Rule lapsed and the maximum-size order eligible for execution through SOES returned to 1,000 shares. Accordingly, effective March 28, 1995, the minimum exposure limit for SOES is 2,000 shares (2 x 1,000). The maximum-size order eligible for execution through SOES in The Nasdaq SmallCap MarketSM securities remains 500 shares.

      Questions concerning this should be directed to Glen Shipway, Nasdaq Market Operations, at (212) 858-4448 or Tom Gira, Office of General Counsel, at (202) 728-8957.

      Foreign Exam Center Changes

      Please note the following changes to the schedule of foreign examination centers:

      • Paris, France—June 24, October 14

      • Heidelberg, Germany—June 10, August 12, October 14

      • Tokyo, Japan—June 24
      • T+3 Impact On Short-Interest Reporting

        The settlement date for monthly short-interest reporting will remain the 15th of themonth, or prior business day if the 15th is a non-settlement day. However, beginning in June, the trade date will be three business days before settlement, in conformance with Securities and Exchange Commission (SEC) Rule 15c6-l, which establishes a standard T+3 settlement period.

        The monthly short-interest reporting schedule is:

        Trade Date

        Settlement Date

        Report Due Date

        6/12/95

        6/15/95

        6/19/95

        7/11/95

        7/14/95

        7/18/95

        8/10/95

        8/15/95

        8/17/95

        9/12/95

        9/1.5/95

        9/19/95

        10/10/95

        10/13/95

        10/17/95

        11/10/95

        11/15/95

        11/17/95

        12/12/95

        12/15/95

        12/19/95

        Questions regarding the monthly short-interest reporting schedule may be directed to NASD Regulatory Systems at (800) 321-6273, or your local NASD District Office.

        T+3 Changes To Reg. T Extension System

        The Reg. T/Rule 15c3-3 Extension Request System has been modified to comply with the change in standard settlement period to three business days after the trade date for most securities, beginning on June 7, 1995, according to SEC Rule 15c6-l. A four-day settlement period will be used for the trade dates of June 5, 1995, and June 6, 1995, during the transition period.

        The schedule for extensions during the transition period is:

        Trade Date

        Settlement Date

        Reg.T Date

        SEC Rule 15c3-3(m) Date

        6/2/95

        6/8/95

        6/13/95

        6/23/95

        6/5/95

        6/9/95

        6/13/95

        6/23/95

        6/6/95

        6/12/95

        6/14/95

        6/26/95

        6/7/95

        6/12/95

        6/14/95

        6/26/95

        Questions regarding the submission of extension requests through the ARRS System may be directed to NASD Regulatory Systems at (800) 321-6273, or your local NASD District Office.

        Definitions Of DNR And DNI Clarified When Used With Open Orders

        On February 7, 1995, the SEC approved an amendment to Article IE, Section 46 of the Rules of Fan-Practice clarifying the meaning of the terms "Do Not Reduce" (DNR) and "Do Not Increase" (DNI) as used in connection with open orders. Section 46 requires members holding open orders to adjust the price and size of the order in proportion to the dividend or other distribution on the day the security is quoted "ex."

        The amendment to Section 46 clarifies that DNR instructions only apply to cash dividends, while DNI instructions apply to stock dividends. The amendment to Subsection 46(e) reads:

        (Note: New text is underlined; deletions are in brackets.)

        (e) The provisions of this rule shall not apply to: (1) orders governed by the rules of a registered national securities exchange; (2) orders marked "do not reduce" where the dividend is payable in cash; (3) orders marked "do not increase[;]" where the dividend is payable in stock, provided that the price of such orders shall be adjusted as required by the Section: (4) open stop orders to buy; (5) open sell orders; or (6) orders for the purchase or sale of securities where the issuer of the securities has not reported a dividend, payment or distribution pursuant to Securities and Exchange Commission Rule 10b-17.

        Members should note carefully the scope of the exemptions. Notwithstanding Notice to Members 94-63, where a dividend or distribution is payable in stock, such as in a stock split, a DNR instruction will not apply and the order must be adjusted for price and size as required by Section 46.

        Treasury Extends Comment Period For Proposal On Large Position Reporting For Government Securities

        The Department of the Treasury is extending until May 24, 1995, the deadline for submitting comments on its Advanced Notice of Proposed Rulemaking (ANPR) under the Government Securities Act of 1986 (GSA). Treasury intends to implement rules to require persons holding, maintaining, or controling large positions in to-be-issued or recently issued Treasury securities to keep records and file reports of these large positions. In its ANPR, Treasury requested comment on how these large-position rules should be structured. For additional information about this proposal, please refer to Notice to Members 95-15, March 1995.

        Persons interested in submitting written comments should submit them by May 24, 1995, to:

        Kenneth R. Papaj, Director
        Government Securities
        Regulations Staff
        Bureau of the Public Debt
        Department of the Treasury
        999 E Street, NW, Room 515
        Washington, DC 20239-0001

        NASAA Implements New Uniform Combined State Law Exam

        Effective July 1, 1995, the North American Securities Administrators Association (NASAA) will implement the Uniform Combined State Law Examination (Series 66). This examination has been developed by a Committee of NASAA representatives to satisfy the agent and investment adviser qualification testing requirements. Before the implementation of the Series 66, candidates required to register as agents of broker/dealers and as investment advisers had to pass two qualifications examinations—the Uniform State Law Examination (Series 63) and the Investment Adviser Law Examination (Series 65). This new test will provide brokerage firms with a way to comply more efficiently with these state qualification requirements. After July 1, candidates will have the option of taking the individual examinations (Series 63 and Series 65) or of taking the combined Series 66.

        Candidates may use the Series 63 and Series 65 training materials to prepare for the Series 66. The testing time for this new examination is two and one-half hours and consists of 100 multiple-choice questions based on the Uniform Securities Act and the Uniform Investment Adviser Act. There are four major sections on the Uniform Combined State Law Examination (see box below).

        The test will be graded on the basis of two group scores—Group 1 includes Section 1 and Group 2 includes the remaining three sections. Candidates will be required to achieve a score of at least 70 percent in each group to pass the Series 66. Candidates who fail either group or both groups will receive a fail for the entire test and will have to retake the entire Series 66.

        The Series 66 will be administered by the NASD® at the 55 PROCTOR® Certification Testing Centers, as well as at the 13 paper-and-pencil locations. Candidates will submit a Page 1 of Form U-4 and the $105 examination fee to request the test. The enrollment period will be valid for 90 days. There will be no waiting period between failed attempts.

        Direct any questions to Sheila Cahill, Chair, NASAA Exams Advisory Committee, at (402) 471-3445 or Jeff Himstreet, Associate Counsel, NASAA, at (202) 737-0900.

        Also effective July 1, 1995, the examination fee for the Series 63 will increase to $65.

        Section

        Title

        Number Of Questions

        1

        Uniform Securities Act

        54

        2

        Federal Acts

        26

        3

        SEC Release IA-1092

        11

        4

        Unethical Business Practices of Investment Advisers

        9

         

        Total

        100

        Enhanced Score Report For Series 7

        Starting in June, a second page will be added to the score report candidates receive at PROCTOR Certification Testing Centers after completing the General Securities Representative Examination (Series 7). The second page will show a detailed list of the topics in each of the section scores that appear on the first page.

        The first page will continue to show the candidate's overall number correct, percentage correct, and a grade. National averages will continue to be shown. Using enhanced scoring statistics, subscores for each section of the test will be reported in a from/to percentage range format.

        Questions regarding these changes may be directed to David Uthe, Assistant Director, NASD Qualifications and Exams, at (301) 590-6695.

        NASD Manual, Notices to Members, and Disciplinary Actions Now Available Through Lexis

        To view all documents—the NASD Manual, Notices to Members, and Disciplinary Actions—through Lexis, users with Lexis accounts can go to the FEDSEC library, and type in the filename NASD. Each document can be accessed directly using its individual filename:

        • MANUAL for the NASD Manual;

        • NOTICE for Notices to Members; and

        • DISCIP for the Disciplinary Actions.

        Users do not have to use all capital letters when typing in filenames.

        Direct questions about how to access NASD information via Lexis to the Lexis/Nexis Customer Service Hotline at (800) 543-6862.

        Continuing Education Program: $75 Regulatory Element Fee

        In February 1995, the SEC approved amendments to Schedule C of the NASD By-Laws to add new Part XII prescribing requirements for the continuing education of certain registered persons subsequent to their initial qualification and registration with the NASD.1 The rule takes effect on July 1, 1995, and establishes a formal two-part Securities Industry Continuing Education Program for securities industry professionals that require uniform periodic training in regulatory matters (the Regulatory Element) and ongoing programs by firms to keep employees informed of the products, services, and investment strategies of their firms (the Firm Element).

        To cover the costs incurred by the NASD for the administration of the Regulatory Element, the NASD filed with the SEC for immediate effectiveness an amendment to Section 2 to Schedule A of the NASD By-Laws to assess a $75 session fee against each individual required to complete the Regulatory Element. The fee will apply to recoup the expenses of the Council and to cover the development, start-up, and on-going operational costs of administering the Regulatory Element. The amendment will be effective July 1, 1995.

        New PROCTOR Certification Testing Center Opens In Sacramento, CA

        The PROCTOR Certification Testing Center in Emeryville, CA, will be closing on June 30, 1995.

        Effective July 10, 1995, anew testing center will open in Sacramento, CA:

        American College Testing 555 Capitol Mall Suite 550 Sacramento, CA 95814

        The telephone number will be available in July.

        1 See, Securities Exchange Act Release No. 34-35341 (February 8, 1995); 60 FR 8426 (February 14, 1995).

        FBI Alerts Members, Seeks Leads

        U.S. Department of Justice Federal Bureau of Investigation One Center Plaza, Suite 600 Boston, MA 02108 June 14, 1995

        Willis Riccio Director
        NASD
        260 Franklin Street, 16th Floor
        Boston, MA 02110

        Dear Mr. Riccio:

        Within the last few months, the Boston Division of the Federal Bureau of Investigation (FBI) has undertaken fraud investigations concerning Boston investment firms that have been victimized by out-of-state parties posing as potential investors. In an effort to prevent further losses and to solicit information that could assist in apprehending the individuals responsible, the following generalized method of operation, names and addresses, are being furnished to your agency for dissemination to member organizations:

        In each instance under investigation shareholder accounts were opened by mail utilizing corporate checks which were stolen after being issued by the payor. The accounts were opened in the name of the payee, which in nearly every instance was another corporation or business entity. False identification was presented in the applications opening the accounts and the checks were fraudulently endorsed and deposited. The individual opening the account requested check writing privileges, and withdrawal checks were written depleting the account balance.

        Investigation has determined that addresses and telephone numbers provided for the account holders are either mail drops or voice mail answering businesses whose services have been subscribed to by those engaged in the alleged criminal activity. These businesses are not subjects of this investigation and are not alleged to have engaged in any criminal conduct. The addresses utilized are identified as:

        1126 Kings Highway Brooklyn, NY 11229
        1204 Ave. 1,Apt. 1280 Brooklyn, NY 11229
        7014 13th Ave., Suite 187 Brooklyn, NY 11228
        1611 73rd Street Brooklyn, NY 11204
        1230 Hempstead Turnpike Franklin Square, NY 11010
        1019 Beach 20th Street, #117 Far Rockaway, NY 11691
        191 Victory Blvd. Staten Island, NY 10301
        244 W. 54th Street, Suite 235 New York, NY 10018
        960 S. 3rd Street Louisville, KY 40203
        186-09 Jamaica Ave. Jamaica, New York 11423
        100 Henry Street, Apt. 222 New York, NY 11201

        The above information is furnished for your attention and dissemination. The Boston Division FBI Special Agent assigned to these matters is Robert A. Keane and he may be contacted at (617) 223-6464.

        Sincerely,

        Richard S. Swensen Special Agent In Charge

        By: Robert E.Schlabach Supervisory Special Agent

        Pennsylvania And CBOE Increase Fees

        Effective July 1, 1995, Pennsylvania's agent registration and re-registration fees increased to $77. In addition, effective with the 1995-96 renewal program, PA's agent renewal fee will increase to $62.

        Also effective July 1, 1995, the Chicago Board Options Exchange increased its agent registration fee to $25 and the agent re-registration and renewal fee to $20.

        If you have any questions regarding these changes, please call the NASD Member Services Phone Center at (301) 590-6500 or your firm's assigned Quality and Service Team.

        Corporate Financing Rule Change Ups Non-Cash Limit To $100

        On June 16, 1995, the Securities and Exchange Commission (SEC) approved amendments to Article III, Section 44 (c)(6)(B)(xi) of the NASD Rules of Fair Practice to raise the value of non-cash sales incentives that an issuer or its affiliates may provide NASD members from $50 to $100 per person, annually. [See, Securities Exchange Act Rel. No. 34-35853 (June 16, 1995); 60 FR 32722 (June 23, 1995)]. Such non-cash sales incentives are typically de minimis in nature, such as small souvenir or gift items provided by issuers to a member or associated persons of a member. The amendment makes the value-limitation provisions of the Rule consistent with similar provisions in Article III, Sections 10 and 34 of the Rules of Fair Practice, with proposed amendments to Sections 26 and 29 now pending SEC approval, and with Rule 350(a) of the New York Stock Exchange.

        NASD Material Now Available On C-Text

        NASD Manual, Notices to Members, and NASD Guide to Rule Interpretations are now published on C-Text by Compliance International, Inc.

        Further information regarding the C-Text service can be obtained directly from Compliance International Inc., at (201) 808-0955.

        Participants Receive State Surety Bond Program Refunds

        The NASD recently sent refund checks to those members who are participants in the NASD State Surety Bond Program. The letter to participants that accompanied the refund checks is reprinted below.

        Dear NASD Member:

        Over 90% of NASD member firms have less than 100 registered representatives. These firms often do not have the individual leverage needed to negotiate advantageous terms with insurance companies and other service providers. The NASD Member Benefits Department, under the guidance of the Membership Committee, uses the group buying power of our members to deliver services that are unavailable in the commercial market or that outperform available services. We are pleased to be able to send you the enclosed refund check for the State Surety Bond program as one of the first fruits of their labors.

        The Membership Committee, NASD Member Benefits staff and Seabury & Smith, the program's broker, have been working with insurance carriers since November 1994 to reduce the costs to members of state surety bonds. The result of their combined efforts is a 40% reduction in premium rates charged to participating members and the establishment of one of the lowest bond premium rates in the surety industry. This rate reduction will save our industry over $500,000 in 1995. Your refund check represents 40% of your December 1994 and April 1995 bond renewal premiums, as applicable.

        A key element to achieving these types of program savings is your participation. The greater the participation in a program, the greater the opportunity to leverage our combined purchasing power. The Membership Committee is working with Member Benefits staff to improve existing NASD Benefits by Association programs and to offer new benefits to reduce your operating costs and enhance your risk management. These programs are offered as a member service. They are not used to fund other NASD activities, nor are they subsidized by the NASD.

        We encourage you to consider the other Benefits by Association programs so you can realize the cost savings and enhanced risk management they offer. If you would like information on these programs, please call Dean Boyle, Director, Member Benefits, at (301) 590-6525.

        Sincerely,

        Joseph R. Hardiman President

        Carl E. Lindros

        Chairman, Membership Committee

        Blanket Or Standing Assurances Not Allowed To Satisfy Affirmative Determinations For Short-Sale Transactions

        Effective September 5, 1995, members may not rely on blanket or standing assurances as to stock availability to satisfy their affirmative determination requirements when effecting short-sale transactions.

        On January 9, 1995, an amendment to the NASD Prompt Receipt and Delivery of Securities Interpretation (Interpretation) went into effect that required members to annotate their affirmative determinations as to stock availability that are required to be made when effecting short sales for their own proprietary account or the account of a customer. The amended Interpretation requires members to annotate the following information on the trade ticket or on some other record:

        • if a customer assures delivery, the member must annotate that conversation noting the present location of the securities; whether the securities are in good deliverable form; and whether they will be delivered to the firm within time for settlement; or

        • if the member locates the stock, the member must annotate the identity of the individual and firm contacted who offered assurance that the shares would be delivered or were available for borrowing by settlement date; and the number of shares needed to cover the short sale. The manner by which a member or person associated with a member annotates compliance with this "affirmative determination" requirement (such as, marking the order ticket, recording inquiries in a log, etc.) is left for each member to decide.

        Since January 9, 1995, however, the effectiveness of one provision of the amended Interpretation was held in abeyance until August 1, 1995. Specifically, this provision clarified that an affirmative determination and annotation of that affirmative determination must be made for each and every transaction since a "blanket" or standing assurance that securities are available for borrowing is not acceptable to satisfy the affirmative determination requirement. This provision will now go into effect on September 5, 1995. Thus, effective September 5, 1995, members will not be able to rely on daily fax sheets of "borrowable stocks" to satisfy their affirmative determination requirements under the Interpretation.

        Direct questions concerning this to NASD Market Surveillance at (800) 925-8156 or (301) 590-6080.

        NASD Preventive Compliance Program Offers New Computerized Support For Continuing Education Program

        As part of an on-going and significant effort to provide education and preventive compliance initiatives, the NASD recently announced the development of the Member Compliance Support System (MCSS). Upon completion, the MCSS will provide member firms with an array of software applications to access, understand, and comply with NASD rules and regulations.

        The Training Analysis and Planning Tool, Release 1.0, was the first component of the MCSS and was provided to all members, free of charge, in June 1995. This Tool, a user-friendly, Windows-based application, was designed with extensive industry input to help members prepare a needs analysis and develop a written training plan pursuant to the July 1, 1995, Firm Element requirement of the newly adopted Continuing Education Program.

        Release 2.0 of The Training Analysis and Planning Tool, which is currently being developed and targeted for release in the fall, will provide a smooth transitional upgrade for current Release 1.0 users. While building significantly on the functionality established in Release 1.0, Release 2.0 will include the following major enhancements:

        • an indexed database of training courses and vendors that can be used to match the training needs of covered persons;

        • the ability to prepare, track, and manage the training progress of covered persons;

        • increased on-line and print reporting capabilities including exception reporting; and

        • expanded on-line help and tutorial screens.

        These additional features will help members comply with the January 1, 1996, Continuing Education Program requirement of implementing their written training plans. A reasonable fee will be charged to parties wishing to purchase The Training Analysis and Planning Tool, Release 2.0.

        Specific information regarding the distribution of Release 2.0 will be provided to members in subsequent Notices to Members and NASD Regulatory & Compliance ALERT. If you have general questions about the Continuing Education Program call (301) 590-6500, or your Quality & Service Team.

        SEC Approves Amendments To NASD By-Laws To Withdraw The Current Option For Member Firms To Report Annual Gross Revenue For Assessment Purposes

        On July 11, 1995, the Securities and Exchange Commission (SEC) approved amendments to Section 1 of Schedule A of the NASD By-Laws to withdraw the current option for member firms to report annual gross revenue for assessment purposes on a calendar-year or fiscal-year basis, and to require all member firms to report annual gross revenue on a calendar-year basis only.

        Currently, Section 5 of Schedule A to the By-Laws defines gross revenue for assessment purposes as income reported on the FOCUS Report. The FOCUS Report reports income only on a calendar-year basis. The amendments rectify the current inconsistency between Sections 1 and 5 of Schedule A and simplify the data collection and reporting process for the NASD.

        NASD Proposes To Delay Implementation Date Of Primary Market-Maker Standards From September 6, 1995, To November 1, 1995

        Subject to regulatory review and any necessary approval by the SEC, the NASD proposes to delay the implementation date of the Primary Market-Maker Standards to be used to determine the eligibility of market makers to an exemption from the NASD's short-sale rule from September 6, 1995, to November 1, 1995. The NASD will immediately notify members of any regulatory action taken with respect to this proposal.

        To qualify for an exemption from the short-sale under the new multi-part quantitative test, market makers must satisfy at least two of the following four criteria: (1) the market maker must be at the best bid or best offer as displayed in Nasdaq no less than 35 percent of the time; (2) the market maker must maintain a spread no greater than 102 percent of the average dealer spread; (3) no more than 50 percent of the market maker's quotation updates may occur without being accompanied by a trade execution of at least one unit of trading; and (4) the market maker executes one-and-a-half times its "proportionate" volume in the stock. Members should review Special Notice to Members 94-68 for a more detailed explanation of the Primary Market-Maker Standards. The multi-part quantitative test will replace the present 20-day test where short sales by market makers that have maintained quotations in a particular security for 20 consecutive business days are exempt from the rule, provided the short sales are made in connection with bona fide market making activity.

        Assuming the phase-in schedule for the Primary Market-Maker Standards is delayed, beginning November 1, 1995, the multi-part quantitative test will be used as a basis to evaluate the eligibility of market makers to an exemption from the rule. On December 1, 1995, market makers can continue to be exempt from the rule if they have satisfied the new multi-part quantitative test based on their trading activity from November 1, 1995, through November 30, 1995. Until November 30, the 20-day test will continue to be used to evaluate market makers' eligibility for an exemption from the rule. After December 1, 1995, a "P" indicator will be displayed next to every qualified market maker that is exempt from the rule according to the new Primary Market-Maker Standards. When the new test for the market-maker exemption goes into effect, firms will be able to verify their primary market-maker status via the Nasdaq Workstation®.

        Direct your questions concerning this to NASD Market Surveillance at (800) 925-8156 or (301) 590-6080; Glen Shipway, Senior Vice President, Nasdaq Market Operations, at (203) 385-6250; or Tom Gira, Assistant General Counsel, Office of General Counsel, at (202) 728-8957.

        SEC Approves Amendment for not Amending Order Prices Where Dividend is Less Than One Cent

        On August 22, 1995, The SEC approved an amendment to Article III, Section 46 of the Rules of Fair Practice to provide that where a dividend or other distribution is less than one cent ($.01), the price of the order will not be adjusted. The NASD believes that the effect of such a small dividend is de minimis and, therefore, the likelihood that unadjusted orders will result in poor executions (the problem Section 46 is designed to prevent) is remote. The effect of the amendment is immediate.

        Affirmative Determination Requirements Postponed Until February 20, 1996

        The effective date of the rule prohibiting members from using blanket or standing assurances as to stock availability to satisfy their affirmative-determination requirements made in connection with short sales was postponed until February 20, 1996. This action supersedes and replaces information sent to Compliance Directors on July 28, 1995, stating that, effective September 5, 1995, members will not be able to rely on daily fax sheets of "borrowable stocks" to satisfy their affirmative-determination requirements under the NASD® Prompt Receipt and Delivery of Securities Interpretation.

        Implementation Of The Primary Market-Maker Standards Postponed Until December 1, 1995

        The implementation date of the primary market-maker standards to determine the eligibility of market makers to an exemption from the NASD short-sale rule was postponed from September 6, 1995, until December 1, 1995. On December 1, 1995, market makers can continue to be exempt from the rule if they have satisfied the new multi-part quantitative test based on their trading activity from November 1, 1995, through November 30, 1995. Until November 30, the 20-day test will continue to be used to evaluate market makers' eligibility for an exemption from the rule. After December 1, 1995, a "P" indicator will be displayed next to every qualified market maker that is exempt from the rule according to the new primary market-maker standards. When the new test for the market-maker exemption goes into effect, firms will be able to verify their primary market-maker status via Nasdaq Workstation II""'.

        Firms Receiving Payment For Order Flow Must Comply With New And Amended Rules

        On October 2, 1995, all firms receiving payment for order flow must comply with new and amended rules. On October 27, 1994, the SEC amended Rule 10b-10 and adopted a new rule, Rule llAcl-3, to address SEC concerns regarding payment for order flow.

        New SEC Rule llAcl-3 requires broker/dealers to inform customers in writing, when a new account is opened, about the firm's policies on the receipt of payment for order flow, including whether it is received and a detailed description of the nature of compensation received. Firms must also disclose information on order routing decisions, including whether market orders are subject to price improvement opportunities. Rule 11 Ac 1-3 also requires the dissemination of an annual update of this information to all customers.

        The SEC also amended Rule 10b-10 to require that a firm must indicate on the confirmation whether it receives payment for order flow and the availability of further information on request. Amended Rule 10b-10(d)(9) also contains a detailed definition of payment for order flow that includes "any monetary payment, service, property, or other benefit that results in any remuneration, compensation, or consideration to a broker or dealer from any broker or dealer, registered securities exchange, registered securities association or exchange member in return for routing customer orders to such entity." The definition provides further examples of remuneration or compensation that is deemed payment for order flow.

        SEC Approves Amendment To Schedule B To The NASD By-Laws

        On September 29, 1995, the SEC approved an amendment to Schedule B to the NASD By-Laws to delete informational text on the number of members of the NASD Board of Governors (Board) elected from each District. The inclusion of the text regarding District representation was informational only and its inclusion unnecessarily limits the ability of the Board to act under Article VII, Section 4(b) of the By-Laws to make changes to the Board's composition.

        Upcoming Release Of PC FOCUS Version 2.00 (For DOS)

        An update to the PC FOCUS application will be released in December 1995. The PC FOCUS application has been modified to accommodate the electronic collection of the Schedule I paper supplement (Question 19, re: bank control) and of annual municipal income data (formerly collected on the NASD Annual Assessment Report).

        The rules used to validate information have been enhanced to improve the validity and consistency of the data submitted to the NASD®. In particular, the rules applied to the annual Schedule I now include intraform edit checks. These new edits will verify that responses throughout the form are consistent. "Instructions" will be provided in the distribution package. Please read the new "Instructions" before preparing your 1995 Schedule I Report for guidance regarding the relationship between the various questions and the potential PC FOCUS errors that may occur.

        The PC FOCUS v2.00 distribution package will include:

        • 3.5" PC FOCUS v2.00 diskette*

        • Installation Instructions

        • Summary of Enhancements and Additions

        • PC FOCUS User Guide vl.02 Update (stickers)

        • Instructions.

        *"Note: If you need a 5.25" diskette, please call the Customer Support Hot Line at (800) 321-NASD.

        This upgrade must be installed before you file your 1995 Schedule I, which is due on January 24, 1996. You may install the application immediately upon receipt, if you prefer.

        To ensure complete compatibility between PC FOCUS v2.00 and the new Customer Complaints application, we strongly recommend that you install and test the Customer Complaints and PC FOCUS v2.00 applications as soon as possible. If you experience any technical difficulties, early testing will allow the Customer Support Hot Line to resolve any problems you encounter in sufficient time to meet the required filing due dates. If you need help installing or using either application, please call the Customer Support Hot Line at (800) 321-NASD.

        NASD

        National Association of Securities Dealers, Inc. • 1735 K Street, NW • Washington, DC 20006-1500 • 202-728-8000

        IMPORTANT

        Special Notices to Members

        December 11, 1995

        Dear NASD Member,

        This upcoming New Year signals an unprecedented milestone in the evolution of the NASD and The Nasdaq Stock Market.

        On November 17, acting on the recommendations of an NASD-created Select Committee headed by former U.S. Senator Warren Rudman of New Hampshire, the NASD Board of Governors approved a series of standard-setting changes in structure and governance that have broad implications for the securities industry and the investing public.

        In essence, we will be putting the NASD at the forefront of setting new standards for self-regulation. We will be creating a new organizational structure, enabling us to more effectively meet our rapidly expanding regulatory responsibilities. We will be reconfiguring our governing boards, giving investors, Nasdaq companies, and other non-industry public representatives a partnering role with members in policy making. And we will be upgrading and expanding key professional and technology resources, adding sharp new focus to our enforcement and disciplinary operations.

        The implementation plan that was adopted by the Board at its November meeting closely follows the Select Committee's "Principles of Effective Governance," endorsed by the Board in September and presented to you in the NASD Notice to Members 95-84, October 1995.

        As a self-regulatory institution, it is critical that investors have a high level of confidence in the fairness of our markets and the nation's self-regulatory system. The NASD is fully committed to implementing all aspects of the plan. We believe that the perception and the reality of fairness are reinforced by the changes that will take place in structure and governance.

        Your understanding of and support for this implementation plan is an integral part of our overall mission to continuously enhance investor protection. We solicit your favorable vote on By-Laws modifications that will move the restructuring process forward in a timely manner.

        The Special Notices to Members which follow provide background on the Select Committee's recommendations, details on the restructuring and the reconfiguration of governing boards, the By-Laws Notice and ballot, and an overview of the changes that will take place to disciplinary and enforcement procedures.

        Compelling Reasons For Change

        Throughout its history, the NASD has searched for and found new and innovative ways to address marketplace trends and emerging industry issues. But unlike any previous period in its history, in 1994, the NASD came under intense public scrutiny of its regulatory oversight of member firms and its stewardship of The Nasdaq Stock Market.

        Amidst this wave of criticism, augmented by a Department of Justice investigation of market makers and an SEC investigation of NASD enforcement of Nasdaq trading rules, the NASD Board of Governors, in cooperation with SEC Chairman, Arthur Levitt, asked former U.S. Senator Warren Rudman to lead a review of NASD governance and oversight.

        This independent, seven-member Select Committee, composed of individuals who have significant experience in the securities industry or are former members or senior staff of the SEC, worked almost 10 months and interviewed nearly 200 people to produce the most substantive and thorough study of the NASD to date.

        The NASD oversees the activities of over 5,400 securities firms, more than 57,000 member branch offices, and nearly 500,000 registered securities professionals. In addition, it conducts examinations of member firms; investigates possible violations of Association rules, SEC regulations, and the federal securities law; and conducts disciplinary proceedings involving member firms and associated persons. It is the principal arbitration forum for securities disputes and reviews of member advertising and corporate finance agreements. The NASD also administers qualification testing for all securities principals and registered representatives, on its own behalf and on behalf of state securities authorities.

        Add to this charter the stewardship of The Nasdaq Stock Market—the fastest growing equities market in the world—and the substance and complexity of the NASD's overall obligations far surpass those of any other SRO, including the major exchanges. Nasdaq has become, in just 24 years, a major source of capital for America's growth companies, with more than 5,000 issuers and a total capitalization of over $1 trillion (three times 1990 levels). Its growth is nothing short of explosive: the Nasdaq Composite index, set at 100 in 1971, is now over 1,000, and daily volumes in 1995 have gone beyond 600 million shares (one week's trading on Nasdaq today is equivalent to Nasdaq's entire first year of operation).

        The Select Committee found this to be a daunting role, and one that, if not addressed soon, threatens to undermine the NASD's ability to effectively carry out its mission. The Committee concluded that the NASD's governance structure has not kept pace with Nasdaq's explosive growth and the NASD's expanding regulatory responsibilities. In some cases, it said, the existing structure has led to ineffective rule making for the Nasdaq market. In others, it has required the NASD to mediate economic clashes among its members arising from their divergent interests in the Nasdaq market. Further, the Committee concluded that the current structure has also placed the NASD, as the owner of Nasdaq's trading systems, in the unenviable position of regulating the competing systems owned by NASD members. The result: NASD and Nasdaq missions are disserved.

        At the Board's request, the Select Committee also examined first-hand our enforcement and disciplinary procedures, some going back 5 to 10 years; conducted surveys and held discussions with federal and state regulators; and reviewed extensive documentation on NASD regulatory operations. While the Committee found that the overall NASD disciplinary process is designed to be effective and fair, it noted that disciplinary proceedings have become more contentious, complex, and consequential than the existing system was designed to accommodate. And certain areas of the regulatory operation, it observed, have not been given the mandate, resources, or prominence necessary for effective oversight, including the critical internal review function.

        With the explosive growth of Nasdaq and the rapid expansion of NASD regulatory responsibilities, the public's claim to representation on the NASD's governing bodies has increased. Here too, the Committee found that the organization has not kept pace with meeting the far-reaching needs of its diverse constituent groups.

        The Select Committee reached a unanimous conclusion: fundamental change is required. "The NASD's relationship with Nasdaq should be restructured so as to put substantial 'daylight' between the membership association and the market, with separate governing bodies whose compositions are tailored to the particular requirements of their respective missions and constituencies."

        To heighten investor confidence in the fairness of the markets and self-regulatory system and broaden public acceptance of the NASD's policies, the Committee strongly recommended that the Association's governing Board be reconfigured to have a majority of non-industry public representatives, which would set a new standard for public participation in the governance of our securities markets.

        The NASD Board of Governors agreed and asked the staff to prepare an implementation plan that addresses all of the Committee's recommendations.

        Implementation Plan Outlines Restructuring Imperatives

        The plan, as approved by the Board at its November meeting, calls for the parent organization, NASD, Inc., and its non-industry public majority Board, to set policy for, provide key corporate services to, and oversee the effectiveness of two subsidiaries as they carry out their respective responsibilities. The two operating units will be independent subsidiaries: a reconstituted Nasdaq, and a newly created NASD Regulation, Inc. (NASDR). Each operating subsidiary will have a full-time president, elected by the subsidiary boards that will each have balanced representation—50 percent industry and 50 percent non-industry.

        The parent organization will be headed by a Chief Executive Officer (CEO), a title that best describes the senior-most executive position in the Association. The parent Board will be composed of five Non-Industry Governors, three Governors from NASD member firms, and the CEO of NASD, Inc.

        One nominating committee, composed of two representatives from each of the three governing Boards—balanced between industry and non-industry—and the CEO of the Association will recruit and nominate outstanding professionals and public figures who are knowledgeable, experienced, and have an interest in the securities industry for all three governing Boards. All governing Boards will be structured to provide a representation of relevant investor, member, issuer, and other constituent interests. Governors of all three Boards will normally serve for three-year terms, staggered to provide continuity, and will be eligible to serve more than one term. The Boards and the Nominating Committee will review the governing process on an ongoing basis to assure that no single constituency dominates a particular governing body or governance process.

        With your approval of the necessary By-Laws modifications (Notice to Members 95-101) and SEC approval, the governing structure for the Association and the Nasdaq subsidiary could be in place as early as the first quarter of 1996.

        The Nasdaq subsidiary will operate and surveil The Nasdaq Stock Market, electronic OTC markets, and all related systems, including trading-halt functions. It will also be responsible for enforcement of contractual obligations between Nasdaq and market participants. Nasdaq's balanced 13-member Board will include six non-industry public representatives, six from the securities industry (including three market-maker representatives), and the President of Nasdaq. The CEO of NASD, Inc., will serve on the Board in a non-voting capacity.

        NASDR To Regulate Broker/Dealer Profession

        The present NASD organization is structured primarily to conduct the NASD's regulatory and member service operations and present board members will be transferred during 1996 to the Board of the new NASDR subsidiary. By January 1997, the NASDR Board will shift from one composed of a majority of industry representatives to one with balanced representation of industry and non-industry public directors. At that time, it is expected to have no more than 25 directors with a goal of downsizing to 21—10 non-industry, 10 industry, and the president of NASDR. The CEO of NASD, Inc., will serve on the NASDR Board in a non-voting capacity.

        NASDR will have primary authority to regulate the broker/dealer profession and provide member and constituent services. The subsidiary will develop and administer NASD Rules of Fair Practice, membership rules, and operational requirements for NASD, Inc., members. NASDR will examine and investigate member firms and their associated persons; enforce securities laws, NASD, Inc., NASDR, and Nasdaq rules and ethical standards; and administer the disciplinary process. NASDR will also be responsible for all disciplinary actions for violations of market-related rules. The actions may be based on initial investigations by the Nasdaq subsidiary or independent investigations by NASDR.

        By-Laws Modifications

        As a first step to implement the Select Committee's recommendations, it will be necessary to modify NASD By-Laws to reconfigure the NASD Board. No changes are required at this time to The Nasdaq Stock Market, Inc., By-Laws.

        Please review the amendments in Notice to Members 95-101 carefully. The membership is asked to approve changes to Articles VII and X, and the deletion of Article V, of the NASD By-Laws. These changes will permit the NASD to begin the restructuring necessary to implement the principles set forth in the report of The Select Committee on Structure and Governance.

        The Committee proposed, and the NASD Board agreed, that with the creation of a new subsidiary responsible for securities regulation, the governing Board of the Association should have a majority of non-industry members. It should be smaller than the current Board and should have in place a structure and policies that will ensure a balance of non-industry and industry representation on the Nasdaq and NASDR Boards.

        Briefly, the changes to the By-Laws: create a national nominating committee comprising the CEO of the Association and an equal number of industry and non-industry persons; reconstitute the Board as a majority non-industry Board comprising the CEO and "Industry" and "Non-Industry" Governors, and reduces the minimum size of the Board from 25 to 5 (the implementation plan adopted by the Board at its November 1995 meeting specified a 1996 Board of 9 persons—the CEO, 3 Industry, and 5 Non-Industry Governors); deletes Article V to remove an archaic and unnecessary reference to the affiliation of other Registered Securities Associations with the NASD (such affiliations remain authorized by Section 15A of the Securities Exchange Act of 1934); and amends Article X to replace the term "President" with the term "Chief Executive Officer" to make clear that this person is the most senior executive of the Association. Additional changes clarify the procedures for the resignation, removal, and replacement of officers.

        Adding Focus, Expanding And Upgrading Resources

        In keeping with the Committee's recommendation that certain areas of the regulatory operation be given the mandate, resources, and prominence necessary for effective oversight, the implementation plan includes changes to NASD disciplinary and enforcement procedures. Other elements of the plan call for the addition of new offices, or the refocusing of responsibilities or priorities within existing offices.

        For those of you who have participated in the NASD disciplinary process, you know that the issues we address today increasingly involve more complicated questions of law. Sanctions imposed in disciplinary proceedings have increased substantially in recent years. Therefore, NASDR will be augmenting its volunteer system with professional Hearing Officers on all panels adjudicating contested disciplinary cases. This will make the process more efficient, particularly in complex or contentious cases. Member volunteers will continue to bring their business experience and judgment to bear in evaluating the facts and assessing penalties.

        Two additional aspects of the implementation plan are noteworthy: the expansion of the NASD Office of Internal Review and the creation of an Office of Investor Services.

        To broaden the scope and focus of its operational reviews, the NASD will increase its Office of Internal Review staff to include the addition of an Ombudsman who will address concerns and issues from industry, internal, and public sources. The department will report to the CEO of NASD, Inc., as well as to the NASD Audit Committee.

        The new Office of Investor Services will centralize the Association's activities focused on investors, including education, inquiries, outreach programs, liaison with investor organizations, and utilization of technology to provide additional information services to investors.

        To summarize, these changes in structure will enhance the NASD's ability to meet its regulatory responsibilities both now and in the future. Significant member participation in governance has been, and will continue to be, a hallmark of self-regulation. More balance on the Boards will bring about solutions and results that receive far greater acceptance of our self-regulatory system by investors.

        As a supplement to this Notice to Members packet, you will also receive a videotape featuring the perspectives of Ian Davidson, current Chairman of the NASD Board of Governors; Mary Alice Brophy, Chairman-elect of the NASD Board of Governors; and Richard DeMartini, chairman of the Nasdaq Board of Directors.

        Please complete the enclosed ballot promptly and review the contents of both Notices carefully. We appreciate your support as we embark on this truly significant period in our history.

        Sincerely,

        Joseph R. Hardiman

        President and CEO

        NASD Publications Available On CD-ROM

        The following NASD® publications are now available for your convenience on CD-ROM format, which is updated each month with the NASD's latest publications:

        • NASD Manual (with updates through 10/31/95)

        • Notices to Members (1987 to present)

        • Regulatory and Compliance Alert

        For further information about the Securities Regulatory Library, contact Information Handling Services (IHS) at (800) 553-8629.

      • 95-109 Fixed Income Pricing System Additions, Changes, And Deletions As Of November 29, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Municipal
        Operations
        Systems
        Trading

        As of November 29, 1995, the following bonds were added to the Fixed Income Pricing System (FIPSSM).

        Symbol

        Name

        Coupon

        Maturity

        MMG.GA

        Metromedia Int'l Group

        9.875

        3/15/97

        MMG.GB

        Metromedia Int'l Group

        10.000

        10/1/99

        MMG.GC

        Metromedia Int'l Group

        10.000

        10/1/99

        FMDD.GA

        F&M Distributors

        11.500

        4/15/03

        EZCI.GB

        EZ Communications

        9.750

        12/1/05

        LENF.GA

        LenFest Communications

        8.375

        11/1/05

        IVCC.GA

        IVAC Corp

        9.250

        12/1/02

        TEXN.GD

        Tex-N.M. Power

        9.250

        9/15/00

        UAL.GP

        United Air

        10.360

        11/13/12

        UAL.GQ

        United Air

        10.360

        11/20/12

        MBLM.GA

        Mobile Media Commun

        9.375

        11/1/07

        CVC.GE

        Cablevision Systems

        9.250

        11/7/95

        UMC.GA

        United Meridian

        10.375

        10/15/05

        QRUM.GB

        Quorom Health Group

        8.750

        11/1/05

        ACOM.GA

        A+ Network

        11.875

        11/1/05

        DAL.GX

        Delta Air

        8.540

        1/2/07

        OI.GI

        Owens-Ill

        10.000

        08/1/02

        SFR.GA

        Santa Fe Energy Res.

        11.000

        05/15/04

        As of November 29, 1995, the following bonds were deleted from FIPS.

        Symbol

        Name

        FMDD.GA

        F&M distributors

        UDC.GA

        UDC Homes

        All bonds listed above are subject to trade-reporting requirements. Questions pertaining to trade-reporting rules should be directed to James C. Dolan, Assistant Director, NASD Market Surveillance, at (301) 590-6460.

      • 95-108 Nasdaq National Market Additions, Changes, And Deletions As Of November 20, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Operations
        Systems
        Trading

        As of November 20, 1995, the following 76 issues joined the Nasdaq National Market®, bringing the total number of issues to 3,946:

        Symbol

        Company

        Entry Date

        SOES Execution Level

        ARGL

        Argyle Television, Inc. (Cl A)

        10/24/95

        1000

        ETEC

        Etec Systems, Inc.

        10/24/95

        200

        ITLA

        Imperial Thrift and Loan Association

        10/24/95

        200

        DELI

        Jerry's Famous Deli, Inc.

        10/24/95

        200

        PARL

        Parlux Fragrances, Inc.

        10/24/95

        200

        PCYC

        Pharmacyclics, Inc.

        10/24/95

        1000

        NMBS

        Nimbus CD International, Inc.

        10/26/95

        200

        ROIX

        Response Oncology, Inc.

        10/26/95

        200

        IGPFF

        Canadian Imperial Ginseng Products, Limited

        10/27/95

        200

        CHTR

        Charter Power Systems, Inc.

        10/27/95

        500

        DWRX

        DataWorks Corporation

        10/27/95

        200

        ANBK

        American National Bancorp, Inc.

        10/31/95

        200

        CALVF

        Caledonia Mining Corporation

        10/31/95

        200

        CCTI

        Cooper & Chyan Technology, Inc.

        10/31/95

        500

        EMSWV

        Effective Management Systems, Inc.

        10/31/95

        200

        SHCR

        Sheridan Healthcare, Inc.

        10/31/95

        200

        FWWB

        First Savings Bank of Washington Bancorp, Inc.

        11/1/95

        200

        CFLO

        Cardiometrics, Inc.

        11/3/95

        200

        CLFY

        Clarify, Inc.

        11/3/95

        200

        FCFC

        FirstCity Financial Corporation

        11/3/95

        200

        FCFCP

        FirstCity Financial Corporation (Pfd B)

        11/3/95

        200

        HSIC

        Henry Schein, Inc.

        11/3/95

        200

        MRII

        Medical Resources, Inc.

        11/3/95

        500

        SHED

        SMT Health Services Inc.

        11/3/95

        500

        ARSW

        Arbor Software Corporation

        11/7/95

        1000

        PERC

        Perclose, Inc.

        11/7/95

        200

        WIKD

        Pete's Brewing Company

        11/7/95

        200

        RTEC

        ROSS Technology, Inc.

        11/7/95

        200

        RWTIW

        Redwood Trust, Inc. (Wts 12/31/97)

        11/7/95

        1000

        RSFCO

        Republic Security Financial Corp. (Pfd C)

        11/7/95

        200

        SANO

        Sano Corporation

        11/7/95

        200

        TRCI

        Technology Research Corporation

        11/7/95

        500

        BLDPF

        Ballard Power Systems, Inc.

        11/8/95

        200

        CSTF

        COREStaff, Inc.

        11/8/95

        1000

        GELX

        GelTex Pharmaceuticals, Inc.

        11/8/95

        200

        HHCA

        Home Health Corporation of America, Inc.

        11/8/95

        200

        MESW

        Meta-Software, Inc.

        11/8/95

        1000

        SNDK

        SanDisk Corporation

        11/8/95

        200

        VTNAF

        Vitran Corporation, Inc.

        11/8/95

        200

        CAFE

        Country Star Restaurants, Inc.

        11/9/95

        200

        FRAC

        Fractal Design Corporation

        11/9/95

        200

        IFIN

        Investors Financial Services Corp.

        11/9/95

        500

        UASI

        United Air Specialists, Inc.

        11/9/95

        500

        VUTK

        View Tech, Inc.

        11/9/95

        500

        VUTKW

        View Tech, Inc. (Wts 6/16/98)

        11/9/95

        500

        YESS

        Yes! Entertainment Corporation

        11/9/95

        500

        YESSW

        Yes! Entertainment Corporation (Wts 6/8/00)

        11/9/95

        500

        ADAM

        A.D.A.M. Software, Inc.

        11/10/95

        500

        CAFEP

        Country Star Restaurants, Inc. (Pfd A)

        11/10/95

        200

        NSCI

        National Surgery Centers, Inc.

        11/10/95

        500

        SYNX

        Sync Research, Inc.

        11/10/95

        200

        VSIO

        Visio Corporation

        11/10/95

        200

        INSGY

        Insignia Solutions, plc (ADR)

        11/14/95

        200

        APMC

        Applied Microsystems Corporation

        11/15/95

        200

        LUMI

        Lumisys Incorporated

        11/15/95

        200

        AMXX

        AMX Corporation

        11/16/95

        200

        ADVS

        Advent Software, Inc.

        11/16/95

        200

        ACNAF

        Air Canada Corp. (Cl A NV)

        11/16/95

        200

        ECGOF

        American Eco Corporation

        11/16/95

        500

        CLYS

        Catalyst International, Inc.

        11/16/95

        200

        LBMSY

        Learmonth & Burchett Mgmt Systems, Inc. (ADR)

        11/16/95

        1000

        ROCM

        Rochester Medical Corporation

        11/16/95

        500

        SHEDW

        SMT Health Services Inc. (Wts 3/4/97)

        11/16/95

        500

        SAVLY

        Saville Systems, plc (ADR)

        11/16/95

        500

        VSEN

        Video Sentry Corporation

        11/16/95

        500

        PHTN

        Photon Dynamics, Inc.

        11/17/95

        1000

        AEIS

        Advanced Energy Industries, Inc.

        11/17/95

        1000

        CFCI

        CFC International, Inc.

        11/17/95

        500

        CORT

        Cort Business Services Corporation

        11/17/95

        200

        FCWI

        First Commonwealth, Inc.

        11/17/95

        200

        IDXC

        IDX Systems Corporation

        11/17/95

        500

        SMOD

        SMART Modular Technologies, Inc.

        11/17/95

        200

        SCOP

        Scopus Technology, Inc.

        11/17/95

        200

        SCUR

        Secure Computing Corporation

        11/17/95

        500

        SIMN

        Simon Transportation Services, Inc.

        11/17/95

        200

        SFWR

        Software 2000, Inc.

        11/17/95

        1000

        Nasdaq National Market Symbol And/Or Name Changes

        The following changes to the list of Nasdaq National Market securities occurred since October 20, 1995:

        New/Old Symbol

        New/Old Security

        Date Of Change

        TNTX/TMAT

        T-NETIX Inc./Tele-Matic Corporation

        10/23/95

        DOSE/DOSE

        Capstone Pharmacy Services, Inc./Choice Drug Systems, Inc.

        10/24/95

        DOSEW/DOSEW

        Capstone Pharmacy Services, Inc. (Wts 3/31/96)/Choice Drug Systems, Inc. (Wts 3/31/96)

        10/24/95

        ACOM/ACOM

        A + Network Inc./A + Communications, Inc.

        10/25/95

        PFACP/PFAPV

        Pro-Fac Cooperative, Inc. (Cl A Cum Pfd)/Pro-Fac Cooperative, Inc. (Cl A Cum Pfd W/I)

        10/25/95

        AVRTW/AVRTW

        Avert, Inc. (Wts 4/30/96)/Avert, Inc. (Wts 12/22/95)

        10/27/95

        SBLI/SBLI

        Staff Builders, Inc. (Cl A)/Staff Builders, Inc.

        10/27/95

        MAIR/ATCC

        Mesaba Holdings, Inc./Mesaba Holdings, Inc.

        10/30/95

        TRUV/ROPS

        Truevision, Inc./RasterOps

        10/30/95

        STAC/STAC

        Stac, Inc./Stac Electronics

        10/30/95

        VISN/VISN

        Sight Resources Corporation/NewVision Technology, Inc.

        10/31/95

        VISNW/VISNW

        Sight Resources Corp. (Wts 10/31/95)/NewVision Technology, Inc. (Wts 10/31/95)

        10/31/95

        VISNZ/VISNZ

        Sight Resources Corp. (Wts 8/25/99)/NewVision Technology, Inc. (Wts 8/25/99)

        10/31/95

        SOPN/SOPN

        First Savings Bancorp Inc./First Savings Bank of Moore County Inc.

        11/1/95

        ISER/MMIM

        InnoServ Technologies Inc./MMI Medical, Inc.

        11/1/95

        ODSI/ODSI

        Optical Data Systems, Inc./Optical Data Systems, Inc.

        11/1/95

        EMSIW/EMSWV

        Effective Mgmt Systems, Inc. (Wts 9/6/05)/Effective Mgmt Systems, Inc. (Wts W/I)

        11/6/95

        HRDG/HRDG

        Harding Lawson Associates Group, Inc./Harding Associates, Inc.

        11/6/95

        WPGDY/WPPGY

        WPP Group plc (ADR New (1-5 R/S)(10 ORDS:1

        ADR)/

        WPP

        Group plc (ADR (2 ORDS:1 ADR))

        11/13/95

        UNII/ACLV

        Unit Instruments, Inc./Autoclave Engineers, Inc.

        11/17/95

        KIDE/LCIC

        4 Kids Entertainment Inc./Leisure Concepts Inc.

        11/17/95

        USRV/MCHS

        US SerVis, Inc./Micro Healthsystems, Inc.

        11/20/95

        Nasdaq National Market Deletions

        Symbol

        Security

        Date

        ELCN

        Elco Industries, Inc.

        10/23/95

        ERIRY

        LM Ericsson Telephone Company (Rts)

        10/24/95

        LICIA

        Lilly Industries, Inc. (Cl A)

        10/25/95

        INSMA

        Insituform Mid-America, Inc.

        10/26/95

        METS

        Met-Coil Systems Corporation

        10/26/95

        PURT

        Pure Tech International, Inc.

        10/27/95

        CRLN

        CareLine, Inc.

        10/30/95

        FRAM

        Frame Technology Corp.

        10/30/95

        HUFK

        Huffman Koos Inc.

        10/30/95

        LTCO

        Lawyers Title Corp.

        10/30/95

        NORL

        Norrell Corp.

        10/30/95

        BRDL

        Brendle's Incorporated

        11/1/95

        FFOM

        FirstFed Michigan Corp.

        11/1/95

        HFBS

        Heritage Federal Bancshares, Inc.

        11/1/95

        JOSL

        Joslyn Corporation

        11/1/95

        VISNW

        Sight Resources Corp. (Wts 10/31/95)

        11/1/95

        INDEW

        IndeNet, Inc.(Wts B 8/31/98)

        11/2/95

        ORPC

        Orion Pictures Corp.

        11/2/95

        RENL

        REN Corporation-USA

        11/2/95

        SSBC

        Shelton Bancorp, Inc.

        11/2/95

        BLLE

        Bolle America, Inc.

        11/3/95

        DEPCA

        DEP Corporation (Cl A)

        11/3/95

        DEPCB

        DEP Corporation

        11/3/95

        MNCO

        Michigan National Corporation

        11/3/95

        CFFS

        Columbia First Bank, A Federal Savings Bank

        11/6/95

        PHARY

        Pharmacia Corporation

        11/6/95

        PHYB

        Pioneer Hi-Bred International, Inc.

        11/6/95

        LGNT

        LEGENT Corp.

        11/7/95

        SYNT

        Syntro Corporation

        11/7/95

        ROUS

        The Rouse Company

        11/9/95

        ROUSP

        The Rouse Company (CV Pfd A)

        11/9/95

        WORKE

        Work Recovery, Inc.

        11/9/95

        DASW

        Data Switch Corp.

        11/10/95

        MDAL

        MedAlliance Inc.

        11/13/95

        ROPK

        Ropak Corp.

        11/13/95

        DVRY

        DeVRY INC.

        11/14/95

        MSII

        Medicine Shoppe International, Inc.

        11/14/95

        ROBC

        Robec, Inc.

        11/14/95

        FERT

        Nu-West Industries, Inc.

        11/15/95

        SAYT

        Sayett Group, Inc.

        11/15/95

        AAMS

        Aames Financial Corp.

        11/20/95

        DFNR

        D F & R Restaurants, Inc.

        11/20/95

        HDSNW

        Hudson Technologies, Inc. (Wts 11/1/99)

        11/20/95

        Questions regarding this Notice should be directed to Mark A. Esposito, Nasdaq Market Services Director, Issuer Services, at (202) 496-2536. Questions pertaining to trade reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590-6436.

      • 95-107 Trade Date-Settlement Date Schedule For 1996

        SUGGESTED ROUTING

        Internal Audit
        Legal & Compliance
        Municipal
        Operations
        Syndicate
        Systems
        Trading

        Martin Luther King, Jr., Day: Trade Date-Settlement Date Schedule

        The schedule of trade dates-settlement dates below reflects the observance by the financial community of Martin Luther King, Jr., Day, Monday, January 15, 1996. On January 15, 1996, The Nasdaq Stock MarketSM and the securities exchanges will be open for trading. However, it will not be a settlement date because many of the nation's banking institutions will be closed.

        Trade Date

        Settlement Date

        Reg. T Date*

        Jan. 5

        Jan. 10

        Jan. 12

        8

        11

        15

        9

        12

        16

        10

        16

        17

        11

        17

        18

        12

        18

        19

        15

        18

        22

        16

        19

        23

        *Pursuant to Sections 220.8(b)(1) and (4) of Regulation T of the Federal Reserve Board, a broker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a cash account if full payment is not received within five (5) business days of the date of purchase or, pursuant to Section 220.8(d)(1), make application to extend the time period specified. The date by which members must take such action is shown in the column entitled "Reg. T Date."

        Note: January 15, 1996, is considered a business day for receiving customers' payments under Regulation T of the Federal Reserve Board.

        Transactions made on January 15 will be combined with transactions made on the previous business day, January 12, for settlement on January 18. Securities will not be quoted ex-dividend, and settlements, marks to the market, reclamations, and buy-ins and sell-outs, as provided in the Uniform Practice Code, will not be made and/or exercised on January 15.

        Presidents' Day: Trade Date-Settlement Date Schedule

        The Nasdaq Stock Market and the securities exchanges will be closed on Monday, February 19, 1996, in observance of Presidents' Day, "Regular way" transactions made on the business days noted below will be subject to the following schedule:

        Trade Date

        Settlement Date

        Reg. T Date*

        Feb. 12

        Feb. 15

        Feb. 20

        13

        16

        21

        14

        20

        22

        15

        21

        23

        16

        22

        26

        19

        Markets Closed

        -

        20

        23

        27

        Good Friday: Trade Date-Settlement Date Schedule

        The Nasdaq Stock Market and the securities exchanges will be closed on Good Friday, April 5, 1996. "Regular way" transactions made on the business days noted below will be subject to the following schedule:

        Trade Date

        Settlement Date

        Reg. T Date*

        Apr. 1

        Apr. 4

        Apr. 9

        2

        8

        10

        3

        9

        11

        4

        10

        12

        5

        Markets Closed

        -

        8

        11

        15

        Memorial Day: Trade Date-Settlement Date Schedule

        The Nasdaq Stock Market and the securities exchanges will be closed on Monday, May 27, 1996, in observance of Memorial Day. "Regular way" transactions made on the business days noted below will be subject to the following

        Trade Date

        Settlement Date

        Reg. T Date*

        May 21

        May 24

        May 29

        22

        28

        30

        23

        29

        31

        24

        30 June

        3

        27

        Markets Closed

        -

        28

        31

        4

        Independence Day: Trade Date-Settlement Date Schedule

        The Nasdaq Stock Market and the securities exchanges will be closed on Thursday, July 4, 1996, in observance of Independence Day. "Regular way" transactions made on the business days noted below will be subject to the following schedule:

        Trade Date

        Settlement Date

        Reg. T Date*

        June 28

        July 3

        July 8

        July 1

        5

        9

        2

        8

        10

        3

        9

        11

        4

        Markets Closed

        -

        5

        10

        12

        Labor Day: Trade Date-Settlement Date Schedule

        The Nasdaq Stock Market and the securities exchanges will be closed on Monday, September 2, 1996, in observance of Labor Day. "Regular way" transactions made on the business days noted below will be subject to the following

        Trade Date

        Settlement Date

        Reg. T Date*

        Aug. 27

        Aug. 30

        Sept. 4

        28 Sept.

        3

        5

        29

        4

        6

        30

        5

        9

        Sept.

        2 Markets Closed

        -

        3

        6

        10

        Columbus Day: Trade Date-Settlement Date Schedule

        The schedule of trade dates-settlement dates below reflects the observance by the financial community of Columbus Day, Monday, October 14, 1996. On this day, The Nasdaq Stock Market and the securities exchanges will be open for trading. However, it will not be a settlement date because many of the nation's banking institutions will be closed.

        Trade Date

        Settlement Date

        Reg. T Date*

        Oct. 7

        Oct. 10

        Oct. 14

        8

        11

        15

        9

        15

        16

        10

        16

        17

        11

        17

        18

        14

        17

        21

        15

        18

        22

        Note: October 14, 1996, is considered a business day for receiving customers' payments under Regulation T of the Federal Reserve Board.

        Transactions made on Monday, October 14, will be combined with transactions made on the previous business day, October 11, for settlement on October 17. Securities will not be quoted ex-dividend, and settlements, marks to the market, reclamations, and buy-ins and sell-outs, as provided in the Uniform Practice Code, will not be made and/or exercised on October 14.

        Veterans' Day And Thanksgiving Day: Trade Date-Settlement Date Schedule

        The schedule of trade dates-settlement dates below reflects the observance by the financial community of Veterans' Day, Monday, November 11, 1996, and Thanksgiving Day, Thursday, November 28, 1996. On Monday, November 11, The Nasdaq Stock Market and the securities exchanges will be open for trading. However, it will not be a settlement date because many of the nation's banking institutions will be closed in observance of Veterans' Day. All securities markets will be closed on Thursday, November 28, in observance of Thanksgiving Day.

        Trade Date

        Settlement Date

        Reg. T Date*

        Nov. 5

        Nov. 8

        Nov. 12

        6

        12

        13

        7

        13

        14

        8

        14

        15

        11

        14

        18

        12

        15

        19

        22

        27

        Dec. 2

        25

        29

        3

        26

        Dec. 2

        4

        27

        3

        5

        28

        Markets Closed

        -

        29

        4

        6

        Note:November 11, 1996, is considered a business day for receiving customers' payments under Regulation T of the Federal Reserve Board.

        Transactions made on November 11 will be combined with transactions made on the previous business day, November 8, for settlement on November 14. Securities will not be quoted ex-dividend, and settlements, marks to the market, reclamations, and buy-ins and sell-outs, as provided in the Uniform Practice Code, will not be made and/or exercised on November 11.

        Christmas Day And New Year's Day: Trade Date-Settlement Date Schedule

        The Nasdaq Stock Market and the securities exchanges will be closed on Wednesday, December 25, 1996, in observance of Christmas Day, and Wednesday, January 1, 1997, in observance of New Year's Day. "Regular way" transactions made on the business days noted below will be subject to the following schedule:

        Trade Date

        Settlement Date

        Reg. T Date*

        Dec. 19

        Dec. 24

        Dec. 27

        20

        26

        30

        23

        27

        31

        24

        30

        Jan. 2, 1997

        25

        Markets Closed

        -

        26

        31

        3

        27

        Jan. 2, 1997

        6

        30

        3

        7

        31

        6

        8

        Jan. 1, 1997

        Markets Closed

        -

        2

        7

        9

        Brokers, dealers, and municipal securities dealers should use the foregoing settlement dates for purposes of clearing and settling transactions pursuant to the NASD Uniform Practice Code and Municipal Securities Rulemaking Board Rule G-12 on Uniform Practice.

        Questions regarding the application of those settlement dates to a particular situation may be directed to the NASD Uniform Practice Department at (203) 375-9609.

      • 95-106 NASD 1996 Holiday Schedule

        SUGGESTED ROUTING

        Internal Audit
        Legal & Compliance
        Operations
        Systems
        Trading

        The NASD® will observe the following holiday schedule for 1996:

        January 1

        New Year's Day

        February 19

        President's Day

        April 5

        Good Friday

        May 27

        Memorial Day

        July 4

        Independence Day

        September 2

        Labor Day

        November 28

        Thanksgiving Day

        December 25

        Christmas Day

        Questions regarding this holiday schedule may be directed to NASD Human Resources, at (301) 590-6821.

      • 95-105 Treasury Offers Revised Currency Transaction Report Form

        SUGGESTED ROUTING

        Senior Management
        Internal Audit
        Legal & Compliance
        Operations
        Trading

        Executive Summary

        The Department of the Treasury (Treasury) issued a revised Form 4789, Currency Transaction Report (CTR), under the Bank Secrecy Act (BSA). CTRs are used to file reports of deposits, withdrawals, exchanges of currency, or other payments or transfers involving a transaction in currency totaling more than $10,000. The revised form was effective October 1, 1995, but filers will not be penalized for using the old form until after December 31, 1995.

        Background

        The BSA authorizes Treasury to require financial institutions, including broker/dealers, to keep records and file reports regarding the source, volume, and movement of funds into and out of the country and through domestic financial institutions. These records and reports are very useful in criminal, tax, and regulatory matters, specifically in money laundering investigations.

        Recently, the authority of the Secretary of the Treasury to administer the BSA was delegated to the Director of the Treasury's Financial Crimes Enforcement Network (FinCEN). FinCEN has computer access to CTRs and uses this access independently and in conjunction with other law enforcement agency databases to produce reports for use by law enforcement in detecting money laundering and other financial crimes.

        Changes To The CTR

        According to FinCEN, it sought to reduce the regulatory burden on financial institutions by revising the CTR. CTR revisions, which reduce the amount of required information by 30 percent, focus on the quality of information rather than the quantity. The revised form eliminates duplication of information and information that was difficult to obtain or of limited value to law enforcement authorities.

        One major change to the form is the reversal of Sections A and B: "Per-son(s) on Whose Behalf Transaction(s) is conducted," which was Section B on the old CTR is now Section A, and "Individual(s) Conducting transaction(s)," which was formerly Section A is now Section B. This was done to place a greater emphasis on all those who benefit from (the beneficiaries of) the transaction by noting that information first in Section A.

        Copies of the revised CTR may be obtained from the IRS Forms Distribution Centers by calling (800) TAX-FORMS, which is (800) 8293676. A copy of the revised form follows this Notice.

        In September 1995, FinCEN published a series of questions and answers about completing and filing the new CTR. While this information is not meant to be comprehensive and does not replace the CTR form instructions and/or the BSA regulations, it provides general, basic guidance. An excerpt of questions and answers that may apply to broker/ dealers is reprinted below for your convenience.

        Members are urged to begin using the revised CTR as soon as possible. Questions concerning this Notice may be directed to Susan Lang, NASD Compliance Department, at (202) 728-6969.

        Questions And Answers

        Question #1: Who should file the revised CTR Form 4789?
        Answer: Each financial institution identified in the regulations in 31 CFR Part 103, must file a revised CTR Form 4789 for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency totaling more than $10,000 in one business day. Multiple transactions must be treated as a simple transaction if the financial institution has knowledge that: (1) they are by or on behalf of the same person, and

        (2) they result in either currency received (Cash In) or currency disbursed (Cash Out) by the financial institution totaling more than $10,000 in any one business day.
        Question #2: Should the revised CTR Form 4789 be used to report suspicious activity?
        Answer: The revised CTR should not be filed for suspicious transactions involving $10,000 or less in currency or to note that a transaction of more than $10,000 in currency is suspicious. Any suspicious or unusual activity should be reported by a financial institution in the manner prescribed by its appropriate federal regulator or FinCEN. If a transaction is suspicious and in excess of $10,000 in currency, then both a revised CTR and, if applicable, a referral form must be filed.

        For banks, a new Suspicious Activity Report (SAR) Form is being prepared for distribution before the end of 1995 for use in reporting suspicious transactions involving $10,000 or less in currency OR to note that a transaction of more than $10,000 in currency is suspicious. Until a similar form is developed for non-bank financial institutions, they should write "SUSPICIOUS" across the top of the revised CTR.
        Question #3: When should financial institutions begin using the revised CTR Form 4789?
        Answer: The revised CTR becomes effective on the business day of October 1, 1995. Filers must continue to use the current CTR Form 4789 (Rev. July 1994) for reportable transactions that occur before October 1, 1995 (business day).
        Question #4: Where can I get usable copies of the revised CTR Form 4789?
        Answer: Usable copies of the revised CTR are available from the IRS Forms Distribution Centers by calling 1-800-TAX-FORMS ((800) 829-3676).
        Question #5: May the old CTR be filed after October 1, 1995?
        Answer: FinCEN is allowing a necessary transition time until the end of December 1995 for financial institutions to start filing the new CTR. Between October 1 and December 31, 1995, paper filers will not be penalized for continuing to file the old CTR or the ADVANCE COPY of the new CTR, which has been available for training purposes since May 1995, while making every "good faith" effort to obtain and file the new CTR as soon as possible after October 1, 1995 (business day). This same policy will also apply to magnetic CTR files.
        Question #6: Where can I get specifications for magnetic filing of the revised CTR?
        Answer: Requests for specifications on magnetic filing of the revised CTR should be directed to the IRS Detroit Computing Center, ATTN: CTR Magnetic Media Coordinator, P. O. Box 33604, Detroit, MI 48232-5604.
        Question #7: The IRS Detroit Computing Center issued specifications on magnetic filing of the revised CTR during the week of June 12, 1995. It will take at least six months from the time of receipt of these specifications until they are fully installed and usable on financial institutions' systems. Is it acceptable for financial institutions to continue to file magnetically the old CTR Form 4789 (Rev. July 1994) until December 1995?
        Answer: Yes, because of the transition time necessary to file the revised CTR magnetically, financial institutions will not be penalized for continuing to use the old CTR while making every "good faith" effort to work with the IRS Detroit Computing Center to implement specifications for magnetic filing of the revised CTR. It is expected that this process should be completed at the latest by the end of December 1995. This same policy will also apply to paper CTR filers.
        Question #8: Where should I file the revised CTR?
        Answer: File the CTR by the 15th calendar day after the day of the transaction with the IRS Detroit Computing Center, ATTN: CTR, P. O. Box 33604, Detroit, MI 48232-5604 or with your local IRS office. Keep a copy (either paper or magnetic) of each CTR for at least five years from the date filed.
        Question #9: Is a U.S. passport acceptable identification since it does not contain an address and is not specifically listed in the regulations (31 CFR Part 103.28)?
        Answer: Yes, for purposes of completing the new CTR, a U.S. passport is considered an acceptable form of identification. Although verification of an address by official document or other means (e.g., through credit bureaus) is desirable, acceptable identification may be made by an official document containing name and a photograph (preferably with address) that is normally acceptable by financial institutions as a means of identification when cashing checks for non-depositors.
        Question #10: What is a cedular card?
        Answer: A cedular card is the term used for a personal identification card issued by foreign governments, particularly in Latin America and Spain, to citizens above a certain age (not issued to minors) and within certain categories (excluding certain classifications of citizens, e.g., military).
        Question #11: What should be included on additional sheets attached to the original CTR?
        Answer: In order for attached sheets to be clearly associated with the original CTR, it would be desirable to have as much identifying information as possible on the attached sheets, including: (1) the name of the financial institution filing the form and (2) the date of the transaction. At a minimum, on all attached sheets of paper to the original CTR, the financial institution should note the following: (1) the name(s) of the person(s) ororganization(s) on whose behalf the transaction(s) is conducted and (2) the Social Security or employer identification number(s).
        Question #12: Must a financial institution amend an incomplete old CTR after October 1, 1995, if the missing information is no longer required on the revised CTR (e.g., a CTR is filed on September 28, 1995, then the financial institution discovers additional information on October 3 that should have been provided as an amendment to the old CTR; however, that information is no longer required on the new CTR)? (Item 1a: Amends prior report)
        Answer: Because the revised CTR requires less information, after October 1, 1995, there is no requirement to amend old CTRs when the amendment concerns information on fields that have been eliminated on the revised CTR.
        Question #13: When should the box for "multiple persons" be checked? (Item 1b: Multiple persons)
        Answer: Multiple person transactions are those conducted by or on behalf of two or more individuals; on behalf of two or more organizations; or on behalf of at least one individual and at least one organization. In these cases, box "1b" (multiple persons) should be checked.
        Question #14: Do all holders of the account, even if they do not come to the financial institution, need to be put on the revised CTR as "Person(s) on Whose Behalf Transaction(s) Is Conducted?"
        Answer: For deposits, all those who are known to benefit from the transaction must be identified on the CTR. However, if a person makes a withdrawal from a joint account, only his/her name needs to be listed as the beneficiary of the transaction if: (1) he/she states that the withdrawal is on his/her own behalf or the financial institution knows that the person making the withdrawal is the only beneficiary, and (2) the financial institution has no reason to believe otherwise.
        Question #15: When should the box for "multiple transactions" be checked? (Item 1c: Multiple transactions)
        Answer: Multiple transactions are any two or more transactions which the financial institution has knowledge are conducted by or on behalf of any person during the same business day and which result in a total cash-in or cash-out of over $10,000. In these cases, box "1c" (multiple transactions) should be checked.
        Question #16: Must the financial institution note whether the number provided in Item 6 is a Social Security number (SSN) or an employer identification number (EIN) since there is no separate configuration of spaces?
        Answer: It is not necessary to note whether the number in Item 6 is an SSN or EIN, and the revised CTR has been simplified to eliminate the separate configuration of these numbers because they may be differentiated solely on the basis of their initial numbers. IRS Service Centers assign EINs, which start with numbers not assigned to SSNs; whereas, the Social Security Administration assigns SSNs, which start with numbers not assigned to EINs.
        Question #17: While an SSN or EIN is required on a CTR, if a CTR is filed without an SSN or EIN, should the financial institution amend the CTR if it subsequently obtains an SSN or EIN? (Items 6 and 19)
        Answer: Yes, the CTR should be amended if an SSN or EIN is subsequently obtained.
        Question #18: Are the terms "homemaker," "retired," or "unemployed" acceptable as descriptions for occupations? (Item 13)
        Answer: "Homemaker," "retired," or "unemployed" are acceptable as occupational descriptions, but financial institutions should attempt to get more specific information. As a basic part of "know your customer" programs, financial institutions should pay particular attention to customers with such non-specific occupations who continually make large cash deposits. "Self-employed" is not acceptable without additional information as it is too non-specific.
        Question #19: Instructions state that financial institutions should enter as much information as is available in Section B. Does this mean that if it is not available, then they do not have to provide it? Should the financial institution refuse to conduct the transaction if the customer refuses to provide the required information?
        Answer: The law requires financial institutions to file complete and accurate CTRs. The CTR Form 4789 indicates the only circumstances in which incomplete data is acceptable (e.g., Armored Car Service, Mail Deposit or Shipment, etc.). If a financial institution elects to conduct a transaction for which it files an incomplete CTR, other than for these specified circumstances, then it should attach an explanation of why the CTR is incomplete.
        Question #20: If box "a" in Section B is checked for Armored Car Service, should the provider's name be inserted?
        Answer: No, the Armored Car Service provider's name does not have to be recorded on the CTR.
        Question #21: Is box "d" for Multiple Transactions on the revised CTR's Part I, Section B the same as the old CTR's Part I, box "3d?" If so, what is considered a "reasonable effort" for obtaining information when the aggregation of multiple transactions has exceeded the reporting threshold? (Part I Section B box d: Multiple Transactions)
        Answer: Yes, box "d" in Part I, Section B of the revised CTR is the same as box "3d" for Multiple Transactions in Part I of the old CTR, and should be checked to indicate that some or all of the information required in Items 15-25 is missing because the transaction being reported is a multiple transaction. A reasonable effort to obtain information for reporting multiple transactions that when aggregated exceeded the reporting threshold might include a check of the financial institution's records, telephone calls to customers, and obtaining information from persons who handled the multiple transactions. However, if complete information is still not obtained, then box "d" in Part I Section B must be checked to explain why.
        Question #22: Should "multiple transactions" be aggregated?
        Answer: Yes, to report multiple transactions, all the individual transactions of which the financial institution has knowledge must be aggregated, which means that debits must be added to debits, and credits must be added to credits. If the cash debits or the cash credits totals exceed $10,000 in a business day, a CTR is required. If debits and credits each exceed $10,000, they can both be reported on a single CTR. Do not mix debits and credits by off-setting one against the other, that is, do not mix cash-in transactions with cash-out transactions.
        Question #23: How should trusts and other third-party accounts be reported?
        Answer: If Jane Doe, the trustee of the John Smith Trust, makes a reportable deposit to the Trust Account, information on Jane Doe, the trustee, including the method used to verify her identification, must be entered in Part I, Section A. Identifying information on the John Smith Trust, who is the beneficiary of the transaction, must also be reported in a separate Section A (on the back of the CTR Form). Then check box "e" (Conducted On Own Behalf) to indicate why Section B is left blank. However, if the transaction is conducted for Jane Doe, the trustee, by her secretary, then in addition to identifying Jane Doe (the trustee) and the John Smith Trust (the beneficiary) in separate Section "As," report identifying information on the secretary, who actually conducted the transaction, in Part I, Section B.
        Question #24: Should dashes be used in recording the financial institution's Magnetic Ink Character Recognition (MICR) number? (Item 43)
        Answer: No, dashes should not be inserted in recording of the MICR number in Item 43.
        Question #25: May the preparer and the approver of the new CTR be the same person?
        Answer: Yes, the preparer and the approving official of the new CTR may be the same person. This is a change in policy based on standardizing paper filing with magnetic filing of the CTR. However, it is still strongly recommended that financial institutions, as a matter of internal review of CTRs, have two people involved.
        Question #26: Must the signature of the approving official be an original, or may it be pre-printed? (Item 45)
        Answer: The signature of the approving official in Item 45 must be an original signature; it may not be pre-printed.
        Question #27: May a department's name be pre-printed instead of the name of a person to contact? (Item 48)
        Answer: The name of a person to contact for questions about the CTR (not a department's name) is preferred in Item 48; however, the name of the compliance office or other designated department would be acceptable.
        PDF TO BE INCLUDED PDF TO BE INCLUDED

        Paperwork Reduction Act Notice.—The requested information has been determined to be useful in criminal, tax. and regulatory investigations and proceedings. Financial institutions are required to provide the information under 31 U.S.C. 5313 and 31 CFR Part 103. These provisions are commonly referred to as the Bank Secrecy Act (BSA) which is administered by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN).

        The time needed to complete this form will vary depending on individual circumstances. The estimated average time is 19 minutes. If you have comments concerning the accuracy of this time estimate or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Internal Revenue Service, Attention: Tax Forms Committee, PC:FP, Washington, DC 20224. DO NOT send this form to this office. Instead, see When and Where To File below.

        Suspicious Transactions

        This Currency Transaction Report (CTR) should NOT be filed for suspicious transactions involving $10,000 or less in currency OR to note that a transaction of more than $10,000 is suspicious. Any suspicious or unusual activity should be reported by a financial institution in the manner prescribed by its appropriate federal regulator or BSA examiner. (See Item 37.) If a transaction is suspicious and in excess of $10,000 in currency, then both a CTR and the appropriate referral form must be filed. Should the suspicious activity require immediate attention, financial institutions should telephone 1–800–800-CTRS. An Internal Revenue Service (IRS) employee will direct the call to the local office of the IRS Criminal Investigation Division (CID). This toll-free number is operational Monday through Friday, from approximately 9:00 am to 6:00 pm Eastern Standard Time. If an emergency, consult directory assistance for the local IRS CID Office.

        General Instructions

        Who Must File,—Each financial institution (other than a casino, which instead must file Form 836a and the U.S. Postal Service for which there are separate rules), must file Form 4789 (CTR) for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000. Multiple transactions must be treated as a single transaction if the financial institution has knowledge that (1) they are by or on behalf of the same person, and (2) they result in either currency received (Cash In) or currency disbursed (Cash Out) by the financial institution totaling more than $10,000 during any one business day. For a bank, a business day is the day on which transactions are routinely posted to customers' accounts, as normally communicated to depository customers. For all other financial institutions, a business day is a calendar day.

        Generally, financial institutions are defined as banks, other types of depository institutions, brokers or dealers in securities, money transmitters, currency exchangers, check cashers, issuers and sellers of money orders and traveler's checks. Should you have questions, see the definitions in 31 CFR Part 103. When and Where To File.—File this CTR by the 15th calendar day after the day of the transaction with the IRS Detroit Computing Center, ATTN: CTR, P.O. Box 33604, Detroit, MI 48232–5604 or with your local IRS office. Keep a copy of each CTR for five years from the date filed.

        A financial institution may apply to file the CTRs magnetically. To obtain an application to file magnetically, write to the IRS Detroit Computing Center, ATTN: CTR Magnetic Media Coordinator, at the address listed above. Identification Requirements.—All individuals (except employees of armored car services) conducting a reportable transaction(s) for themselves or for another person must be identified by means of an official document(s).

        Acceptable forms of identification include a driver's license, military, and military/dependent identification cards, passport, state issued identification card, cedular card (foreign), non-resident alien identification cards, or any other identification document or documents, which contain name and preferably address and a photograph and are normally acceptable by financial institutions as a means of identification when cashing checks for persons other than established customers.

        Acceptable identification information obtained previously and maintained in the financial institution's records may be used. For example, if documents verifying an individual's identity were examined and recorded on a signature card when an account was opened, the financial institution may rely on that information. In completing the CTR, the financial institution must indicate on the form the method, type, and number of the identification. Statements such as "known customer" or "signature card on file" are not sufficient for form completion. Penalties.—Civil and criminal penalties are provided for failure to file a CTR or to supply information or for filing a false or fraudulent CTR. See 31 U.S.C. 5321, 5322 and 5324. For purposes of this CTR, the terms below have the following meanings:

        Currency.—The coin and paper money of the United States or any other country, which is circulated and customarily used and accepted as money.

        Person.—An individual, corporation, partnership, trust or estate, joint stock company, association, syndicate, joint venture or other unincorporated organization or group.

        Organization.—Person other than an individual.

        Transaction In Currency.—The physical transfer of currency from one person to another. This does not include a transfer of funds by means of bank check, bank draft, wire transfer or other written order that does not involve the physical transfer of currency.

        Negotiable Instruments.—All checks and drafts (including business, personal, bank, cashier's and third-party), money orders, and promissory notes. For purposes of this CTR, all traveler's checks shall also be considered negotiable instruments. All such instruments shall be considered negotiable instruments whether or not they are in bearer form.

        Specific Instructions

        Because of the limited space on the front and back of the CTR, it may be necessary to submit additional information on attached sheets. Submit this additional information on plain paper attached to the CTR. Be sure to put the individual's or organization's name and identifying number (items 2, 3, 4, and 6 of the CTR) on any additional sheets so that if it becomes separated, it may be associated with the CTR.

        Item 1a. Amends Prior Report—If this CTR is being filed because it amends a report filed previously, check Item 1 a. Staple a copy of the original CTR to the amended one. complete Part IT fully and only those other entries which are being amended.

        Item 1b. Multiple Persons.—If this transaction is being conducted by more than one person or on behalf of more than one person, check Item 1 b. Enter information in Part I for one of the persons and provide information on any other persons on the back of the CTR. Item 1c. Multiple Transactions.—If the financial institution has knowledge that there are multiple transactions, check Item 1c.

        PART I – Person(s) Involved in Transaction(s)

        Section A must be completed. If an individual conducts a transaction on his own behalf, complete Section A; leave Section B BLANK. If an individual conducts a transaction on his own behalf and on behalf of another person(s), complete Section A for each person; leave Section B BLANK. If an individual conducts a transaction on behalf of another person(s), complete Section B for the individual conducting the transaction, and complete Section A for each person on whose behalf the transaction is conducted of whom the financial institution has knowledge.

        Section A. Person(s) on Whose Behalf Transaction(s) Is Conducted.—See instructions above.

        Items 2, 3, and 4. Individual/Organization Name.—If the person on whose behalf the transaction(s) is conducted is an individual, put his/her last name in Item 2, first name in Item 3 and middle initial in Item 4. If there is no middle initial, leave item 4 BLANK. If the transaction is conducted on behalf of an organization, put its name in Item 2 and leave Items 3 and 4 BLANK.

        Item 5. Doing Business As (DBA).—If the financial institution has knowledge of a separate "doing business as" name, enter it in Item 5. For example, Johnson Enterprises DBA PJ's Pizzeria.

        Item 6. Social Security Number (SSN) or Employer Identification Number (EIN).—Enter the SSN or EIN of the person identified in Item 2. If none, write NONE.

        Items 7, 9, 10, 11 and 12. Address.—Enter the permanent street address including zip code of the person identified in Item 2. Use the Post Office's two letter state abbreviation code. A P.O. Box should not be used by itself and may only be used if there is no street address. If a P.O. Box is used, the name of the apartment or suite number, road or route number where the person resides must also be provided. If the address is outside the U.S., provide the street address, city, province, or state, postal code (if known), and the name of the country.

        Item 8. Date of Birth.—Enter the date of birth. Six numerals must be inserted for each date. The first two will reflect the month of birth, the second two the calendar day of birth, and the last two numerals the year of birth. Zero (0) should precede any single digit number. For example, if an individual's birth date is April 3, 1948, Item 8 should read 04 03 48.

        Item 13. Occupation, Profession, or Business.—Identify fully the occupation, profession or business of the person on whose behalf the transaction(s) was conducted. For example, secretary, shoe salesman, carpenter, attorney, housewife, restaurant, liquor store, etc. Do not use non-specific terms such as merchant, self-employed, businessman, etc.

        Item 14. If an Individual, Describe Method

        Used To Verify.—If an individual conducts the transaction(s) on his/her own behalf, his/her identity must be verified by examination of an acceptable document (see General Instructions). For example, check box a if a driver's license is used to verify an individual's identity, and enter the state that issued the license and the number in items e and f. If the transaction is conducted by an individual on behalf of another individual not present or an organization, enter N/A in item 14.

        Section B. Individual(s) Conducting Transaction(s) (if other than above).—Financial institutions should enter as much information as is available. However, there may be instances in which Items 15–25 may be left BLANK or incomplete.

        If Items 15–25 are left BLANK or incomplete, check one or more of the boxes provided to indicate the reason(s).

        Example: If there are multiple transactions that, if only when aggregated, the financial institution has knowledge the transactions exceed the reporting threshold, and therefore, did not identify the transactor(s), check box d for Multiple Transactions.

        Items 15, 16, and 17. Individual(s)

        Name.—Complete these items if an individual conducts a transaction(s) on behalf of another person. For example, if John Doe, an employee of XYZ Grocery Store makes a deposit to the store's account, XYZ Grocery Store should be identified in Section A, and John Doe should be identified in Section B.

        Items 18, 20, 21, 22, and 23. Address.—Enter the permanent street address including zip code of the individual. (See Items 7, 9, 10, 11, and 12.)

        Item 19. SSN.—If the individual has an SSN, enter it in Item 19. If the individual does not have an SSN, enter NONE.

        Item 24. Date of Birth.—Enter the individual's date of birth. See the instructions for item 8.

        Item 25. If an Individual, Describe Method Used To Verify.—Enter the method by which the individual's identity is verified (see General Instructions and Item 14).

        PART II – Amount and Type of Transaction(s)

        Complete Part II to Identify the type of transaction(s) reported and the amount(s) involved.

        Items 26 and 27. Cash In/Cash Out.—In the spaces provided, enter the amount of currency received (Cash In) or disbursed (Cash Out) by the financial institution. If foreign currency is exchanged, use the U.S. dollar equivalent on the day of the transaction.

        If less than a full dollar amount is involved, increase that figure to the next highest dollar. For example, if the currency totals $20,000.05, show the total as $20,001.00.

        Item 28. Date of Transaction.—Six numerals must be inserted for each date. (See Item 8.)

        Determining Whether Transactions Meet the Reporting Threshold

        Only cash transactions that, if alone or when aggregated, exceed $10,000 should be reported on the CTR. Transactions shall not be offset against one another.

        If there are both Cash In and Cash Out transactions that are reportable. the amounts should be considered separately and not aggregated. However, they may be reported on a single CTR.

        If there is a currency exchange, it should be aggregated separately with each of the Cash In and Cash Out totals.

        Example 1: A person deposits $11,000 in currency to his savings account and withdraws $3,000 in currency from his checking account.

        The CTR should be completed as follows: Cash In $11,000 and no entry for Cash Out. This is because the $3,000 transaction does not meet the reporting threshold.

        Example 2: A person deposits $11,000 in currency to his savings account and withdraws $12,000 in currency from his checking account.

        The CTR should be completed as follows: Cash In $11,000, Cash Out $12,000. This is because there are two reportable transactions. However, one CTR may be filed to reflect both.

        Example 3: A person deposits $6,00C in currency to his savings account and withdraws $4,000 in currency from his checking account. Further, he presents $5,000 in currency to be exchanged for the equivalent in French francs.

        The CTR should be completed as follows: Cash In $11,000 and no entry for Cash Out. This is because in determining whether the transactions are reportable, the currency exchange is aggregated with each of the Cash In and the Cash Out amounts. The result is a reportable $11,000 Cash In transaction. The total Cash Out amount is $9,000 which does not meet the reporting threshold; therefore, it is not entered on the CTR.

        Example 4: A person deposits $6,000 in currency to his savings account and withdraws $7,000 in currency from his checking account. Further, he presents $5,000 in currency to be exchanged for the equivalent in French francs.

        The CTR should be completed as follows: Cash In $11,000, Cash Out $12,000. This is because in determining whether the transactions are reportable, the currency exchange is aggregated with each of the Cash In and Cash Out amounts. In this example, each of the Cash In and Cash Out totals exceed $10,000 and must be reflected on the CTR.

        Item 29. Foreign Currency.—If foreign currency is involved, check Item 29 and identify the country. If multiple foreign currencies are involved, identify the country for which the largest amount is exchanged.

        Items 30–33.—Check the appropriate item(s) to identify the following type of transaction(s):

        30. Wire Transfer(s)
        31. Negotiable Instrument(s) Purchased
        32. Negotiable Instrument(s) Cashed
        33. Currency Exchange(s)

        Item 34. Deposits/Withdrawals.—Check this item to identify deposits to or withdrawals from accounts, e.g., demand deposit accounts, savings accounts, time deposits, mutual fund accounts or any other account held at the financial institution. Enter the account number(s) in item 35.

        Item 35. Account Numbers Affected (if any).— Enter the account numbers of any accounts affected by the transaction(s) that are maintained at the financial institution conducting the transaction(s). If necessary, use additional sheets of paper to indicate all of the affected accounts.

        Example 1: if a person cashes a check drawn on an account held at the financial institution, the CTR should be completed as follows: Indicate Negotiable Instrument(s) Cashed and provide the account number of the check.

        If the transaction does not affect an account, make no entry.

        Example 2: A person cashes a check drawn on another financial institution. In this instance, Negotiable Instruments) Cashed would be indicated, but no account at the financial institution has been affected. Therefore, item 35 should be left BLANK.

        Item 36. Other (specify).—If a transaction is not identified in Items 30–34, check Item 36 and provide an additional description. For example, a person presents a check to purchase "foreign currency".

        Part III – Financial Institution Where Transaction(s) Takes Place

        Item 37. Name of Financial Institution and Identity of Federal Regulator or BSA Examiner.—Enter the financial institution's full legal name and identify the federal regulator or BSA examiner, using the following codes:

        FEDERAL REGULATOR OR BSA EXAMINER CODE

        Comptroller of the Currency (OCC). 1
        Federal Deposit Insurance Corporation (FDIC) 2
        Federal Reserve System (FRS) 3
        Office of Thrift Supervision (OTS) 4
        National Credit Union Administration (NCUA) 5
        Securities and Exchange Commission (SEC) 6
        Internal Revenue Service (IRS) 7
        U.S. Postal Service (USPS) 8

        Items 33, 40, 41, and 42. Address.—Enter the street address, city, state, and ZIP code of the financial institution where the transaction occurred. If there are multiple transactions, provide information on the office or branch where any one of the transactions has occurred.

        Item 39. EIN or SSN.—Enter the financial institution's EIN. If the financial institution does not have an EIN, enter the SSN of the financial institution's principal owner.

        Item 43. MICR Number.—If a depository institution, enter the Magnetic Ink Character Recognition (MICR) number.

        Signature

        Items 44 and 45. Title and Signature of Approving Official.—The official who reviews and approves the CTR must indicate his/her title and sign the CTR.

        Item 46. Date the Form Was Signed.—The approving official must enter the date the CTR is signed. (See Item 8.)

        Item 47. Preparer's Name.—Type or print the full name of the individual preparing the CTR. The preparer and the approving official may not necessarily be the same individual.

        Items 48 and 49. Contact Person/Telephone Number.—Type or print the name and telephone number of an individual to contact concerning questions about the CTR.

      • 95-104 Expanded Sign-In Procedures At The PROCTOR Centers, Effective February 1, 1996; And PROCTOR Adds Remote Delivery Sites

        SUGGESTED ROUTING

        Registration
        Training

        Expanded Sign-In Procedures

        Concerns always exist regarding proper identification of candidates who are taking exams and training. A single finger imprint procedure will be added to our sign-in procedure to help address this issue.

        Effective February 1, 1996, all candidates taking computerized NASD® exams or Continuing Education Program training sessions must provide a single fingerprint impression at the PROCTOR® Certification Testing Center before being seated. Obviously, candidates who do not comply with the new procedure will not be seated, and will be assessed a late cancelation fee.

        Under the supervision of the PROCTOR Center staff, all candidates must adhere to the following sign-in procedures before being seated for their session:

        • Present one Official ID (state or government issued), with picture and signature.

        • Sign the NASD Rules of Conduct form.

        • Provide a single fingerprint on the NASD Rules of Conduct form, using the "inkless" pads supplied by the PROCTOR Center.

        If you have any questions, please contact Dan Klingbiel, NASD Member Services, at (301) 590-6394.

        Remote Delivery Sites

        NASD Member Services expects to provide testing and training at remote delivery sites in the following cities at least once per quarter in the first half of 1996:

        Alaska: Anchorage
        California: Culver City, Fresno, Fullerton, La Verne, Riverside, San Jose
        Florida: Jacksonville, Fort Myers, West Palm Beach
        Hawaii: Honolulu
        Idaho: Boise
        Louisiana: Shreveport
        Michigan: Lansing
        Mississippi: Jackson
        Montana: Billings, Great Falls
        Nevada: Las Vegas
        New Hampshire: Manchester
        New Jersey: Edison, Newark, Paterson
        New York: Buffalo, Loudonville
        North Dakota: Bismarck
        Puerto Rico: Rio Piedras
        South Carolina: Charleston
        South Dakota: Sioux Falls
        Texas: Austin, Lubbock
        Vermont: Burlington
        Virginia: Norfolk
        Washington: Spokane
        Wyoming: Cheyenne

        A final schedule for the first half of 1996 is in development. To schedule in one of these locations call (800) 999-6647 and select option 1 at the voice prompt.

      • 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)

        SUGGESTED ROUTING

        Senior Management
        Institutional
        Internal Audit
        Legal & Compliance
        Municipal
        Training

        Executive Summary

        On October 20, 1995, the Securities and Exchange Commission (SEC) approved a statement of policy that establishes internal NASD® procedures delegating to the NASD staff and the NASD Fixed Income Committee the authority to review requests by members for exemptions from the business prohibition requirement in Municipal Securities Rulemaking Board (MSRB) Rule G-37(b).

        The statement of policy is an NASD internal procedure and will not be in the NASD Manual. A footnote referencing this Notice will be placed by the heading of the Code of Procedure. The full text of the statement of policy, which became effective October 20, 1995, follows the discussion below.

        Background

        The SEC approved MSRB Rule G-37 on April 7, 1994.1 MSRB Rule G-37(b) prohibits any broker, dealer, or municipal securities dealer from engaging in municipal securities business with any issuer within two years after any contribution to an official of that issuer made by that broker, dealer, or municipal securities dealer, or any political action committee controlled by that broker, dealer, or municipal securities dealer. The two-year prohibition is not triggered by contributions by a municipal finance professional to issuer officials for whom that municipal finance professional was entitled to vote if such contribution does not exceed $250 per official per election.

        Subsequently, on June 3, 1994, the SEC granted accelerated approval to an amendment to MSRB Rule G-372 to provide a procedure for a broker, dealer, or municipal securities dealer to seek exemptive relief from the business prohibition language under MSRB Rule G-37(b) if the broker, dealer, or municipal securities dealer discovers that a prohibited political contribution was made. Pursuant to Release 34-34160, subsection (i) to MSRB Rule G-37 permits the NASD to exempt, conditionally or unconditionally, an NASD member that is prohibited from engaging in municipal securities business with an issuer pursuant to subsection (b) of MSRB Rule G-37. MSRB Rule G-37(i)(ii) provides that the NASD shall consider, among other factors, whether such exemption is consistent with the public interest, the protection of investors and the purposes of this Rule. MSRB Rule G-37(i)(ii) sets forth further criteria for granting the exemption by requiring that the MSRB member have in place procedures designed to ensure compliance with the Rule, had no actual knowledge of the contribution(s), and has taken other remedial measures as may be appropriate.

        Release No. 34-3160 states that the MSRB believes that exemptions from MSRB Rule G-37 should be granted only if a disgruntled employee contributes to an issuer official to injure the member or if an employee makes a number of small contributions during an election cycle (e.g., four years), which, when consolidated, amount to slightly over the $250 de minimis exemption (such as contributions totaling $255). It also states that the MSRB would expect that the exemption not be routinely requested by dealers and that exemptions would be granted by the NASD only in limited circumstances. To implement a procedure for reviewing requests for NASD member exemptions anticipated under MSRB Rule G-37, the NASD has adopted a Policy that establishes an NASD internal procedure to review and grant or deny exemptions from MSRB Rule G-37.

        Members are advised to retain this Notice for future reference. The policy is an NASD internal procedure and will not be in the NASD Manual. A footnote referencing this Notice will be placed by the heading of the Code of Procedure.

        Description Of NASD Policy

        Initial Review

        The NASD Board of Governors (Board) has delegated authority to John E. Pinto, Executive Vice President, NASD Regulation Business Line, to authorize a member of the staff to conduct an initial review of requests of NASD members for exemptions pursuant to Section (1) of MSRB Rule G-37. The staff authorized to review exemption requests will issue a written decision to the member that will set forth the decision and that the member may request a review of the staff decision by the Fixed Income Committee within 15 calendar days of the date of the decision.

        Appellate Review

        The Board has delegated authority to the Fixed Income Committee, or a subcommittee thereof, to review the appeal of a member from a decision of the staff with respect to the member's request for an exemption from MSRB Rule G-37. The Fixed Income Committee, or a subcommittee thereof, is required to issue a written decision to the member setting forth the decision. Unless a matter is called for discretionary review by the Board, the decision of the Fixed Income Committee, or a subcommittee thereof, will constitute final NASD action.

        Written Record Required

        The review conducted by the staff of the Regulation Business Line and the Fixed Income Committee, or a subcommittee thereof, of a member's request for exemption will be on the written record, including any submissions made by the member in support of its request for exemption.

        Board Review

        The decision of the Fixed Income Committee, or a subcommittee thereof, may be reviewed by the Board solely upon the request of one or more Governors. Such review, which may be undertaken solely at the discretion of the Board, will be in accordance with any future resolutions of the Board governing the review of the Fixed Income Committee decisions. In reviewing any decision of the Fixed Income Committee, the Board may affirm, modify, or reverse the decisions of Fixed Income Committee or remand the matter to the Fixed Income Committee with appropriate instructions. In the event of discretionary review by the Board, the decision of the Board constitutes final NASD action.

        Summary Of MSRB Rule G-373

        To help members comply with MSRB Rule G-37, the NASD is providing the following exact text from the MSRB Reports outlining the substantive requirements of MSRB Rule G-37 and related MSRB Rules, except for MSRB Rule G-37(i) discussed above.

        In general, rule G-37 (i) prohibits brokers, dealers and municipal securities dealers ("dealers") from engaging in municipal securities business with issuers if certain political contributions have been made to officials of such issuers; and (ii) requires dealers to record and disclose certain political contributions, as well as other information, to allow public scrutiny of political contributions and the municipal securities business of a dealer. The rule is divided into eight sections, which are lettered (a) - (h).

        Section (a) sets forth the general purpose and intent of the rule.

        Section (b) is the business prohibition section which prohibits dealers from engaging in municipal securities business with an issuer within two years after any contribution to an official of such issuer made by the dealer, any municipal finance professional and any political action committee (PAC) controlled by the dealer or any municipal finance professional. This paragraph also sets forth a de minimis exemption such that a dealer would not be subject to the prohibition on business if the only contributions made were by municipal finance professionals who were entitled to vote for the officials to whom they contributed, provided that such contributions by each municipal finance professional did not exceed $250 per official per election.

        Section (c) is the anti-solicitation provision which prohibits dealers and municipal finance professionals from soliciting any person or PAC to make contributions, or to coordinate (or bundle) contributions to an official of an issuer with which the dealer is engaging or seeking to engage in municipal securities business.

        Section (d) prohibits dealers and municipal finance professionals from doing indirectly any act which the dealer or municipal finance professional is prohibited from doing directly, pursuant to sections (b) and (c) of the rule.

        Section (e) is the reporting provision which requires dealers to submit to the Board certain summary information on their municipal securities business and contributions to issuer officials and political parties, by the dealer, municipal finance professionals, PACs controlled by dealers and municipal finance professionals, and executive officers. Section (e) also provides that the reports must be submitted in accordance with rule G-37 filing procedures. These procedures require dealers to file two copies of Form G-37 within thirty (30) calendar days after the end of each calendar quarter (which filing dates correspond to January 31, April 30, July 31, and October 31).

        Section (f) states that the Board will accept additional information that is voluntarily provided by dealers or others, so long as such information is submitted pursuant to the rule G-37 filing procedures.

        Section (g) is the definitional section which defines the following terms:

        (i) contribution; (ii) issuer; (iii) broker, dealer and municipal securities dealer; (iv) municipal finance professional; (v) executive officer; (vi) official of an issuer; and (vii) municipal securities business.

        Section (h) provides that a prohibition on municipal securities business under section (b) arises only from contributions made on or after April 25, 1994.

        In addition, Board rule G-8(a)(xvi) sets forth the specific recordkeeping requirements for rule G-37 which begin with contributions made and municipal securities business engaged in as of April 25, 1994. These requirements are designed to assist dealers in determining whether or not they may engage in business with a particular issuer. In addition to recording contributions to officials of issuers made by dealers, municipal finance professionals and PACs controlled by dealers and municipal finance professionals, rule G-8 requires dealers to record contributions made by executive officers and contributions made to political parties of states and political subdivisions. Dealers also are required to record the name, company, role and compensation arrangement of any person employed by the dealer to obtain or retain municipal business. Rule G-9(a)(viii), on record retention, requires dealers to retain the records made pursuant to rule G-8(a)(xvi) for at least six years.

        Questions regarding this Notice may be directed to Walter Robertson, NASD Compliance Department, at (202) 728-8236. In addition, the MSRB has advised the NASD that members may call the MSRB about questions concerning MSRB Rule G-37.


        1 Securities Exchange Act Release No. 33868 (April 7, 1994), 59 F.R. 17621 (April 13, 1994).

        2 Securities Exchange Act Release No. 34160 (June 3, 1994), 59 FR 30376 (June 13, 1994) ("Release 34-34160").

        3 MSRB Reports, June 14, Number 3 (June 1994) at 11. See also, MSRB Manual, General Rules, Rule G-37, MSRB Interpretations, Questions and Answers concerning Political Contributions and Prohibitions on Municipal Securities Business: Rule G-37.


        Text Of New Rule

        (Note: New text is underlined.)

        Procedure of the Board of Governors For The Granting of Exemptions From MSRB Rule G-37

        1. The Board of Governors("Board") delegates authority to John E. Pinto, Executive Vice President, Regulation Business Line, to authorize a member of the staff to review requests of NASD members for exemptions pursuant to Section (1) of MSRB Rule G-37.
        2. The staff authorized to review exemption requests shall issue a written decision to the member which shall set forth the decision and that the member may request a review of the staff decision by the Fixed Income Committee of the NASD within 15 calendar days of the date of the decision.
        3. The Board of Governors delegates authority to the Fixed Income Committee, or a subcommittee thereof, to review the appeal of a member from a decision of the staff with respect to the member's request for an exemption from MSRB Rule G-37.
        4. The Fixed Income Committee, or a subcommittee thereof, shall issue a written decision to the member setting forth the decision.
        5. Unless a matter is called for discretionary review by the Board pursuant to Section 7 of this Policy, the decision of the Fixed Income Committee, or a subcommittee thereof, constitutes final action of the NASD.
        6. The review conducted by the staff of the Regulation Business Line and the Fixed Income Committee, or a subcommittee thereof, of a member's request for exemption will be on the written record, including any submissions made by the member in support of its request for exemption.
        7. The decision of the Fixed Income Committee, or a subcommittee thereof, may be reviewed by the Board solely upon the request of one or more Governors. Such review, which may be undertaken solely at the discretion of the Board, shall be in accordance with resolutions of the Board governing the review of the Fixed Income Committee decisions. In reviewing any decision of the Fixed Income Committee, the Board may affirm, modify or reverse the decisions of the Fixed Income Committee or remand the matter to the Fixed Income Committee with appropriate instructions. In the event of discretionary review by the Board, the decision of the Board constitutes final action of the NASD.

      • 95-102 Overview Of Planned Changes To Disciplinary And Enforcement Procedures

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance

        Executive Summary

        The NASD® Select Committee on Structure and Governance (Select Committee), also known as the Rudman Committee, has proposed significant changes to the manner in which the NASD operates. After substantial discussion, the NASD Board of Governors adopted the proposals in substantially the form recommended by the Select Committee. A number of these proposals call for fundamental changes to the procedures followed in the NASD's disciplinary program. Others call for the establishment of new offices within the NASD, or the refocusing of responsibilities or priorities within existing offices.

        The NASD conducted a detailed analysis of the Select Committee's recommendations and shortly thereafter developed a plan for implementation which was presented to the Board in mid-November 1995. The principal procedural changes that the NASD expects to implement in 1996 include:

        • the creation of an Office of Professional Hearing Officers and the use of professional Hearing Officers in all disciplinary cases;

        • an amendment to the NASD Code of Procedure to define and prohibit ex parte communications;

        • an amendment to the Code of Procedure providing for an "open file" discovery process intended to assist respondents in preparing their defenses;

        • new rules and possible sanctions against hearing participants who behave improperly during proceedings;

        • the delegation of operational tasks to Office of General Counsel (OGC) staff to refocus the National Business Conduct Committee (NBCC) on national policy issues;

        • a study of personnel resources to determine whether there is sufficient staff to handle the proposed changes;

        • an increase in staff and broadening of scope for the Office of Internal Review, including the creation of a new "ombudsman" position;

        • the centralization of staff responsible for coordinating national, regional, and local initiatives to coordinate regulatory and enforcement matters; and

        • the creation of a new Investor Services Department to coordinate investor programs throughout the Association and act as liaison to investors and investor groups.

        Changes To Disciplinary And Enforcement Procedures

        Office Of Professional Hearing Officers

        The NASD's plan to use professional Hearing Officers in all disciplinary cases, and the resulting creation of the Office of Professional Hearing Officers, together constitute the single most fundamental change that will occur in the NASD disciplinary program. The Office of Professional Hearing Officers will be housed under the newly established NASD Regulation, Inc. (NASDR). The NASD expects to appoint the Chief Hearing Officer in early 1996 and to fully staff the Office of Professional Hearing Officers by the end of that year.

        After implementation of the new procedures, Hearing Officers will play a key role in managing cases and handling the many procedural issues that increasingly arise in disciplinary proceedings. They will participate as voting members of all District Business Conduct Committee (DBCC) and Market Surveillance Committee (MSC) hearing panels, and will chair these panels. However, industry volunteers will continue to constitute the majority on disciplinary hearing panels.

        Hearing Officers will assume primary responsibility for managing the procedural aspects of disciplinary hearings before, during, and after the hearings. Before hearings, Hearing Officers will be expected to administer a new pre-hearing/motion process, which is discussed in greater detail below. Because Hearing Officers will resolve procedural and evidentiary issues at the pre-hearing stage, the NASD anticipates that hearings will be more orderly and focus on substantive issues. Hearing Officers will also oversee the settlement and discovery process prior to the hearings to ensure that all relevant documents are produced timely and that ex parte communications do not occur. (See discussion of ex parte communications below.)

        Hearing Officers will chair the hearing panels, rule on procedural and other legal matters, advise industry volunteers on relevant legal principles, and ensure the creation and maintenance of an appropriate record. As chairperson, the Hearing Officer will participate in hearing panel deliberations and, like the two industry volunteer panelists, he or she will vote on the disposition of cases. Once voting has occurred, the Hearing Officer will be responsible for drafting a decision that represents the views of the hearing panel.

        Following hearings, Hearing Officers will conduct necessary legal research, provide legal guidance to the industry panelists, and analyze the hearing transcript and exhibits to prepare a written decision that reflects the view of the Hearing Panel. This augments service to the Hearing Panels as presently there is no legal advisor appointed in most cases.

        Additionally, Hearing Officers will be empowered independently to resolve certain categories of disciplinary cases, without the participation of industry volunteers: 1) cases that fall within the NASD's minor violation plan1 but in which respondents wish to challenge the alleged violations; and 2) cases in which the respondent has defaulted by failing to respond to a DBCC or MSC complaint. In the first category of cases, however, respondents would not be compelled to have their cases heard by a Hearing Officer alone; they may request a hearing before the customary three-person hearing panel.

        Although cases falling within the above two categories generally do not require the expertise of industry volunteers, they do require a carefully constructed record regarding technical issues (e.g., whether actual or constructive service has been effected). These categories, therefore, appear to be well suited to processing by Hearing Officers alone and should result in more efficient use of the industry volunteers' time.

        The NASD anticipates that the use of trained hearing professionals will enhance the NASD's ability to conduct fair and efficient disciplinary proceedings. At the same time, the functional role of professional Hearing Officers will free industry volunteers to focus on their area of expertise: securities industry business practices. As a consequence, the NASD believes that the introduction of professional Hearing Officers will enhance the self-regulatory process.

        Although the Office of Professional Hearing Officers will be housed within NASDR, the office will be wholly separate from that corporation's examination, investigatory, and prosecuting departments. The office also will be separate from NASDR appellate and oversight staff. At least initially, the office will be centralized in a single location—likely in the Washington, DC, metropolitan area—to make the most effective use of the substantial staffing and physical resources that will be necessary to support Hearing Officer operations, to promote uniformity and consistency in training and management, and to ensure appropriate separation between the Hearing Officers and regional prosecutorial staff. After the NASD gains experience with the Hearing Officer program, consideration will be given as to whether satellite offices are needed and appropriate.

        Motions

        Consistent with its initiative on Hearing Officers, the NASD plans to adopt a Code of Procedure provision that authorizes Hearing Officers to engage in a broad range of case-management activities, most significantly, governing the matters of motions—how they are filed and served, and the length and timing of these motions. These provisions likely will be modeled after comparable provisions in federal court and agency rules. Other case-management activities, such as conducting pre-trial conferences and entering scheduling orders, will be modeled after a comparable provision in the SEC's Rules of Practice.

        Ex Parte Contacts

        Another anticipated change to disciplinary and enforcement procedures is the amendment of the NASD Code of Procedure to define what constitutes ex parte communications and to prohibit such communications in disciplinary proceedings. Generally speaking, an ex parte communication is one that occurs between a party to a proceeding and a decision-maker regarding the merits of the proceeding, without notice to other parties. For example, the term would encompass off-the-record communications between either a disciplinary respondent or NASD prosecutorial staff and a member of a DBCC hearing panel regarding the issues presented in a pending disciplinary proceeding. In drafting these provisions, the NASD will be guided by comparable provisions in the Administrative Procedure Act, and the rules of various of federal agencies, including the Securities and Exchange Commission (SEC).

        As recommended by the Select Committee, prosecuting attorneys will cease their traditional involvement in the decision-drafting process, and as discussed above, decision-drafting responsibilities will be shifted to Hearing Officers in an attempt to avoid ex parte contacts. Also, prosecuting attorneys will cease to advise DBCC panels on whether settlement offers conform to NASD Sanction Guidelines or other applicable NASD policies. Once again, this advisory function will be performed by Hearing Officers. However, consistent with long-standing SEC practice, prosecutorial staff will be permitted to present offers of settlement to District Committees on an ex parte basis when staff urges acceptance of offers and the respondent consents to such staff presentation.

        The Acceptance, Waiver, and Consent (AWC) process—the widely utilized procedure for settling cases by providing respondents advance notice that they are going to be the subject of a complaint and allowing them to settle the matter quickly— will remain unchanged: AWCs will continue to be negotiated between NASD prosecutorial staff and respondents and be submitted to the DBCC or MSC in the normal course of business.

        Beyond implementing the Select Committee's recommendations regarding ex parte communications in the decision-drafting and settlement processes, the NASD will devote substantial effort to identifying other contexts in which ex parte contacts may occur, and devising procedures to prevent inappropriate contacts. The NASD welcomes suggestions regarding additional measures that it might consider in addressing circumstances that have given rise to ex parte concerns in the past.

        Discovery

        In another Select Committee recommendation approved by the Board for implementation, the NASD will amend its Code of Procedure to provide for the type of "open file" discovery that is available in SEC enforcement proceedings. Materials in the NASD's possession relevant to a specific case will be made available to respondents for inspection and copying at an early stage in disciplinary proceedings, unless that material is subject to certain narrow categories of exceptions. The NASD believes that the new procedures will assist respondents substantially in preparing their defenses. Not only will respondents have access to staff documents beyond those that the NASD staff will introduce as hearing exhibits, but the access will occur much earlier in disciplinary proceedings.

        Among other discovery-process initiatives:

        • The NASD will adopt the principles followed by prosecutors (and the prosecutorial staffs of many federal agencies) to determine the extent of the NASD's obligation to disclose exculpatory evidence—evidence that may clear a respondent, for example.

        • NASD discovery obligations will be case-specific. Respondents will be able to obtain non-privileged materials relevant to the specific proceeding in which they are involved; respondents' access will be limited to documents that are relevant to the facts of that case.

        • The NASD staff's document production deadline will fall relatively early in the disciplinary proceeding. The NASD is considering adopting the SEC's requirement that staff documents be made available to respondents no later than 14 days after respondents answer the complaint.

        • In order to be fairer to respondents who are representing themselves, NASD staff documents will be made available as a matter of right; access will not be contingent upon a respondent's making a request. Instead, respondents will be notified that staff documents are available for inspection and copying.

        • The NASD intends to follow the SEC's practice of requiring production of otherwise privileged documents that contain material exculpatory evidence. Staff will be required to produce these documents to respondents.

        • The NASD plans to provide guidance on the limited circumstances in which the NASD will, at the request of a respondent, compel third parties to produce documentary or testimonial evidence.

        Sanctions

        New procedures resulting from the Select Committee recommendations include less tolerance for inappropriate behavior that occurs during hearings. The NASD plans to adopt variants of the SEC rules that address contemptuous conduct during hearings. Among other things, the NASD will adopt a new Code of Procedure provision to authorize Hearing Officers and hearing panels to exclude persons who engage in contemptuous behavior, or frivolous, dilatory, or other improper practices. This applies to anyone involved in the hearing: respondents, counsel, witnesses, or others. In addition, the NASD will consider whether member firms, associated persons, or NASD staff should be subject to monetary sanctions if they engage in improper behavior during proceedings. Finally, the NASD plans to address whether counsel, who are excluded from hearings for contumacious or otherwise inappropriate behavior, should forfeit the privilege of appearing in future NASD disciplinary proceedings.

        NBCC Refocused On Policy

        To enable the NBCC to devote more time to issues of national policy, many time-consuming operational tasks will be delegated to NASD OGC staff to perform them under the NBCC's oversight and direction. The OGC staff's role will be expanded to include reviewing settlement offers and non-appealed disciplinary cases and OGC staff will provide extensive additional services to the NBCC, including substantially expanded assistance in preparing for NBCC hearings, to free the NBCC to focus on "big picture" issues.

        In the membership area, the NASD also contemplates that the roles of the District staff, the District Committees, and the NBCC will be refined and clarified. For instance, to increase NBCC involvement in policy and membership applications, the NBCC will devote considerable effort to amending the membership criteria set forth in Schedule C of the NASD By-Laws, and formulating uniform policy guidance for the NASD District Offices in applying those criteria. The NASD expects that, in the future, both the District Committees and the NBCC will act in purely appellate capacities with regard to membership applications and restriction agreements. Authority to act with respect to these matters will be delegated to District staff, whose function will be limited to administering membership policies that have been established by the NBCC. In the future, District Committees and the NBCC will focus on ensuring that NBCC-established policies are administered by the staff, fairly and uniformly.

        Diversity In DBCC Composition And Selection

        Answering the Select Committee's recommendation to foster diversity in DBCC membership, nominating committees now will be provided with more information regarding the relevant criteria such as the need for diversity in size and type of firms represented, and in product knowledge and functional expertise. Nominating committees also may be provided with profiles that summarize relevant membership information including categorization of District Committee members by revenue, number of registered representatives, and primary income sources. The NASD will also consider developing candidate outreach programs, more clearly delineating the responsibilities of District Directors in the nomination process, and providing nominating committees with more candidate background information.

        Resources And Staffing

        To abate any concerns that existing staff will be insufficient to manage all of the approved changes, the NASD intends to perform immediate analysis of disciplinary and enforcement personnel needs. This analysis will include a determination of resources necessary to establish an Office of Professional Hearing Officers, and a significant expansion of OGC duties associated with the NBCC's appellate functions.

        NASDR will construct, implement, and use, on an ongoing basis, a resource needs model that objectively determines resources required to perform current tasks, and projects resources required to perform additional tasks planned for upcoming years. Further, the NASD plans to adopt a policy that will require all future proposals that may affect staffing and resource needs (e.g., rulemaking, or shifts in priorities) to include an estimate of the anticipated resource requirements.

        New Offices And Functions Planned

        Office Of Internal Review

        To broaden the scope and focus of its operational reviews, the NASD will increase the staff of the Office of Internal Review. This step will also permit Internal Review to focus on District reviews, and an aggressive plan to review all Districts will be adopted and implemented as soon as possible.

        The Office of Internal Review will be located within the parent corporation and will report to the CEO as well as to the NASD Audit Committee. Internal Review will be housed within the parent corporation to insulate the office and its staff from possible retribution by the operating business lines. The Vice President for Internal Review will be empowered to conduct special investigations on his or her own initiative.

        Ombudsman Function Established

        A new position and function recommended by the Select Committee— the "ombudsman"— will also be sited within the NASD's existing Office of Internal Review. The ombudsman will receive, consider, and investigate "out of channel" concerns and complaints, that is, those remaining after normal complaint mechanisms are exhausted, from internal and external sources, and act as a liaison with operating departments to resolve complaints.

        Centralized Coordination With Other Regulators

        The NASD plans to centralize in a single unit staff responsible for coordinating national, regional, and local initiatives designed to further coordination of regulatory and enforcement matters with state regulators, the SEC, other federal regulators, and the other SROs. This action would formalize efforts presently carried out by the Office of Regulatory Policy and others. This central unit will, among other things, sponsor annual meetings with other securities regulators to address regulatory and enforcement matters and coordinate national initiatives. The central unit will also serve as the point of contact for state and other regulators seeking information or assistance from NASDR.

        Investor Services

        A new Investor Services Department will be charged with promoting individual investor education, functioning as a central point of entry for written inquiries from investors, coordinating investor programs throughout the Association, administering a formal investor outreach program, acting as liaison with investor organizations and governmental consumer affairs offices, and identifying technology services that might be provided to investors.

        Because investor concerns may emanate from the rules of either Nasdaq® or NASDR, and because the office's educational efforts should be targeted at both securities market issues and the regulatory process, the Investor Services Department will be housed in the corporate parent. This newly created department will be headed by an officer who reports to the CEO of the parent corporation. The head of this Office will be authorized to raise issues and have open access to the chairs of the NASD's Quality of Markets Committee and/or non-industry directors of the Nasdaq or NASDR Boards.

        Questions regarding this Notice should be directed to Daniel M. Sibears, Director, Office of Regulatory Policy at (202) 782-6911 or Anne H. Wright, Assistant General Counsel, Office of General Counsel, at (202) 728-8815.


        1 The minor violation plan allows simplified handling of misconduct for which the recommended sanctions are limited to censures, or fines that do not exceed $2,500. Persons who are believed to have engaged in misconduct falling within the plan are given notice of that fact before a disciplinary complaint is issued, and may consent to the entry of specified sanctions. The proposal outlined in text would permit Hearing Officers to act as single-person hearing panels in cases in which disciplinary respondents elected against having allegations of misconduct resolved pursuant to the minor violation plan. Details regarding the minor violation plan may be found in Article II, Section 10(b) of the NASD Code of Procedure, and in NASD Notice to Members 93-42.

        © National Association of Securities Dealers, Inc. (NASD), December 1995. All rights reserved. NASD is a registered service mark of the National Association of Securities Dealers, Inc. Central Registration Depository (CRD), MediaSource, PC Focus, and NASDnet are service marks of the NASD. NAqcess, Nasdaq, Nasdaq National Market, and OTC Bulletin Board are registered service marks of The Nasdaq Stock Market, Inc. Automated Confirmation Transaction (ACT) Service, The Nasdaq SmallCap Market, and Small Order Execution System (SOES) are service marks of The Nasdaq Stock Market, Inc. NASD Notices to Members is published monthly by the NASD Communication Services Department, Jean Robinson Curtiss, Editor, NASD Communication Services, 1735 K Street, NW, Washington, DC 20006-1500, (202) 728-6900. No portion of this publication may be copied, photocopied, or duplicated in any form or by any means, except as described below, without prior written consent of the NASD. Members of the NASD are authorized to photocopy or otherwise duplicate any part of this publication without charge only for internal use by the member and its associated persons. Nonmembers of the NASD may obtain permission to photocopy for internal use through the Copyright Clearance Center (CCC) for a $3-per-page fee to be paid directly to CCC, 222 Rosewood Drive, Danvers, MA 01923. Annual subscriptions cost $225; single issues cost $25. Send a check or money order (payable to the National Association of Securities Dealers, Inc.) to NASD MediaSourceSM, P.O. Box 9403, Gaithersburg, MD 20898-9403, or to phone in an order using American Express, MasterCard, or Visa charge, call (301) 590-6578, Monday to Friday, 9 a.m. to 5 p.m., Eastern Time. Back issues may be ordered by writing NASD, Support Services Department, 1735 K Street, NW, Washington, DC 20006-1500 or by calling (202) 728-8061.

      • 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;

        Last Voting Date: January 12, 1996

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance

        Executive Summary

        The NASD® invites members to vote to approve amendments to Articles VII and X and to delete Article V of the NASD By-Laws. The last voting date is January 12, 1996. The text of the proposed amendments follows this Notice.

        Background

        The proposed amendments to Articles VII and X and the deletion of Article V of the NASD By-Laws will permit the NASD to begin the restructuring necessary to implement the principles articulated in the report of The Select Committee on Structure and Governance (the Select Committee). The NASD, Inc., Board of Governors has adopted the Select Committee proposal that the NASD, Inc., create a new subsidiary responsible for regulation and the provision of member and constituent services, with the NASD, Inc., retaining responsibility for general oversight over the effectiveness of the self-regulatory and business operations of the NASD and its major subsidiaries, The Nasdaq Stock MarketSM and NASD Regulation, Inc. (NASDR), and final policymaking authority for the Association as a whole. The Board also adopted Select Committee proposals to restructure and reduce the size of the NASD, Inc., Board, and implement policies that will ensure a balance of non-industry and industry representation on The Nasdaq Stock Market and NASDR Boards. The governing board of the NASD, Inc., is proposed to be restructured to have a majority of non-industry members.

        Briefly, the changes to the By-Laws, which are described in more detail below, will:

        • Create a national nominating committee comprising the Chief Executive Officer (CEO) of the NASD, Inc., and an equal number of industry and non-industry persons. This committee will identify and nominate, for election by the NASD, Inc., Board, industry and non-industry persons to serve on the NASD, Inc., Board. The committee will also nominate industry and non-industry persons to serve on the subsidiary boards, to provide adequate representation of the various constituencies served by the Association.

        • Reconstitute the Board as a majority non-industry board comprising the CEO and "Industry" and "Non-Industry" Governors, and reduces the minimum size of the Board from 25 to 5. The term "Industry Governors" means persons associated with an NASD, Inc., member. The term "Non-Industry Governors" means persons representing investors, issuers, and other constituents, pursuant to criteria that will be adopted by the NASD, Inc., Board. The implementation plan adopted by the Board at its November 1995 meeting specified a 1996 NASD, Inc., board of nine persons— the CEO, three Industry, and five Non-Industry Governors.

        • Delete Article V to remove an unnecessary reference to the affiliation of other Registered Securities Associations with the NASD. Such affiliations remain authorized by Section 15A of the Securities Exchange Act of 1934.

        • Amend Article X to replace the term "President" with the term "Chief Executive Officer," to make clear that this person is the most-senior executive of the Association. Additional changes clarify the procedures for the resignation, removal, and replacement of officers.

        Article VII Amendments

        The following is a description of the proposed amendments to Article VII of the By-Laws:

        Section 1—Powers And Authority Of Board Of Governors

        There are numerous references, beginning in this section, to the "restated" Certificate of Incorporation. The NASD's Certificate of Incorporation will be amended to be consistent with the changes proposed for the By-Laws.

        Section 2—Authority To Suspend For Failure To Submit Required Information

        There are numerous references to the "Chief Executive Officer." This term replaces the term "President," to make clear that this person is the most senior executive of the Association.

        Section 3—Authority To Take Action Under Emergency Or Extraordinary Market Conditions

        These changes eliminate the special, small committee that has authority to take action in case of emergencies or extraordinary market conditions, when the Board is not available. This special committee is necessary today, when the NASD Board and the Executive Committee are large and, under emergency conditions, difficult to assemble. The new, smaller Board and the correspondingly small Executive Committee will make this special committee unnecessary.

        Section 4—Composition And Qualifications Of The Board

        These changes reconstitute the NASD Board as a smaller, majority Non-Industry Board, comprising the CEO, Industry, and Non-Industry Governors. The Board shall have at least five persons and will have the flexibility to determine the size that is most efficient, but must maintain a Non-Industry majority.

        Section 5—Term Of Office Of Governors

        These changes alter the Governors' term of office from a three-year fixed term to a term not to exceed three years. This change will enhance the effectiveness of the Board by providing the flexibility to attract the services of individuals able to make a valuable contribution to the Association, who may not be able to commit to a three-year term but who may be able to commit to a fixed term of one or two years. Successive terms will be permitted.

        Section 6—Filling Of Vacancies

        At present, the By-Laws provide that, in case of an in-term vacancy, a Governor elected from a District will be replaced by a successor from that District. This newly named section provides that all vacancies occurring during a term of office will be filled by a vote of the remaining Governors. This change is necessary because, under the amended By-Laws, Governors of the NASD, Inc., will not be elected from NASD administrative Districts. Pursuant to the implementation plan adopted by the Board, the NASDR Board will include representatives of member firms elected by NASD Districts.

        Section 7—Election Of Board Members

        This section establishes a National Nominating Committee of seven or more persons, comprising the CEO, at least three persons associated with NASD members, and an equal number of non-industry persons. New Governors will be selected by the Board from among persons nominated by this committee. This will ensure that the nominating process includes a balance of industry and public interest. This committee is also empowered to nominate persons to serve as directors of The Nasdaq Stock Market, Inc., and NASDR Boards.

        Section 8—Meeting Of Board; Quorum; Required Vote, And Section 9—Action By Written Consent Of Governors

        The amendments to these sections clarify that the Board and any Committee may act when a majority is present at a meeting, and that a meeting includes any event at which persons may interact, including telephone and video conferences. Committee or Board action may be taken in the absence of a meeting only by unanimous consent.

        Section 10—Offices Of The Corporation

        This section is being deleted as unnecessary. It restates what is true by operation of law.

        Request For Vote

        The NASD Board of Governors believes the proposed amendments will facilitate implementation of the Select Committee's recommendations. Please mark the attached ballot according to your convictions and mail it in the enclosed, stamped envelope to The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware, 19801. Ballots must be postmarked no later than January 12, 1996.

        Questions about this Notice may be directed to Phillip A. Rosen, Associate General Counsel, at (202) 728-8446.

        Text Of Amendments To The NASD By-Laws

        (Note: New text is underlined; deletions are bracketed.)

        Only those provisions containing proposed amendments are printed below. The full text of the NASD By-Laws appear in the NASD Manual at pp. 1001–1695.

        Additional note: The following Article entitled "Affiliates" is proposed to be deleted in its entirety.

        [ARTICLE V

        AFFILIATES

        Qualifications for Affiliation

        Sec. 1. Any association of brokers or dealers, registered with the Commission as an affiliated securities association under the provisions of Section 15A of the Act, may become an affiliate of the Corporation as hereinafter provided in this Article.

        Application for Admission as Affiliate

        Sec. 2. Application for admission as an affiliate shall be made to the Board of Governors in writing, in such form as the Board of Governors may prescribe, and shall contain a certified copy of the application to the Commission for registration as an affiliated securities association, a certified copy of the order of the Commission granting such registration, and such other reasonable information as the Board of Governors may require.

        Agreement of Affiliate

        Sec. 3. No applicant may become an affiliate of the Corporation unless it agrees:

        (a) That it will classify its members, for purposes of levying dues and assessments, on the same basis as that applicable to members of the Corporation and that the amount of dues or assessments payable by each of its members for any given period, based on such classification, shall not be lower than that payable by a member of the Corporation in the same class for the comparable period; provided, however, that if by reason of the special type of business conducted by members of an applicant, the foregoing agreement is impracticable of application to such applicant, such applicant shall agree that it will fix and levy dues or assessments payable by its members on some other basis to be agreed upon by the applicant and the Board of Governors of the Corporation, which shall be fair and equitable in view of the dues and assessments payable by members of the Corporation.
        (b) That it will pay the Corporation annually, in the form of dues or otherwise, for services to be rendered by the Corporation to the applicant, the amount to be agreed upon by the applicant and the Board of Governors of the Corporation annually in advance, and that should the applicant and the Corporation be unable to reach an agreement as to an appropriate amount, the applicant will consent to the submission of the controversy to the Commission for arbitration, and that if submitted, it will abide by the Commission's decision thereon;
        (c) That, after affiliation, it will at all times keep its charter, by-laws, and other rules so integrated with the corresponding Charter, By-Laws, and other rules of the Corporation as not to conflict in any way therewith; and
        (d) That the Board of Governors, in accordance with the provisions of Section 6 of this Article, may at any time suspend or cancel its affiliation with the Corporation.

        Conditions of Affiliation

        Sec. 4. No applicant may become an affiliate of the Corporation unless it appears to the Board of Governors:

        (a) That such applicant is so organized and is of such a character as to be able to comply with and carry out its purposes, and those of the Corporation and of the Act; and
        (b) That the charter, by-laws, and other rules of the applicant are so integrated with the corresponding Charter, By-Laws, and other rules of the Corporation as not to conflict in any way therewith.

        Approval of Admission as an Affiliate

        Sec. 5. If it appears to the Board of Governors that the foregoing requirements of this Article are met by the applicant, it shall approve such applicant's admission as an affiliate; otherwise, after appropriate notice and opportunity for hearing, it shall disapprove such application in writing and shall set forth therein the specific grounds upon which such disapproval is based.

        Suspension or Cancellation of Affiliation

        Sec. 6. The Board of Governors may at any time suspend or cancel the affiliation of an affiliate with the Corporation if the Board of Governors finds that the affiliate has ceased to be of such character as to be able to or has failed to carry out its purposes or the purposes of the Act, or has failed to carry out any of the conditions of affiliation. In any proceeding, however, under this Section to determine whether the affiliation of an affiliate should be suspended or canceled, specific charges shall be brought; such affiliate shall be notified of, and be given an opportunity to defend against such charges; a record shall be kept; and any determination that the affiliation of an affiliate shall be suspended or canceled shall be in writing and shall set forth therein the specific grounds upon which such determination is based. Such suspension or expulsion shall take effect upon the 60th day after the filing with the Commission of notice thereof and a copy of the record of the proceedings before the Board of Governors, unless within thirty days after such filing such suspensions or cancellation is disapproved by the Commission.

        Exclusion of Territory Covered by Affiliated Association

        Sec. 7. The Board of Governors shall, if it deems such action to be in the interest of efficient and economical administration and desirable in carrying out the purposes of the Act, recommend appropriate changes in the By-Laws to exclude the territory covered by an affiliate association from the geographical area covered by the Corporation.]

        ARTICLE VII

        BOARD OF GOVERNORS

        Powers and Authority of Board of Governors

        Sec. 1.

        (a) The Board of Governors shall be the governing body of the Corporation and, except as otherwise provided by applicable law, the Restated Certificate of Incorporation or these By-Laws, shall be vested with all powers necessary for the management and administration of the affairs of the Corporation and the promotion of the Corporation's welfare, objects and purposes. In the exercise of such powers, the Board of Governors[,] shall have the authority to:

        Sec. 1(a)(1) through Sec. 1(a)(9). No change.

        (10) engage in any activities or con-duct necessary or appropriate to carry out the Corporation's purposes under its Restated Certificate of Incorporation and the federal securities laws.

        Sec. 1(b). No change.

        Authority to Suspend for Failure to Submit Required Information

        Sec. 2.

        (a). No change.
        (b) The Board of Governors is authorized to delegate the authority herein above granted to the [President] Chief Executive Officer of the Corporation; provided, however, that the Executive Committee of the Board of Governors shall be notified in writing of any such contemplated action by the [President] Chief Executive Officer.

        Authority to Take Action Under Emergency or Extraordinary Market Conditions

        Sec. 3.

        [(a)] The Board of Governors, [or between meetings of the Board, a Committee consisting of the Chairman of the Board (or in his absence, a Vice Chairman of the board), the President of the Corporation, and a member of the Executive Committee,] in the event of an emergency or extraordinary market conditions, shall have the authority to take any action regarding (1) the trading in or operation of the over-the-counter securities market, the operation of any automated system owned or operated by the Corporation or any subsidiary thereof, and the participation in any such system of any or all persons or the trading therein of any or all securities and (2) the operation of any or all member firms' offices or systems, if, in the opinion of the Board [of the Committee hereby constituted,] such action is necessary or appropriate for the protection of investors or the public interest or for the orderly operation of the marketplace or the system.
        [(b) The authority provided in Subsection (a) shall be exercised by the Committee only if the President, in his discretion, concludes that it is not practical or appropriate to convene a meeting of the Board of Governors or executive Committee to consider the contemplated action.]
        [(c) The President shall immediately report any action taken by the Committee pursuant to this Section to the Executive Committee and to the Board of Governors.]

        Composition and Qualifications of the Board

        Sec. 4.

        (a) The management and administration of the affairs of the Corporation shall be vested in a Board of Governors [composed of from twenty-five to twenty-nine Governors as determined from time to time by the Board. The Board shall consist of:
        (1) at least thirteen but not more than fifteen Governors to be elected by the members of the various districts] . Governors shall be elected by the Board in accordance with the provisions of [subsection (b) hereof; (2) at least eleven but not more than thirteen Governors to be elected by the Board] Section 7 of this Article. A person shall be qualified to serve on the Board if such person is: (1) the Chief Executive Officer of the Corporation;
        (2) associated with a member of the Corporation (an "Industry Governor"); or (3) satisfies the criteria adopted from time to time by the Board (a "Non-Industry Governor").
        (b) The Board of Governors shall consist of five or more members, the number thereof to be determined from time to time by resolution of the Board of Governors, and shall include at all times: (1) the Chief Executive Officer; (2) one or more Non-Industry Governors representative of issuers and investors and not associated with a member of the Corporation; (3) one or more Industry Governors; and (4) a majority of Non-Industry Governors, unless (A) there shall be a vacancy in the position of a Non-Industry Governor, in which case such vacancy shall be filled by a person satisfying the criteria for a Non-Industry Governor in accordance with the provisions of Section 6 of this Article or (B) a Governor elected as a Non-Industry Governor becomes an Industry Governor and his remaining term of office is six months or less. If a Governor elected as a Non-Industry Governor becomes an Industry Governor and his remaining term of office is more than six months, or a Governor elected as an Industry Governor becomes a Non-Industry Governor and his remaining term of office is more than six months, he shall be automatically removed from office unless the Board determines otherwise.
        [subsection (c) hereof; (3) the President of the Corporation to be selected by the Board in accordance with the provisions of Article X, Section 2 of the By-Laws. The Board, in exercising its power to determine its size and composition under this subsection (a), shall be required to select its members in a manner such that when all vacancies, if any, are filled, the number of Governors elected by the members of the various districts in accordance with subsection (b) hereof shall exceed the number of Governors (including the President) not so elected.]
        [(b) The several districts shall be represented on the Board. Each district shall elect at least one Governor. The Board shall determine from time to time which districts, if any, shall elect more than one Governor, so as to provide fair representation of the Corporation's members and of its various districts on the Board. The determination of which districts shall elect more than one Governor need not be submitted to the membership for approval and shall become effective at such time as the Board may prescribe. The Board shall, from time to time, consider the fairness of the representation of members and of the various districts on the Board. Whenever the Board finds any unfairness in such representation to exist, it shall make appropriate changes in the number of boundaries of the districts or the number of Governors elected by each district to provide fair representation of members and districts.]
        [(c) The Board shall elect (1) at least three Governors representative of investors, none of whom are associated with a member or any broker or dealer; (2) at least three Governors representative of issuers, at least one of whom is not associated with a member or any broker or dealer; (3) at least three Governors chosen from members; (4) at least one Governor representative of the principal underwriters of investment company shares or affiliated members; and (5) at least one Governor representative of insurance companies or insurance company affiliated members.]

        Term of Office of Governors

        Sec. 5. Each Governor, except as otherwise provided by [these By-Laws or the] the Restated Certificate of Incorporation or these By-Laws, shall hold office for a term of [three years, and] not more than three years, such term to be fixed by the Board at the time of the election of such Governor, or until his successor is elected and qualified, or until his death, resignation [or removal. The President], disqualification or removal. Governors may be elected to successive terms of office. The Chief Executive Officer of the Corporation shall serve as a member of the Board until his successor is selected and qualified, or until his death, resignation [or removal.], disqualification or removal.

        [Succession to Office] Filling of Vacancies

        Sec. 6.

        (a) [The office of a retiring Governor elected under subsection (b) of] Any vacancy in the office of a Governor, whether occurring by reason of death, disability, disqualification, removal, or resignation, other than a vacancy occurring by reason of an increase in the size of the Board, shall be filled by majority vote of the remaining Governors then in office and any person elected to fill such vacancy shall satisfy the qualifications and criteria for the governorship being filled as provided in Section 4 of this Article [shall be filled by the election of a Governor from the same district as that of the retiring Governor. The office of a retiring Governor elected under subsection (c) of Section 4 of this Article shall be filled by election by the Board as provided in subsection (c) of Section 4 of this Article].
        [(b) Notwithstanding subsection (a) of this Section 6, the Board shall prescribe the succession of office in cases affected by a change in the number of Governors constituting the Board, the composition of the Board, the number or boundaries of districts, or the number of Governors elected by a district.]
        (b) Any vacancy in the office of a Governor occurring by reason of an increase in the size of the Board shall be filled by majority vote of the Board and any person elected to fill such vacancy shall satisfy the criteria for such newly created governorship as shall be established by resolution of the Board, provided that the filing of any such vacancy shall not be inconsistent with any other provision of these By-Laws.

        Election of Board Members

        Sec. 7. The Governors elected by the Board under [subsection (b) of] Section 4 of this Article shall be [chosen as follows:] nominated by the Nominating Committee as provided in this Section 7.

        [Procedure for Nominations by Nominating Committees]

        The Nominating Committee

        [(a) Before June 1 of each year, the Secretary of the Corporation shall notify in writing the Chairman of the respective District Committees of the expiration of the term of office of any member of the Board elected under subsection (b) of Section 4 of this Article which will expire during the next calendar year. The said Chairman shall thereupon notify]
        (a) The Nominating Committee shall consist of seven or more persons, the number thereof to be determined from time to time by resolution of the Board of Governors. Members of the Nominating Committee [elected for such District pursuant to the provisions of Section 3 of Article IX of the By-Laws and such] shall be elected by the Board from time to time. The Nominating Committee shall [proceed to nominate a candidate from such District for the office of each such member of the Board whose term is to expire. Nominating Committees in nominating candidates for the office of Governor shall endeavor, as nearly as practicable, to secure appropriate and fair representation on the Board of all classes and types of members engaged in the investment banking and securities business. No Nominating Committee shall nominate an incumbent member of the Board to succeed himself unless it first takes appropriate action by a written ballot sent to the entire membership within the District to ascertain that such nomination is acceptable to] consist of: (1) the Chief Executive Officer of the Corporation; (2) at least three persons associated with members of the Corporation ("Industry Members"); and (3) a number of non-industry representatives who satisfy the criteria adopted from time to time by the Board equal in amount to the number of Industry Members serving on the Nominating Committee. Members of the Nominating Committee need not be Governors. Members of the Nominating Committee may be removed, with or without cause, by vote of a majority of the members of [voting on such ballot in the District except where the incumbent member of the Board is serving pursuant to the provisions of Section 8(a) of this Article. Before October 1 of each year, each candidate nominated by the Nominating Committees shall be certified to the respective District Committee. Within five (5) days after certification, a copy of such certification shall be sent by the District Committee to each member of the Corporation eligible to vote in the District. Such candidate shall be designated the "regular candidate."]

        [Nomination of Additional Candidates]

        [(b) An additional candidate or candidates may be nominated for the office of any member elected under Section 4(b) of this Article, and whose term is to expire, if written notice of the nomination, signed by at least ten percent of the members of the Corporation eligible to vote in the district, is filed with the District Committee within thirty (30) days from the date of the notice of the action taken by the Nominating Committee. If no additional candidate or candidates are nominated within such thirty-day period, the candidate or candidates nominated by the Nominating Committee shall be considered duly elected, and the District Committee shall certify the election to] the Board of Governors.

        [Contested Elections]

        Procedure for Nomination of Governors

        [(c) If any additional candidate or candidates are nominated, as provided in subsection (b) of this Section, the District Committee shall forthwith cause the names of the regular candidate and of all other duly nominated candidates for each office to be placed upon a ballot, which shall be sent to all members of the Corporation eligible to vote in the district. Each member of the Corporation having its principal place of business in the district shall be entitled to one vote, and each member having one or more registered branch offices in the district shall be entitled to vote as provided in Section 9 of Article III. The District Committee shall fix a date before which ballots must be returned to be counted. All ballots shall be opened and counted by such officer or employee of the Corporation as the Chairman of the District Committee may designate and in the presence of a representative of each of the candidates if such representation is requested in writing by any candidate named on the ballot. The candidate for each office to be filled receiving the largest number of votes cast shall be declared elected to membership on the Board of Governors, and certification thereof shall be made forthwith to the Board of Governors. In the event of a tie, there shall be a run-off election. In all elections held under this subsection voting shall be made by secret ballot, the procedure for which shall be prescribed by the Board of Governors.]
        (b) The Nominating Committee shall propose a nominee for each governorship up for election (a "Nominee") and shall provide the name, qualifications and such other information regarding each such Nominee as the Nominating Committee deems pertinent. The Nominating Committee may also propose nominees for boards of directors of any wholly owned subsidiary of the Corporation.

        [Transitional Procedures]

        [(d) Notwithstanding subsections (a),
        (b) and (c) of this Section 7, the Board shall prescribe the nomination and election procedures in cases affected by a change in the number of Governors constituting the Board, the composition of the Board, the number or boundaries of districts, or the number of Governors elected by a district.]

        [Filling of Vacancies on Board]

        [Sec. 8. All vacancies in the Board other than those caused by the expiration of a Governor's term of office, shall be filled as follows:]

        [(a) If the unexpired term of a Governor elected under subsection
        (b) of Section 4 of this Article is for less than twelve months, such vacancy shall be filled by appointment by the District Nominating Committee of a representative of a member of the Corporation eligible to vote in the same district.]
        [(b) If the unexpired term of a governor elected under subsection (b) of Section 4 of this Article is for twelve months or more, such vacancy shall be filled by election, which shall be conducted as nearly as practicable in accordance with the provisions of Section 7 of this Article.]
        [(c) If the unexpired term is that of a Governor elected by the Board such vacancy shall be filled in accordance with the provisions of subsections (c)(1) through (c)(5) of Section 4 of this Article as the case may be.]

        Meetings of Board; Quorum; Required Vote

        [Sec. 9.] Sec. 8. Meetings of the Board of Governors shall be held at such times and places, upon such notice, and in accordance with such procedure as the Board of Governors in its discretion may determine. A quorum of the Board of Governors shall consist of a majority of the [members] total number of Governors of the Corporation, and any action taken by a majority vote at any meeting at which a quorum is present, except as otherwise provided in the Restated Certificate of Incorporation or these By-Laws, shall constitute the action of the Board. [Meetings] Members of the Board of Governors [may be held by mail, telephone or telegraph, in which case any action taken by a majority vote of] , or any committee designated by the Board of Governors [shall constitute the action of the Board. Any action taken by telephonic vote shall be confirmed in writing at a regular meeting of the Board of Governors] or any other committee of the Corporation, may participate in a meeting thereof by means of communications facilities that ensure all persons participating in the meeting can hear and speak to each other, and participation in a meeting pursuant to this By-Law shall constitute presence in person at such meeting. No member of the Board of Governors shall vote by proxy at any meeting of the Board.

        [Offices of Corporation] Action by Written Consent of Governors

        [Sec. 10. The Corporation shall maintain such offices as]

        Sec. 9. Unless otherwise restricted by the Restated Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Governors [may from time to time deem necessary or appropriate], or of any committee of the Board or any committee of the Corporation, may be taken without a meeting if all members of the Board of Governors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Governors or such committee.

        ARTICLE X

        OFFICERS AND EMPLOYEES

        Election of Officers of the Board

        Sec. 1. No change.

        Officers of the Corporation

        Sec. 2. The Board of Governors shall select a [chief executive officer, to be designated President of the Corporation] Chief Executive Officer, who shall be responsible for the management and administration of its affairs and shall be the official representative of the Corporation in all public matters and who shall have such powers and duties in the management of the Corporation as may be prescribed in a resolution by the Board of Governors. The Chief Executive Officer shall be ex-officio a member of any committee authorized by the Board of Governors. The Board may provide for such other executive or administrative officers as it shall deem necessary or advisable, including, but not limited to, President, Executive Vice-President, Senior Vice-President, Vice-President, General Counsel, Secretary and Treasurer of the Corporation. All such officers shall have such titles, such powers and duties and shall be entitled to such compensation as shall be determined from time to time by the Board of Governors.

        [The terms of office of such officers shall be at the pleasure of the Board of Governors, which by affirmative vote of a majority of the members, may remove any such] Each such officer shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. The Board of Governors may remove any officer, with or without cause, at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Governors at any meeting.

        Absence of Chief Executive Officer [President]

        Sec. 3. In the case of the absence or inability to act of the [President] Chief Executive Officer of the Corporation, or in case of a vacancy in such office, the Board of Governors may appoint its Chairman or such other person as it may designate to act as such officer pro tem, who shall assume all the functions and discharge all the duties of the [President] Chief Executive Officer.

        Sec. 4 through Sec. 6. No change.

        © National Association of Securities Dealers, Inc. (NASD), December 11, 1995. All rights reserved. NASD is a registered service mark of the National Association of Securities Dealers, Inc. Central Registration Depository (CRD), MediaSource, PC Focus, and NASDnet are service marks of the NASD. NAqcess, Nasdaq, Nasdaq National Market, and OTC Bulletin Board are registered service marks of The Nasdaq Stock Market, Inc. Automated Confirmation Transaction (ACT) Service, The Nasdaq SmallCap Market, and Small Order Execution System (SOES) are service marks of The Nasdaq Stock Market, Inc. NASD Notices to Members is published monthly by the NASD Communication Services Department, Jean Robinson Curtiss, Editor, NASD Communication Services, 1735 K Street, NW, Washington, DC 20006-1500, (202) 728-6900. No portion of this publication may be copied, photocopied, or duplicated in any form or by any means, except as described below, without prior written consent of the NASD. Members of the NASD are authorized to photocopy or otherwise duplicate any part of this publication without charge only for internal use by the member and its associated persons. Nonmembers of the NASD may obtain permission to photocopy for internal use through the Copyright Clearance Center (CCC) for a $3-per-page fee to be paid directly to CCC, 222 Rosewood Drive, Danvers, MA 01923. Annual subscriptions cost $225; single issues cost $25. Send a check or money order (payable to the National Association of Securities Dealers, Inc.) to NASD MediaSourceSM, P.O. Box 9403, Gaithersburg, MD 20898-9403, or to phone in an order using American Express, MasterCard, or Visa charge, call (301) 590-6578, Monday to Friday, 9 a.m. to 5 p.m., Eastern Time. Back issues may be ordered by writing NASD, Support Services Department, 1735 K Street, NW, Washington, DC 20006-1500 or by calling (202) 728-8061.

      • 95-100 Fixed Income Pricing System Additions, Changes, And Deletions As Of October 27, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Municipal
        Operations
        Systems
        Trading

        As of October 27, 1995, the following bonds were added to the Fixed Income Pricing System (FIPSSM):

        Symbol Name

        Coupon

        Maturity

        BG.GA Brown Group

        7.375

        1/15/98

        PRWL.GB Price Cellular Wireless

        12.250

        10/1/03

        UAL.GH United Air

        10.110

        2/19/06

        UAL.GI United Air

        10.850

        7/5/14

        UAL.GJ United Air

        10.850

        2/19/15

        UAL.GK United Air

        9.760

        5/13/06

        UAL.GL United Air

        9.760

        5/27/06

        UAL.GM United Air

        10.360

        11/27/12

        UAL.GN United Air

        10.670

        5/1/04

        UAL.GO United Air

        11.210

        5/1/14

        CAWS.GA CAI Wireless Systems

        12.250

        9/15/02

        PTPK.GA Portola Packaging

        10.750

        10/1/05

        NMK.GA Niagara Mohawk Power

        5.875

        11/1/96

        NMK.GB Niagara Mohawk Power

        6.250

        8/1/97

        NMK.GC Niagara Mohawk Power

        6.500

        8/1/98

        NMK.GD Niagara Mohawk Power

        9.250

        10/1/01

        NMK.GE Niagara Mohawk Power

        9.500

        6/1/00

        NMK.GF Niagara Mohawk Power

        9.750

        11/1/05

        NMK.GG Niagara Mohawk Power

        9.500

        3/1/21

        NMK.GH Niagara Mohawk Power

        8.750

        4/1/22

        NMK.GI Niagara Mohawk Power

        8.000

        6/1/04

        NMK.GJ Niagara Mohawk Power

        8.500

        7/1/23

        NMK.GK Niagara Mohawk Power

        7.375

        8/1/03

        NMK.GL Niagara Mohawk Power

        6.875

        4/1/03

        NMK.GM Niagara Mohawk Power

        6.625

        7/1/05

        NMK.GN Niagara Mohawk Power

        7.875

        4/1/24

        NMK.GO Niagara Mohawk Power

        5.875

        9/1/02

        NMK.GP Niagara Mohawk Power

        6.875

        3/1/01

        NMK.GQ Niagara Mohawk Power

        7.750

        5/15/06

        GUCO.GA* Grand Union

        12.000

        9/1/04

        NME.GD* National Medical Enterprises

        10.125

        9/1/04

        FD.GB Federated Dept. Stores

        8.125

        10/15/02

        MCLL.GA Metrocall

        10.375

        10/1/07

        SCIN.GA SC Int'l Services

        13.000

        10/1/05

        TLCB.GA TLC Beatrice Int'l Hldgs.

        11.500

        10/1/05

        RICE.GA American Rice

        13.000

        7/31/02

        GSTE.GA GS Technologies Open

        12.250

        10/1/05

        CMCS.GE ComCast

        9.125

        10/15/06

        CVDF.GA CVD Financial

        0.000

        7/31/08

        CMCS.GF ComCast

        9.375

        5/15/05

        THC.GC Tenet Health Care Corp.

        8.625

        12/1/03

        RHS.GA Regency Health Svcs.

        9.875

        10/15/02

        REIH.GA Resorts Int'l Hotel Fin.

        11.375

        12/15/04

        RIGS.GB Riggs Nat'l

        8.500

        2/1/06

        ORX.GG ORYX Energy

        8.000

        10/15/03

        ORX.GG ORYX Energy

        8.125

        10/15/05

        GSNP.GA Garden St. Newspapers

        12.000

        7/1/04

        ACUM.GA A+ Communications

        11.875

        11/1/05

        IHS.GB Integrated Health Svcs.

        9.625

        5/31/02

        PHP.GC Petroleum Heat & Power

        9.375

        2/1/06

        As of October 27, 1995, the following bonds were deleted from FIPS:

        Symbol Name Symbol Name Symbol Name
        AMR.GR AMR Corp. CMS.HB CMS Energy CMS.ID CMS Energy
        AMR.GS AMR Corp. CMS.HC CMS Energy CMS.IE CMS Energy
        AMR.GT AMR Corp. CMS.HD CMS Energy CMS.IF CMS Energy
        CMS.GC CMS Energy CMS.HE CMS Energy CMS.IG CMS Energy
        CMS.GD CMS Energy CMS.HF CMS Energy ISAS.GA Imperial Sav. Assn
        CMS.GE CMS Energy CMS.HG CMS Energy MXS.GH Maxus
        CMS.GF CMS Energy CMS.HH CMS Energy MXS.GI Maxus
        CMS.GG CMS Energy CMS.HI CMS Energy MXS.GJ Maxus
        CMS.GH CMS Energy CMS.HJ CMS Energy MXS.GK Maxus
        CMS.GI CMS Energy CMS.HK CMS Energy MXS.GL Maxus
        CMS.GJ CMS Energy CMS.HL CMS Energy MXS.GM Maxus
        CMS.GK CMS Energy CMS.HM CMS Energy MXS.GN Maxus
        CMS.GL CMS Energy CMS.HN CMS Energy MXS.GO Maxus
        CMS.GM CMS Energy CMS.HO CMS Energy GAUN.GA Grand Union
        CMS.GN CMS Energy CMS.HP CMS Energy GAUN.GB Grand Union
        CMS.GO CMS Energy CMS.HQ CMS Energy GAUN.GC Grand Union
        CMS.GP CMS Energy CMS.HR CMS Energy HTI.GA Health Trust
        CMS.GQ CMS Energy CMS.HS CMS Energy HTI.GB Health Trust
        CMS.GR CMS Energy CMS.HT CMS Energy HTI.GC Health Trust
        CMS.GS CMS Energy CMS.HU CMS Energy BRNB.GA Burnham
        CMS.GT CMS Energy CMS.HV CMS Energy   Broadcasting
        CMS.GU CMS Energy CMS.HW CMS Energy   Company, L.P.
        CMS.GV CMS Energy CMS.HX CMS Energy NME.GA National Medical
        CMS.GW CMS Energy CMS.HY CMS Energy   Enterprises
        CMS.GX CMS Energy CMS.HZ CMS Energy NME.GB National Medical
        CMS.GY CMS Energy CMS.IA CMS Energy   Enterprises
        CMS.GZ CMS Energy CMS.IB CMS Energy    
        CMS.HA CMS Energy CMS.IC CMS Energy    

        As of October 27, 1995, changes were made to the symbols and names of the following FIPS bonds:

        New Symbol New Name Old Symbol Old Name
        THC.GA Tenet Health Care Corp. NME.GC National Medical Enterprises
        THC.GB* Tenet Health Care Corp. NME.GD* National Medical Enterprises

        * a mandatory FIPS bond

        All bonds listed above are subject to trade-reporting requirements. Questions pertaining to trade-reporting rules should be directed to James C. Dolan, NASD Market Surveillance, at (301) 590–6460.

      • 95-99 Nasdaq National Market Additions, Changes, And Deletions As Of October 20, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Operations
        Systems
        Trading

        As of October 20, 1995, the following 82 issues joined the Nasdaq National Market®, bringing the total number of issues to 3,913:

        Symbol Company

        Entry Date

        SOES Execution Level

        ANMWV Advanced NMR Systems, Inc. (Wts 8/30/00 WI)

        9/21/95

        200

        BVAS Bio-Vascular, Inc.

        9/21/95

        500

        CRLBF Core Laboratories, N.V.

        9/21/95

        200

        TALK Tel-Save Holdings, Inc.

        9/21/95

        500

        GSCN General Scanning Inc.

        9/22/95

        200

        MLWL Mail-Well, Inc.

        9/22/95

        1000

        SPOT PanAmSat Corporation

        9/22/95

        500

        UDCI United Dental Care, Inc.

        9/22/95

        500

        ACMM Accom, Inc.

        9/27/95

        200

        CKFR Checkfree Corporation

        9/28/95

        1000

        MIZR Mizar, Inc.

        9/28/95

        500

        AHIS AHI Healthcare Systems, Inc.

        9/29/95

        200

        CMSX Computer Management Sciences, Inc.

        9/29/95

        200

        DEPO DepoTech Corporation

        9/29/95

        200

        EBAY Eastbay, Inc.

        9/29/95

        1000

        MPDI Microwave Power Devices, Inc.

        9/29/95

        200

        SIMWF Simware, Inc.

        9/29/95

        200

        ZCON Zycon Corporation

        9/29/95

        200

        DFIN Damen Financial Corporation

        10/2/95

        500

        ERIE Erie Indemnity Company (Cl A)

        10/2/95

        200

        SFIN Statewide Financial Corp.

        10/2/95

        500

        TL1C Transport Holdings Inc. (Cl A)

        10/2/95

        200

        DDII Data Documents Incorporated

        10/3/95

        200

        BGLS Manhattan Bagel Company, Inc.

        10/3/95

        500

        FTPS First Investors Financial Services Group

        10/4/95

        500

        HFFB Harrodsburg First Financial Bancorp, Inc.

        10/4/95

        200

        DCBK Desert Community Bank

        10/5/95

        200

        HDSX HDS Network Systems, Inc.

        10/5/95

        200

        HDSXW HDS Network Systems, Inc. (Wts 3/25/00)

        10/5/95

        200

        KFBI Klamath First Bancorp, Inc.

        10/5/95

        200

        ERIRY LM Ericsson Telefonaktiebolaget (Rts)

        10/5/95

        200

        TPNZ Tappan Zee Financial, Inc.

        10/5/95

        200

        ESST ESS Technology, Inc.

        10/6/95

        200

        GADZ Gadzooks, Inc.

        10/6/95

        500

        LCRY LeCroy Corporation

        10/6/95

        200

        MYGN Myriad Genetics, Inc.

        10/6/95

        200

        NURTF Nur Advanced Technologies, Limited

        10/6/95

        200

        TSTI TST/Impreso, Inc.

        10/6/95

        200

        TIPIF The Instant Publisher, Inc.

        10/6/95

        200

        VRTY Verity, Inc.

        10/6/95

        200

        VTEK Vodavi Technology, Inc.

        10/6/95

        200

        WLDA World Airways, Inc.

        10/6/95

        500

        LIHRY Lihir Gold, Limited

        10/9/95

        1000

        USDL U.S. Diagnostic Labs Inc. (Cl A)

        10/9/95

        500

        USDLW U.S. Diagnostic Labs Inc. (Wts Cl A 10/14/99)

        10/9/95

        500

        USDLZ U.S. Diagnostic Labs Inc. (Wts Cl B 10/14/99)

        10/9/95

        500

        SFAM SpeedFam International, Inc.

        10/10/95

        1000

        SYMT Symetrics Industries, Inc.

        10/10/95

        200

        WLTR Walter Industries, Inc.

        10/10/95

        200

        APAC APAC TeleServices, Inc.

        10/11/95

        500

        ELNT Elantec Semiconductor, Inc.

        10/11/95

        1000

        GMSTF Gemstar International Group, Ltd.

        10/11/95

        500

        NSYS Nortech Systems Incorporated

        10/11/95

        200

        SCSC ScanSource, Inc.

        10/11/95

        200

        OAKF Oak Hill Financial, Inc.

        10/12/95

        200

        PFAPV Pro-Fac Cooperative, Inc. (Cl A Pfd WI)

        10/12/95

        200

        SNUS SONUS Pharmaceuticals, Inc.

        10/12/95

        200

        GTBX GT Bicycles, Inc.

        10/13/95

        200

        RSTOW Rose's Stores, Inc. (Wts 4/28/02)

        10/13/95

        200

        POOL SCP Pool Corporation

        10/13/95

        1000

        XETA Xeta Corporation

        10/13/95

        200

        AMCN American Coin Merchandising, Inc.

        10/16/95

        1000

        FDYMF First Dynasty Mines Limited

        10/16/95

        200

        FBHC Fort Bend Holding Corp.

        10/16/95

        200

        SMCS Star Multi Care Services, Inc.

        10/16/95

        200

        IMAC Int'l Metals Acquisition Corp.

        10/17/95

        1000

        IMACW Int'l Metals Acquisition Corp. (Wts)

        10/17/95

        1000

        LGWX Logic Works, Inc.

        10/17/95

        200

        MVCO Meadow Valley Corporation

        10/17/95

        200

        MVCOW Meadow Valley Corporation (Wts 10/17/00)

        10/17/95

        200

        ADEX ADE Corporation

        10/18/95

        500

        ARVI ARV Assisted Living, Inc.

        10/18/95

        200

        AFCB Affiliated Community Bancorp, Inc.

        10/19/95

        1000

        ANGN Angeion Corporation

        10/19/95

        500

        ANGNW Angeion Corporation (Wts 3/12/96)

        10/19/95

        500

        GLIA Gliatech Inc.

        10/19/95

        200

        SVECF ScanVec Company (1990), Limited

        10/19/95

        200

        TGAL Tegal Corporation Ltd.

        10/19/95

        200

        WIRL Wireless One, Inc.

        10/19/95

        200

        ESIX Enterprise Systems, Inc.

        10/20/95

        200

        RSYS RadiSys Corporation

        10/20/95

        1000

        RMRPO Resource Mortgage Capital, Inc. (Pfd Ser B)

        10/20/95

        1000

        Nasdaq National Market Symbol And/Or Name Changes

        The following changes to the list of Nasdaq National Market securities occurred since September 21, 1995:

        New/Old Symbol New/Old Security

        Date of Change

        CYGN/CYGN Cygnus, Inc./Cygnus Therapeutic Systems, Inc.

        9/21/95

        GTTIF/MTCEF GrandeTel Technologies, Inc./MTC Electronic Technologies Co., Ltd.

        9/21/95

        MEDS/CYT1 Medstone International Inc./Cytocare, Inc.

        9/25/95

        DOSEW/DOSEW Choice Drug Systems, Inc. (Wts 3/31196)/Choice Drug Systems, Inc. (Wts 9/30/95)

        9/26/95

        CINRF/CINDF Cinar Films, Inc./Cinar Films, Inc.

        9/27/95

        PURW/HOLD Pure World, Inc./American Holdings, Inc.

        9/28/95

        VWRX/VWRX VWR Scientific Products Corporation/VWR Corporation

        9/28/95

        FDEF/FDEF First Defiance Financial Corp./First Federal Savings and Loan

        10/2/95

        TWSTY/TWSTY Tele West plc/TeleWest Communications pic

        10/2/95

        KAYE/OLHC Kaye Group Inc./Old Lyme Holding Corporation

        10/3/95

        LIHRY/LIHYV Lihir Gold, Ltd./Lihir Gold, Ltd. (WI)

        10/10/95

        UNFR/UNFR Uniforce Services, Inc./Uniforce Temporary Personnel, Inc.

        10/10/95

        NRLD/OSTC Norland Medical Systems, Inc./Ostech, Inc.

        10/11/95

        NEXT/STSN NextHealth, Inc/Sierra Tucson Companies, Inc.

        10/12/95

        HOLI/AMPC Hollinger International, Inc. (Cl A)/American Publishing Company (Cl A)

        10/16/95

        HRZB/HRZB Horizon Financial Corp./Horizon Bank

        10/16/95

        ANMRW/ANMWV Advanced NMR Systems, Inc. (Wts 8/30/00)/Advanced NMR Systems, Inc. (Wts 8/30/00 W/I)

        10/18/95

        HDSXW/HDSXW HDS Network Systems, Inc. (Wts 3/25/00)/HDS Network Systems, Inc. (Wts 3/25/98)

        10/20/95

        Nasdaq National Market Deletions

        Symbol Security

        Date

        RNDM Random Access, Inc.

        9/21/95

        NGCO National Gypsum Company

        9/22/95

        NGCOW National Gypsum Company (Wts 7/1/00)

        9/22/95

        SDNBR SDNB Financial Coip. (Rts 7/21/95)

        9/22/95

        GUCOW The Grand Union Co. (Wts Ser 1 6/15/00)

        9/22/95

        GUCOZ The Grand Union Co. (Wts Ser 2 6/15/00)

        9/22/95

        CREB Champion Parts, Inc.

        9/27/95

        AUFN AutoFinance Group, Inc.

        9/28/95

        NVIC N-Viro International Corporation

        9/28/95

        PTCM Pacific Telecom, Inc.

        9/28/95

        ACSE ACS Enterprises, Inc.

        9/29/95

        PLSE Pulse Engineering, Inc.

        9/29/95

        IGLI IG Laboratories, Inc.

        10/2/95

        IFLM Interfilm, Inc.

        10/2/95

        VIGN Viagene, Inc.

        10/2/95

        ADVC Advance Circuits, Inc.

        10/3/95

        CROM Chromcraft Revington, Inc.

        10/3/95

        CLIN CliniCom Incorporated

        10/3/95

        IFGI Insignia Financial Group, Inc.

        10/3/95

        MEDR Medrad, Inc.

        10/3/95

        MILW Milwaukee Insurance Group, Inc.

        10/3/95

        TYGR Tigera Group, Inc.

        10/3/95

        LINB LIN Broadcasting Corp.

        10/4/95

        HTPI Home Theater Products International, Inc.

        10/5/95

        PTENW Patterson Energy, Inc. (Wts)

        10/5/95

        UNSA United Financial Corp. of S.C., Inc.

        10/6/95

        TOWVW Stratosphere Corporation (Wts 2/22/99)

        10/11/95

        HISSZ Healthcare Imaging Services, Inc. (Wts B)

        10/12/95

        BUMM B.U.M. International, Inc.

        10/13/95

        SDYN Staodyn,Inc.

        10/13/95

        SDYNZ Staodyn, Inc. (Ser II Wts 11/1/96)

        10/13/95

        CHPM Chipcom Corporation

        10/16/95

        FSTMQ Forstmann & Company, Inc.

        10/16/95

        PCLI Physicians Clinical Laboratory, Inc.

        10/16/95

        SUPR Super Rite Corp.

        10/16/95

        AMBJ American City Business Journals, Inc.

        10/19/95

        BWSQE BioMedical Waste Systems, Inc.

        10/19/95

        LEXB Lexington Savings Bank

        10/19/95

        MSCB Main Street Community Bancorp, Inc.

        10/19/95

        Questions regarding this Notice should be directed to Mark A. Esposito, Nasdaq Market Services Director, Issuer Services, at (202) 496–2536. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590–6436.

      • 95-98 Christmas Day And New Year's Day: Trade Date-Settlement Date Schedule

        SUGGESTED ROUTING

        Internal Audit
        Legal & Compliance
        Municipal
        Operations
        Syndicate
        Systems
        Trading

        The Nasdaq Stock Market™ and the securities exchanges will be closed on Monday, December 25, 1995, in observance of Christmas Day, and Monday, January 1, 1996, in observance of New Year's Day. "Regular way" transactions made on the business days noted below will be subject to the following schedule:

        Trade Date

        Settlement Date

        Reg. T Date*

        Dec. 19

        Dec. 22

        Dec. 27

        20

        26

        28

        21

        27

        29

        22

        28

        Jan. 2, 1996

        25

        Markets Closed

        26

        29

        3

        27

        Jan. 2, 1996

        4

        28

        3

        5

        29

        4

        8

        Jan. 1, 1996

        Markets Closed

        2

        5

        9

        *Pursuant to Sections 220.8(b)( 1) and (4) of Regulation T of the Federal Reserve Board, a broker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a cash account if full payment is not received within five business days of the date of purchase or, pursuant to Section 220.8(d)( 1), make application to extend the time period specified. The date by which members must take such action is shown in the column titled "Reg. T Date."

        Brokers, dealers, and municipal securities dealers should use these settlement dates to clear and settle transactions pursuant to the NASD Uniform Practice Code and Municipal Securities Rulemaking Board Rule G-12 on Uniform Practice.

        Questions regarding the application of these settlement dates to a particular situation may be directed to the NASD Uniform Practice Department at (203) 375–9609.

      • 95-97 NASD Reminds Members About Treasury's Foreign Assets Control Regulations

        SUGGESTED ROUTING

        Senior Management
        Internal Audit
        Legal & Compliance
        Operations

        Executive Summary

        The Department of Treasury (Treasury) asked the NASD® to remind its members about regulations issued by the Office of Foreign Assets Control (OFAC). These regulations require broker/dealers to block1 accounts and other assets of countries identified as threats to national security by the President of the United States and prohibit broker/dealers from engaging in unlicensed trade and financial transactions with such countries. OFAC is authorized to impose significant monetary fines for violations of these regulations.

        Background

        The U.S. government mandates that all financial institutions located in the United States, overseas branches of these institutions and, in certain instances, overseas subsidiaries of the institutions comply with OFAC regulations governing economic sanctions and embargo programs regarding the accounts and other assets of countries identified as threats to national security by the President of the United States. This always involves accounts and assets of the sanctioned countries' governments, and it may also involve the accounts and assets of individual nationals of the sanctioned countries. Also, these regulations prohibit unlicensed trade and financial transactions with such countries.

        Under these regulations, financial institutions must block identified assets and accounts when such property is located in the United States, is held by U.S. individuals or entities, or comes into the possession or control of U.S. individuals or entities. The definition of assets and property is very broad and covers direct, indirect, present, future, and contingent interests. In addition, Treasury identifies certain individuals and entities located worldwide that are acting on behalf of sanctioned governments, and these must be treated as if they are part of the sanctioned governments.

        OFAC may impose criminal or civil penalties for violations of these regulations. Criminal violations may result in corporate fines of up to $ 1 million and personal fines of up to S250,000 and 12 years in jail; civil penalties of up to $250,000 per violation also may be imposed. To ensure compliance, OFAC enlists the cooperation of various regulatory organizations and recently asked the NASD to remind its members about these regulations.

        Foreign Assets Control Regulations

        OFAC currently administers sanctions and embargo programs against Libya, Iran, Iraq, the Federal Republic of Yugoslavia (Serbia and Montenegro), Serb-controlled areas of Bosnia and Herzegovina and Bosnian Serb military and civilian leaders, North Korea, and Cuba. In addition, it prohibits certain exports to the UNITA faction in Angola and prohibits transactions with terrorists threatening to disrupt the Middle East peace process.

        Broker/dealers cannot deal in securities issued from these target countries and governments and must block or freeze accounts, assets, and obligations of blocked entities and individuals when this property is in their possession or control.

        Responsibilities Of Broker/Dealers

        According to OFAC, broker/dealers need to establish internal compliance programs to monitor these regulations. OFAC urges broker/dealers to review their existing customer accounts and the securities in their custody to ensure that any accounts or securities blocked by existing sanctions are being treated properly. Broker/dealers also should review any other securities that may represent obligations of, or ownership interests in, entities owned or controlled by blocked commercial or government entities identified by OFAC.

        Blocked Accounts And Securities

        Broker/dealers must report blockings within 10 days by fax to OFAC Compliance Division at (202) 622–1657. Firms are prohibited from making debits to blocked customer accounts, although credits are authorized. Blocked securities may not be paid, withdrawn, transferred (even by book transfer), endorsed, guaranteed, or otherwise dealt in.

        General Licenses

        OFAC has issued general licenses authorizing continued trading on the national securities exchanges on behalf of blocked Cuban and North Korean customer accounts under conditions preserving the blocking of resulting assets and proceeds. Secondary market trading with respect to certain Yugoslav debt securities issued pursuant to the "New Financing Agreement" of September 20, 1988, also are authorized; however, certain restrictions and reporting requirements apply.

        List Of Sanctioned Governments And Individuals

        Whenever there is an update to its regulations, an addition or removal of a specifically designated national, or any other pertinent announcement, OFAC makes the information available electronically on the U.S. Council on International Banking's INTERCOM Bulletin Board in New York and the International Banking Operations Association's Bulletin Board in Miami. The information also is immediately uploaded onto Treasury's Electronic Library (TEL) on the FedWorld Bulletin Board network. In addition, the information is available through several other government services provided free of charge to the general public.

        NASD members are urged to review their procedures to ensure compliance with OFAC regulations. Attached for your review is a copy of an OFAC bulletin, "Foreign Assets Control Regulations for the Securities Industry." In addition to providing practical guidelines, it contains a complete list of electronic services for OFAC announcements.

        The NASD urges its members to review the attached list of 80 blocked persons who have been designated by the President of the United States for their significant role in international narcotics trafficking centered in Columbia, or have been determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, to have materially assisted in or provided financial or technological support for, or goods or services in support of, the narcotics trafficking activities of other blocked persons on the list, or to be owned or controlled by, or to act for or on behalf of, other blocked persons on the list.

        Questions concerning this Notice may be directed to OFAC at (202) 622–2490.


        1 Blocking, which also may be called freezing, is a form of controlling assets under U.S. jurisdiction. While title to blocked property remains with the designated country or national, the exercise of the powers and privileges normally associated with ownership is prohibited without authorization from OFAC. Blocking immediately imposes an across-the-board prohibition against transfers or transactions of any kind with respect to the property.

        FOREIGN ASSETS CONTROL REGULATIONS FOR THE SECURITIES INDUSTRY

        Recently, a U.S. bank blocked a funds transfer en route to a U.S. securities account held in the name of an attorney residing in Geneva. Two broker/dealers and two clearing firms had been taking orders and operating securities accounts for him for quite some time and had understood that both he and his family enjoyed excellent reputations. What was the problem? The attorney had been identified as an agent of the Iraqi government and U.S. law required that his assets be blocked beginning in November of 1994. For the U.S. securities firms involved, each transaction handled for the attorney after his designation as a "Specially Designated National of Iraq " could mean civil penalties of up to $250,000!

        Another U.S. bank was caught by surprise when a 6 figure transfer it was expecting never arrived The funds were interdicted by an alert correspondent bank because the payment instructions referenced "Yugoslavian Loans. " The U.S. bank was on the verge of closing a deal to sell Serbian debt instruments on the secondary market. Another big mistake the U.S. bank was hit with stiff fines.

        You might receive instructions from a long-time customer to wire sales proceeds to an account at the Arab Bank for Investment and Foreign Trade (ARBIFT) in the U.A.E. or to an account at Banque Intercontinental* Arabe (BIA) in Paris, France. All in a day's work, right? Wrong. These funds will most likely be blocked because both ARBIFT and BIA have been found to be acting on behalf of Libya. Your firm may be fined up to $10,000 for initiating the transfer, even though your own bank blacked it You'll also have to break the news to your client that his funds may be in limbo indefinitely.

        You might also unwittingly open a margin account for a customer who happens to be a Cuban national, in which case the U.S. Government may be the least of your problems! Your firm could be on the hook for any purchases made on margin for this client before you realize that all of his U.S. assets are frozen.

        These examples illustrate how costly it can be to ran afoul of U.S. laws enforced by the U.S. Treasury Department's Office of Foreign Assets Control (OF AC). OF AC administers sanctions and embargo programs against Libya, Iran, Iraq, the Federal Republic of Yugoslavia (Serbia and Montenegro), Serb-controlled areas of Bosnia and Herzegovina and Bosnian Serb military and civilian leaders, North Korea, and Cuba, and administers prohibitions against exports of arms and petroleum products to the UNITA faction in Angola, and prohibitions against transactions with terrorists threatening to disrupt the Middle East peace process. Securities firms are prohibited from dealing in securities issued from target countries and governments and must "block" or "freeze" accounts, assets, and obligations of an extensive number of blocked entities and individuals located in cities all over the globe.

        Criminal violations of the statutes administered by OFAC can result in corporate fines of up to $1 million and personal fines of up to $250,000 and 12 years in jail. OFAC also has independent authority to impose civil penalties of up to $250,000 per count. To assure that illicit transactions are not processed, much of the banking industry has installed sophisticated and highly effective "interdict" software to block questionable funds transfers and other transactions automatically. Some of the filters contain every name on OFAC's master list of "Specially Designated Nationals and Blocked Persons" (SDN list) along with geographical names for embargoed countries and cities. Because of the current level of electronic compliance programs in the financial community, it is more likely now than ever that violations by the securities industry will come to the attention of OFAC. It is critical that securities firms establish internal compliance programs to avert violations and costly enforcement actions.

        OFAC Customer Assessment Checklist

        It is recommended that you start by taking a look at your existing customer accounts to determine whether you are properly treating those that are blocked by existing sanctions, including:

        • personal and commercial accounts held in the name of individuals or organizations appearing on OFAC's SDN list;

        • personal accounts with Cuban or North Korean addresses;

        • personal accounts held in the name of nationals of Cuba or North Korea, regardless of address (except nationals unblocked by OFAC license);

        • commercial accounts with addresses in Cuba, North Korea, Libya, Iraq, Serbia, Montenegro, and cities and towns in areas of Bosnia and Herzegovina controlled by Bosnian Serb forces;

        • accounts held in the name of the government of Cuba, North Korea, Libya, Iraq, or the Federal Republic of Yugoslavia (Serbia and Montenegro); and

        • accounts owned by individuals acting for or on behalf of any of the account parties listed above or accounts owned by entities which are owned or controlled by any of the account parties listed above.

        Although no blocking provisions apply with regard to Iranian accounts, firms may no longer act on buy or sell orders originating from the Government of Iran, or individuals or entities located in Iran. At the request of the account holder, a firm may close out an Iranian account and effect a one-time lump sum transfer of all remaining account funds and other assets to the account holder.

        OFAC Securities Assessment Checklist

        Next, you should review the securities in your custody to determine whether you are properly treating any that are blocked, including:

        • securities registered or inscribed in the name of a Cuban or North Korean national (regardless of whether the registered or inscribed owner appears to have assigned, transferred or otherwise disposed of the security);

        • sovereign debt securities representing obligations of the governments of Cuba, North Korea, Libya, Iraq, the Federal Republic of Yugoslavia (Serbia and Montenegro), or the former Socialist Federal Republic of Yugoslavia (except as licensed by OFAC for trading);

        • debt or equity securities representing obligations of, or ownership interests in, companies appearing on OFAC's SDN list;

        • debt or equity securities representing obligations of, or ownership interests in, companies located in Cuba, North Korea, Libya, Iraq, the Federal Republic of Yugoslavia (Serbia and Montenegro), or areas of Bosnia and Herzegovina controlled by Bosnian Serb forces; or

        • bankers acceptances that indicate on their face that they relate to trade transactions involving North Korea, Cuba, Libya, Iran (post June 5, 1995 shipments), Iraq, the Federal Republic of Yugoslavia (Serbia & Montenegro), areas of Bosnia and Herzegovina controlled by Bosnian Serb forces, or the U.N. Protected Areas in Croatia, or exports of arms, petroleum, and petroleum products to the territory of Angola (other than through certain designated ports).

        You should also scrutinize any other securities which you have reason to believe represent obligations of, or ownership interests in, entities owned or controlled by blocked commercial or governmental entities referenced above.

        OFAC Banking Checklist

        Before they are relayed to your bank, outgoing wire transfer instructions should be reviewed to insure that:

        • neither intermediary banks nor banks of beneficiaries appear on OFAC's SDN list;

        • the funds are not destined for Cuba, North Korea, Libya, Iraq, the Federal Republic of Yugoslavia (Serbia and Montenegro) or areas of Bosnia and Herzegovina controlled by Bosnian Serb forces; and

        • the beneficiary is not otherwise blocked (to determine whether a beneficiary is blocked, apply the same criteria as those found in the OFAC Customer Assessment Checklist).

        Blocked Accounts and Securities

        Blockings must be reported within 10 days by fax to OFAC Compliance Division at 202/622–1657. Debits to blocked customer accounts are prohibited, although credits are authorized. Cash balances in customer accounts must earn interest at commercially reasonable rates. Blocked securities may not be paid, withdrawn, transferred (even by book transfer), endorsed, guaranteed, or otherwise dealt in.

        General Licenses

        General licenses have been issued authorizing continued trading on the national securities exchanges on behalf of blocked Cuban and North Korean customer accounts under conditions preserving the blocking of resulting assets and proceeds. Secondary market trading with respect to certain Yugoslav debt securities issued pursuant to the "New Financing Agreement" of September 20, 1988 (the "NFA") has also been authorized by General License. Certain restrictions and reporting requirements apply – contact OFAC if further information is needed with respect to trading under a general license.

        Ongoing OFAC Compliance

        The information on the OFAC assessment checklists will assist you when you evaluate new clients and unfamiliar investment securities. In addition, it may be helpful to designate a "Compliance Officer" responsible for monitoring compliance with OFAC programs and overseeing blocked accounts and securities. Internal auditing departments can assist in the development of "corporate compliance memoranda" and verification that procedures, once established, are being followed. An effective internal communication network is critical for regulatory compliance. Firms might consider including regulatory notices and explanations in staff newsletters. Compliance training programs will help prevent violations. Other useful measures would include reviewing regulations in staff meetings, incorporating compliance requirements into operating procedures, and joining with other firms to sponsor compliance seminars.

        The economic sanctions programs of the U.S. Government are powerful foreign policy tools. Their success requires the active participation and support of every U.S. citizen. Protect your firm from losses and civil penalty exposure — don't open your doors to OFAC targets; stay abreast of U.S. sanctions law. When in doubt about a specific account or transaction, or in need of additional information, contact OFAC's Compliance Hotline for financial institutions at 1–800–540-OFAC (6322).

        Additional Information

        Whenever there is an update to any OFAC regulation, an addition or removal of an SDN, or any other announcement from OFAC, the information is quickly made available electronically via many different sources.

        • The Federal Bulletin Board of the U. S. Government Printing Office, which is linked to the Federal Register and Code of Federal Regulations, carries all OFAC brochures in ASCII, WordPerfect, and Adobe/Acrobat "*.PDF" format, as well as the entire Code of Federal Regulations containing OFAC regulations, all Federal Register notices that OFAC puts out, and all of OFAC's current press releases. For information on the Federal Bulletin Board call 202/512–1530 or dial 202/512–1387 to connect [Telnet access via Internet = federal.bbs.gpo.gov 3001].

        • Information is also immediately uploaded onto the U.S. Treasury Department's free Electronic Library (TEL) on the FedWorld bulletin board network. FedWorld, a service of the National Technical Information Service, can be reached by dialing 703/321–3339 [or over Internet using one of the following protocols: Telnet Access Via Internet = fedworld.gov (192.239.93.3); FTP Site Access Via Internet = ftp.fedworld.gov (192.239.92.205); World Wide Web (Home Page) = http://www.fed-world.gov]. Its help desk number is 703/487–4608 and business office is 703/487–4648. Once access to FedWorldhas been gained, option "[C]," the Business, Trade, and Labor Mall, should be chosen. Then, "[E]" should be chosen for TEL. OFAC's files are all prefixed with the call letters "Til" Files are available for downloading in camera-ready Adobe/Acrobat "*.PDF" format (for Mac or Windows 3.1) as well as in a self-extracting ASCII "*.EXE" format.

        • Simultaneous uploads are made to the U.S. Department of Commerce Economic Bulletin Board. For information on the Commerce EBB, call 202/482–1986 or dial into 202/482–3870 with a 2400 bps modem or 202/482–2584 with a 9600 baud modem [Telnet access via Internet = ebb.stat-usa.gov]. OFAC material can be found in file area#17. Commerce also operates a monthly CD-Rom service (the National Trade Data Bank) with OFAC data in ASCII format (call 202/482–1986 for information), a fee-based fax-on-demand service, called STAT-USA/FAX (call 202/482–0005 from a fax machine's handset), and a World Wide Web server, called STAT-USA/Internet, with access at "//www.stat-use.gov" and voice support at 202/482–1986. OFAC's program brochures and SDN information is available in downloadable Adobe/Acrobat "*.PDF" format on the Commerce server.

        • Information is disseminated to banks on the U.S. Council on International Banking's INTERCOM Bulletin Board in New York and the IBOA Bulletin Board (International Banking Operations Association) in Miami. The Office of the Comptroller of the Currency operates a special 24 hour a day "fax-on-demand" service for National banks and examiners. The computer-based system, called OCC Information Line, provides documents from any touchtone phone by calling 202/479–0141 and following voice prompts. OCC's Communications Division may be reached at 202/874–4960. (Note that OFAC's SDN list on the OCC system is split into two separate documents [A-K] and [L-Z]). Major announcements are also distributed to U.S. financial institutions through Fedwire bulletins and CHIPS system broadcasts, as well as, from time to time, in printed format through the various Federal bank supervisory agencies.

        • The U.S. Maritime Administration operates a free electronic bulletin board, called Marlinspike, which can be accessed via modem at 202/366–8505 with voice help at 202/366–9991 (OFAC's brochures and SDN information can be scanned on-line or downloaded for further use).

        • The U.S. Customs Service maintains a free Customs Electronic Bulletin Board geared especially toward Customs House Brokers (OFAC's information is available as a date-specific self-extracting DOS file through modem access at 703/440–6155 and voice support at 703/440–6236).

        DEPARTMENT OF THE TREASURY

        Office of Foreign Assets Control

        List of Specially Designated Narcotics Traffickers

        AGENCY: Office of Foreign Assets Control, Treasury. ACTION: Notice of blocking.

        SUMMARY: The Treasury Department is issuing a list of 80 blocked persons who have been designated by the President for their significant role in international narcotics trafficking centered in Colombia, or have been determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, either to have materially assisted in or provided financial or technological support for, or goods or services in support of, the narcotics trafficking activities of other blocked persons on the list, or to be owned or controlled by, or to act for or on behalf of, other blocked persons on the list.

        EFFECTIVE DATE: October 23, 1995.

        FOR FURTHER INFORMATION CONTACT: Office of Foreign Assets Control, Department of the Treasury, 1500 Pennsylvania Ave. NW., Washington, DC 20220; Tel.: (202) 622–2420.

        SUPPLEMENTARY INFORMATION:

        Electronic Availability

        This document is available as an electronic file on The Federal Bulletin Board the day of publication in the Federal Register. By modem, dial 202/ 512–1387 and type "/GO FAC," or call 202/512–1530 for disks or paper copies. This file is available for downloading in WordPerfect, ASCII, and Adobe Acrobat™ readable (*.PDF) formats. The document is also accessible for downloading in ASCII format without charge from Treasury's Electronic Library ("TEL") in the "Business, Trade and Labor Mall" of the FedWorld bulletin board. By modem dial 703/321–3339, and select self-expanding file "TllFR00.EXE" in TEL. For Internet access, use one of the following protocols: Telnet = fedworld.gov (192.239.93.3); World Wide Web (Home Page) = http://www.fedworld.gov; FTP = ftp.fedworld.gov (192.239.92.205).

        Background

        On October 21, 1995, President Clinton signed Executive Order 12978, "Blocking Assets and Prohibiting Transactions with Significant Narcotics Traffickers" (the "Order").

        The Order blocks all property subject to U.S. jurisdiction in which there is any interest of four principal figures in the Cali drug cartel who are listed in the annex to the Order. In addition, the Order blocks the property and interests in property of foreign persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, (a) to play a significant role in international narcotics trafficking centered in Colombia, or (b) to materially assist in or provide financial or technological support for, or goods or services in support of, persons designated in or pursuant to the Order. In addition, the Order blocks all property and interests in property subject to U.S. jurisdiction of persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, to be owned or controlled by, or to act for or on behalf of, persons designated in or pursuant to the Order (collectively "Specially Designated Narcotics Traffickers" or "SDNTs").

        The Order further prohibits any transaction or dealing by a United States person or within the United States in property or interests in property of SDNTs, and any transaction that evades or avoids, has the purpose of evading or avoiding, or attempts to violate, the prohibitions contained in the Order.

        Designations of foreign persons blocked pursuant to the Order are effective upon the date of determination by the Director of the Office of Foreign Assets Control, acting under authority delegated by the Secretary of the Treasury. Public notice of blocking is effective upon the date of filing with the Federal Register, or upon prior actual notice.

        Specially Designated Narcotics Traffickers

        PRINCIPAL INDIVIDUALS:

        HERRERA BUITRAGO, HELMER (A.K.A. "PACHO"; A.K.A. "H7"), DOB: 24 August 1951; alt. DOB: 5 July 1951; Passport: J287011 (Colombia); Cedula No. 16247821 (Colombia); Cali, Colombia.

        RODRIGUEZ OREJUELA, GILBERTO, (A.K.A. "THE CHESS PLAYER"; A.K.A. "LUCAS"), DOB: 31 January 1939; Passports: T321642 (Colombia), 77588 (Argentina), 10545599 (Venezuela); Cedula No. 6068015 (Colombia); Cali, Colombia.

        RODRIGUEZ OREJUELA, MIGUEL ANGEL, (A.K.A. "EL SENOR"; A.K.A. "PATRICIA"; A.K.A. "PATRICIO"; A.K.A. "PATTY"; A.K.A. "PAT"; A.K.A. "MANUEL"; A.K.A. "MANOLO"; A.K.A. "MIKE"; A.K.A. "MAURO"; A.K.A. "DOCTOR M.R.O."), DOB: 23 November 1943; alt. DOB: 15 August 1943; Cedula No. 6095803 (Colombia); Casa No. 19, Avenida Lago, Ciudad Jardin, Cali, Colombia.

        SANTACRUZ LONDONO, JOSE, (A.K.A. "CHEPE"; A.K.A. "DON CHEPE"; A.K.A. "EL GORDO CHEPE"; A.K.A. "07"), DOB: 1 October 1943; Passport: AB149814 (Colombia); Cedula No. 14432230 (Colombia); Cali, Colombia.

        ENTITIES:

        AUREAL INMOBILIARIA LTDA., Avenida 7 No. 112–38 of. 104, Bogota, Colombia.

        CARS & CARS LTDA., (A.K.A. COMERCIALIZADORA INTEGRAL LTDA.; A.K.A. PROYECTO CARS & CARS; A.K.A. CENTRO COMERCIAL DEL AUTOMOVIL), Avenida Roosevelt entre carreras 38 y 38A esquinas, Cali, Colombia.

        DISTRIBUIDORA DE DROGAS CONDOR LTDA., (A.K.A. CONDOR), Calle 10 No. 32A-64, Bogota, Colombia; Calle 68 52–05, Bogota, Colombia.

        DISTRIBUIDORA DE DROGAS LA REBAJA S.A., (A.K.A. DROGAS LA REBAJA; A.K.A. DISTRIBUIDORA DE DROGAS LA REBAJA PRINCIPAL S.A.), Calle 10 No. 4–47 Piso 19, Cali, Colombia; Calle 18 121–130, Cali, Colombia; Calle 14 6–66, Cali, Colombia; Carrera 7 13–132 piso 4, Cali, Colombia; Carrera 7A 14–25 piso 2, Cali, Colombia; Carrera 10 11–71, Cali, Colombia; Carrera 99 No. 46 A-10 Bdg 6 y 8, Bogota, Colombia.

        DISTRIBUIDORA MIGIL LTDA., (A.K.A. MIGIL; A.K.A. DISTRIBUIDORA MIGIL CALI S.A.; F.K.A. DISTRIBUIDORA MIGIL BOGOTA LTDA.), Calle 5C 41–30, Cali, Colombia; Carrera 26 5B-65, Cali, Colombia; Carrera 30–5-12, Cali, Colombia.

        DROGAS LA REBAJA BARRANQUILLA S.A., Avenida Pedro Heredia, Barranquilla, Colombia; Local Cerete, Barranquilla, Colombia; Local de Riohacha, Barranquilla, Colombia.

        DROGAS LA REBAJA BUCARAMANGA S.A., Local No. 1, Bucaramanga, Colombia; Local No. 1, Cucuta, Colombia; Local No. 2, Cucuta, Colombia; Local No. 6, Cucuta, Colombia; Local No. 7, Cucuta, Colombia; Local No. 9, Cucuta, Colombia; Local 201, Valledupar, Colombia.

        DROGAS LA REBAJA CAU S.A., Barrio Siloe, Cali, Colombia; Calle 13 #6–85, Cali, Colombia; Calle 3 #4–02 B/Ventura, Cali, Colombia; Local Comuneros No. 20. Cali, Colombia; Local del Poblado No. 17, Cali, Colombia; Santander de Quilichao, Cali, Colombia.

        DROGAS LA REBAJA NEIVA S.A., Neiva, Colombia.

        DROGAS LA REBAJA PASTO S.A., Calle 18 #26–40, Pasto, Colombia; Local No. 6, Pasto, Colombia; Local No. 13, Puerto Asis, Colombia.

        DROGAS LA REBAJA PEREIRA S.A., Local Cajamarca, Pereira, Colombia; Local Dos Quebradas, Pereira, Colombia; Local Santa Rosa de Cabal, Pereira, Colombia; Local la Virginia, Pereira, Colombia.

        QANADERA LTDA., (A.K.A. QANADERIA), Carrera 4 12–41 piso 15, Edificio Seguros Bolivar, Cali, Colombia.

        QRUPO SANTA LTDA., Calle 18 106–98 of. 201/ 202, Cali, Colombia; Carrera 4 12–41 piso 14 y 15, Edificio Seguros Bolivar, Cali, Colombia; Carrera 84 17–29, Cali, Colombia.

        HACIENDA LA NOVILLERA, (A.K.A. NOVILLERA; A.K.A. NOVILLERA QANADERA), Carrera 4 12–41 piso 15, Edificio Seguros Bolivar, Cali, Colombia; Paso de la Bolsa, Jamundi, Valle del Cauca, Colombia.

        HACIENDA SANDRANA, (A.K.A. SANDRANA; A.K.A. SANDRANA GANADERA), Carrera 4 12–41 piso 15, Edificio Seguros Bolivar, Cali, Colombia; San Pedro, Valle del Cauca, Colombia.

        INMOBILIARIA AURORA LTDA., Avenida Canasgordas con Avenida Guali Casa 35, Cali, Colombia; Carrera 4 12–41 piso 15, Edificio Seguros Bolivar, Cali, Colombia; Carrera 24F Oeste 3–70, Cali, Colombia; Carrera 38A No. 5E-31, Edificio Conquistadores, Cali, Colombia.

        INMOBILIARIA SAMARIA LTDA., Calle 13 3–32 piso 13, Cali, Colombia; Calle 13A 64–50 F201, Cali, Colombia; Calle 18, No. 106–98 of. 201/202, Cali, Colombia; Carrera 4 12–41 piso 15, Edificio Seguros Bolivar, Cali, Colombia.

        INTERCREDITOS S.A., (A.K.A. INTERCREDITOS BOGOTA), Bogota, Colombia; (A.K.A. INTERCREDITOS CALI), Avenida Roosevelt No. 38–32, piso 2, Cali, Colombia.

        INVERSIONES ARA LTDA., Avenida 4N 6N-67 of. 601, Cali, Colombia; Avenida 6AN 18–69 1–128, Cali, Colombia; Avenida 6AN 23DN-16 of. 402, Cali, Colombia; Club El Remanso, Jamundi, Colombia.

        INVERSIONS EL PASO LTDA., (F.K.A. INVERSIONS MEGOAGRICOLA S.A.), Carrera 4 No. 12–41 of. 1403, Cali, Colombia.

        INVERSIONES INTEGRAL Y CIA., Calle 16B No. 114–80 Casa 2, Cali, Colombia; Carrera 2 Oeste 5–46 apt./of. 503, Cali, Colombia. INVERSIONES MIGUEL RODRIGUEZ E HUO, Avenida 4N 6N-67 of. 601, Cali, Colombia; Avenida 6N 23DN-16 of. 202, 301, 302, 401, 402, Cali, Colombia.

        INVERSIONES SANTA LTDA., (F.K.A. INVERSIONES Y CONSTRUCCIONES SANTA UMTADA), Calle 5 66B-49 piso 3, Cali, Colombia; Calle 5 Oeste 3A-26 apt/of 103, 301, 404, 502, 503, Cali, Colombia; Calle 7 Oeste 25–48, Cali, Colombia; Calle 9 No. 46–69 of. 302, Cali, Colombia; Calle 13 3–32 piso 14, Cali, Colombia; Carrera 2 Oeste 5–46 of 502, Cali, Colombia; Carrera 4 12–41 piso 14, Edificio Seguros Bolivar, Cali, Colombia; Carrera 4 12–41 piso 15, Edificio Seguros Bolivar, Cali, Colombia.

        LABORATORIOS BLAIMAR DE COLOMBIA S.A., (A.K.A. BLAIMAR), Calle 12B 27 39, Bogota, Colombia.

        LABORATORIOS KRESSFOR DE COLOMBIA S.A., (A.K.A. KRESSFOR), Calle 16 28A 51, Bogota, Colombia; Calle 16 28A 57, Bogota, Colombia; Calle 17 28A-43, Bogota, Colombia; Calle 17A 28 43, Bogota, Colombia.

        PREVIA S.A., (A.K.A. PREVENCION Y ANALISIS DE RIESGOS), Carrera 3 No. 10–20 of. 202, Cali, Colombia; Carrera 3 No. 12–40 of. 504, Cali, Colombia.

        SAMARIA ARRENDAMIENTO, Cali, Colombia.

        SAMARIA CANAS, Cali, Colombia.

        SAMARIA NTERESES, Cali, Colombia.

        SAMARIA LTDA., Cali, Colombia.

        SAMARIA TIERRAS, Cali, Colombia.

        SANDRANA CANAS, Cali, Colombia.

        SOCIEDAD CONSTRUCTORA LA CASCADA S.A., (A.K.A. CONSTRUCTORA CASCADA), Calle 1A 62A-120, Cali, Colombia; Calle 1A 62A-120 B2 108, Cali, Colombia; Calle 1A 62A-120 2305, Cali, Colombia; Calle 1A 62A-120 2418, Cali, Colombia; Calle 1A 62A-120 4114, Cali, Colombia; Calle 1A 62A-120 6245, Cali, Colombia; Calle 13 3–32 piso 12 y piso 14, Cali, Colombia; Carrera 4 12–41 of. 1401, Cali, Colombia; Carrera 4 No. 12–41 of. 1403, Cali, Colombia; Carrera 64 1C-63, Cali, Colombia; Carrera 64 1B-83, Cali, Colombia.

        OTHER INDIVIDUALS:

        ARBELAEZ PARDO, AMPARO, DOB: 9 November 1950; alt. DOB: 9 August 1950; Passports: AC568973 (Colombia), PE001850 (Colombia); Cedula No. 31218903 or 31151067 (Colombia); Casa No. 19, Avenida Lago, Ciudad Jardin, Cali, Colombia; c/o INVERSIONES ARA LTDA., Cali, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        ARLONE FACELU, ROBERTO, Cedula No. 16632415 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR S.A., Bogota, Colombia.

        BORRERO Q., HECTOR FABIO, c/o INMOBILIARIA SAMARIA LTDA., Cali, Colombia; c/o INVERSIONES SANTA LTDA., Cali, Colombia; c/o SOCIEDAD CONSTRUCTORA LA CASCADA S.A., Cali, Colombia.

        CALDERON RODRIGUEZ, SOLANGE, c/o INMOBILIARIA AURORA LTDA., Cali, Colombia; c/o INVERSIONES SANTA LTDA., Cali, Colombia; c/o SOCIEDAD CONSTRUCTORA LA CASCADA S.A., Cali, Colombia.

        CARDONA OCHOA, CARLOS JULIO, Cedula No. 7524996 (Colombia); c/o AUREAL INMOBILIARIA LTDA., Bogota, Colombia; c/o GRUPO SANTA LTDA., Cali, Colombia.

        CASTRO DE SANTACRUZ, AMPARO, DOB: 13 January 1948; alt. DOBs: 13 January 1946, 14 April 1959, 14 April 1957; SSN 150–50–6323; Passports: PEO2737O (Colombia), AA429676 (Colombia); Cedula No. 38983611 (Colombia); c/o INMOBILIARIA SAMARIA LTDA., Cali, Colombia; c/o INVERSIONES EL PASO LTDA., Cali, Colombia; c/o INVERSIONES SANTA LTDA., Cali, Colombia; c/o SAMARIA LTDA., Cali, Colombia.

        CAVIEDES CRUZ, LEONARDO, DOB: 23 November 1952; Passports: AB151486 (Colombia), AC444270 (Colombia), OC444290 (Colombia); Cedula No. 16593470 (Colombia); c/o INVERSIONES SANTA LTDA., Cali, Colombia.

        DIAZA QUIROA, HUGO CARLOS, Cedula No. 19236485 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        DONNEYS GONZALEZ, FEDERICO, c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia.

        ESTRADA URIBE, OCTAVIO, c/o GRUPO SANTA LTDA., Cali, Colombia; c/o SOCIEDAD CONSTRUCTORA LA CASCADA S.A., Cali, Colombia.

        GIL OSORIO, ALFONSO, DOB: 17 December 1946; alt. DOB: 17 December 1940; Passports: 14949229 (Colombia), 14949279 (Colombia), 14949289 (Colombia), AC342060 (Colombia); Cedula No. 14942279 or 14949279 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        GOMEZ V., MANUEL ANTONIO, Cedula No. 7921814 (Colombia); c/o GANADERA LTDA., Cali, Colombia.

        GUTIERRES C, ALVARO (A.K.A. GUTIERREZ C, ALVARO), DOB: 9 May 1942; Cedula No. 14966562 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia;

        GUTIERREZ CANCINO, FERNANDO ANTONIO, DOB: 4 December 1941; Cedula No. 6089071 (Colombia); c/o DISTRIBUIDORA DE DROGAS LA REBAJA, S.A., Bogota, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        GUTIERREZ LOZANO, ANA MARIA, DOB: 1972; Cedula No. 39783954 or 39783975 (Colombia); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        GUTIERREZ LOZANO, JUAN PABLO, DOB: 11 April 1972; Passport: AC480604 (Colombia); Cedula No. 79570028 (Colombia); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        HOLGUIN SARRIA, ALVARO, Cedula No. 14950269 or 18950260 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA.-, Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia.

        IDARRAGA ORTIZ, JAIME, Cedula No. 8237011 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia.

        IZOUIERDO OREJUELA, PATRICIA, Cedula No. 41594424 (Colombia); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        LOZANO DE GOMEZ, ZILIA, Cedula No. 41577886 (Colombia); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        LOZANO CANCINO DE GUTIERREZ, MARIA GLADYS, (A.K.A. LOZANO DE GUTIERREZ, GLADYS), DOB: 19 October 1948; Cedula No. 41444092 (Colombia); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        MAZUERO ERAZO, HUGO, DOB: 17 July 1936; alt. DOB: 1945; Cedula No. 2445590 (Colombia); c/o GRUPO SANTA LTDA., Cali, Colombia; c/o INVERSIONES SANTA LTDA., Cali, Colombia; c/o SOCIEDAD CONSTRUCTORA LA CASCADA S.A., Cali, Colombia.

        MOGOLLON RUEDA, EDUARDO, DOB: 5 February 1953; Cedula No. 19149691 or 19194691 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia.

        MONDRAGON DE RODRIGUEZ, MARIELA, DOB: 12 April 1935; Passport: 4436059 (Colombia); Cedula No. 29072613 (Colombia); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        MUNOZ RODRIGUEZ, JUAN CARLOS, DOB: 25 September 1964; Passport: 16703148 (Colombia); Cedula No. 16703148 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA, S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        MUNOZ RODRIGUEZ, SORAYA, DOB: 26 July 1967; Passport: AC569012 (Colombia); Cedula 31976822 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        PINZON, MARCO ANTONIO, Cedula No. 17801803 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia.

        RAMIREZ UBREROS, GLADYS MIRIAM, DOB: 20 November 1945; Passport: 38974109 (Colombia); Cedula No. 38974109 (Colombia); c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia.

        RIZO, DIEGO, Cedula No. 144483334 (Colombia); c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia.

        RODRIGUEZ ABADIA, WILLIAM, DOB: 31 July 1965; Cedula No. 16716259 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA, S.A., Bogota, Colombia.

        RODRIGUEZ ARBELAEZ, CAROLINA, DOB: 17 May 1979; c/o INVERSIONES ARA LTDA., Cali, Colombia.

        RODRIGUEZ ARBELAEZ, MARIA FERNANDA, DOB: 28 November 1973; alternate DOB: 28 August 1973; Passport: AC568974 (Colombia); Cedula No. 7382804819 (Colombia); c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia.

        RODRIGUEZ MONDRAGON, HUMBERTO, DOB: 21 June 1963; Passport: AD387757 (Colombia); Cedula No. 16688683 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA, S.A., Bogota, Colombia.

        RODRIGUEZ MONDRAGON, JAIME, Cedula No. 16637592 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBA)A S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        RODRIGUEZ MONDRAGON, MARIA ALEXANDRA, (A.K.A. RODRIGUEZ MONDRAGON, ALEXANDRA), DOB: 30 May 1969; alt. DOB: 5 May 1969; Passport: AD359106 (Colombia); Cedula No. 66810048 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia.

        RODRIGUEZ OREJUELA DE GIL, AMPARO, DOB: 13 March 1949; Passport: AC342062 (Colombia); Cedula No. 3121877003 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS BLAIMAR DE COLOMBIA S.A., Bogota, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        RODRIGUEZ OREJUELA DE MUNOZ, HAYDEE, (A.K.A. RODRIGUEZ OREJUELA DE ROJAS, HAYDEE), DOB: 22 September 1940; Cedula No. 38953333 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia.

        RODRIGUEZ RAMIREZ, CLAUDIA PILAR, DOB: 30 June 1963; alt. DOB: 30 August 1963; alt. DOB: 1966; Passports: 007281 (Colombia), P0555266 (Colombia); Cedula No. 51741013 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia; c/o DISTRIBUIDORA DE DROGAS LA REBAJA S.A., Bogota, Colombia; c/o DISTRIBUIDORA MIGIL LTDA., Cali, Colombia; c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia.

        SANTACRUZ CASTRO, ANA MILENA, DOB: 31 March 1965; Passports: 31929808 (Colombia), AB151189 (Colombia); Cedula No. 31929808 (Colombia); c/o AUREAL INMOBILIAR1A LTDA., Bogota, Colombia; c/o INMOBILIARIA SAMARIA LTDA., Cali, Colombia; c/o INVERSIONES EL PASO LTDA., Cali, Colombia; c/o INVERSIONES SANTA LTDA., Cali, Colombia; c/o SAMARIA LTDA., Cali, Colombia; c/o SOCIEDAD CONSTRUCTORA LA CASCADA S.A., Cali, Colombia.

        SANTACRUZ CASTRO, SANDRA, DOB: 28 September 1973; SSN 090–80–3433; Passports: 043827307 (United States), D1690693 (United States), 100330728 (United States), J24728201 (Country unknown); c/o INMOBILIARIA SAMARIA LTDA., Cali, Colombia.

        TORRES CORTES, JOSELIN, Cedula No. 19482747 (Colombia); c/o AUREAL INMOBILIARIA LTDA., Bogota, Colombia.

        VILLALOBOS, LUIS E., Cedula No. 14875020 (Colombia); c/o DISTRIBUIDORA DE DROGAS CONDOR LTDA., Bogota, Colombia.

        ZABALETA SANDOVAL, NESTOR, DOB: 1927; Cedula No. 20305353 (Colombia); Passports: 1690693 (United States), 100330728 (United States), J24728201 (Country unknown); c/o LABORATORIOS KRESSFOR DE COLOMBIA S.A., Bogota, Colombia; c/o INMOBILIARIA SAMARIA LTDA., Cali, Colombia.

        Dated: October 23, 1995

        R. Richard Newcomb,

        Director, Office of Foreign Assets Control.

        Approved: October 23, 1995

        John P. Simpson

        Deputy Assistant Secretary (Regulatory, Tariff & Trade Enforcement).

        [FR Doc. 95–26555 Filed 10–23–95; 11:21 am]

        BILLING CODE 4610–25-F

      • 95-96 Continuing Education Rosters Now Available To Member Firms

        SUGGESTED ROUTING

        Legal & Compliance
        Registration
        Training

        NASD® member firms may now order rosters of their registered persons who are subject to the Regulatory Element of the new Securities Industry Continuing Education rules, which were effective July 1, 1995. (See Special Notice to Members 95-13, March 8, 1995).

        Firm rosters will be prepared from a database periodically extracted from the Central Registration Depository (CRD). The rosters will show those whom the CRD recognizes as being covered by the Regulatory Element of Continuing Education Program because their Continuing Education base date is on or after July 1, 1985. The Continuing Education base date is the more recent of a person's initial registration date or the date on which a significant disciplinary action (as defined by the rules) was posted to the CRD. The CRD measures an individual's second, fifth, and tenth anniversaries from the Continuing Education base date.

        A roster will be available as a printed report or a data file in ASCII text format (see attachment). Rosters will have each employee's name, CRD number, Continuing Education base date, and employment status. Member firms can use the information from the roster to forecast how many of their employees must complete a Regulatory Element computer-based training session at an NASD PROCTOR® Certification Testing Center. The roster information also will help firms budget Regulatory Element training expenses and learn what the CRD is showing as the Continuing Education base date for each employee.

        Firms may order Continuing Education rosters from their Quality & Service Teams. Rosters will cost $200. Rosters on a floppy disk in ASCII text format are $300. Firms will be charged by way of a debit to their CRD account. Rosters will be prepared and charged by BD number, with no discounts for affiliated groups of firms.

        To order a Continuing Education roster from the latest CRD extract, please call your NASD Quality & Service Team at:

        Quality & Service Team 1 (301)921–9499

        Quality & Service Team 2 (301)921–9444

        Quality & Service Team 3 (301)921–9445

        Quality & Service Team 4 (301)921–6664

        Quality & Service Team 5 (301)921–6665.

        Questions about this Notice may be directed to your Quality & Service Team, or John Linnehan, Director of Continuing Education, at (301) 208–2932.

        Continuing Education Roster of Persons Registered on or after July 1, 1985

        Broker/Dealer: 1960

        Report Dated: 11/1/95

        Representative Name

        CRD Number

        CE Base Date

        Employment Status

        Burgess, Smokey

        888888

        9/13/88

         
        Clemente, Roberto

        212121

        1/1/89

         
        Face, Elroy

        654128

        2/16/88

         
        Friend, Bob

        605023

        7/5/86

         
        Groat, Dick

        111111

        6/8/91

         
        Haddix, Harvey

        801457

        6/7/93

         
        Hoak, Don

        121212

        4/15/92

         
        Law, Vernon

        741369

        7/1/85

         
        Mazerowski, Bill

        999999

        10/13/90

         
        Mizell, Wilmer V. B,

        302050

        8/8/88

        Termed

        Murtaugh, Danny

        123321

        2/28/86

         
        Nelson, Rocky

        785214

        8/15/90

         
        Schofield, Dick

        963214

        12/31/94

         
        Skinner, Bob

        654896

        3/3/88

         
        Smith, Hal

        852147

        10/27/87

         
        Stuart, Dick

        777777

        11/19/93

         
        Virdon, Bill

        181818

        5/17/94

         
        Total number of reps: 17      

      • 95-95 SEC Approves Amendments To The Corporate Financing Rule Relating To Rights Of First Refusal

        SUGGESTED ROUTING

        Corporate Finance
        Legal & Compliance
        Syndicate
        Training

        Executive Summary

        On September 29, 1995, the Securities and Exchange Commission (SEC) approved amendments to the Corporate Financing Rule, Article III, Section 44 of the NASD Rules of Fair Practice relating to rights of first refusal. The amendment continues to permit the use of rights of first refusal, but prohibits an underwriter from receiving a right of first refusal to underwrite or participate in the issuer's future offerings that:

        • have a duration of longer than three years;

        • have more than one opportunity to waive or terminate the right in consideration of any payment of fee; and

        • are paid other than in cash.

        The amended rule also requires that a right of first refusal has a compensation value of one percent of the offering proceeds or the dollar amount contractually agreed to for waiver or termination of the right. The amendment prohibits payment of any fee to waive or terminate a right of first refusal that has a value in excess of the greater of one percent of the original offering (or an amount in excess of one percent if additional compensation is available under the compensation guideline of the original offering) or five percent of the underwriting discount or commission paid in connection with future offering. The full text of the amendment, which becomes effective January 1, 1996, follows the discussion below.1

        Background And Discussion Of The Rule Change

        The NASD® developed its policy on the valuation of rights of first refusal in the early 1970s. Rights of first refusal are typically negotiated in connection with an issuer's initial public offering (IPO) and grant the underwriter a right to underwrite or participate in any future public offerings, private placements, or other financings by the issuer for a certain period of years.2 The NASD values rights of first refusal as a noncash item of compensation at one percent of the offering proceeds and currently limits the duration of the right to five years. To the extent that an underwriting agreement includes a provision specifying a dollar amount for the waiver or termination of a right of first refusal, the Corporate Financing Rule also requires that the right of first refusal be valued at the dollar amount contractually agreed to for waiver of the right in place of the one percent valuation.3

        The NASD believes that members should be permitted to negotiate to waive or terminate a right of first refusal if the issuer wishes to use a different underwriter to subsequently raise additional capital through a public or private offering of its securities, provided that amounts negotiated are limited to an amount that has some relation to the size of the subsequent offering in which the member is not participating. The NASD is concerned that smaller issuers entering into these agreements may not be in a position to evaluate fully the ramifications of agreeing to a right of first refusal with a five-year term. The NASD staff rarely sees a right of first refusal with a term of less than five years, thus there is a concern that the duration of rights may not be freely negotiated by the issuer and the underwriter. The NASD has observed that certain underwriters routinely negotiate to receive rights of first refusal at the time of an IPO and later negotiate to waive or terminate their rights, without any original intent to underwrite any subsequent offering of securities by the issuer.

        The NASD is concerned that an issuer may find it difficult to negotiate appropriate underwriting compensation with a new underwriter, where the issuer has determined to sever its relationship with its former underwriter and the former underwriter requires a substantial payment to waive or terminate its right of first refusal. The NASD has determined that underwriters should not be permitted to avoid underwriting compensation limits by negotiating to waive or terminate a right of first refusal with no limitation whatsoever on the amount of compensation they might negotiate to receive.

        Three-Year Duration

        Currently, Subsection 44(c)(6)(B)(v) of the Corporate Financing Rule prohibits, as unreasonable, any "right of first refusal" regarding future public offerings, private placements or other financings that has a duration of more than five years from the effective date of the offering. The NASD has determined that a right of first refusal with a duration of five years is overreaching and that three years are more appropriate. The NASD has, therefore, amended Subsection 44(c)(6)(B)(v) to reduce the duration of the right of first refusal from five years to three years.

        Number Of Payments For Waiver/Termination

        The NASD is also amending the Corporate Financing Rule to address the practice of certain underwriters to routinely negotiate to receive rights of first refusal at the time of an IPO and later negotiate, repeatedly, to waive or terminate their rights, without any original intent to actually underwrite any subsequent offerings of securities by the issuer. The NASD has amended the Corporate Financing Rule to add new subparagraph (v)(2) to Subsection 44(c)(6)(B) to limit a member to one opportunity to waive or terminate a right of first refusal in consideration of any payment or fee. An underwriter that does not wish to terminate its right of first refusal for future offerings may preserve its right by waiving its participation in a particular offering without accepting payment for such waiver.4

        Limitation On Waiver/ Termination Compensation

        The NASD believes that members should be permitted to negotiate to waive or terminate a right of first refusal if the issuer wishes to use a different underwriter to subsequently raise additional capital through a public or private offering of its securities. However, the NASD believes that the amounts negotiated for the waiver or termination of the right should be limited to an amount that has some relation to the size of the subsequent offering in which the member is not participating. The NASD has, therefore, adopted an amendment limiting the amount of such waiver/termination payments by adding a new subparagraph (vi)(1) to Subsection 44(c)(6)(B) to the Corporate Financing Rule to prohibit any payment to waive or terminate a right of first refusal that has a value in excess of the greater of one percent of the original offering (or a higher amount if additional compensation is available under the compensation guideline applicable to the original offering) or five percent of the underwriting discount or commission paid in connection with the future offering (including any overallotment option that may be exercised), regardless of whether the payment or fee is negotiated at the time of or subsequent to the original public offering.5

        The one percent limitation reflects the NASD's belief that it is appropriate that the former underwriter be permitted to negotiate a fee that is at least equal to the valuation of the right of first refusal in connection with the NASD's review of the original offering if the issuer wishes to sever its relationship with the former underwriter. The five percent alternative limitation reflects the NASD's belief that the former underwriter that assumed the risk of distributing the issuer's IPO should be allowed to participate or equitably benefit in the issuer's subsequent offering of securities, including any overallotment option that may be exercised, regardless of whether the payment or fee is negotiated at the time of or subsequent to the original public offering.

        Cash Payment Requirement

        The NASD has also adopted new subparagraph (vi)(2) of Subsection 44(c)(6)(B) of the Corporate Financing Rule to specify that compensation to members for waiving or terminating a right of first refusal must be in cash. The NASD believes this provision will limit the waiver/ termination payment to a percentage of the capital raised in the secondary offering and protect the company's shareholders from dilution from issuing shares to a former underwriter.

        Implementation Of Rule

        The rule change is applicable to filings that become effective with the SEC on or after January 1, 1996. Thus offerings filed with the NASD Corporate Financing Department that have not become effective with the SEC before January 1, 1996, must comply with the rule change, regardless of whether the Corporate Financing Department has previously issued an opinion that it has no objections to the terms and arrangements.

        Questions about this Notice may be directed to the Corporate Financing Department, at (301) 208–2700.


        1 Securities Exchange Act Release No. 34–36303 (September 29, 1995); 60 F. R. 52232 (October 5, 1995).

        2 Rights of first refusal are also granted in connection with private venture capital investments and leveraged buy-out transactions. The rights granted in connection with private venture capital investments are to underwrite the issuer's initial equity public offering and, therefore, would not normally be considered compensation received in connection with the issuer's IPO. Rights granted in connection with leveraged buy-out transactions are for future financings of the issuer and may be considered received in connection with the issuer's offering of new equity securities or in connection with the secondary offering of debt securities by private debt-holders of the issuer.

        3 Subsection 44(c)(3)(A)(ix) has been amended to make the rule language consistent with Subsection 44(c)(6)(B)(v), and add the words "or terminate" to clarify that the dollar amount contractually agreed to by the issuer and underwriter to waive or terminate the right of first refusal will be considered in lieu of the one percent compensation valuation.

        4 The NASD anticipates that the former underwriter will contact the NASD Corporate Financing Department when it is negotiating a waiver or termination of a right of first refusal to obtain information on whether additional compensation is available under the compensation guideline applicable to the original offering.

        5 The NASD does not include the payment to waive or terminate a right of first refusal as compensation in connection with its review of the subsequent offering of securities. The rule change does not modify this practice.


        Text Of Amendments

        (Note: New text is underlined; deletions are bracketed.)

        The Corporate Financing Rule

        Underwriting Terms and Arrangements

        Article III, Section 44 of the Rules of Fair Practice

        (a) and (b) No change.
        (c) Underwriting Compensation and Arrangements
        (1) and (2) No change.
        (3) Items of Compensation
        (A) For purposes of determining the amount of underwriting compensation received or to be received by the underwriter and related persons pursuant to paragraph (c)(2) above, the following items and all other items of value received or to be received by the underwriter and related persons in connection with or related to the distribution of the offering, as determined pursuant to paragraph (c)(4) below shall be included:
        (i) through (viii) No change.
        (ix) any right of first refusal provided to the underwriter and related persons to underwrite or participate in future public offerings, private placements or other financings [by the issuer], which will have a compensation value of one percent (1 %) of the offering proceeds or that dollar amount contractually agreed to by the issuer and underwriter to waive or terminate the right of first refusal;
        (4) and (5) No change.
        (6) Unreasonable Terms and Arrangements
        (A) No change.
        (B) Without limiting the foregoing, the following terms and arrangements, when proposed in connection with the distribution of a public offering of securities, shall be unfair and unreasonable:
        (i) through (iv) No change.
        (v) any right of first refusal provided to the underwriter or related persons [regarding] to underwrite or participate in future public offerings, private placements or other financings which:
        (1) has a duration of more than [five (5)] three (3) years from the effective date of the offering; or
        (2) has more than one opportunity to waive or terminate the right of first refusal in consideration of any payment or fee;
        (vi) any payment or fee to waive or terminate a right of first refusal regarding future public offerings, private placements or other financings provided to the underwriter and related persons which:
        (1) has a value in excess of the greater of one percent (1 %) of the offering proceeds in the public offering where the right of first refusal was granted (or an amount in excess of one percent if additional compensation is available under the compensation guideline of the original offering) or five percent (5%) of the underwriting discount or commission paid in connection with the future financing (including any overallotment option that may be exercised), regardless of whether the payment or fee is negotiated at the time of or subsequent to the original public offering: or
        (2) is not paid in cash. Subsections (vi) through (xii) are renumbered (vii) through (xiii).

      • 95-94 NASD Requests Comment On Proposed Redefinition Of Gross Revenue For Assessment Purposes;

        Comment Period Expires November 27, 1995

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance

        Executive Summary

        The NASD® is requesting member comment on a proposed change to the NASD By-Law definition of Gross Revenue for NASD Assessment Purposes to require inclusion of net interest and dividend income (gross income less related interest and dividend expense but not in excess of such revenue) in assessable revenue. The change would take effect for the 1996 assessment based on revenues generated in calendar year 1995.

        Background

        Based on an extensive survey of members' FOCUS filings for 1995 and follow-up discussions with a number of member firm representatives, the NASD found that along with the normal interest income from customer margin accounts and dividends from trading and investment positions, a significant portion of member revenue is generated "from the securities business," representing interest associated with trading strategies involving, for example, repurchase, reverse repurchase, and stock loan/borrow transactions. The NASD Board of Governors (Board) has, therefore, approved for member comment an amendment to the definition of gross revenue to require inclusion of net interest and dividend income (gross income less related interest and dividend expense but not in excess of such revenue) in assessable revenue. This amendment treats interest and dividend income for NASD assessment purposes the same way the Securities Investor Protection Corporation treats such income for assessment purposes.

        Based on FOCUS data, NASD assessment data, and survey data, the NASD estimated that this change in assessment definition, if adopted for 1995, would have generated additional assessment revenue of $3 million based on the budgeted level of assessment revenue of $39 million. Higher revenues are anticipated to be necessary beginning in 1996 to fund the commitment of greater resources to the NASD's broker/dealer regulation activities, partly in response to the recent findings and recommendations of The NASD Select Committee on Structure and Governance (the Rudman Committee).

        Request For Comments

        The Board believes that this amendment provides for consistent treatment of net interest and dividend income for assessment purposes, and supports the equitable allocation of dues, fees, and assessments among member firms as contained in the NASD By-Laws. The Board requests member comment before filing the amendment with the Securities and Exchange Commission. Written comments must be received no later than November 27, 1995, and should be addressed to:

        Joan Conley
        Corporate Secretary
        National Association of
        Securities Dealers, Inc.
        1735 K Street, NW
        Washington, DC 20006–1500.

        Questions concerning this Notice may be directed to James Shelton, NASD Billing Manager, at (301) 590–6757.

      • 95-93 Fixed Income Pricing System Additions, Changes, And Deletions As Of September 28, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Municipal
        Operations
        Systems
        Trading

        As of September 28, 1995, the following bonds were added to the Fixed Income Pricing System (FIPSSM). These bonds are not subject to mandatory quotation:

        Symbol Name

        Coupon

        Maturity

        SINC.GB Sinclair Broadcast

        10.000

        9/30/05

        OWI.GA Owens-Ill

        10.000

        8/1/02

        ACME.GB Acme Metals

        13.500

        8/1/04

        TBS.GC Turner Br

        7.400

        2/1/04

        TRNL.GA Total Renal Care

        12.000

        8/15/04

        TBS.GD Turner Br

        8.400

        2/1/24

        KOGC.GA Kelley Oil & Gas

        13.500

        6/15/99

        RBK.GA Reebok

        9.750

        9/15/98

        FRP.GA Freeport-McMoRan Res

        8.750

        2/15/04

        TWA.GC Trans World Airlines

        12.000

        11/3/98

        GLXT.GA Galaxy Telecom LP/CAP

        12.375

        10/1/05

        As of September 28, 1995, changes were made to the symbols and names of the following FIPS bonds:

        New Symbol New Name Old Symbol Old Name
        IGL.GA IMC Global Inc IFL.GA IMC Fertilizer Group
        IGL.GB IMC Global Inc IFL.GB IMC Fertilizer Group

        As of September 28, 1995, changes were; made to the symbols of the following FIPS bonds:

        New Symbol Old Symbol Name
        OI.GI OWI.GA Owens-Ill
        SBGI.GA SINC.GA Sinclair Broadcast
        SBGI.GB SINC.GB Sinclair Broadcast

        Two bonds were listed in the September 1995 edition of Notices to Members with incorrect maturity dates. The correct listings for these bonds are:

        Symbol Name

        Coupon

        Maturity

        CNC.GA Conseco

        8.125

        2/15/03

        BRUO.GA Bruno's

        10.500

        8/1/05

        All bonds listed above are subject to trade-reporting requirements. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590–6436.

      • 95-92 Nasdaq National Market Additions, Changes, And Deletions As Of September 20, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Operations
        Systems
        Trading

        As of September 20, 1995, the following, 38 issues joined the Nasdaq National Market®, bringing the total number of issues to 3,870:

        Symbol Company

        Entry Date

        SOES Execution Level

        BCOM Bank of Commerce

        8/22/95

        200

        EUPH Euphonix, Inc.

        8/22/95

        1000

        HRBC Harbinger Corporation

        8/22/95

        200

        WNUT Walnut Financial Services, Inc.

        8/22/95

        200

        ATCE ATC Environmental Inc.

        8/23/95

        500

        ATCEL ATC Environmental Inc. (Cl C Wts 9/30/96)

        8/23/95

        500

        CTRN Computron Software, Inc.

        8/24/95

        200

        INLD Inland Casino Corporation

        8/24/95

        200

        PMAT Plasma & Materials Technologies, Inc.

        8/24/95

        200

        USAP Universal Stainless & Alloy Products, Inc.

        8/24/95

        200

        NNEXF Newscope Resources, Limited

        8/25/95

        200

        CVANV Crown Vantage Inc. (WI)

        8/28/95

        200

        CSIN Computational Systems, Inc.

        8/29/95

        500

        TSSW Touchstone Software Corp.

        8/29/95

        200

        PDTI PDT, Inc.

        8/30/95

        200

        RWAY Rent-Way, Inc.

        8/31/95

        200

        AAIRV Airways Corporation (WI)

        8/31/95

        500

        NRGIA National Energy Group, Inc. (Cl A)

        9/1/95

        200

        FAIR Renaissance Entertainment Corp.

        9/1/95

        500

        FAIRW Renaissance Entertainment Corp. (Cl A Wts 1/27/00)

        9/1/95

        500

        FAIRZ Renaissance Entertainment Corp. (Cl B Wts 1/27/00)

        9/1/95

        500

        ALLA Allied Capital Advisers, Inc.

        9/8/95

        200

        ADVNZ ADVANTA Corp. (Dep Shrs)

        9/11/95

        1000

        PRFN Prestige Financial Corp.

        9/11/95

        200

        LINK Interlink Electronics

        9/14/95

        200

        LINKW Interlink Electronics (Wts 6/7/96)

        9/14/95

        200

        RCHI Risk Capital Holdings, Inc.

        9/14/95

        1000

        CGG1 The Carbide/Graphic Group, Inc.

        9/14/95

        500

        BYDS Boyds Wheels, Inc.

        9/15/95

        500

        FPBN FP Bancorp Inc.

        9/18/95

        200

        NTSR NetStar, Inc.

        9/19/95

        500

        SMSI Smith Micro Software, Inc.

        9/19/95

        200

        RELEF Ariely Advertising, Limited (Ord Shrs)

        9/20/95

        200

        HDSN Hudson Technologies, Inc.

        9/20/95

        500

        HDSNW Hudson Technologies, Inc. (Wts 11/2/99)

        9/20/95

        500

        PEDX Pediatrix Medical Group, Inc.

        9/20/95

        500

        PRMO Premenos Technology Corp.

        9/20/95

        200

        SENEA Seneca Foods Corporation (Cl A)

        9/20/95

        200

        Nasdaq National Market Symbol And/Or Name Changes

        The following changes to the list of Nasdaq National Market securities occurred since August 22, 1995:

        New/Old Symbol New/Old Security

        Date of Change

        NELL/NELL Nellcor Puritan Bennett, Inc/Nellcor, Inc.

        8/28/95

        CVAN/CVANV Crown Vantage Inc./Crown Vantage Inc. (WI)

        8/29/95

        ATCC/ATCC Mesaba Holdings, Inc./AirTran Corporation

        8/31/95

        KNIDV/KNIC L.L. Knickerbocker Co. (New WI)/L.L. Knickerbocker Co.

        8/31/95

        KNWDV/KNICW L.L. Knickerbocker Co. (Wts New WI 1/24/97)/L.L. Knickerbocker Co. (Wts 1/24/97)

        8/31/95

        PARQ/PARQ ParcPlace-Digitalk, Inc./ParcPlace Systems, Inc.

        8/31/95

        MAIC/MAIC MAIC Holdings Inc./Mutual Assurance Inc.

        9/1/95

        RCSB/RCSB RCSB Financial Inc ./Rochester Community Savings Bank

        9/1/95

        RCSBP/RCSBP RCSB Financial Inc. (Conv Pfd Cl B)/Rochester Community Savings Bank (Conv Pfd B)

        9/1/95

        USTC/USTD USTC Holdings Corp./U S Trust Corp. (New WI)

        9/7/95

        AAIR/AAIRV Airways Corporation/Airways Corporation (WI)

        9/8/95

        NEGX/NRGIA National Energy Group, Inc. (Cl A)/National Energy Group, Inc. (Cl A)

        9/8/95

        ARNX/ARGS Aronex Pharmaceuticals, Inc./Argus Pharmaceuticals, Inc.

        9/12/95

        CPDN/CPDN CompDent Corporation/APPS Dental, Inc.

        9/15/95

        CELL/CELL Brightpoint, Inc./Wholesale Cellular USA, Inc.

        9/15/95

        CYNRW/CYNRW Canyon Resources Corp. (Wts 12/31/95)/Canyon Resources Corp. (Wts 9/30/95)

        9/19/95

        SENEB/SENE Seneca Foods Corp. (Cl B)/Seneca Foods Corp.

        9/20/95

        Nasdaq National Market Deletions

        Symbol Security

        Date

        AMEI American Medical Electronics, Inc.

        8/22/95

        AIHI Automotive Industries Holding, Inc.

        8/23/95

        ALTI Altai, Inc.

        8/24/95

        GRARE Great American Recreation, Inc.

        8/24/95

        TRCK Truck Components, Inc.

        8/24/95

        FPNX First Pacific Networks, Inc.

        8/25/95

        ITEG IntegraCare, Inc.

        8/28/95

        PBEN Puritan-Bennett Corp.

        8/28/95

        TRNZ Trinzic Corporation

        8/28/95

        YSCO Yes Clothing Co.

        8/28/95

        CBOT Cabot Medical Corporation

        8/29/95

        LIDA Lida Inc. (Cl A)

        8/30/95

        MLTI Multicare Companies, Inc.

        8/30/95

        SABR Saber Software Corp.

        8/31/95

        ABEV Atlantic Beverage Company, Inc.

        9/1/95

        DSGT Designatronics Inc.

        9/1/95

        FBARP Family Bargain Corporation (Ser A Pfd)

        9/1/95

        LZTN Lazer-Tron Corp.

        9/1/95

        MDIX Medical Diagnostics, Inc.

        9/1/95

        PSBX PSB Holdings Corp.

        9/1/95

        PTNM Putnam Trust Co.

        9/1/95

        RWTiW Redwood Trust, Inc. (Wts 12/31/97)

        9/1/95

        SKEYW Softkey International Inc. (Wts 3/26/96)

        9/1/95

        VUPDW Video Update, Inc. (Wts 7/20/99)

        9/1/95

        ACMT ACMAT Corporation

        9/5/95

        BMTI Bird Medical Technologies, Inc.

        9/7/95

        USAM USA Mobile Communications Holdings, Inc.

        9/8/95

        PREF Preferred Entertainment, Inc.

        9/11/95

        MSAM Marsam Pharmaceuticals, Inc.

        9/13/95

        ETEX Eastex Energy Inc.

        9/15/95

        NCEL Nationwide Cellular Service, Inc.

        9/20/95

        Questions regarding this Notice should be directed to Mark A. Esposito, Nasdaq Market Services Director, Issuer Services, at (202) 496–2536. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590–6436.

      • 95-91 SOES Tier Levels Set To Change November 13, 1995

        SUGGESTED ROUTING

        Senior Management
        Institutional
        Legal & Compliance
        Operations
        Options
        Systems
        Trading

        Effective November 13, 1995, tier sizes for 900 Nasdaq National Market® securities will be revised in accordance with paragraph 245 Ia7 of the Rules of Practice and Procedure for the Small Order Execution System (SOESSM).

        Under the SOES Rules, the maximum SOES order size for a Nasdaq National Market security is 1,000, 500, or 200 shares depending upon the trading characteristics of the security. The maximum SOES order size for a Nasdaq National Market security also corresponds to the minimum quote size requirement for Nasdaq market makers in that security (Schedule D to the NASD By-Laws, paragraph 1819, Part V, Sec. 2a). The old Nasdaq Workstation® service indicates the minimum quote size requirement for each Nasdaq National Market security in its bid/offer quotation display. The indicator "SM10," "SM5," or "SM2" is displayed to the left of the security name, corresponding to a minimum-size display of 1,000, 500, or 200 shares, respectively.

        The criteria for establishing tier sizes are:

        • A 1,000-share tier size was applied to Nasdaq National Market securities that had an average daily nonblock volume of 3,000 shares or more a day, a bid price that was less than or equal to $100, and three or more market makers.

        • A 500-share tier size was applied to Nasdaq National Market securities that had an average daily nonblock volume of 1,000 shares or more a day, a bid price that was less than or equal to $150, and two or more market makers.

        • A 200-share tier size was applied to Nasdaq National Market securities that had an average daily nonblock volume of less than 1,000 shares a day, a bid price that was less than or equal to $250, and less than two market makers.

        According to SOES Rules, Nasdaq® periodically reviews the SOES tier size applicable to each Nasdaq National Market security to determine if the trading characteristics of the issue have changed so as to warrant a tier-size adjustment. Such a review was conducted as of March 31, 1995, using the aforementioned formula.1 Subsequently, the NASD Board approved implementation of the SOES tier size changes called for by this review with two exceptions:

        • An issue would not be permitted to move more than one level. For example, if an issue was previously categorized in the 1,000-share tier, it would not be permitted to move to the 200-share tier, even if the formula calculated that such a move was warranted. The issue could move only one level to the 500-share tier as a result of any single review. In adopting this policy, the NASD is attempting to maintain adequate public investor access to the market for issues in which the tier-size level decreased and to help ensure the ongoing participation of market makers in SOES for issues in which the tier-size level increased.

        • For 20 securities priced below $ 1, where the reranking called for a reduction in tier size, the NASD Board did not approve a decline in tier size.

        Following is a list of the Nasdaq National Market issues that will require a SOES tier-level change on November 13, 1995. For more information, please contact Nasdaq Market Operations at (203) 378–0284.

        Nasdaq National Market SOES Tier-Size Changes

        All Issues In Alphabetical Order By Security Name (Effective November 13, 1995)

        Symbol Company Name

        Old Tier Level

        New Tier Level

               
        A      
        ABCB ABC BANCORP

        200

        500

        ABCR ABC RAIL PROD CP

        500

        1000

        ACMTA A C M A T CP CL A

        200

        500

        ARIS A RI NETWORK SVCS

        1000

        500

        AVEC A V E C O R CARDIO

        500

        1000

        ARONA AARON RENTS INC CL-A

        1000

        500

        ASHE AASCHE TRANSPORT SVC

        200

        500

        ABTE ABLE TELECOM HLDG CP

        200

        500

        ABRX ABR INFORMATION SVCS

        200

        500

        ASTF ACCUSTAFF INC

        500

        1000

        ATVI ACTTVISION INC

        200

        500

        AFLX ADFLEX SOLUTIONS INC

        200

        500

        ADTN ADTRANINC

        200

        500

        CHGNF AES CHINA GENER CL A

        500

        1000

        ACSA AFFILIATED COMP A

        200

        500

        AGNU AGRI-NUTRITION GRP

        500

        1000

        AEIC AIR EXPRESS INTL CP

        200

        500

        ALAB ALABAMA NATL BNCP

        200

        500

        ALDNF ALADDIN KNOW SYS LTD

        500

        1000

        ATNG ALATENN RESOURCES

        1000

        500

        ALCO ALICO INC

        500

        1000

        ALLG ALLEGIANCE BANC CP

        200

        500

        ALSC ALLIANCE SEMICON CP

        500

        1000

        ABCI ALLIED BANK CAPITAL

        500

        1000

        HAUL ALLIED HOLDINGS INC

        500

        1000

        ALFC ALLIED LIFE FINL CP

        500

        1000

        ALMIW ALPHA MICROSYS WTS

        500

        1000

        ALRC ALTERNATIVE RES CP

        200

        500

        AMBC AMER BNCP OHIO

        200

        500

        AMBJ AMER CITY BUS IOURNL

        500

        1000

        AMCE AMER CLAIMS EVALUAT

        1000

        500

        ACPI AMER CONSUMER PROD

        500

        200

        AEOS AMER EAGLE OUTFIT

        200

        500

        AFIL AMER FILTRONA CP

        200

        500

        HSTR AMER HOMESTAR CP

        500

        1000

        AIFC AMER INDEMNITY FIN

        1000

        500

        ALHCP AMER LIFE HLDG PFD

        500

        1000

        SKYC AMER MOBILE SATEL CP

        500

        1000

        AMPC AMER PUBLISHING CL A

        500

        1000

        SNIFF AMER SENSORS INC

        200

        500

        AMGD AMER VANGUARD CP

        500

        200

        AMOO AMERCO

        200

        500

        ATEL AMERICAN TELECASTING

        500

        1000

        ALNK AMERILINK CP

        200

        500

        AMES AMES DEPT STORES INC

        200

        500

        AMESW AMES DEPT STRES WT C

        200

        500

        AMPI AMPLICON INC

        500

        200

        SLOT ANCHOR GAMING

        500

        1000

        ANDR ANDERSEN GROUP INC

        500

        200

        ADYNF ANDYNE COMPUTING LTD

        200

        500

        ANTC ANTEC CORPORATION

        500

        1000

        APHT APHTON CORP

        500

        1000

        APGG APOGEE INC

        200

        500

        APOL APOLLO GROUP INC A

        200

        500

        AD AX APPLIED DIGITAL ACCE

        500

        1000

        AVTC APPLIED VOICE TECH

        200

        500

        APLX APPLIX INC

        200

        500

        AQUX AQUAGENIX INC

        500

        1000

        AQUXW AQUAGENIX INC WTS

        500

        1000

        AKSEF ARAKIS ENERGY CP

        200

        500

        ARAM ARAMED INC

        1000

        500

        AFAS ARDENIND PRODS INC

        200

        500

        ARLCF AREL COMMU & SFT ORD

        200

        500

        ARLWF AREL COMMUN WTS A

        200

        500

        ARIA ARIAD PHARM INC

        500

        1000

        ARIAW ARIAD PHARM INC WTS

        500

        1000

        ARTL ARISTOTLE CP

        1000

        500

        ARKR ARK RESTAURANTS CP

        500

        1000

        ABFSP ARKANSAS BEST CV PFD

        1000

        500

        ARTW ART S WAY MFG CO INC

        500

        200

        ASND ASCEND COMMUN INC

        500

        1000

        AZPN ASPEN TECHNOLOGY INC

        200

        500

        AGRPA ASSOCIATED GRP INC A

        200

        500

        AGRPB ASSOCIATED GRP INC B

        200

        500

        ASTR ASTROSYSTEMS INC

        1000

        500

        ASTI ASTRUM INTL CP

        200

        500

        ATSW ATRIA SOFTWARE INC

        500

        1000

        ACLV AUTOCLAVE ENGINEERS

        500

        1000

        AVRT AVERT INC

        200

        500

        AVRTW AVERT INC WTS

        200

        500

               
        B      
        BCTI B C T INTL INC

        200

        500

        BFEN B F ENTERPRISES INC

        500

        200

        BFSI B F S BANKORP INC

        500

        200

        BKCS B K C SEMICONDUCTORS

        500

        200

        BTGI BTGINC

        200

        500

        BTBTY B T SHIP SPONSOR ADR

        1000

        500

        BUMM BUM INTL INC

        200

        500

        BSST BABY SUPERSTORE INC

        500

        1000

        PAPA BACK BAY RESTAURANT

        1000

        500

        BPMI BADGER PAPER MILLS

        200

        500

        BWINB BALDWIN LYONS CL B

        500

        1000

        BGLV BALLY'S GRAND INC

        200

        500

        BGLVW BALLY'S GRAND INC WT

        200

        500

        BANF BANCFIRSTCP

        1000

        500

        BMCCP BANDO MCGLOC PFD A

        500

        200

        BARY BARRY'S JEWELERS INC

        200

        500

        BPILF BASIC PET INTL LTD

        500

        1000

        BTIOF BATTERY TECHS INC

        200

        500

        BRBC BAY RIDGE BNCP INC

        500

        1000

        BFSB BEDFORD BCSHS INC

        200

        500

        BEBA BEEBA S CREATIONS

        1000

        500

        BCMPY BELL CABLEMEDIA ADR

        500

        1000

        BELW BELLWETHER EXPL CO

        500

        1000

        BNHNA BENIHANA NATL CP A

        200

        500

        BFCX BENSON FINANCIAL CP

        200

        500

        BGAS BERKSHIRE GAS CO

        200

        500

        BEST BEST PRODS CO INC

        200

        500

        BETT BETTIS CP

        200

        500

        BLSC BIO LOGIC SYS CP

        1000

        500

        BPLX BIO-PLEXUS INC

        500

        1000

        BCRX BIOCRYST PHARM INC

        500

        1000

        BDTC BIODENTAL TECH CP

        200

        500

        BSSI BIOSAFETY SYSTEMS

        500

        1000

        BSEP BIOSEPRA INC

        500

        1000

        BINC BIOSPHERICS INC

        1000

        500

        BLIS BLISS LAUGHLIN INDS

        200

        500

        BLLE BOLLE AMERICA INC

        500

        1000

        BNSOF BONSO ELEC INTL INC

        200

        500

        BNSWF BONSO ELECT INTL WTS

        200

        500

        BORAY BORAL LTD ADS

        500

        200

        BOSA BOSTON ACOUSTICS INC

        500

        1000

        BPRXL BRADLEY PHARM WTS D

        200

        500

        BPRXA BRADLEY PHARMA A

        200

        500

        BPRXW BRADLEY PHARMA WTS A

        200

        500

        BPRXZ BRADLEY PHARMA WTS B

        200

        500

        BRCOA BRADY W H CO CL A

        1000

        500

        BTSB BRAINTREE SAV BK THE

        1000

        500

        BPTM BRIDGEPORT MACH INC

        500

        1000

        BRID BRIDGFORD FOODS CP

        500

        1000

        BNBC BROAD NATL BNCP

        200

        500

        BRKB BROOKLYN BNCP INC

        500

        1000

        BKST BROOKSTONE INC

        500

        1000

        BEAN BROTHERS GOURMET

        500

        1000

        BUCK BUCKHEAD AMERICA CP

        200

        500

        RARE BUGABOO CREEK STEAK

        500

        1000

        BOBJY BUSINESS OBJ S A ADS

        200

        500

               
        C      
        CBBI C B BANCSHARES INC

        500

        200

        CBTC CBTCP

        200

        500

        CBHI C BREWER HOMES INC A

        500

        1000

        CDPT C D P TECH INC

        500

        1000

        CFIB CFIINDSINC

        500

        200

        CFWC CFWCOMMUNCO

        200

        500

        FLYAF C H C HEI.ICO CL A

        1000

        500

        CIMC CI M C O INC

        1000

        500

        CMGI C M G INFO SVCS INC

        500

        1000

        CNBF C N B FINANCIAL CP

        500

        200

        CNXS CNSINC

        200

        500

        COSB C S B FINL CORP

        500

        1000

        CUBE C-CUBE MICROSYS INC

        500

        1000

        CLCI CADIZ LAND CO INC

        200

        500

        CLNP CALLON PETROLEUM CO

        200

        500

        HIFI CAMBRIDGE SOUNDWORKS

        500

        1000

        CMSH CAMERON ASHLEY INC

        500

        1000

        CANXA CANNON EXPRES INC A

        1000

        500

        CANXB CANNON EXPRESS INC B

        500

        200

        BIKE CANNONDALE CP

        500

        1000

        CNTBY CANTAB PHARM PLC ADR

        200

        500

        CABK CAPITAL BANCORP

        200

        500

        CAPS CAPITAL SAV BNCP INC

        200

        500

        CSWC CAPITAL SOUTHWEST CP

        500

        200

        CARD CARDINAL BSCHS INC

        200

        500

        CARH CAREER HORIZONS INC

        200

        500

        CBNJ CARNEGIE BANCORP

        200

        500

        CBNJW CARNEGIE BANCORP WTS

        200

        500

        CARV CARVER FED SAV BK

        200

        500

        CSCC CASCADE: COMMUN CP

        500

        1000

        CSNRW CASINO RES WTS A

        500

        1000

        CSNR CASINO RESOURCE CP

        500

        1000

        CATS CATALYST SEMICOND

        500

        1000

        CGMV CEDAR GROUP INC

        200

        500

        CLDN CELADON GROUP INC

        200

        500

        CCIL CELL COMM INTL INC

        500

        1000

        CLST CELLSTAR CP

        500

        1000

        CSBC CENTRAL & STHN HLD GA

        500

        200

        CETV CENTRAL EURO CL A

        500

        1000

        CNSP CENTRAL SPRINKLER CP

        500

        1000

        CTFC CENTRAL TRACTOR INC

        200

        500

        CPLX CERPLEX GROUP INC

        500

        1000

        CHPP CHAMPPS ENTERTAIN

        500

        1000

        CHANF CHANDLER INS CO LTD

        1000

        500

        CMFB CHEMFAB CP

        1000

        500

        CHERA CHERRY CPCL A

        500

        1000

        CVAL CHESTER VALLEY BNCP

        500

        200

        CINDF CINAR FILMS VTG CL B

        200

        500

        CNMWW CINCINNATI MICRO WTS

        200

        500

        CINE CINERGI PICTURES ENT

        500

        1000

        CINS CIRCLE INCOME SHARES

        1000

        500

        CAST CITATION CP

        500

        1000

        CITI CITICASTERS INC

        200

        500

        CICS CITIZENS BKSH INC

        200

        500

        CLNTF CLEARNET COMMUN CL A

        500

        1000

        CTRIS CLEVETRUST RLTY SBI

        500

        200

        CLDRP CLIFFS DRILLING PFD

        500

        200

        CNRG COASTWIDE ENERGY SER

        200

        500

        COBI COBANCORP INC

        500

        200

        CCSC COHERENT COMMUN SYS

        200

        500

        COHU COHU INC

        200

        500

        CTFG COLE TAYLOR FIN GRP

        200

        500

        CMCAF COMCAST UK CABLE

        200

        500

        CMTTF COMET SOFTWARE ORD

        200

        500

        CFBXZ COMM FIRST DEP SH

        500

        200

        CBKI COMMUNITY BANKS INC

        500

        200

        CBNH COMMUNITY BANKSHARES

        500

        1000

        CMSV COMMUNITY SAV F A

        200

        500

        CMSB COMNWLTH SAV BANK

        500

        1000

        CPTL COMPUTER TELE CL 1

        200

        500

        CHGR CONCORD HEALTH GRP

        200

        500

        CHGRW CONCORD HLTH GRP WTS

        200

        500

        CPLNY CONCORDIA PAPER ADS

        500

        1000

        COND CONDOR SVCS INC

        1000

        500

        CONE CONESTOGA BNCP INC

        500

        1000

        CTWS CONN WATER SVCS INC

        500

        1000

        COGI CONSOLIDATED GRAPHIC

        500

        1000

        CPSS CONSUMER PORTFOLIO

        200

        500

        CFIN CONSUMERS FIN CP

        500

        200

        CCCI CONTL CHOICE CARE

        200

        500

        CCCIW CONTL CHOICE WTS

        200

        500

        CONT CONTL WASTE INDS INC

        200

        500

        CEXCF CONWEST EXPLOR CO LD

        500

        200

        COOP COOPERATIVE BKSHS

        500

        1000

        CPRT COPARTINC

        500

        1000

        CORC CORCOM INC

        500

        1000

        CEXP CORP EXPRESS INC

        200

        500

        COSCB COSMETIC CENTER CL-B

        500

        1000

        CNSK COVENANT BK FOR SAV

        200

        500

        CVTI COVENANT TRANS INC A

        500

        1000

        CRTV CREATIVE TECH CP

        200

        500

        CGRO CROP GROWERS CP

        200

        500

        CRWN CROWN BOOKS CP

        1000

        500

        CYBX CYBERONICS INC

        1000

        500

               
        D      
        DNFCW D&NFINCPWTS

        1000

        500

        DEPCA DEP CORP CL A

        500

        1000

        DPKG D O L C O PKG CP

        200

        500

        DSPG DSPGROUPINC

        200

        500

        DTII D T INDUSTRIES INC

        500

        1000

        DAIG DAIG CP

        500

        1000

        DMCVA DAIRY MART STORES A

        1000

        500

        DMCVB DAIRY MART STORES B

        1000

        500

        DKTH DAKOTAH INC

        500

        1000

        DAKT DAKTRONICS INC

        500

        1000

        DARL DARLING INTL INC

        200

        500

        DARTA DART GROUPCPCLA

        500

        1000

        DBCC DATA BROADCASTING

        500

        1000

        DMCB DATA MEASUREMENT CP

        500

        1000

        DKEY DATAKEY INC

        1000

        500

        DMAR DATAMARINE INTL INC

        500

        1000

        DWCHW DATAWATCHCPWTS

        500

        1000

        DAWK DAW TECHNOLOGIES INC

        200

        500

        DEEP DEEPTECH INTL INC

        200

        500

        TRUX DEFLECTA-SHIELD CP

        500

        1000

        DOCP DELAWARE OTSEGO CP

        500

        200

        DEVC DEVCON INTL CP

        1000

        500

        DLGC DIALOGIC CORP

        500

        1000

        DMED D1AMETRICS MED INC

        200

        500

        DCPI DICK CLARK PROD INC

        1000

        500

        DLNK DIGITAL LINK CP

        200

        500

        DGIC DONEGAL GROUP INC

        500

        1000

        DHULZ DORCHESTER HUGO DR

        1000

        500

        DSYT DORSEY TRAILERS INC

        500

        1000

        DYPR DRYPERS CP

        500

        1000

        DUCK DUCKWALL-ALCO STORES

        200

        500

        DRMD DURAMED PHARM INC

        200

        500

        DWYR DWYER GROUP INC

        200

        500

        DRCO DYNAMICS RESEARCH CP

        500

        1000

               
        E      
        EBMA E & B MARINE INC

        200

        500

        ECCS E C C S INC

        500

        1000

        EMLTF EMCOLTD

        200

        500

        ERLY ERLY INDS INC

        200

        500

        ESSF E S S E F CP

        1000

        500

        EBSI EAGLE BANCSHARES

        500

        200

        EFCW EAGLE FINANCE CP

        200

        500

        EGFC EAGLE FINANCIAL CP

        200

        500

        EESI EASTERN ENVIRONM SVC

        1000

        500

        EATS EATERIES INC

        500

        1000

        EDMK EDMARK CP

        200

        500

        EDUC EDUCATIONAL DEV CP

        200

        500

        EMSI EFFECTIVE MGMT SYS

        500

        1000

        ELCN ELCOINDSINC

        500

        1000

        EFCX ELECTRIC FUEL CP

        500

        1000

        ELRC ELECTRO RENT CP

        500

        1000

        ETCIA ELECTRONIC TELECOM A

        500

        200

        ELTN ELTRON INTL INC

        200

        500

        EMCR EMCARE HOLDINGS INC

        500

        1000

        EMMS EMMIS BROADCASTING A

        500

        1000

        ENCC ENCORE COMPUTER CP

        200

        500

        ERCC ENERGY RESEARCH CP

        200

        500

        EWST ENERGY WEST INC

        500

        200

        EFBI ENTERPRISE FED BNCP

        200

        500

        EPIC EPIC DESIGN TECH INC

        200

        500

        ETRC EQUITRAC CP

        1000

        500

        ECU EQUITY CORP INTL

        500

        1000

        ENNS EQUITY INNS INC

        500

        1000

        ERNS ERNST HOME CENTER

        200

        500

        ESCA ESCALADE INC

        1000

        500

        ESMR ESMOR CORRECT SVCS

        500

        1000

        EVGMP EVERGRN MEDIA CP PFD

        500

        200

        XLTCP EXCEL TECH CONV PFD

        1000

        500

        EXTR EXSTAR FINANCIAL CP

        1000

        500

               
        F      
        FMBN F &MBANCORP (MD)

        200

        500

        FBTC FB&TFINANCIALCP

        200

        500

        FCBF FCB FINANCIAL CP

        500

        1000

        FHPCA F H P INTL CP PFD A

        500

        1000

        FACE FACELIFTERS HOME SYS

        200

        500

        FBARP FAMILY BRGN CP PFD A

        200

        500

        FGCI FAMILY GOLF CENTERS

        500

        1000

        FMCT FARMERS & MECH BANK

        500

        1000

        FTHR FEATHERLITEMFG

        200

        500

        FOBC FED ONE BANCORP INC

        200

        500

        FILAF FEDERAL INDS LTD A

        1000

        500

        FSCR FEDERAL SCREW WORKS

        200

        500

        FLCO FELCOR SUITE HOTELS

        200

        500

        FFFC FFVA FINANCIAL CORP

        200

        500

        FBST FIBERSTARS INC

        500

        1000

        FBCI FIDELITY BANCORP DEL

        200

        500

        FSBI FIDELITY BANCORP INC

        1000

        500

        FFFL FIDELITY FED SAV(FL)

        500

        1000

        FIBC FINANCIAL BNC INC

        200

        500

        FFSI FINANCING FOR SCI

        500

        1000

        FIRE FINL INST INS GP LTD

        200

        500

        ALRT FIRST ALERT INC

        200

        500

        FAHC FIRST AMER HEALTH

        200

        500

        FBSI FIRST BANCSHARES INC

        1000

        500

        FBNKP FIRST BKS CUM PFD C

        500

        200

        FCBK FIRST CHARTER BANK

        200

        500

        FCTR FIRST CHARTER CP

        500

        200

        FTCG FIRST COLONIAL GP

        1000

        500

        FCOMP FIRST COMMERCE PFD

        1000

        500

        FFDP FIRST FED BANCSHARES

        1000

        500

        FFEC FIRST FED EAU CLR

        200

        500

        FFFD FIRST FED FT DODGE

        200

        500

        FMAC FIRST MERCH ACCEP CP

        500

        1000

        FRME FIRST MERCHANTS CP

        500

        200

        CASH FIRST MIDWST FIN INC

        200

        500

        FMOR FIRST MTGE CP

        500

        200

        FMSB FIRST MUTUAL SAV BK

        200

        500

        FNGB FIRST NORTHERN SV BK

        500

        1000

        FPBK FIRST PATRIOT BKSR

        200

        500

        SOPN FIRST SAV BK MOORE

        200

        500

        SHEN FIRST SHENANGO BNCP

        1000

        500

        FUBC 1ST UNITED BANCORP

        500

        1000

        FAME FLAMEMASTER CP THE

        500

        200

        FNRI FLORES & RUCKS INC

        500

        1000

        FLSC FLORSHEIM SHOE CO

        200

        500

        FLRO FLUOROSCAN IMAG SYS

        200

        500

        FLROW FLUOROSCAN IMAG WTS

        200

        500

        FMXI FOAMEX INTL INC

        500

        1000

        FLMK FOILMARKINC

        200

        500

        FORE FORE SYSTEMS INC

        200

        500

        FSTM FORSTMANN & CO

        1000

        500

        FPAM FPA MED MGMT INC

        500

        1000

        FRES FRESH AMERICA CP

        500

        1000

        FRDM FRIEDMANS INC CL A

        500

        1000

        FFHH FSF FINANCIAL CP

        200

        500

        FUSN FUSION SYSTEMS CP

        500

        1000

               
        G      
        DRTK GTS DURATEK INC

        200

        500

        GZEA G Z A GEDENVIRONMENT

        1000

        500

        GAMBY GAMBRO ABB ADR

        500

        1000

        GWLD GAMING WORLD INTL

        200

        500

        GWLDW GAMING WORLD INTL WT

        200

        500

        GDMI GARDNER DENVER MACH

        200

        500

        GEER GEERLINGS & WADE INC

        500

        1000

        GPAR GEN PARAMETRICS CP

        1000

        500

        GCOR GENCOR INDS INC

        1000

        500

        GMED GENEMEDICINE INC

        500

        1000

        GNSAW GENSIA INC WTS

        200

        500

        GENZL GENZYME CP-TISSUE RP

        500

        1000

        BOTX GEORGIA BONDED FIBER

        500

        200

        GWRX GEOWORKS

        500

        1000

        GCHI GIANT CEMENT HLDG

        200

        500

        ROCK GIBRALTAR STEEL CP

        500

        1000

        GIGA GIGA TRONICS INC

        500

        1000

        GMKT GLOBAL MKT INFO INC

        500

        1000

        GMKTW GLOBAL MKT INFO WTS

        500

        1000

        GVIL GLOBAL VILLAGE COMMU

        500

        1000

        GLFE GOLF ENTERPRISES INC

        500

        1000

        GNCNF GORAN CAPITAL INC

        200

        500

        GOVTY GOVETT LTD ADR

        200

        500

        GPPV GRAFF-PAY-PER-VIEW

        500

        1000

        GRNTP GRANT GEOPHYS PFD

        1000

        500

        GCBK GREAT COUNTRY BANK

        1000

        500

        GTFN GREAT FINANCIAL CP

        200

        500

        GLUX GREAT LAKES AVIATION

        500

        1000

        GWALY GREAT WALL ADR

        1000

        500

        STON GREENSTONE INDS INC

        200

        500

        STONW GREENSTONE INDS WTS

        200

        500

        GSOF GROUP I SOFTWARE INC

        500

        200

        GLFD GUILFORD PHARM INC

        500

        1000

        GMRK GULFMARKINTL INC

        1000

        500

               
        H      
        HFFC HF FINANCIAL CP

        1000

        500

        HMGC H M G WORLDWIDE CP

        200

        500

        HMNF H M N FINANCIAL INC

        500

        1000

        HDVS H. D. VEST INC

        1000

        500

        NOSH HAIN FOOD GROUP INC

        500

        1000

        HALL HALLMARK CAP CP

        200

        500

        HAPY HAPPINESS EXPRESS

        200

        500

        HRBF HARBOR FED BNCP INC

        500

        1000

        HARB HARBOR FED SAV BK

        500

        1000

        HARC HARCOR ENERGY INC

        200

        500

        HNBC HARLEYSVILLE NATL CP

        200

        500

        NHWK HARRIS COMPUTER SYS

        500

        1000

        HAVAB HARVARD INDS CL B

        500

        1000

        HRVY HARVEY ENTERTAIN CO

        200

        500

        HSKL HASKEL INTL INC CL A

        200

        500

        HTHR HAWTHORNE FINANCIAL

        1000

        500

        HPWR HEALTH POWER INC

        500

        1000

        HOAM HEALTHWISE OF AMER

        500

        1000

        HART HEARTLAND WIRELESS

        200

        500

        HBCCA HEFTEL BRDCSTG CP A

        500

        1000

        HEIDF HEIDEMIJ N.V.

        200

        500

        HMSR HEMASURE INC

        500

        1000

        HFBS HERITAGE FED BANCSH

        200

        500

        HILI HILITE INDS INC

        200

        500

        HIFS HINGHAM INSTI SAVING

        500

        200

        HNFC HINSDALEFINLCP

        1000

        500

        HRSH HIRSCHINTLCPCLA

        500

        1000

        HLGRF HOLLINGER INC

        1000

        500

        HPRKZ HOLLYWOOD PK DEP SHS

        1000

        500

        HOLO HOLOPAK TECHS INC

        1000

        500

        HLPH HOLOPHANE CP

        500

        1000

        HFMD HOME FED CP

        1000

        500

        HPBC HOME PORT BNCP INC

        1000

        500

        HTPI HOME THEATER PROD

        200

        500

        HMCI HOMECORP INC

        500

        200

        HZWV HORIZON BNCP INC

        500

        200

        HOSP HOSPOSABLE PROD INC

        500

        200

        HUGO HUGOTON ENERGY CP

        200

        500

        HTCC HUNGARIAN TELEPHONE

        200

        500

               
        I      
        ISGTF I S G TECH INC

        500

        1000

        IVFAP IVFAMERINCPFD

        1000

        500

        IVIP IVI PUBLISHING INC

        500

        1000

        JEWLF IW I HOLDING LTD

        200

        500

        IBSF IBS FINANCIAL CORP

        200

        500

        IDMCW IDM ENVIRON WTS A

        200

        500

        IDMC IDM ENVIRONMENTAL CP

        200

        500

        IGEN IGEN INC

        500

        1000

        IMAXF IMAX CORP

        500

        1000

        INHO INDEPENDENCE HLDG CO

        1000

        500

        IFSL INDIANA FED CP

        1000

        500

        INDGF INDIGO N.V.

        500

        1000

        ISCX INDUSTRIAL SCI CORP

        1000

        500

        ITCC INDUSTRIAL TRAINING

        500

        1000

        IREG INFOR RES ENGINEER

        500

        1000

        INHL INHALE THERAP SYS

        200

        500

        NKPR INNKEEPERS USA TRUST

        200

        500

        IGCA INNOVATIVE GAMING CP

        200

        500

        IMMI INPHYNET MED MGMT

        500

        1000

        IPEC INTEGRATED PROCESS

        200

        500

        ITGR INTEGRITY MUSIC A

        500

        1000

        ISLSW INTELLIGENT SUR WT A

        200

        500

        ISLSL INTELLIGENT SUR WT B

        200

        500

        INTG INTERGROUPCPTHE

        200

        500

        IPICZ INTERNEURON WTS B

        1000

        500

        INTR INTERSCIENCE COMP CP

        500

        1000

        INTRW INTERSCIENCE COMP WT

        200

        500

        IMPTY INTGRATED MICRO ADS

        200

        500

        POST INTL POST LIMITED

        200

        500

        ITGI INVESTMENT TECH GRP

        500

        1000

        IPCI IPC INFO SYSTEMS INC

        200

        500

        OREX ISOLYSER CO INC

        200

        500

        ILDCY ISRAEL DEVEL LTD ADR

        200

        500

        ITII ITI TECHNOLOGIES INC

        500

        1000

               
        J      
        JGIN J G INDUSTRIES INC

        500

        200

        JPFS JP FOODSERVICE INC

        200

        500

        JCORW JACOR COMMUN INC WTS

        500

        200

        JANNF JANNOCK LIMITED

        500

        200

        JEBC JEFFERSON BNCP (LA)

        200

        500

        JJSC JEFFERSON SMURFIT CP

        500

        1000

        JOSB JOS A BANK CLOTHIERS

        500

        1000

        FEET JUST FOR FEET INC

        500

        1000

               
        K      
        KBKC KB K CAPITAL CP

        500

        1000

        KTII KTRONINTLINC

        500

        1000

        KHLR KAHLER REALTY CP

        500

        1000

        KYMDA KENTUCKY MED INS A

        1000

        500

        KIDD KIDDIE PRODUCTS INC

        200

        500

        KLRT KLEINERTS INC

        200

        500

        KNGT KNIGHT TRANS INC

        200

        500

        KRUG KRUG INTL CP

        1000

        500

        KURZ KURZWEIL APPLIED INT

        200

        500

               
        L      
        LFSB L F S BNCP INC

        500

        1000

        LVMHY LVMHMOETADR

        500

        1000

        LJPC LAJOLLAPHARMCO

        200

        500

        UPCW LA JOLLA PHARM CO WT

        200

        500

        LCLD LACLEDE STEEL CO

        500

        1000

        BOOT LACROSSE FOOTWEAR

        200

        500

        LVSB LAKEVIEW FIN CP

        500

        1000

        LAND LANDAIR SERVICES INC

        500

        1000

        LARK LANDMARK BSCHS INC

        200

        500

        LACI LATIN AMER CASINOS

        1000

        500

        LFED LEEDS FED SAV BANK

        200

        500

        LIBT LIBERTY TECHS INC

        500

        1000

        LIFB LIFE BANCORP INC

        500

        1000

        LGND LIGAND PHARM INC B

        200

        500

        LNTV LIN TELEVISION CP

        200

        500

        LNDL LINDAL CEDAR HOMES

        500

        1000

        LIQB LIQUI BOX CP

        500

        1000

        LOFSY LONDON & OVERSEA ADR

        200

        500

        LONDY LONDON INTL PLC ADR

        500

        200

        LORX LORONIX INFO SYS INC

        200

        500

        LEIX LOWRANCE ELECTRONICS

        1000

        500

        LUFK LUFKININDS INC

        1000

        500

               
        M      
        MFBC M F B CORP

        500

        1000

        MHMY M H MEYERSON & CO

        500

        1000

        MKAU M K GOLD CO

        200

        500

        MKRL M K RAIL CP

        200

        500

        MLXR M L X CORP

        200

        500

        MROC M O N R O C INC

        200

        500

        MTIC M TI TECH CORP

        500

        1000

        MTLI MTLINC

        500

        1000

        MACD MACDERMID INC

        200

        500

        MMRI MACHEEZMO MOUSE REST

        200

        500

        MACR MACROMEDIA INC

        500

        1000

        OSKY MAHASKAINV CO

        200

        500

        MKTAY MAKITA CP SPONS ADR

        1000

        500

        MANA MANATRON INC

        1000

        500

        MGAS MARCUM NATURAL GAS

        500

        1000

        MRSA MARISA CHRISTINA INC

        200

        500

        MFAC MARKET FACTS INC

        500

        200

        MARSA MARSH SUPERMARKETS A

        1000

        500

        MFCX MARSHALLTOWN FIN CP

        200

        500

        MATK MARTEK BIOSCIENCE CP

        500

        1000

        MRCF MARTIN COLOR-FI INC

        1000

        500

        MSDX MASON-DIXON BCSHS

        200

        500

        MATW MATTHEWS INTL CP A

        200

        500

        MTSN MATTSON TECH INC

        200

        500

        MAVK MAVERICK TUBE CORP

        200

        500

        MAXM MAXIM GROUP INC

        500

        1000

        MXWL MAXWELL LABS INC

        1000

        500

        MAXS MAXWELL SHOE CO CL A

        200

        500

        MOXY MCMORAN OIL & GAS CO

        200

        500

        MBRK MEADOWBROOK REH CL-A

        1000

        500

        MCTH MEDCATHINC

        500

        1000

        ARTS MEDIA ARTS GROUP INC

        200

        500

        MMGT MEDICAL MGMT INC

        500

        1000

        MDCLW MEDICALCONTL INC WTS

        200

        500

        MDCL MEDICALCONTROL INC

        200

        500

        MSNS MEDISENSE INC

        200

        500

        MEGT MEGATEST CP

        500

        1000

        MEGO MEGO F[NL CP

        200

        500

        MMTCY MEMTEC LTD ADR NEW

        200

        500

        MBVT MERCHANTS BANCSHARES

        500

        200

        MBIA MERCHANTS BNCP IL

        500

        1000

        MERQ MERCURY INTERACTIVE

        500

        1000

        MERX MERIX CP

        500

        1000

        MFIN METRO FINLCP

        500

        200

        MTLG METROLOGICINSTR INC

        500

        1000

        MNCO MICHIGAN NATL CP

        1000

        500

        MICM MICOM COMMUN CP

        500

        1000

        MCRL MICREL INC

        200

        500

        MICN MICRION CP

        200

        500

        MIFGY MICRO FOCUS SPON ADR

        1000

        500

        MLIN MICRO LINEAR CORP

        200

        500

        MINT MICRO-INTEGRATION CP

        200

        500

        MPIX MICROELCT PACKAGING

        500

        1000

        MTEC MICROTEC RES INC

        200

        500

        MCBS MID CONT BCSHS INC

        500

        1000

        MIDS MID SOUTH INS CO

        500

        1000

        MSEX MIDDLESEX WATER CO

        200

        500

        MIDI MIDISOFT CORP

        200

        500

        MTIK MILLER BUILDNG SYS

        1000

        500

        MILL MILLER INDS INC

        200

        500

        MFFC MILTON FED FINL CP

        500

        1000

        MECC MINN EDUCAT COMP CP

        200

        500

        MMAN MINUTEMANINTL INC

        500

        200

        MISS MISSISSIPPI CHEMICAL

        500

        1000

        MITY MITY-LITEINC

        200

        500

        MBLYA MOBLEY ENVIRO SVCS A

        1000

        500

        MODL MODEL IMPERIAL INC

        200

        500

        MODT MODTECH INC

        1000

        500

        PSTA MONTEREY PASTA CO

        500

        1000

        MORP MOORE PRODUCTS CO

        200

        500

        MOTR MOTOR CLUB OF AMER

        500

        1000

        MPAA MOTORCAR PARTS&ACCES

        500

        1000

        MOVI MOVIE GALLERY INC

        500

        1000

        MOFN MOVIEFONE INC CL A

        200

        500

        LABL MULTI COLOR CP

        1000

        500

        RDIOA MULTI-MKT RADIO CL A

        200

        500

        RDIOW MULTI-MKT RADIO WT A

        200

        500

        RDIOZ MULTI-MKT RADIO WT B

        200

        500

               
        N      
        NBTB N B T BANCORP INC

        500

        1000

        AGVS N D C AUTOM INC

        500

        1000

        NNBR N N BALL & ROLLER

        500

        1000

        NSAI N S A INTL INC

        1000

        500

        NSCC NSC CORPORATION

        1000

        500

        NAGC NATIONAL GAMING CP

        200

        500

        POPS NATLBEVERAGE CP

        1000

        500

        NCBE NATL CITY BANCSHARES

        500

        200

        NCBM NATL CITY BNCP

        1000

        500

        NADX NATL DENTEX CP

        500

        1000

        NIRTS NATL INCOME RLT TRUS

        1000

        500

        NAIG NATL INSURANCE GP

        1000

        500

        NSSX NATL SANITARY SUPPLY

        500

        200

        NMSS NATURAL MICROSYS CP

        500

        1000

        NAVG NAVIGATORS GP INC

        1000

        500

        NEOG NEOGEN CP

        200

        500

        NEOS NEOSTAR RETAIL GROUP

        500

        1000

        NIIUF NEOZYMEII UTS

        500

        1000

        NETC NETCOM ON-LINE COMMU

        500

        1000

        IMGXW NETWORK IMAGING WTS

        1000

        500

        NPIX NETWORK PERIPHERALS

        500

        1000

        NTH NEUROBIO TECH INC

        500

        1000

        NWCG NEW WORLD COMMUN A

        200

        500

        NWPC NEW WORLD POWER NEW

        500

        1000

        NMSB NEWMIL BANCORP

        1000

        500

        V1SNZ NEWVIS1ON RED WTS

        200

        500

        VISN NEWVISION TECH INC

        200

        500

        VISNW NEWVISION TECH WTS

        200

        500

        NXTR NEXSTAR PHARM INC

        500

        1000

        NDCOO NOBLE DRILL CV PFD

        200

        500

        NRTI NOONEY REALTY TRUST

        500

        200

        NORL NORRELL CP

        200

        500

        NBSI NORTH BSCHS INC

        200

        500

        NSCF NORTHSTAR COMPUTER

        200

        500

        NWAC NORTHWEST AIRLN CL A

        500

        1000

        NWSB NORTHWEST SAV BK

        500

        1000

        NWTL NORTHWEST TELEPROD

        1000

        500

        NSSY NORWALK SAV SOCIETY

        200

        500

        NORWY NORWEB PLC ADR

        500

        1000

        NPPI NORWOOD PROM PRODS

        500

        1000

        NMTXW NOVAMETRIX MED WTS A

        200

        500

        NMTXZ NOVAMETRIX MED WTS B

        200

        500

        FERTP NU WEST INDS PF A

        500

        200

        NUCM NUCLEAR METALS INC

        1000

        500

        NUMR NUMARCP

        500

        1000

        NYCO NYCOR INC

        1000

        500

        NYCOA NYCORINCCLA

        1000

        500

        NYCOP NYCOR INC PFD

        500

        200

               
        O      
        OSBF O S B FINANCIAL CP

        500

        200

        OHSC OAK HILL SPORTSWEAR

        1000

        500

        ODETA ODETICS INC CL A

        200

        500

        ODETB ODETICS INC CL B

        200

        500

        OLGR OILGEAR CO

        200

        500

        OLHC OLD LYME HOLDING CP

        1000

        500

        ZEUS OLYMPIC STEEL INC

        500

        1000

        OPPCF OPTIMA PETROLEUM CP

        500

        1000

        ORRA ORBIT SEMICON INC

        200

        500

        ORTL ORTEL CP

        200

        500

        OCAI ORTHODONTIC CENTERS

        200

        500

        GOSHB OSHKOSH B GOSH CL B

        500

        200

        OFCP OTTAWA FINANCIAL CP

        200

        500

        OCOMA OUTLET COMMUN CL-A

        500

        1000

        OWOS OWOSSO CP

        200

        500

               
        P      
        PCSS P C SVC SOURCE INC

        500

        1000

        PDSF P D S FINANCIAL CP

        200

        500

        PICM PIC O M INS CO

        200

        500

        PMRP PMRCP

        500

        1000

        PMTS P M T SERVICES INC

        200

        500

        PRIA P RI AUTOMATION INC

        200

        500

        PCCI PACIFIC CREST CAP

        200

        500

        PSUN PACIFIC SUNWEAR CAL

        500

        1000

        PLLL PARALLEL PET CP

        200

        500

        PKWY PARKWAY CO

        200

        500

        PRLX PARLEX CP

        500

        1000

        PTEN PATTERSON ENERGY INC

        500

        1000

        PSON PAUL-SON GAMING CP

        500

        1000

        PSAI PEDIATRIC SVC AMER

        200

        500

        PMFG PEERLESS MFG CO

        500

        1000

        PTAC PENN TREATY AMER CP

        500

        1000

        PVIR PENN VIRGINIA CP

        500

        1000

        PAGI PENN-AMERICA GRP INC

        1000

        500

        PBCTP PEOPLES BKPFD(CT)

        1000

        500

        PEBO PEOPLES BNCP INC OH

        200

        500

        PERM PERMANENT BNCP INC

        200

        500

        PMFI PERPETUAL MIDWEST

        200

        500

        PTCCZ PERSEPTTVE TEC II UT

        200

        500

        TPMI PERSONNEL MGMT INC

        200

        500

        PFWA PET FOOD WAREHSE INC

        500

        1000

        PETC PETCO ANIMAL SUP INC

        200

        500

        PNTGF PETROMET RES LTD

        200

        500

        PHAM PHAMIS INC

        500

        1000

        PHARY PHARMACIA AKTIA ADR

        500

        1000

        PHOC PHOTO CONTROL CP

        1000

        500

        PHYN PHYSICIAN RELIANCE

        500

        1000

        PSSI PHYSICIANS SALES&SVC

        200

        500

        PIR PIEMONTE FOODS INC

        500

        200

        PGDA PIERCING PAGODA INC

        200

        500

        PCLE PINNACLE SYSTEMS INC

        200

        500

        PLEN PLENUM PUBLISHING CP

        500

        1000

        POLK POLK AUDIO INC

        200

        500

        PRTV POSITIVE RESPONSE TV

        200

        500

        PBKC PREMIER BKSHS

        500

        200

        PREN PRICE ENTERPR INC

        500

        1000

        PSAB PRIME BNCP INC

        1000

        500

        PRES PRIME RESIDENTIAL

        500

        1000

        PNBC PRINCETON NATL BNCP

        200

        500

        PSCM PRO SPORTS CARE MGMT

        500

        1000

        PRCT PROCEPT INC

        500

        1000

        PSDI PROJECT SOFTWRE & DV

        500

        1000

        PXXI PROPHET 21 INC

        500

        1000

        PROS PROSPECT GROUP INC

        500

        200

               
        Q      
        QLGC QLOGIC CP

        200

        500

        QSYS QUAD SYSTEMS CP

        500

        1000

        QDIN QUALITY DINING INC

        500

        1000

        QSII QUALITY SYSTEMS INC

        500

        1000

        QDELW QUIDELCPWTS2000

        1000

        500

        QUIP QUIPP INC

        200

        500

        QHGI QUORUM HEALTH GP INC

        200

        500

               
        R      
        RACO RACOTEK INC

        500

        1000

        RADAF RADICA GAMES LTD

        200

        500

        RMPO RAMAPO FINANCIAL CP

        500

        1000

        RMTR RAMTRON INTL CP

        200

        500

        RARB RARITAN BANCORP INC

        200

        500

        REDI REDDI BRAKE SUPPLY

        200

        500

        RDMN REDMAN INDUSTRIES

        500

        1000

        REED REEDS JEWELERS INC

        500

        200

        RFTN REFLECTONEINC

        1000

        500

        RELY RELIANCE BNCP INC

        500

        1000

        RSFCP REPUBLIC SEC PFD A

        500

        200

        RESR RESEARCH INC

        500

        200

        RSND RESOUND CORP

        500

        1000

        RCRE RETIREMENT CARE ASSO

        200

        500

        RPCLF REVENUE PROP LTD

        1000

        500

        REXW REXWORKS INC

        1000

        500

        RFMI RF MONOLITHICS INC

        200

        500

        RIDE RIDE SNOWBOARD CO

        200

        500

        RIMG RIMAGE CP

        1000

        500

        RFBC RIVER FOREST BNCP

        500

        1000

        RSGI RIVERSIDE GP INC

        500

        200

        RNRC RIVERSIDE NATL BANK

        200

        500

        RESC ROANOKE ELEC STEEL

        1000

        500

        ROBN ROBBINS AND MYERS

        500

        1000

        RCSBP ROCHESTER COM PFD B

        500

        1000

        BREW ROCK BOTTOM RESTR

        500

        1000

        OTCM ROYCE OTC MICRO-CAP

        500

        1000

        RBCO RYAN BECK CO INC

        1000

        500

               
        S      
        SBSE S B S ENGINEERING

        200

        500

        SFXBA S F X BRDCST CL A

        500

        1000

        SIHS S I HANDLING SYS INC

        1000

        500

        SUGN S U G E N INC

        200

        500

        ABAG SAFETY COMPONENTS

        500

        1000

        SCHR SCHERER HEALTHCARE

        500

        1000

        STIZ SCIENTIFIC TECH INC

        1000

        500

        SCGN SCIGENICS INC CLLBLE

        1000

        500

        SCOT SCOTT AND STRINGFELL

        200

        500

        SEWY SEAWAY FOOD TOWN INC

        500

        200

        SDTI SECURITY DYNAMICS

        200

        500

        SEMCF SEMI-TECH CP VTG A

        1000

        500

        SENE SENECA FOODS CP

        200

        500

        SEVN SEVENSON ENVIRONMENT

        1000

        500

        SEVL 7TH LEVEL INC

        500

        1000

        SSBC SHELTON BNCP INC

        200

        500

        SHVA SHIVA CP

        200

        500

        SMFC SHO-ME FINANCIAL CP

        500

        1000

        SLFC SHORELINE FINCP

        500

        200

        SHFL SHUFFLE MASTER INC  

        1000

        SIGA SIGMA CIRCUITS INC

        200

        500

        SGMA SIGMATRON INTL INC

        500

        1000

        SFNCA SIMMONS FIRST NATL A

        1000

        500

        SIMM SIMMONS OUTDOOR CP

        500

        1000

        SMCO SIMPSON MFG CO

        200

        500

        SINGW SINGING MACH CO WTS

        500

        1000

        SING SINGING MACHINE CO

        500

        1000

        SIRN SIRENA APPAREL GP

        200

        500

        FISH SMALL'S OILFIELD

        1000

        500

        HAMS SMITHFIELD CO INC

        200

        500

        SDSK SOFTDESK INC

        500

        1000

        SKEY SOFTKEY INTL INC NEW

        500

        1000

        SOMR SOMERSET GP INC THE

        500

        200

        SNIC SONIC SOLUTIONS

        200

        500

        SMBC SOUTHERN MO BNCP INC

        500

        1000

        SWBI SOUTHWEST BANCSHARES

        I0O0

        500

        OKSB SOUTHWEST BNCP INC

        1000

        500

        SWWC SOUTHWEST WATER CO

        1000

        500

        SCTRW SPECIALTY TELE WTS

        200

        500

        SCTR SPECIALTY TELECONSTR

        200

        500

        DIAGF SPECTRAL DIAGNOSTICS

        200

        500

        SPCT SPECTRIAN CP

        200

        500

        SPIR SPIRE CP

        500

        200

        SPOR SPORT-HALEY INC

        500

        1000

        SPMTA SPORTMART INC A

        500

        1000

        SPKL SPRECKELS INDS CL A

        500

        1000

        SQAI SQUARE INDUSTRIES

        200

        500

        STND STANDARD FIN INC

        200

        500

        STLY STANLEY FURNITURE

        1000

        500

        SBNP STATE BSCHS INC

        500

        1000

        SBIB STERLING BCSHS TX

        500

        1000

        PGMS STILLWATER MINING CO

        500

        1000

        STIM STIMSONITE CP

        200

        500

        STRD STRATEGIC DIST INC

        200

        500

        TOWV STRATOSHERE CP

        200

        500

        TOWVW STRATOSHERE CP WTS

        200

        500

        STRO STROUDS INC

        200

        500

        STUA STUART ENTERTAINMENT

        1000

        500

        SUBM SUBMICRON SYSTEMS

        200

        500

        SBCN SUBURBAN BNCP

        500

        1000

        SUMI SUMITOMO BANK OF CA

        1000

        500

        SBIT SUMMIT BCSHS INC TX

        200

        500

        SUBI SUN BANCORP INC

        500

        200

        SIHLF SUN INTL HOTELS A

        1000

        500

        SRBC SUNRISE BNCP CALIF

        1000

        500

        SILVW SUNSHINE MINING WTS

        200

        500

        SCON SUPERCONDUCTOR TECHS

        500

        1000

        SWSH SWISHER INTL INC

        1000

        500

        SYSF SYSTEMSOFT CP

        200

        500

               
        T      
        TFCE TFCENTERPRINC

        500

        1000

        TIII T I I INDUSTRIES INC

        200

        500

        CFON TARGET TECH INC

        500

        1000

        TGEN TARGETED GENETICS CP

        200

        500

        TKOCF TASEKO MINES LTD

        200

        500

        TOFF TATHAM OFFSHORE INC

        500

        1000

        TBUD TEAM RENTAL GRP INC

        200

        500

        TENXF TEE-COMM ELECTRONICS

        500

        1000

        TCOMP TELE COMMUN PFD B

        500

        200

        TWSTY TELEWEST COMMUN ADR

        200

        500

        WRLS TELULAR CP

        500

        1000

        TESS TESSCO TECH INC

        500

        1000

        TRBS TEXAS REGIONAL CL A

        200

        500

        HBGI THE HOLSON BURNES GP

        1000

        500

        RHOM THE ROTTLUND CO

        1000

        500

        SBLT THE SUNBELT CO

        1000

        500

        TDHC THERMADYNE HLDGS CP

        200

        500

        TGIS THOMAS GROUP INC

        500

        1000

        TMSTA THOMASTON MILLS A

        1000

        500

        THOM THOMPSON PBE INC

        500

        1000

        TBDI TMBR/SHARP DRILL INC

        200

        500

        TODDA TODD A O CP CL A

        200

        500

        TCIX TOTAL CONTAINMENT

        200

        500

        TELU TOTAL-TEL USA COMMUN

        1000

        500

        TWER TOWER AUTOMOTIVE INC

        200

        500

        TSEMF TOWER SEMICONDUCTOR

        200

        500

        TTRRW TRACOR INC WTS A

        500

        1000

        TSCO TRACTOR SUPPLY CO

        500

        1000

        TCAM TRANS CP OF AMER INC

        500

        1000

        TRNI TRANS INDS INC

        500

        200

        IBET TRANS WORLD GAMING

        200

        500

        IBETW TRANS WORLD GAMNG WT

        200

        500

        TREX TRANSNATL RE CORP A

        500

        1000

        TTXG TRANSTEXAS GAS CO

        500

        1000

        TWBC TRANSWORLD BNCP

        500

        200

        TWHH TRANSWORLD HOME HLTH

        200

        500

        TWHHW TRANSWORLD HOME WTS

        200

        500

        TRED TREADCOINC

        1000

        500

        TPIFY TR1 POLYTAINDO ADR

        200

        500

        TCBK TRICO BANCSHARES

        200

        500

        TRCD TRICORD SYSTEMS INC

        500

        1000

        TRPS TRIPOS INC

        200

        500

        TRSM TRISM INC

        500

        1000

        THBC TROY HILL BNCP INC

        200

        500

        TFCO TUFCO TECHS INC

        1000

        500

               
        U      
        UBSH UNION BANKSHARES CP

        1000

        500

        UTII UNITECHINDS INC

        200

        500

        UFCS UNITED FIRE CASUALTY

        500

        200

        UNBJ UNITED NATL BNCP

        200

        500

        UNEWY UNITED NEWSPAPER ADR

        200

        500

        UBMT UNITED SAV BKFAMT

        1000

        500

        UHCO UNIV HOLDING CP

        1000

        500

        UFPI UNIVERSAL FOREST PRO

        500

        1000

        URMD UROMED CP

        500

        1000

        XPRSA US XPRESS ENTRP CL A

        200

        500

               
        V      
        VALN VALLEN CP

        1000

        500

        VALE VALLEY SYSTEMS INC

        1000

        500

        VJET VALUJET AIRLINES INC

        200

        500

        VFLX VARIFLEX INC

        200

        500

        VGHN VAUGHN COMMUN INC

        500

        1000

        VTRA VECTRA BANKING CP

        500

        1000

        VECO VEECO INSTRUMENT INC

        500

        1000

        VENGF VENGOLD INC

        200

        500

        VCNB VENTURA COUNTY NATL

        1000

        500

        VENT VENTURIAN CP

        200

        500

        VRTS VERITAS SOFTWARE CP

        1000

        500

        BEAR VERMONT TEDDY BEAR

        200

        500

        VIGN VIAGENE INC

        500

        1000

        VDNX VIDEONICS INC

        200

        500

        VVUS VIVUS INC

        500

        1000

        VOLT VOLT INFO SCIENCES

        500

        1000

               
        W      
        WBCI W F S BANCORP INC

        200

        500

        BKLYZ W R BERKLEY DEP SHR

        500

        1000

        WRTEP WRTENERGYCPPFD

        500

        1000

        WSMP WSMP1NC

        500

        200

        WTDI WTDINDSINC

        500

        1000

        WVFC W V S FINANCIAL CP

        1000

        500

        WCCX WACKENHUT CORRECT GP

        500

        1000

        WGTI WANDEL & GOLTERMANN

        500

        1000

        WANG WANG LABS INC DEL

        500

        1000

        WANGW WANG LABS INC WTS

        500

        1000

        WAVX WAVE SYSTEMS CP A

        500

        1000

        WAVT WAVE TECH INTL INC

        500

        1000

        WAVO WAVEPHORE INC

        200

        500

        WELC WELCOME HOME INC

        200

        500

        WCSTF WESCAST INDS INC A

        500

        1000

        WCBO WEST COAST BNCP ORE

        500

        1000

        WABC WESTAMERICA BNCP

        500

        1000

        WBKC WESTBANK CORP

        200

        500

        WCBI WESTCO BANCORP

        1000

        500

        WSTR WESTERFED FIN CP

        500

        1000

        WSBK WESTERN BANK OREGON

        1000

        500

        WOFC WESTERN OHIO FIN

        200

        500

        WBAT WESTPORT BNCP INC

        500

        1000

        WHRC WHITE RIVER CP

        1000

        500

        CELL WHOLESALE CELL USA

        500

        1000

        WIKS WICKES LUMBER CO

        500

        1000

        WMCO WILLIAMS CONTROLS

        200

        500

        WCII WINSTAR COMMUN INC

        200

        500

        WCHI WORKINGMENS CAP HLDG

        200

        500

               
        X      
        XNET XCELLENETINC

        500

        1000

        XPLR XPLOR CP

        500

        200

               
        Y      
        YFED YORK FINANCIAL CP

        1000

        500

        YBTVA YOUNG BRDCSTG INC A

        200

        500

        YSII YOUTH SVCS INTL INC

        500

        1000

               
        Z      
        ZALEW ZALE CP WTS A

        500

        1000

        ZING ZING TECHS INC

        500

        1000


        1 33 of the Nasdaq National Market securities subjected to the SOES tier-size reranking procedures on March 31, 1995, are no longer Nasdaq National Market securities.

      • 95-90 Thanksgiving Day: Trade Date-Settlement Date Schedule

        SUGGESTED ROUTING

        Internal Audit
        Legal & Compliance
        Municipal
        Operations
        Syndicate
        Systems
        Trading

        The Nasdaq Stock Market™ and the securities exchanges will be closed on Thursday, November 23, in observance of Thanksgiving Day. "Regular way" transactions made on the business days rioted below will be subject to the following schedule:

        Trade Date

        Settlement Date

        Reg. T Date*

        Nov. 17

        Nov. 22

        Nov. 27

        20

        24

        28

        21

        27

        29

        22

        28

        30

        23

        Markets Closed

        24

        29

        Dec. 1

        * Pursuant to Sections 220.8(b)(1) and (4) of Reg. T of the Federal Reserve Board, a broker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a cash account if full payment is not received within five business days of the date of purchase or, pursuant to Section 220.8(d)(1), make application to extend the time period specified. The date by which members must take such action is shown in the column titled "Reg. T Date."

        Brokers, dealers, and municipal securities dealers should use these settlement dates to clear and settle transactions pursuant to the NASD Uniform Practice Code and Municipal Securities Rulemaking Board Rule G-12 on Uniform Practice.

        Questions regarding the application of these settlement dates to a particular situation may be directed to the NASD Uniform Practice Department at (203) 375–9609.

      • 95-89 Broker/Dealer And Agent Renewals For 1996;

        Dues Must Be Paid By December 15, 1995

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance
        Operations
        Registration

        Executive Summary

        The 1995–96 NASD® broker/dealer and agent registration renewal cycle begins in early November. This program simplifies the registration renewal process through the payment of one invoiced amount that includes fees for NASD personnel assessments, NASD branch offices, New York Stock Exchange (NYSE), American Stock Exchange (AMEX), Chicago Board Options Exchange (CBOE), Pacific Stock Exchange (PSE), and Philadelphia Stock Exchange (PHLX) maintenance fees. The invoice also includes state agent renewal fees and state broker/dealer renewal fees.

        Members should read this Notice and the instruction materials to be sent with the November invoice package to ensure continued eligibility to do business in their respective states effective January 1, 1996.

        Initial Renewal Invoices

        In early November, initial renewal invoices will be mailed to all member firms. The invoices will include fees for NASD personnel assessments, NASD branch-office fees, NYSE, AMEX, CBOE, PSE, and PHLX maintenance fees, state agent renewal fees, and state broker/dealer renewal fees. The NASD must receive full payment of the November invoice no later than December 15, 1995.

        NASD personnel assessments for 1996 will be based on the number of registered personnel with an approved NASD license as of December 31, 1995. That personnel assessment is currently $10 per person. NASD branch office assessments is $75 per branch based on the number of active branches as of December 31, 1995.

        Agent renewal fees for NYSE, AMEX, CBOE, PSE, PHLX, and state affiliations are listed in a matrix enclosed with each invoice. The matrix includes a list of broker/dealer renewal fees for states that participate in the broker/dealer renewal program. NYSE, AMEX, CBOE, PSE, and PHLX maintenance fees—collected by the NASD for firms that are registered with those exchanges as well as the NASD—are based on the number of NYSE-, AMEX-, CBOE-, PSE-, and PHLX-registered personnel employed by the member.

        If a state does not participate in this year's broker/dealer renewal program, members registered in that state must contact the state directly to ensure compliance with renewal requirements. Some participating states may require steps beyond the payment of renewal fees to complete the broker/dealer renewal process. Members should contact states directly for further information on state renewal requirements.

        Payment of the initial invoice should l>e by check, made payable to the National Association of Securities Dealers, Inc., or by bank wire transfer. The check should be drawn on the member firm's account, with the firm's Central Registration Depository (CRDSM) number on the check. Submit the check along with the top portion of the invoice and mail in the return envelope provided. To ensure prompt processing, do not include the renewal invoice payment with other forms or fee submissions. Members should be advised that failure to return payment to the NASD by the December 15, 1995, deadline could result in an immediate ineligibility to do business in their respective states effective January 1, 1996.

        Filing Forms U-5

        Members may avoid paying unnecessary renewal fees by filing Forms U-5 for agents terminating in one or more jurisdiction affiliations. Due to the positive feedback received by the NASD by its member firms that used post-dated Forms U-5 for renewals, the NASD will again accept postdated agent termination notices on Forms U-5. From November 1 to December 15, the NASD will accept and process Forms U-5 (partial and full terminations) with post-dated dates of termination. Under this procedure, if the Form U-5 indicates a termination date of December 31, 1995, an agent may continue doing business in a jurisdiction until the end of the calendar year without being assessed renewal fees for that jurisdiction. Please ensure that Forms U-5 are filed by the renewal deadline date of December 15, 1995. Also, post-dated Forms U-5 cannot be processed if the date of termination is after December 31, 1995.

        Members should exercise care when submitting post-dated Forms U-5. The NASD will process these forms as they are received, but cannot withdraw a post-dated termination once it is processed. Once an agent has been terminated, a member must file a new Form U-4 after the termination date indicated on the Form U-5.

        The NASD encourages members having access to the Firm Access Query System (FAQS) to electronically file all Forms U-5 and Page 1 s of Form U-4. FAQS offers several advantages to firms in this regard, including the ability to immediately process terminations, ensure in-house control over agent registrations, and reduce normal and express mailing costs as well as long-distance telephone charges. FAQS also allows members to quickly and efficiently handle the large filing volumes that typically occur at this time every year. Because of that, the NASD will provide an additional service to FAQS users by expanding the on-line user hours for November and December 1995. The system will be operational from 7 a.m. to 11 p.m., Eastern Time (ET), Monday through Friday, and from 9 a.m. to 5 p.m., ET, on Saturday.

        Filing Forms BDW

        The CRD Phase II allows firms requesting terminations (full or state only) to file their Forms BDW with the CRD to avoid the assessment of renewal fees in those jurisdictions that are designated on the Form BDW, provided that the jurisdiction is a CRD Phase II participant. Currently, there are six jurisdictions that are not participating in Phase II:

        • Michigan;

        • Puerto Rico;

        • American Stock Exchange;

        • Chicago Board Options Exchange;

        • New York Stock Exchange; and

        • Pacific Stock Exchange.

        Firms requesting termination in any of the above-listed jurisdictions must submit a Form BDW directly to the jurisdiction as well as to the CRD.

        The deadline for receipt of Forms BDW by the CRD for firms desiring to terminate an affiliation before year end 1995 is December 15, 1995. This same date applies to the filing of Forms BDW with the jurisdictions that are not participating in Phase II. Post-dated Forms BDW filed with the CRD will be accepted and processed in the same manner as postdated Forms U-5.

        Removing Open Registrations

        For the ninth year, the initial invoice package will include a roster of firm agents whose NASD registration is terminated or purged due to a deficient condition for more than 180 days, but who have an approved registration with a state. This roster helps reconcile personnel registrations before year end. Firms may terminate obsolete state registrations through the submission of Forms U-5 or reinstate the NASD licenses through the filing of Page 1 s of Forms U-4. No roster will be included if a firm does not have agents in this category.

        Final Adjusted Invoices

        On January 15, 1996, the NASD will mail final adjusted invoices to its members. These invoices will reflect the final status of firm and agent registrations as of December 31, 1995. Any adjustments in fees owed as a result of registration terminations or approvals subsequent to the initial invoice mailing will be made in this final reconciled invoice. If a member has more agents and/or branch offices registered at year end than it did on the November invoice date, additional fees will be assessed. If a member has fewer agents and/or branch offices registered at year end than it did in November, a credit/refund will be issued.

        Included with this adjusted invoice will be the member renewal rosters, which will list all renewed personnel with the NASD, NYSE, AMEX, CBOE, PSE, PHLX, and each state. Persons whose registrations are approved in any of these jurisdictions during November and December will be on this roster, while registrations that are pending approval or are deficient at year end will not be in the renewal process. Firms will also receive an NASD branch-office roster that lists all branches for which they have been assessed.

        This year's final invoice package will also include a breakdown of fees by billing code for firms that use billing codes in the registration process. This breakdown will aid firms in their internal research and allocation of fees.

        Firms then will have about two months in which to reconcile any discrepancies on the rosters. All jurisdictions should be contacted directly in writing. Specific information and instructions concerning the final adjusted invoice package will appear in the January 1996 issue of the Notices to Members, as well as on the inside cover of the renewal roster. Firms may also refer to their renewal edition of Membership On Your Side for details concerning the renewal process.

        Questions concerning this Notice may be directed to your firm's assigned Quality & Service Team or the NASD Member Services Phone Center at (301) 590–6500.

      • 95-88 Treasury Delays Effective Date Of Wire Transfer Recordkeeping Requirements Until April 1, 1996; Proposes Clarifying Amendments

        SUGGESTED ROUTING

        Senior Management
        Internal Audit
        Legal & Compliance
        Operations
        Trading

        Executive Summary

        The Department of the Treasury (Treasury) recently announced a delay in the effective date for certain amendments to the Bank Secrecy Act (BSA) that were scheduled for January 1, 1996. The amendments, which require broker/dealers to comply with additional recordkeeping requirements for funds transfers and transmittals, now are effective April 1, 1996. The changes are delayed while Treasury seeks comment on proposed amendments that clarify definitions regarding the parties to an international funds transfer.

        Background

        The BSA authorizes Treasury to require financial institutions, including broker/dealers, to keep records and file reports about the source, volume, and movement of funds into and out of the country and through domestic financial institutions. In 1992, the Annunzio-Wylie Anti-Money Laundering Act (the 1992 Amendment) amended the BSA to give Treasury and the Board of Governors of the Federal Reserve System (the Fed.) joint authority to prescribe regulations for maintaining records of domestic and international transfers of funds.

        In April 1993, Treasury and the Fed. published a joint proposal with amendments to the BSA for wire transfers, which was adopted in final form in early 1995 (the Joint Rule). The Joint Rule requires additional recordkeeping related to certain funds transfers and transmittals by broker/dealers and other financial institutions. At the same time, Treasury adopted a companion rate (the Travel Rule) that requires financial institutions to include in transmittal orders certain information that must be retained under the new record-keeping requirements. Members may refer to Notice to Members 95-69 (August 1995) for a more detailed discussion of these rates.

        Originally scheduled to become effective on January 1, 1996, these changes prompted industry concerns because the parties to an international funds transfer were defined differently in the BSA than they are in the Uniform Commercial Code Article 4A (UCC 4A). In response, Treasury and the Fed. determined to delay the effective date of these changes until April 1, 1996, and proposed amendments that clarify the roles of the parties to an international funds transfer.

        Proposed Amendments

        To clarify the requirements, Treasury and the Fed. are proposing changes to the definitions in the Joint Rule that make the roles of the parties to an international funds transfer or transmittal of funds consistent under the BSA and under the UCC 4A. Specifically, the amendments expand the definitions of beneficiary's bank, originator's bank, payment order, receiving bank, receiving financial institution, recipient's financial institution, transmittal order, transmitter, and transmitter's financial institution to include both domestic and foreign institutions. The changes also clarify that only financial institution offices located within the United States are subject to the Joint Rule's requirements. In addition, Treasury and the Fed. are revising Sections 103.33(e)(6) and (f)(6) of the BSA to delete the word "domestic" in certain places. These changes do not effect the scope of the exceptions in these sections.

        Finally, Treasury is proposing changes to the Travel Rule that reflect the amended definitions in the Joint Rule. The proposed amendments to the Travel Rule also incorporate the exceptions contained in the Joint Rule.

        Members may refer to the August 24, 1995, Federal Register to review the proposed amendments in their entirety.

        Questions concerning this Notice may be directed to Susan Lang, NASD Compliance Department, at (202) 728–6969.

      • 95-87 Confidentiality Clauses In Settlement Agreements

        SUGGESTED ROUTING

        Senior Management
        Internal Audit
        Legal & Compliance
        Training

        Executive Summary

        Members must review and correct promptly, as needed, their settlement agreements with customers or other persons that contain confidentiality clauses that prohibit or discourage the customer or other person from disclosing the settlement terms (and the underlying facts of the dispute) to the NASD® or any other securities regulator upon inquiry. Such confidentiality clauses violate NASD Rules of Fair Practice.

        Background

        Recent NASD examinations and a special survey have revealed that a number of member firms continue to use broad confidentiality clauses in settlement agreements with customers and other parties that impede NASD investigations. Such settlement agreements violate Article III, Section 1 of the NASD Rules of Fair Practice as conduct inconsistent with just and equitable principles of trade.

        Of the member firms surveyed during June to August 1995, 61 percent were using settlement agreements with customers that contained confidentiality or nondisclosure provisions that prohibited the customer from disclosing the settlement terms (and the underlying facts of the dispute) to the NASD or any other securities regulator upon inquiry. Some clauses required a court order, subpoena, or similar condition before permitting disclosure to a securities regulator.

        These prohibitively broad nondisclosure clauses continue to be used by certain members despite past NASD notices warning members to stop using them. Notice to Members 86–36 (May 1986) and the NASD Regulatory & Compliance Alert (June 1994 and July 1995) were among the warning notices provided. For example, Notice to Members 86–36 cautioned members "against executing agreements that may prevent any customer or other party from providing information, documents, or testimony, or otherwise cooperating with the NASD in its investigations of alleged violations."

        Other than these broad confidentiality clauses, settlement agreements used by firms in settling disputes with their customers or other persons are not usually a regulatory concern. Indeed, settlement agreements may require confidentiality as to persons other than securities regulators. However, a violative confidentiality clause is one that prohibits or inhibits the customer or other person from disclosing the settlement terms (and the underlying facts of the dispute), upon inquiry, to a securities regulator, such as the NASD, or imposes conditions on such disclosure.

        Acceptable Confidentiality Clauses

        Whenever the settlement agreement references confidentiality, the confidentiality clause should be written to expressly authorize the customer or other person to respond, without restriction or condition, to any inquiry about the settlement or its underlying facts and circumstances by any securities regulator, including the NASD. In a recent case, a District Business Conduct Committee found violative settlement agreements that required the customers to notify the firm, reasonably in advance, before disclosing any information to the NASD concerning their complaints against the firm.

        We are suggesting appropriate language below that members may use to correct past confidentiality clauses and to ensure that new or future agreements comply with NASD rules.

        Suggested Notice To Customers To Correct Past Settlement Agreements

        "You are hereby notified that the Settlement Agreement you previously executed with this firm should not be construed to prohibit or restrict you (or your attorney) from responding to any inquiry about the settlement or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc. (NASD) or any other self-regulatory organization."

        Suggested Language For Future Settlement Agreements

        "Any non-disclosure provision in this agreement does not prohibit or restrict you (or your attorney) from responding to any inquiry about this settlement or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc. (NASD) or any other self-regulatory organization."

        Conclusion

        An attempt to impede an NASD investigation is a serious violation of just and equitable principles of trade [see William Edward Daniel, Sec. Exch. Act Rel. No. 28408 (September 6, 1990)]. Use of such violative confidentiality clauses will likely result in NASD disciplinary proceedings, especially in view of past warnings to NASD members about noncompliance in this important area. The New York Stock Exchange recently fined a member $25,000 for executing improper settlement agreements that required "prior notification, consent or formal process before customers could disclose information relating to their complaints, which thus restricted or limited the customers' ability to cooperate with an Exchange investigation."

        Member firms should immediately review their settlement agreements and make such changes in the confidentiality clauses as may be necessary to ensure that they comply with Article III, Section 1 of the NASD Rules of Fair Practice as discussed above.

        If you have questions about appropriate language for the confidentiality clause, please contact your local NASD District Office.

      • 95-86 NASD Reminds Members About Continuing Education Program Regulatory Element

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance
        Registration
        Training

        Executive Summary

        The NASD® reminds members that registered persons who do not satisfy their Regulatory Element computer-based training requirement within the 120-calendar-day period beginning on the second, fifth, or tenth anniversary of their initial securities registration or of the date of a serious disciplinary action (see below) may not perform, nor be paid for, any activity that requires a securities registration.

        In June, the Central Registration Depositary (CRDSM) sent 8, 132 registered persons Continuing Education Advisory Messages notifying them of their obligation to satisfy a Continuing Education Program Regulatory Element computer-based training requirement. Their obligation began on a date beginning in July and ending 120 calendar days later. As of September 15, most (4,224, or 52 percent) of this group have not made arrangements to satisfy their requirement.

        A notified registered person satisfies the Regulatory Element computer-based training requirement by making an appointment at any NASD PROCTOR® Certification Testing Center and completing a Regulatory Element training session. Because the number of registered persons with Regulatory Element computer-based training obligations grows each day, the NASD is concerned that those who wait until the last minute may have difficulty scheduling an appointment at a PROCTOR Center, have their 120-day window close, and will find themselves with an inactive registration until they can complete their training.

        Members are urged to encourage all employees with Regulatory Element requirements, and especially those with requirements expiring in the next 30 days, to make their appointments at a PROCTOR Center as soon as possible. The NASD has 55 fixed-site PROCTOR Centers and a remote site delivery capability (PROCTOR PRO) with an established schedule of dates and locations through December 1995. A listing of the fixed-site PROCTOR Centers and the schedule of the mobile PROCTOR PRO for 1995 are included with this Notice.

        Background

        On February 8, 1995, the Securities and Exchange Commission (SEC) approved a new Part XII to Schedule C of the By-Laws prescribing requirements for the continuing education of certain registered persons subsequent to their initial qualification and registration with the NASD.

        The Regulatory Element of the Continuing Education Program requires that every person registered for 10 years or less who is covered by the Regulatory Element will be required to satisfy the requirement within 120 calendar days after the second, fifth, and tenth anniversaries of their initial securities registration. Also covered are those who have been registered more than 10 years and who have been the subject of a serious disciplinary action (suspension, bar, fine of $5,000 or more, or a statutory disqualification) during the most recent 10 years.

        Since July 1, 1995, individuals have been phased into the Regulatory Element daily, based on their anniversaries as explained above. The CRD notifies registered individuals of their Regulatory Element obligation by sending a Continuing Education Program Advisory Message to their firm 30 days in advance of their anniversary date. The Advisory Message specifies the Begin Date (the anniversary date) and the End Date (120 calendar days later) of the period during which the person must satisfy the Regulatory Element requirement. For example, persons registered in July 1990 received Advisory Messages in June advising that they are required to satisfy the Regulatory Element within a 120-calendar-day period beginning on their fifth anniversary in July and ending in late October or November, as the case may be.

        Continuing Education Information

        Several publications are available that explain the Continuing Education Program. Special Notice to Members 95-13 (March 8, 1995) has the actual rule language, which is Part XII of Schedule C of the NASD By-Laws, and three other reference sections:

        • Status Report On The Securities Industry Continuing Education Program, including a questions and answers section to help member firms understand the Program;

        • Content Outline For The Regulatory Element, which specifies the subject areas covered in the Regulatory Element computer-based training; and

        • Guidelines For Firm Element Training, which provide firms with a common approach for developing and implementing a firm-specific training program that meets the needs of all types and sizes of firms.

        The Continuing Education Program For Securities Professionals, a pamphlet available at cost ($.35), describes the Continuing Education Program to registered persons through a series of questions and answers about the Program. Many firms send this pamphlet to their employees who are notified that they must take the Regulatory Element computer-based training.

        Notice to Members 95-35 (May 1995) has an update on the Continuing Education Program and 38 questions and answers about the Regulatory Element specifically.

        Membership On Your Side, Volume 4, Number 2 (July 1995), has an overview of the Continuing Education Program and examples of the CRD Reports (Continuing Education Program Advisory Messages) sent to firms.

        To order copies of any of these publications call NASD MediaSourceSM at (301) 590–6578. Questions about this Notice may be directed to John Linnehan, Director of Continuing Education, at (301)-208–2932, or your Quality & Service Team at:

        Quality & Service Team 1 (301)921–9499

        Quality & Service Team 2 (301)921–9444

        Quality & Service Team 3 (301) 921–9445

        Quality & Service Team 4 (301) 921–6664

        Quality & Service Team 5 (301)921–6665

        Firms uncertain as to which Quality & Service Team is assigned to work with them can call the NASD Member Services Phone Center at (301) 590–6500.

        NASD PROCTOR Centers

        Below is a listing, as of October 1, 1995, of the fixed-site PROCTOR Centers, as well as the schedule of the mobile PROCTOR PRO facilities through the balance of 1995. Phone the individual PROCTOR Center to schedule a computer-based training session appointment. To schedule an appointment with PROCTOR PRO please phone (800) 999–6647 and select option 1 at the voice prompt.

        Holiday Schedule

        Jan. 2 New Year's Day
        Feb. 20 Washington's Birthday
        Apr. 14 Good Friday
        May 29 Memorial Day
        July 4 Independence Day
        Sept. 4 Labor Day
        Nov. 23 Thanksgiving Day
        Dec. 25 Christmas Day

        Alabama

        Birmingham Metro. Area
        PROCTOR Certification Testing
        Lakeshore Park Plaza
        2204 Lakeshore Drive
        Suite 305
        Birmingham, AL 35209
        (205) 870–1643
        Hours: 8:00–1:00 (M,T,Th,Fr)
        8:00–3:30 (W)
        Delivery Stations: 5

        Arizona

        Phoenix Metro. Area
        PROCTOR Certification Testing
        1717 W. Northern Avenue
        Park North II Building
        Suite 117
        Phoenix, AZ 85021
        (602) 870–7522
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 11

        Arkansas

        Little Rock Metro. Area
        PROCTOR Certification Testing
        11219 Financial Ctr. Pkwy
        Suite 311
        Little Rock, AR 72211–2859
        (501)224–5781
        Hours: 8:30–4:00 (M,F); 8:30–2:00
        (T.Th)
        8:30–1:00 (W)
        Delivery Stations: 4

        California

        Los Angeles Metro. Area
        PROCTOR Certification Testing
        Koll Center
        1920 Main Street,
        Suite 230
        Irvine, CA 92714
        (714) 757–7530
        Hours: 8:00–4:00 (M-F)
        Delivery Stations: 20

        Los Angeles Metro. Area
        PROCTOR Certification Testing
        701 N. Brand Blvd.,
        Suite 340
        Glendale, CA 91203
        (818)545–7383
        Delivery Stations: 20
        Hours: 8:00–4:00 (M-F)

        Sacramento Metro. Area
        ACT Center 555 Capitol Mall
        Suite 550
        Sacramento, CA 95814
        (916)658–0180
        Hours: 7:30–3:30 (M-F)
        Delivery Stations: 8

        San Diego Metro. Area
        PROCTOR Certification Testing
        6333 Greenwich Drive
        Suite 175
        San Diego, CA 92122
        (619)558–1164
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 11

        San Francisco Metro. Area
        PROCTOR Certification Testing
        525 Market Street
        Suite 390
        San Francisco, CA 94105
        (415)882–1212
        Hours: 8:00–4:00 (M-F)
        Delivery Stations: 24

        Colorado

        Denver Metro. Area
        PROCTOR Certification Testing
        2000 South Colorado Blvd.
        Suite 2100 Denver, CO 80222
        (303) 692–8745
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 13

        Connecticut

        Hartford Metro. Area
        PROCTOR Certification Testing
        Glastonbury Corporate Ctr. 628 Hebron Avenue,
        Suite 210
        Glastonbury, CT 06033
        (860)657–3161
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 12

        Norwalk Metro. Area
        PROCTOR Certification Testing
        Merritt 7 Corporate Park 101Merritt7, 3rd Floor Norwalk, CT 06851
        (203) 845–9655
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 10

        District Of Columbia

        Please see Virginia

        Florida

        Miami Metro. Area
        PROCTOR Certification Testing
        The Spessard Holland Building 8000 Governors Square Blvd.
        Suite 303
        Miami Lakes, FL 33016
        (305) 825–7940
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 18

        Orlando Metro. Area
        PROCTOR Certification Testing
        601 South Lake Destiny Road
        Suite 220
        Maitland,FL 32751
        (407)875–8118
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 24

        Georgia

        Atlanta Metro. Area
        PROCTOR Certification Testing
        900 Ashwood Parkway
        Suite 490
        Atlanta, GA 30338
        (404)551–0845
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 18

        Illinois

        Bloomington Metro. Area
        PROCTOR Certification Testing
        211 Landmark Drive,
        Suite A3 Normal, IL 61761
        (309) 452–4788
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 10

        Chicago Metro. Area
        PROCTOR Certification Testing
        10 South LaSalle Street
        Suite 2101 Chicago, IL 60603
        (312)609–2525
        Hours: 8:00–4:00 (M-F)
        Delivery Stations: 25

        ACT Center
        River Tree Court
        Corner of 21 and Rt. 60
        Vernon Hills, IL 60061
        (708)247–4218
        Hours: 8:00–4:00 (M, T, Th, F, S)
        Delivery Stations: 9

        Indiana

        Indianapolis Metro. Area
        PROCTOR Certification Testing
        Keystone at the Crossing 8900 Keystone Crossing
        Suite 990
        Indianapolis, IN 46240
        (317)846–8287
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 8

        Iowa

        Des Moines Metro. Area
        PROCTOR Certification Testing
        3737 Woodland Avenue
        Suite 232
        West Des Moines, IA 50265
        (515)223–5452
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 6

        Kansas

        Kansas City Metro. Area
        PROCTOR Certification Testing
        Commerce Plaza II
        7400 West 110th Street
        Suite 310
        Overland Park, KS 66210
        (913)338–4700
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 9

        Kentucky

        Louisville Metro. Area
        PROCTOR Certification Testing
        10170 Linn Station Road
        Suite 550
        Louisville, KY 40223
        (502)423–1603
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 4

        Louisiana

        New Orleans Metro. Area
        PROCTOR Certification Testing
        Energy Centre
        1100 Poydras Street
        Suite 810
        New Orleans, LA 70163
        (504) 522–7999
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 7

        Maryland

        Baltimore Metro. Area
        PROCTOR Certification Testing
        Dulaney Center II
        901 Dulaney Valley Road
        Suite 502
        Towson, MD 21204
        (410)337–5103
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 9

        Massachusetts

        Boston Metro. Area
        PROCTOR Certification Testing
        1601 Trapelo Road Building C
        Waltham, MA 02154–1046
        (617) 890–0466
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 23

        Michigan

        Detroit Metro. Area
        PROCTOR Certification Testing
        Oakland Towne Square One Towne Square 2nd Floor
        Southfield, MI 48076
        (810)351–9088
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 16

        Minnesota

        Minn./St. Paul Metro. Area
        PROCTOR Certification Testing
        8300 Norman Center Drive
        Suite 850
        Bloomington, MN 55437
        (612)835–9420
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 18

        Missouri

        St. Louis Metro. Area
        PROCTOR Certification Testing
        West Park I
        12655 Olive Blvd., 3rd Floor CreveCoeur, MO 63141
        (314)469–6086
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 11

        Nebraska

        Omaha Metro. Area
        PROCTOR Certification Testing
        Century Building 11213 Davenport Street
        Suite 103
        Omaha, NE 68154
        (402) 333–6278
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 6

        New Jersey

        West Orange Metro. Area
        PROCTOR Certification Testing
        Eisenhower Office Park
        101 Eisenhower Parkway
        4th Floor
        Roseland, NJ 07068
        (201) 228–8777
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 18

        New Mexico

        Albuquerque Metro. Area
        PROCTOR Certification Testing
        City Center
        6400 Uptown Blvd. N.E.
        Suite 476W
        Albuquerque, NM 87110
        (505) 884–6033
        Hours: 8:30–4:30 (M,W, F); 8:30-
        2:30 (T, Th)
        Delivery Stations: 4

        New York

        Please also see New Jersey

        New York City Metro. Area
        PROCTOR Certification Testing
        225 Broad Hollow Road
        Suite 116W Melville, NY 11747
        (516)845–9063
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 21

        New York City Midtown Area
        PROCTOR Certification Testing
        201 East 42nd Street
        Suite 1000, 10th Floor New York, NY 10017
        (212)809–5509
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 50

        New York City Whitehall Area
        PROCTOR Certification Testing
        33 Whitehall Street
        11th Floor
        New York, NY 10004
        (212)809–5509
        Hours: 8:30–5:30 (M-F)
        Delivery Stations: 50

        Rochester Metro. Area
        PROCTOR Certification Testing
        WoodcliffI
        345 Woodcliff Drive, 1st Floor
        Fairport, NY 14450
        (716)383–5630
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 8

        North Carolina

        Charlotte Metro. Area
        PROCTOR Certification Testing
        5000 Nations Crossing Road 9 Woodlawn Green
        Suite 219
        Charlotte, NC 28217
        (704) 523–2773
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 14

        Raleigh Metro Area 5540 Centerview Drive
        Suite 307
        Raleigh, NC 27606
        (919) 859–2240
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 8

        Ohio

        Cincinnati Metro. Area
        PROCTOR Certification Testing
        4445 Lake Forest Drive
        Suite 210
        Cincinnati, OH 45242
        (513)769–6555
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 9

        Cleveland Metro. Area
        PROCTOR Certification Testing
        6450 Rockside Woods Blvd.
        Suite 155
        Independence, OH 44131
        (216) 642–7745
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 7

        Columbus Metro. Area
        PROCTOR Certification Testing
        655 Metro Place South
        Suite 145
        Dublin, OH 43017
        (614)793–1592
        Hours: 8:00–3:30 (M-F)
        Delivery Stations: 7

        Oklahoma

        Oklahoma City Metro. Area
        PROCTOR Certification Testing
        One Lakeview Energy Center 3817 Northwest Expressway
        Suite 150
        Oklahoma City, OK 73112
        (405)942–1562
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 6

        Oregon

        Portland Metro. Area
        PROCTOR Certification Testing
        9115 S.W.Oleson Road
        Suite 101
        Portland, OR 97223
        (503) 293–8957
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 7

        Pennsylvania

        Allentown Metro. Area
        PROCTOR Certification Testing
        7660 Imperial Way
        Suite A-l 01 Allentown, PA 18195
        (610)481–0460
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 5

        Harrisburg Metro. Area
        PROCTOR Certification Testing
        Commerce Park 2405 Park Drive,
        Suite 202
        Harrisburg, PA 17110
        (717)652–4821
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 4

        Philadelphia Metro. Area
        PROCTOR Certification Testing
        1760 Market Street, 9th Floor Philadelphia, PA 19103
        (215)564–2980
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 20

        Pittsburgh Metro. Area
        PROCTOR Certification Testing
        Foster Plaza, Building 9 750 Holiday Drive
        Suite 605
        Pittsburgh, PA 15220
        (412)928–2440
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 8

        Tennessee

        Memphis Metro. Area
        PROCTOR Certification Testing
        Penn Marc Centre
        6401 Poplar Avenue,
        Suite 110
        Memphis, TN 38119
        (901)767–1180
        Hours: 9:00–4:30 (M, T); 9:00–3:00
        (W, Th, F)
        Delivery Stations: 4

        Nashville Metro. Area
        PROCTOR Certification Testing
        One Lakeview Place
        25 Century Blvd.,
        Suite 604
        Nashville, TN 37214
        (615)871–9972
        Hours: 9:00–3:00 (M, W, F); 9:00-
        4:30 (T, Th)
        Delivery Stations: 6

        Texas

        Dallas Metro. Area
        PROCTOR Certification Testing
        Wellington Centre 14643 Dallas Parkway
        Suite 640
        Dallas, TX 75240
        (214)385–1181
        Hours: 8:30–4:30 (M-F)
        Delivery Stations: 20

        Houston Metro. Area
        PROCTOR Certification Testing
        Park National Bank Building 10333 Richmond Avenue
        Suite 680
        Houston, TX 77042
        (713)952–5005
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 14

        San Antonio Metro. Area
        PROCTOR Certification Testing
        40 Northeast Loop 410
        Suite 431
        San Antonio, TX 78216
        (210) 349–5900
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 8

        Utah

        Salt Lake City Metro. Area
        PROCTOR Certification Testing
        560 East 200 South
        Suite 360
        Salt Lake City, UT 84102
        (801)537–1615
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 9

        Virginia

        No. Virginia Metro. Area
        PROCTOR Certification Testing
        Tycon Towers I Building 8000 Towers Crescent Drive
        Suite 280
        Vienna, VA 22182
        (703) 821–3695
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 12

        Richmond Metro. Area
        PROCTOR Certification Testing
        Culpeper Building 1606 Santa Rosa Road
        Suite 113
        Richmond, VA 23288
        (804) 285–8706
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 7

        Washington

        Seattle Metro. Area
        PROCTOR Certification Testing
        11400 Southeast 8th Street
        Suite 270
        Bellevue, WA 98004
        (206)451–9883
        Hours: 9:00–4:30 (M-F)
        Delivery Stations: 11

        Wisconsin

        Milwaukee Metro. Area
        PROCTOR Certification Testing
        10400 West North Avenue
        Suite 340
        Milwaukee, WI53226
        (414)774–1378
        Hours: 8:30–4:00 (M-F)
        Delivery Stations: 12

        PROCTOR PR01995 Delivery Schedule For Continuing Education Regulatory Element Computer-Based Training

        To schedule an appointment with PROCTOR PRO, please phone (800) 999–6647 and select option 1 at the voice prompt.

        Dates Location/Address
        Oct. 11–13 Las Vegas, NV
          University of Nevada Las Vegas
          UNLV Business Center
        Oct. 18–20 Sioux Falls, SD
          University of Sioux Falls
          Salsbury Student Union-Rose Room
          1101 West 22nd Street
        Oct. 25–27 Amarillo, TX
          Amarillo College
          Russell Gym, Room #131
        Nov. 8–10 Boise, ID
          Holiday Inn-Airport
          3300 Vista Ave.
        Nov. 29-Dec. 1 Anchorage, AK
          2550 Denali
          16th Floor Conference Room
        Dec. 13–15 Spokane, WA
          Eastern Washington University
          Spokane Center
          705 West First Street

        As of this printing, dates and location are pending in Honolulu.

      • 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

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance
        Operations

        Executive Summary

        NASD Notice to Members 95-16 (March 1995) and NYSE Information Memorandum 95-16 (April 1995) (collectively referred to as "95-16") were published to address issues concerning provisions in customer agreements and predispute arbitration clauses that appear to violate NASD and NYSE rules. The NASD and NYSE are issuing this Notice to address important questions raised by members and others concerning the statements in 95-16, NASD Notice to Members 95-16 see attached.

        Questions about this notice should be directed to William R. Schief, Vice President, Regional Attorneys/Enforcement, NASD; at (301) 208–2858, Elliott R. Curzon, Assistant General Counsel, NASD, (202) 728–8451; your coordinator at the NYSE; or Salvatore Pallante, Senior Vice President, NYSE, at (212) 656–8480.

        NASD® National Association of Securities Dealers, Inc.

        NYSE New York Stock Exchange

        TO: Members And Member Organizations

        DATE: October 16, 1995

        SUBJECT: 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

        NASD Notice to Members 95-16 (March 1995) and NYSE Information Memorandum 95-16 (April 1995) (collectively referred to as "95-16") were published to address issues concerning provisions in customer agreements and predispute arbitration clauses that appear to violate NASD and NYSE rules. The NASD and NYSE are issuing this notice to address important questions raised by members and others concerning the statements in 95-16.

        Background

        Earlier this year NASD Notice to Members 95-16 and NYSE Information Memo 95-16 were issued to notify members that customer agreements of some members contained predispute arbitration clauses and other provisions that were inconsistent with NASD and NYSE arbitration rules.1 Specifically mentioned were NYSE Rules 636(d), 613, 607(b), 603, and 627(a); Article III, Section 21(f) of the NASD Rules of Fair Practice; and the NASD Code of Arbitration Procedure.

        Members were cautioned not to include nor seek to enforce provisions in customer agreements that restrict or limit, contrary to such rules, the ability of customers to arbitrate disputes or the authority of the arbitrators to make an award, including an award of punitive damages.

        Important questions have been raised by members and others regarding the meaning and application of certain statements in 95-16. Those questions and our answers are presented in this notice to provide further clarification.

        Article III, Section 21 (f)(4) of the NASD Rules of Fair Practice and NYSE Rule 636 address the form and content of predispute arbitration clause in customer agreements. These rules recognize that customer agreements "cannot be used to curtail any rights that a party may otherwise have had in a judicial forum."2

        The NASD and NYSE expect their members to comport with high standards of professional conduct when dealing with their customers with respect to the arbitration of disputes and predispute arbitration clauses.

        Questions And Answers

        Question No. 1: May customer agreements contain a "governing law clause?"3
        Answer: Yes, provided: (a) there is an appropriate contact or relationship between the transaction at issue or the parties and the law selected; and (b) that the clause is otherwise consistent with the aforementioned NYSE or NASD rules. For example, neither the governing law clause, nor any other clause in the customer agreement, may "limit[] the ability of a party to file any claim in arbitration or limit[] the ability of the arbitrators to make any award," or limit or contradict any of the aforementioned NYSE or NASD rules, such as rules relating to the location of the arbitration hearing. Article m, Section 21(f)(4) of the NASD Rules of Fair Practice, NYSE Rule 636.
        Question No. 2: Is it permissible to include a disclosure in the customer agreement that the law governing the agreement prohibits or may prohibit an award of punitive damages in arbitration?
        Answer: No. Such a disclosure would be inconsistent with NYSE Rule 636(d) and Article III, Section 21(f)(4) of the NASD Rules of Fair Practice.
        Question No. 3: Is a "governing law clause" (as described in Question No. 1) which names the state of residence of the customer permissible?
        Answer: Yes, provided that the clause is otherwise consistent with aforementioned NYSE or NASD rules.
        Question No. 4: If, under the governing law set forth in the customer agreement, punitive damages are not available in court, may a party assert this as a defense in an arbitration proceeding to a claim for punitive damages?
        Answer: Yes, although the arbitrators will determine whether, or to what extent, this defense will be accepted.
        Question No. 5: Is there anything in NASD Notice to Members 95-16 (or NYSE Information Memorandum 95-16) intended to endorse the awarding of punitive damages in arbitration?
        Answer: No, they are not intended to encourage or discourage the award of punitive damages.
        Question No. 6: May a party in arbitration raise the governing law provision (in the customer agreement at issue) in arguing issues before the arbitrators such as state law interest rates and state law economic loss theories?
        Answer: Yes, although the arbitrators will determine which arguments they will permit.
        Question No. 7: May a firm designate a hearing location for self-regulatory organization (SRO) arbitrations in its arbitration clause?
        Answer: No.
        Question No. 8: May a firm dictate the composition of a panel for an SRO arbitration in its arbitration clause?
        Answer: No.

        Conclusion

        Enforcing provisions of a customer agreement that are inconsistent with NYSE or NASD rules will be deemed to constitute violative activity and could subject the member to disciplinary action.

        As stated in 95-16, members should promptly review their customer agreements and make such changes as are necessary and appropriate to ensure that they comply with the NASD's and NYSE's rules. Members should also advise their customers of the changes to the agreements. Members will have thirty (30) days from the date of this notice to make any necessary changes to their agreements. Members using agreements determined not to be in compliance may be subject to disciplinary action.

        Questions about this notice should be directed to William R. Schief, Vice President, Regional Attorneys/Enforcement, NASD, at (301) 208–2858; Elliott R. Curzon, Assistant General Counsel, NASD, (202) 728–8451; your coordinator at the NYSE; or Salvatore Pallante, Senior Vice President, NYSE, at (212) 656–8480.

        John E. Pinto

        Executive Vice President

        National Association of Securities Dealers, Inc.

        Edward A. Kwalwasser

        Executive Vice President

        New York Stock Exchange, Inc.


        1 Copies of Notice to Members 95-16 are available from the NASD Support Services Department at (202) 728–8061; and copies of NYSE Information Memorandum 95-16 are available from your NYSE Coordinator.

        2 Order Approving Proposed Rule Changes by the New York Stock Exchange, Inc., National Association of Securities Dealers, Inc., and the American Stock Exchange, Inc., SEC Release No. 34–26805 (May 10, 1989); 54 F.R. 21144:

        "This provision makes clear that the use of arbitration for the resolution of investor/broker-dealer disputes represents solely a choice of arbitration as a means of dispute resolution. Agreements cannot be used to curtail any rights that a party may otherwise have had in a judicial forum. If punitive damages or attorneys fees would be available under applicable law, then the agreement cannot limit parties' rights to request them, nor arbitrators rights to award them. The agreements may not be used to shorten applicable statutes of limitation, restrict the situs of an arbitration hearing contrary to SRO rules, nor limit SRO forums otherwise available to parties."

        3 Sometimes referred to as a "choice of law clause."

      • 95-84 Rudman Committee Releases Summary Of Conclusions And Recommendations

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance
        Registration
        Systems
        Trading

        Below are the summary conclusions and recommendations that the Rudman Committee released on Tuesday, September 19, 1995.

        Overall Conclusions

        Based on its Review, the Select Committee concludes that the NASD® has discharged its self-regulatory responsibilities, not of course with perfection or without difficulty, but professionally and reasonably. The NASD's role as the primary regulator of the broker/dealer profession and the non-exchange securities markets, combined with its stewardship of the vast Nasdaq® market, is both difficult and unique. No other SRO is faced with such complex and challenging obligations.

        The Committee's Review does not support the claims of those who assert that the NASD is controlled by and for the benefit of Nasdaq market makers. Nor does it support those who assert that the NASD cloaks in regulatory garb actions that are in fact designed solely to advance the commercial interests of certain segments of the NASD's membership.

        The Select Committee does find, however, that the NASD's governance structure has failed to keep pace with the significant growth and continuing evolution of the Nasdaq market, and the concomitant expansion of the NASD's regulatory responsibilities. In some cases, the existing governance structure has led to ineffective rulemaking for the Nasdaq market. In others, it has required the NASD to mediate economic clashes among its members arising from their divergent interests in the Nasdaq market—a daunting role which the NASD, as a membership association and regulator of the entire broker/dealer profession, did not seek and was never designed to play. The current structure has also placed the NASD, as the owner of Nasdaq's trading systems, in the unenviable position of regulating the competing systems owned by NASD members.

        The NASD's existing governance structure thus blurs the distinction between regulating the broker/dealer profession and overseeing the Nasdaq stock market. Both missions are thereby disserved.

        The NASD's existing structure would also benefit from increasing public representation on the NASD's governing bodies. Not only would a full measure of public representation befit the NASD's current stature and importance, it should also bolster confidence in the NASD's policies. It would not be inconsistent with self-regulation, because NASD members would still be fairly represented in the Association's affairs and have ample opportunity to bring their expertise and viewpoint to bear.

        Regarding NASD enforcement, the Committee believes that the core of the NASD's disciplinary process is sound. No doubt, mistakes have been made, and some judgments certainly can be questioned in retrospect, but the overall process is designed to be effective and fair. At the same time, however, NASD disciplinary proceedings have become more contentious, complex, and consequential than the existing system was designed to accommodate. New measures are required to address these developments.

        This will entail certain changes significant in the conduct of most NASD disciplinary proceedings. It will also entail greater national oversight within the NASD itself, greater public participation, more frequent, formal coordination of enforcement efforts with the SEC, the states and the major securities exchanges, and prompt deployment of increased financial and human resources. The Committee believes that these measures can be implemented without compromising the principle of peer review.

        Finally, the Committee believes that the critical internal review function (including regular district audits) has not been given the mandate, resources, or prominence necessary for effective oversight within the NASD itself. Significant improvement is required.

        Principles Of Effective Governance

        Based on its Review, the Committee believes that, to be fully effective, the NASD's governance structure should conform to the following principles:

        • The NASD and the Nasdaq market should not be divorced, but regulation of the broker/dealer profession should otherwise be separated from and performed independently of regulation of the Nasdaq and other OTC markets.

        • To this end, the governing Board charged with regulating the NASD's member firms should be separate and independent from the governing Board responsible for overseeing the Nasdaq market. So, too, should their respective professional staffs. Those two governing Boards and staffs, however, should remain associated within a single SRO structure. This will maintain the strength of the existing NASD organization in linking commercial and technical expertise to regulation so that each informs and enhances the other.

        • In all events, enforcement should be independent of responsibility for the Nasdaq and other OTC markets and should be the paramount task of the Board charged with regulating the broker/dealer profession.

        • The separate governing Boards responsible for regulating the broker/dealer profession and for regulating the Nasdaq market should each have 50 percent public membership. The parent (or equivalent) Board should have a majority of public members. Other governing bodies with substantial policymaking or oversight authority also should have strong public representation, as appropriate to their specific tasks.

        • The public members of the Boards and other governing bodies, though not affiliated with NASD member firms, should have sufficient knowledge, experience, and interest in the securities industry or markets to play a meaningful role in governance, and should represent a wide spectrum of skills and interests.

        • Apart from public representation, the composition of the separate governing Boards should be tailored to reflect the interests of their respective constituencies.

        • In addition, the composition of the Board responsible for regulating the broker/dealer profession should provide for balanced representation of the NASD's diverse membership, including small and large firms and firms involved in different business specialties.

        • The Nominating Committees for the principal governing bodies should be composed equally of NASD members and public representatives, and the selection process should provide an opportunity for all interested and qualified constituencies to participate.

        • The NASD's professional staff should take an active management role, and should ensure that all governing bodies are equipped to reach decisions in a fully informed and timely fashion and that the views of all relevant constituencies are taken into account.

        • NASD discipline and enforcement should be, in fact and appearance, fair, effective, and professional.

        • The NASD should have a strong, independent and well-equipped Office of Internal Review, with provision for regular district audits and an Ombudsman.

        • The NASD should at all times devote the financial and human resources necessary to meet its paramount regulatory obligations.

        Specific Recommendations

        Guided by the foregoing, and based on the Review, the Select Committee makes the following specific recommendations:

        Corporate Restructuring

        (a) The NASD should reconstitute and establish Nasdaq as a strong, independent operating subsidiary, not divorced from the NASD, but with as much autonomy and authority over the Nasdaq and OTC markets as the law will allow.
        (b) The NASD should create a separate, strong and independent operating subsidiary, NASD Regulation, Inc. (NASDR), responsible for regulating the broker/dealer profession.
        (c) The NASD should retain ultimate policymaking, oversight, and corporate authority as parent holding company and statutory SRO. However, to effectuate the purposes of this proposed restructuring, the NASD should grant substantial deference to its operating subsidiaries in the areas of their respective jurisdiction.
        (d) The composition of the Boards of the NASD, Nasdaq, and NASDR should be tailored to meet their respective responsibilities and to reflect the interests of their respective constituencies.
        (e) The governing Boards of Nasdaq and NASDR should each have 50 percent public membership, meaning directors drawn from outside the membership of the NASD and representing a broad spectrum of skills and interests. The Board of the NASD should have a majority of public members, also representing a broad spectrum of skills and interests.
        (f) Board compositions that would satisfy the foregoing criteria are depicted in Exhibit D (see page 529).
        (g) The members of the NASD Board of Governors should be selected as shown in Exhibit D. Although as there shown, certain NASD governors would be selected by the Nasdaq and NASDR Boards, those governors should not be directors of Nasdaq or NASDR at the time of their selection. The public governors on the NASD Board should be proposed by an NASD Nominating Committee and elected by the NASD Board, with provision for public governor candidates to be proposed as well by any NASD member, under rules to be established by the NASD Board.
        (h) The District members of the NASDR Board should be proposed by District Nominating Committees and elected by the NASD Districts, under rules to be established by the NASDR Board (including rules for contested elections). The remaining members of the NASDR Board should be proposed by an NASDR Nominating Committee and elected by the NASDR Board. The NASDR Board should establish procedures permitting NASD members or the public also to propose candidates for non-District seats.
        (i) The members of the Nasdaq Board should be proposed by a Nasdaq Nominating Committee and elected by the Nasdaq Board. The Nasdaq Board should establish procedures permitting NASD members or the public also to propose candidates.
        (j) The Nominating Committees of the NASD, NASDR, and Nasdaq, respectively, should be composed equally of individuals affiliated with NASD member firms and individuals drawn from the public. The members of the Nominating Committees need not be present members of the respective Boards.
        (k) The Nasdaq and NASDR Boards should select, respectively, the CEOs of each entity. The NASD Board should retain the authority to reject or dismiss the CEOs chosen by Nasdaq and NASDR, but should exercise such authority only in exceptional cases.
        (l) The NASD Board should choose the CEO of NASD.
        (m) The CEOs of the NASD, Nasdaq, and NASDR, respectively, need not be affiliated with an NASD member, but may be drawn from the public or from the professional staffs of NASD, NASDR, or Nasdaq.
        (n) The principal functions of NASD, NASDR, and Nasdaq, respectively, should be as shown in Exhibit E (see pages 530 and 531).

        Discipline And Enforcement

        (a) The NASD should significantly augment its disciplinary procedures, and allocate the necessary financial resources and personnel at both the District and national levels, so as to ensure effective, fair, and professional enforcement.
        (b) The NASD should establish an Office of Professional Hearing Officers within NASDR. The profession al hearing officers should be NASDR employees and should sit, along with two industry representatives, in every NASD disciplinary proceeding in which either the respondent or NASDR so elects, or the Board of the NASD or NASDR so determines.
        (c) In all disciplinary proceedings, ex parte contacts between the disciplinary panels—including the District Business Conduct Committees and the Market Surveillance Committee and the parties or their representatives—including attorneys presenting the case for NASDR— should be prohibited.
        (d) Before any proposed settlement of a disciplinary proceeding is approved by a panel sitting without a professional hearing officer, it should be reviewed by a designated NASDR staff attorney (other than the attorney presenting the case) to determine and advise the panel whether the proposed settlement conforms to NASD policy, including sanction guidelines.
        (e) The documentary discovery rights of respondents in NASD disciplinary proceedings should be expanded to furnish respondents, at a reasonable time in advance of the initial hearing, with all non-privileged materials in the NASD's possession (including exculpatory evidence) directly relevant to the dispute. The precise rules should be established by NASDR. Also, NASDR should establish rules for a motions practice suitable for NASD disciplinary proceedings. Disciplinary panels, including NBCC panels, should be given the power to impose sanctions on either side for frivolous practice or contumacious behavior by the parties or their counsel.
        (f) The workload of the NBCC should be reduced in order for it to address national enforcement policy issues and ensure uniformity in NASD membership application processing. To help achieve this goal, the professional staff assigned to the NBCC should be delegated the responsibility to review all settlements and non-appealed disciplinary cases, referring to the NBCC itself only such settlements and non-appealed cases, if any, as appear inconsistent with NASD enforcement policy or sanction guidelines. Public members should serve on the NBCC, but NASD member firms should be in the majority.

        District Committees

        (a) District Nominating Committees should be directed to consider diversity in the size and type of firms represented on the District Committees, especially in Districts that have larger-than-average Committees.
        (b) In the event of a contested election for District Committee seats, the NASD and its staff should remain strictly neutral. To the extent that NASD or NASDR resources are employed in the election process, they should be made available on an equal basis to all candidates.

        Office Of Internal Review

        (a) The NASD should create a strong, independent, and responsive Office of Internal Review, to be housed in and administered by the NASD parent. This Office should conduct regular internal audits and reviews of the NASD's and its subsidiaries' operations, including the Districts. The Office should also be equipped with the necessary authority and resources to conduct special internal investigations on its own initiative or at the request of the NASD Board, the Nasdaq Board, the NASDR Board, or the CEOs of the NASD, Nasdaq, or NASDR.
        (b) The Office should serve also as an "Ombudsman" for receiving and addressing concerns and complaints, whether anonymous or not, from any source (within or outside of the NASD), concerning the operations, policies, or activities of the NASD, Nasdaq, or NASDR, or any staff members.
        (c) The hiring, firing, and compensation of the professional staff serving in the Office should be exclusively the province of the NASD's CEO and the NASD Board. The Office should have authority to raise issues directly with any operating entity, unit, or official within the NASD organization.

        Coordination With Other Regulators

        On at least a semi-annual basis, high-level NASD and NASDR officials should engage in formal consultations to coordinate national enforcement policy with the other principal securities industry regulators, i.e., the SEC, state regulators, and the New York and American Stock Exchanges.

        Membership Voting

        The Select Committee finds no reason to change the NASD's decision, approved by the SEC in 1994, to eliminate the requirement of membership voting on proposed rule changes except in those unusual cases in which the NASD Board or NASDR Board determines otherwise.

        Professional Staff

        The NASD, NASDR, and Nasdaq professional staffs should take an active role in management and in identifying and pursuing issues and recommending proposed solutions, policies, and rules.

        Individual Investors

        The Committee notes that, in accordance with the principles of effective governance endorsed by this Committee, the NASD is creating an Office dedicated to representing the interests of individual investors and making certain that those interests are taken into account in policy and rulemaking.

        Allocation Of Financial Resources

        The NASD should allocate the necessary financial resources and personnel to achieve the foregoing goals as soon as practicable. In particular, the NASD should significantly increase the resources it currently allocates to enforcement and discipline and to internal audit and review.

        Exhibit D

        Current and Proposed Makeup of NASD and Subsidiary Boards

        NASD, Inc., Board of Governors
        Current Proposed

        President of NASD

        13–15 Governors elected by NASD members in the various NASD Districts

        11–13 Governors elected by the Board (the "at-large" Governors)

        CEO of NASD

        1 industry representative selected by the Nasdaq Board

        1 industry representative from the NASD Districts

        selected by the NASDR Board

        1 at-large industry representative selected by the

        NASDR Board

        5 public members representing a broad spectrum of skills and interests
        The Nasdaq Stock Market, Inc., Board of Directors
        Current Proposed
        President of NASD/Nasdaq

        4 public representatives (including 2 issuer representatives)

        10 industry representatives (including 1 current NASD Governor)
        CEO of Nasdaq

        8 public members representing a broad spectrum of skills and interests

        4 "market maker" representatives

        4 industry representatives from firms that are not primarily "market makers"

        CEO of NASD (ex officio, non-voting)
        Proposed Makeup of the NASD Regulation, Inc., Board of Directors

        CEO of NASDR

        11 representatives of member firms elected by the NASD Districts

        3 at-large industry representatives

        14 public members representing a broad spectrum of skills and interests

        CEO of NASD (ex-officio, non-voting)

        Exhibit E

        Recommended Role and Composition of NASD and Subsidiary Boards

        NASD, Inc.

        Makes ultimate policy decisions and exercises ultimate review authority over the decisions of the two operating subsidiaries, including NASDR disciplinary decisions (but with substantial deference to each subsidiary's expertise in the areas of its jurisdiction)

        Resolves jurisdictional or other disputes between Nasdaq and NASDR

        Administers the Office of Internal Review

        Administers common overhead and technology of Nasdaq and NASDR

        Establishes a consolidated corporate budget

        Manages external relations on major policy issues, including relations with Congress, the SEC, state regulators, other SROs, business groups and the public at large

        Retains overall responsibility for ensuring that the NASD's statutory obligations and functions are fulfilled

        Board of Governors

        CEO of NASD

        1 industry representative selected by the Nasdaq Board

        1 industry representative from the NASD Districts selected by the NASDR Board

        1 at-large industry representative selected by the NASDR Board

        5 public members representing a broad spectrum of skills and interests
        The Nasdaq Stock Market, Inc.

        Oversees and operates the Nasdaq market

        Designs and operates Nasdaq trading systems, and promulgates rules for those trading systems and for the other OTC markets

        Conducts market surveillance, including trading halts

        Establishes fees for market services

        Prepares the annual budget and strategic plan for the Nasdaq subsidiary

        Board of Directors

        CEO of Nasdaq

        8 public members representing a broad spectrum of skills and interests

        4 "market maker" representatives

        4 industry representatives from firms that are not primarily "market makers"

        CEO of NASD (ex officio, non-voting)
        NASD Regulation, Inc.

        Establishes rules and regulations for the broker/dealer profession generally (including Rules of Fair Practice and membership requirements)

        Administers the enforcement and disciplinary systems, including investigation and adjudication of all cases referred by the NASD or Nasdaq, or initiated by NASDR itself

        Administers the Office of Professional Hearing Officers

        Conducts arbitrations

        Conducts qualification examinations and operates the CRD system

        Oversees all District Offices and compliance activities (including review of underwriting agreements, advertising, and enforcement of MSRB rules)

        Establishes the annual budget and strategic plan for the NASDR subsidiary

        Board of Directors

        CEO of NASDR

        11 representatives of member firms elected by the NASD Districts

        3 at-large industry representatives

        14 public members representing a broad spectrum of skills 2nd interests

        CEO of NASD (ex officio, non-voting)

      • 95-83 SEC Approves Rules Permitting Arbitration Participants To Seek Injunctive Relief From Arbitrators

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance

        Executive Summary

        On August 23, 1995, the Securities and Exchange Commission (SEC) approved amendments to the Code of Arbitration Procedure (Code) clarifying the authority of arbitrators to issue injunctions. The amendments include a new section that permits parties in intra-industry disputes1 to seek emergency relief, called "immediate injunctions," or nonemergency relief, called "regular injunctions." The parties will remain free, however, to obtain interim injunctive relief from the courts even though the merits of the case, and any claims for permanent injunctive relief, must be submitted to arbitration.

        The new section codifies the authority of arbitrators to grant interim injunctive relief; requires parties seeking injunctions, in court or from the arbitrators, to submit a claim to arbitration for permanent relief; and provides that parties failing to comply with injunctive orders issued pursuant to Section 45 may be subject to disciplinary action for violating Article III, Section 1 of the Rules of Fair Practice. The amendments also require the party requesting interim injunctive relief pay a $2,500 nonrefundable surcharge for expedited proceedings. The new section is effective on January 3, 1996, for a one-year trial period. The text of the amendments follows this Notice.

        Description Of Amendments

        On August 23, 1995, the SEC approved an amendment to the Code adding a new section specifying procedures for obtaining injunctive relief in arbitration in connection with intra-industry disputes. The amendments also set forth fees for such injunctive relief proceedings and provide that members may be subject to disciplinary actions for failure to abide by injunctive orders issued under the new rules.

        New Section 47 of the Code expressly provides that temporary and permanent injunctive relief may be obtained from the arbitrators; however, because parties may prefer to vest jurisdiction over interim relief in the courts, the NASD® has determined not to interfere with such preferences by barring resort to the courts at this time. Therefore, parties to an arbitration proceeding will still be permitted to obtain temporary injunctive relief from a court of competent jurisdiction, but they must submit the dispute to arbitration for final resolution. The new provision limits the scope of the relief that the parties may obtain in court to temporary relief and clarifies that the arbitrators have the authority to make final resolutions of issues in arbitration, including enjoining any party.

        The NASD's goal in adopting these changes to the Code is to force eligible intra-industry disputes that include injunctive actions into arbitration, even if the initial temporary relief is obtained in court. The NASD is adopting the new rules as a pilot program and they will be effective for one year from January 3, 1996. The NASD will evaluate the new injunctive relief process toward the end of the first year of operation to determine, among other things, whether the process is providing the procedural efficiency and protection for the parties that would justify mandating that the parties obtain injunctive relief exclusively in arbitration, and whether the process should be adopted as a permanent addition to the Code.

        Introduction To New Section 47

        The introduction to new Section 47 provides that the parties to an arbitration may seek an "interim injunction" from a single arbitrator or a "permanent injunction" from a panel of arbitrators. In addition, parties may seek temporary injunctive relief in court; however, a party seeking temporary relief from a court for a dispute that is required to be submitted to arbitration pursuant to Section 8 of the Code must also file a claim for permanent relief in arbitration for the same dispute. This provision will prevent a party who is seeking interim relief in court from failing to pursue final resolution of the claim in arbitration. Thus, temporary injunctive relief may be obtained from a court or a single arbitrator, while permanent injunctive relief may be obtained only as a final remedy or award from a full panel hearing a claim in arbitration submitted pursuant to Subsection 25(a) of the Code.

        Procedure For Seeking Interim Injunctive Relief

        Under new Section 47, interim injunctions are available as Immediate Injunctive Orders (essentially emergency relief) or Regular Injunctive Orders (nonemergency relief). Immediate Injunctive Orders are the approximate equivalent of temporary restraining orders, while Regular Injunctive Orders are the approximate equivalent of Preliminary Injunctions designed to preserve the positions of the parties pending arbitration of the dispute on the merits. Subsection 47(a) provides that applications for interim injunctions will be heard by a single arbitrator.

        Subsection 47(b) requires the party seeking interim injunctive relief to make a clear showing that it is likely to succeed on the merits, that it will suffer irreparable injury unless the relief is granted, and that the balancing of the equities lies in its favor. Thus, the proposed standards for granting injunctive relief are similar to those traditionally employed in many courts.

        Subsection 47(c) provides that the party seeking interim injunctive relief must serve a Statement of Claim, a statement of facts demonstrating the necessity for injunctive relief, and a properly executed Uniform Submission Agreement (collectively, the application) on the party or parties against whom injunctive relief is sought. The applicant must also simultaneously file the application with the NASD Arbitration and Mediation Department.

        Subsection 47(d) sets forth the procedure and timetable for the administration of applications for interim injunctive relief. Paragraph (d)(1) provides that applications for Immediate Injunctive Orders will generally be scheduled for hearing one to three business days after the NASD receives the application. If the party against whom an Immediate Injunctive Order is sought chooses to file a response, two copies must be submitted to the Director and served on all other parties at or before the hearing. The Arbitration Department will provide the name and background of the arbitrator assigned to hear the application before the hearing. The hearing on the application may be held by telephone or in person in a location specified by the NASD, taking into consideration the needs and circumstances of the parties. The NASD intends to conduct such hearings as teleconferences whenever personal attendance by all parties is difficult and where the nature of the hearing and the evidence to be presented will permit. To the extent personal hearings are held, the NASD contemplates holding such hearings in New York, Chicago, and San Francisco. The arbitrator will attempt to rule on the application within one business day after the hearing and record are closed. The duration of an Interim Injunction will be determined by the arbitrator, but, in any event, it will expire no later than the date of any ruling on a Regular Injunctive Order (if any) or a decision on the merits of the entire controversy.

        Under Paragraph 47(d)(2), applications for Regular Injunctive Orders generally will be scheduled for a hearing within three to five business days after the response is filed or due to be filed, whichever comes first. A response to an application is due three business days after the party against whom an injunction is sought receives a copy of the application. If a responding party does not file a response, however, the responding party may still be heard and present evidence at the hearing. As with applications for Immediate Injunctive Relief under paragraph (d)(1), the Arbitration and Mediation Department will provide the name and background information of the arbitrator assigned to hear the application for a Regular Injunction, and the hearing on the application may be held by telephone or in selected cities. The arbitrator will attempt to rule on applications for Regular Injunctions within one business day after the hearing and record are closed. If granted, the injunction will remain in effect for a term to be determined by the arbitrator, but in no event later than the date of a decision on the merits of the dispute.

        The NASD does not intend that interim relief be open-ended in nature. The NASD will advise and train arbitrators hearing applications for Immediate Injunctive Orders that they should consider setting short time limits on the duration of an order and require the applicant to seek renewal of an order in the event a Regular Injunctive Order has not been obtained. The NASD will also advise and train arbitrators hearing applications for Regular Injunctive Orders that they should consider limiting the duration of an injunctive order to remove incentives for the applicant to delay proceedings on the merits. In addition, the NASD will advise parties who have been enjoined that they may seek reconsideration (including termination or limitation) of the injunctive order at any stage of the proceedings. Finally, the NASD will monitor cases where Immediate Injunctive Orders have been granted to determine if any party is being unfairly disadvantaged during the effectiveness of the order.

        Peremptory Challenges

        To recognize and facilitate expedited injunctive proceedings, new Subsection 47(e) provides the parties with unlimited challenges for cause to the single arbitrator appointed to hear the application for an interim injunction, but no peremptory challenges are permitted. In addition, the parties will not be permitted a peremptory challenge to the arbitrator who heard an application for an injunctive order and who subsequently is appointed to participate on the arbitration panel hearing the same arbitration on the merits.

        The amendments also include a change to Section 22 of the Code that excepts proceedings for injunctive orders under new Section 47 from the provisions of Section 22 granting a party one peremptory challenge to an arbitrator. Therefore, the two changes together (new Subsection 47(e) and the amendment to Section 22) make clear that with respect to the single arbitrator appointed to hear an application for an injunction there will be no peremptory challenge available.

        Expedited Hearings

        Subsection 47(f) provides for the appointment of a panel of arbitrators to hear the merits of a claim immediately following the issuance of an interim injunction. The arbitration of the claim will proceed in an expedited manner according to a timetable and procedures specified by the arbitration panel. This provision ensures that, in cases where interim injunctive relief has been granted, the merits of the dispute will be resolved expeditiously.

        Subsection 47(g) provides that if a court has issued an injunction against one of the parties to an arbitration agreement, any arbitration that might be requested will be handled expeditiously, according to a timetable and procedures determined by the arbitration panel. Thus, in all cases eligible for arbitration, an injunction usually will speed up the proceedings.

        Subsection 47(h) permits the arbitrator to require a party to deposit security in an amount that the arbitrator deems proper for the payment of any costs or damages that might be incurred by the adverse party if it were wrongfully enjoined. If the arbitrator security deposit, Subsection (h) requires that the deposit be placed in a separate bank trust or escrow account for the benefit of the party against whom injunctive relief is sought for the payment of any costs or damages that may be incurred or suffered by the party against whom injunctive relief is sought if it is found to have been wrongfully enjoined. This provision provides a mechanism to protect the party who is enjoined from the consequences of the injunction if, in the final decision on the merits, the enjoined party prevails. The NASD will not be the depository for security deposits; rather, parties required to deposit security will be required to make their own private arrangements with a financial institution to comply with the rule and the arbitrator's order.

        Subsection 47(i) contains a "sunset" clause, causing the section to expire in one year unless extended by the NASD Board of Governors. This will provide for a pilot period, during which allowing arbitrators to issue interim injunctions can be assessed.

        Fees

        Currently, Section 44 imposes a non-refundable $2,500 surcharge on all parties in an expedited proceeding. Expedited proceedings are provided in connection with a request for injunctive relief under new Section 47 and as a result of a court granting injunctive relief. The amended Section 44 provides that the total $2,500 surcharge is to be paid only by the party or parties requesting expedited proceedings. The NASD regards the language of Section 44(h) imposing a surcharge as applying to a party seeking temporary injunctive relief, regardless of whether that relief is sought in court or in arbitration. In addition, the rule change provides that the arbitrator may determine that a party shall reimburse another party for any such surcharge it has paid.

        Failure To Comply With Injunctive Orders

        The NASD has also amended the Resolution of the Board of Governors, Failure to Act Under Provisions of the Code of Arbitration Procedure currently found at paragraph 3744 of the NASD Manual to provide that failure to comply with any injunctive order issued pursuant to Section 47 may be deemed conduct inconsistent with just and equitable principles of trade and a violation of Article III, Section 1 of the Rules of Fair Practice. The failure of a party to comply with a court-issued injunction may be remedied through contempt proceedings in that court and, therefore, are not covered by this amendment.

        Questions regarding this Notice may be directed to the NASD Arbitration and Mediation Department at (212) 858–4400.


        1 The new section is expressly limited to intra-industry (member to member or employee to member) claims eligible for arbitration under Section 8 of the Code.


        Text Of Amendments To The Code Of Arbitration Procedure

        (Note: New text is underlined; deletions are bracketed.)

        CODE OF ARBITRATION PROCEDURE

        PART I and PART II No change.

        PART III UNIFORM CODE OF ARBITRATION

        Sec. 12 through Sec. 21 No change. Peremptory Challenge

        Sec. 22. In any arbitration proceeding, except as provided in Section 47, each party shall have the right to one peremptory challenge. In arbitrations where there are multiple Claimants, Respondents and/or Third-Party Respondents, the Claimants shall have one peremptory challenge, the Respondents shall have one peremptory challenge, and the Third-Party Respondents shall have one peremptory challenge, unless the Director of Arbitration determines that the interests of justice would best be served by awarding additional peremptory challenges. Unless extended by the Director of Arbitration, a party wishing to exercise a peremptory challenge must do so by notifying the Director of Arbitration in writing within five (5) business days of notification of the identity of the person(s) named under Section 21 or Section 32(d) or (e), whichever comes first. There shall be unlimited challenges for cause.

        Sec. 23 through Sec. 43 No change.

        Schedule of Fees for Industry and Clearing Controversies

        Sec. 44.

        (a) through (g) No change.

        (h) In each industry or clearing controversy which is required to be submitted to arbitration before the Association as set forth in Section 8, above, [requiring] where interim injunctive relief is requested or where a court has issued a temporary injunction and a party requests expedited [hearings] proceedings, a total non-refundable surcharge of $2,500 shall be paid by [all Claimants, collectively, and a non-refundable surcharge of $2,500 shall be paid by all Respondents, collectively] the party or parties requesting the expedited proceedings as provided in Section 47. For purposes of this Section, where expedited proceedings are mandated by subsection (g) of Section 47 of this Code, the party that sought and was granted injunctive relief by a court shall be deemed a party requesting expedited proceedings. These surcharge fees shall be in addition to all other non-refundable filing fees, hearing deposits, or costs which may be required. The arbitrators may determine that a party shall reimburse another party for any non-refundable surcharge it has paid.

        Sec. 45 and Sec. 46 No change.

        Injunctions

        Sec. 47. In industry or clearing disputes required to be submitted to arbitration pursuant to Section 8. parties to the arbitration may seek injunctive relief either within the arbitration process or from a court of competent jurisdiction. Within the arbitration process, parties may seek either an "interim injunction" from a single arbitrator or a permanent injunction from a full arbitration panel. From a court of competent jurisdiction, parties may seek a temporary injunction. A party seeking temporary injunctive relief from a court with respect to an industry or clearing dispute required to be submitted to arbitration pursuant to Section 8 shall simultaneously file a claim for permanent relief with respect to the same dispute with the Director in the manner specified under this Code. This section 47 contains procedures for obtaining an interim injunction. Paragraph (g) of this Section relates to the effect of court-imposed injunctions on arbitration proceedings. If any injunction is sought as part of the final award, such request should be made in the remedies portion of the Statement of Claim, pursuant to Section 25(a).

        Single Arbitrator

        (a) Applications for interim injunctive relief shall be heard by a single

        Showing Required

        (b) In order to obtain an interim injunction, the party seeking the injunction must make a clear showing that it is likely to succeed on the merits, that it will suffer irreparable injury unless the relief is granted, and that the balancing of the equities lies in its favor.

        Application for Relief

        (c) Interim injunctions include both Immediate Injunctive Orders and Regular Injunctive Orders, as described in paragraph (d) below. In either case, the applicant shall make application for relief by serving a Statement of Claim, a statement of facts demonstrating the necessity for injunctive relief, and a properly executed Submission Agreement on the party or parties against whom injunctive relief is sought. The above documents shall simultaneously and in the same manner be filed with the Director of Arbitration, together with an extra copy of each document for the arbitrator, proof of service on all parties, and all fees required under Section 44. Filings and service required under this Section 47 may be made by United States mail, overnight delivery service or messenger.

        (d) The procedures and timetable for handling applications for interim injunctive relief are as follows:

        (1) Immediate Injunctive Orders.

        (A) Upon receipt of an application for an Immediate Injunctive Order, the Director shall endeavor to schedule a hearing no sooner than one and no later than three business days after receipt of the application by the respondent and the Director.

        (B) The filing of a response to an application for an Immediate Injunctive Order is optional to the party against whom the immediate order is sought. Any response shall be served on the applicant. If a response is submitted, the responding party shall, prior to the hearing or at the hearing, file with the Director two copies of the response and proof of service on all parties.

        (C) Notice of the date, time and place of the hearing: the name and employment history of the single arbitrator required by Section 21: and any information required to be disclosed by the arbitrator pursuant to Section 23 shall be provided to all parties via telephone, facsimile transmission or messenger delivery prior to the hearing.

        (D) The hearing on the application for an Immediate Injunctive Order may be held, at the discretion of the arbitrator or the Director, by telephone or in person in a city designated by the Director of Arbitration.

        (E) The arbitrator shall endeavor to grant or deny the application within one business day after the hearing and record are closed.

        (F) If the application is granted, the arbitrator shall determine the duration of the Immediate Injunctive Order. Unless the parties agree otherwise, however, the order will expire no later than the earlier of the issuance or denial of a Regular Injunctive Order under subparagraph (2) or a decision on the merits of the entire controversy by an arbitration panel appointed under this Code.

        (2) Regular Injunctive Orders.

        (A) Upon receipt of an application for a Regular Injunctive Order, the Director shall endeavor to schedule a hearing no sooner than three and no later than five business days after the response is filed or due to be filed, whichever comes first.

        (B) The party against which a Regular Injunctive Order is sought shall serve a response on the applicant within three business days of receipt of the application. The responding party shall simultaneously and in the same manner file with the Director two copies of the response and proof of service on all parties. Failure to file a response within the specified time period shall not be grounds for delaying the hearing, nor shall it bar the respondent from presenting evidence at the hearing.

        (C) Notice of the date, time and place of the hearing: the name and employment history of the single arbitrator required by Section 21: and any information required to be disclosed by the arbitrator pursuant to Section 23 shall be provided to all parties via telephone, facsimile transmission or messenger delivery prior to the hearing.

        (D) The hearing on the application for a Regular Injunctive Order may be held, at the discretion of the arbitrator or the Director, by telephone or in person in a city designated by the Director of Arbitration.

        (E) The arbitrator shall endeavor to grant or deny the application within one business day after the hearing and record are closed.

        (F) If the application is granted, the arbitrator shall determine the duration of the Regular Injunctive Order. Unless the parties agree otherwise, however, a Regular Injunctive Order shall expire no later than a decision on the merits of the entire controversy by an arbitration panel appointed under this Code.

        Challenges to Arbitrators

        (e) There shall be unlimited challenges for cause to the single arbitrator appointed to hear the application for injunctive relief, but there shall be no peremptory challenges. Parties wishing to object to the arbitrator shall do so by telephone to the Director, and shall confirm such objection immediately in writing or by facsimile transmission, with a copy to all parties. A peremptory challenge may not be made to an arbitrator who heard an application for an injunctive order and who subsequently participates or is to participate on the arbitration panel hearing the same arbitration case on the merits.

        Hearing on the Merits

        (f) Immediately following the issuance of an Immediate or Regular Injunctive Order, the Director shall appoint arbitrators according to the procedures specified in the Code to hear the matter on the merits. The arbitration shall proceed in an expedited manner pursuant to a schedule and procedures specified by the arbitrators. The arbitrators may specify procedures and time limitations for actions by the parties different from those specified in the Code.

        (g) If a court has issued an injunction against one of the parties to an arbitration agreement, unless otherwise specified by the court, any requested arbitration concerning the matter of the injunction shall proceed in an expedited manner according to a time schedule and procedures specified by the arbitration panel appointed under this Code.

        (h) The arbitrator issuing the Immediate or Regular Injunctive Order may require the applicant, as a condition to effectiveness of the order, to deposit security in an amount that the arbitrator deems proper, in a separate bank trust or escrow account for the benefit of the party against whom injunctive relief is sought, for the payment of any costs and damages that may be incurred or suffered by the party against whom injunctive relief is sought if it is found to have been wrongfully enjoined.

        Effective Date

        (i) This Section 47 shall apply to arbitration claims filed on or after the effective date of this section. Except as otherwise provided in this Section 47. the remaining provisions of the Code shall apply to proceedings instituted under Section 47. Section 47 shall expire one year after its effective date unless extended by the NASD Board of Governors.

        Resolution of the Board of Governors

        Failure to Act Under Provisions of Code of Arbitration Procedure

        It may be deemed conduct inconsistent with just and equitable principles of trade and a violation of Article III, Section 1 of the Rules of Fair Practice for a member or a person associated with a member to: (1) fail to submit a dispute for arbitration under the NASD Code of Arbitration Procedure as required by that Code; (2) fail to comply with any injunctive order issued pursuant to Section 47: (3) fail to appear or to produce any document in his possession or control as directed pursuant to provisions of the NASD Code of Arbitration Procedure; [(3)] (4) fail to honor an award, or comply with a written and executed settlement agreement, obtained in connection with an arbitration submitted for disposition pursuant to the procedures specified by the National Association of Securities Dealers, Inc., the New York, American, Boston, Cincinnati, Chicago, Pacific, or Philadelphia Stock Exchanges, the Chicago Board Options Exchange, the Municipal Securities Rulemaking Board, or pursuant to the rules applicable to the arbitration of securities disputes before the American Arbitration Association where timely motion has not been made to vacate or modify such award pursuant to applicable law; or [(4)] (5) fail to comply with a written and executed settlement agreement, obtained in connection with a mediation submitted for disposition pursuant to the procedures specified by the National Association of Securities Dealers, Inc.

      • 95-82 SEC Approves NASD Rules Concerning Index, Currency, And Currency Index Warrants

        SUGGESTED ROUTING

        Senior Management
        Advertising
        Legal & Compliance
        Options
        Trading
        Training

        Executive Summary

        On September 28, 1995, the Securities and Exchange Commission (SEC) approved proposed changes to NASD® rules governing index, currency, and currency index warrants. The amended rules:

        • revise the listing criteria for stock index warrants;

        • specify the customer margin requirements for the purchase and short sale of stock index and currency warrants; and

        • create a new Schedule J to the NASD By-Laws that consolidates all of the regulatory requirements applicable to the conduct of accounts, the execution of transactions, and the handling of orders in index warrants listed on Nasdaq® and exchange-listed stock index warrants, currency index warrants, and currency warrants by members that are not members of the exchange on which the warrant is listed or traded.

        The full text of the rule changes concerning index, currency, and currency index warrants is at the end of this Notice.

        All currency and index warrants traded on a national securities exchange before the SEC's approval of the new rules are grandfathered.

        Summary Of The Rule Changes

        Account Approval, Trading, And Advertising Rules

        New Schedule J to the By-Laws sets out various customer protection rules applicable to stock index, currency index, and currency warrants. Specifically, Schedule J makes existing options customer protection rules in Article III, Section 33 of the NASD Rules of Fair Practice applicable to stock index, currency, and currency index warrants. Where the options sales practice rules are made applicable by Schedule J to such warrants, the term "option" includes a stock index, currency index, or currency warrant.

        Section 3 of Schedule J states that no member may accept an order from a customer to purchase or sell a stock index, currency index, or currency warrant unless the customer's account has been approved for options trading pursuant to Article III, Section 33(b)(16) of the Rules of Fair Practice.

        Sections 4 through 7 and 9 of Schedule J apply the options rules for suitability (Section 33(b)(9)), discretionary accounts (Section 33(b)(18)), supervision of accounts (Sections 33(b)(17)(B) and (20)), and customer complaints (Section 33(b)(17)(A)) to stock index and currency warrants.

        Section 8 of Schedule J generally applies the standards applicable to written communications regarding listed options (Section 35A) to stock index and currency warrants. The provisions of Section 35A as applied to stock index and currency warrants require that all advertisements, sales literature, and educational material issued by a member pertaining to stock index and currency warrants be approved by a Compliance Registered Options Principal, and all advertisements and educational materials pertaining to stock index warrants be approved by the NASD or by another self-regulatory organization.

        The NASD cautions its members that any time they provide information to a customer regarding stock index warrants, they should provide the customer with information regarding the unique characteristics and risks of these instruments. In addition, any written communications to customers regarding stock index and currency warrants should state that these warrants share many of the risks of standardized options, but, unlike standardized options, they are backed only by the credit of the issuer (not The Options Clearing Corporation (OCC)) and each issue of warrants contains its own terms and conditions that may differ from those of other warrants, even other warrants on the same underlying index or issued by the same issuer.

        Position And Exercise Limits And Reporting Requirements

        Section 10 of Schedule J provides that position limits for stock index warrants on the same index with original issue prices of $10 or less will be 15 million warrants, except that for warrants on the Standard & Poor's MidCap 400 Index with an original issue price of $10 or less, the position limit will be 7.5 million warrants. The position limits are consolidated position limits, meaning that index warrants on the same index on the same side of the market must be aggregated for position-limit purposes.

        The position limit rule also contains a provision that equalizes positions in index warrants that initially were priced above $10 with those that were priced at or below $10. In particular, positions will be equalized by dividing the original issue price of the index warrants priced above $10 by 10 and multiplying this number by the size of the index warrant position. For example, if an investor held 100,000 Nasdaq 100 Index® warrants priced initially at $20, the size of this position for position-limit purposes would be 200,000, or 100,000 times 20 divided by 10.

        Section 11 of Schedule J sets forth the exercise limits applicable to index warrants. Specifically, the exercise limits provide that no investor or group of investors acting in concert may, within five consecutive business days, exercise more index warrants on the same index on the same side of the market than the applicable index warrant position limit.

        Section 12 of Schedule J provides that positions of 100,000 or more index warrants on the same index on the same side of the market must be reported to the NASD.

        Section 14 of Schedule J provides that the NASD may halt or suspend trading in an index warrant if it concludes that such action is appropriate in the interests of a fair and orderly market and the protection of investors. Among the factors that may be considered by the NASD are:

        • trading has been halted or suspended in underlying stocks whose weighted value represents 20 percent or more of the index value;

        • the current calculation of the index derived from the current market prices of the stocks is not available; or

        • other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.

        Margin

        New Section 3(f)(10) of Article III, Section 30 of the Rules of Fair Practice states the margin requirements applicable to index, currency, and currency index warrants.

        For long warrant positions, the new requirements provide that the initial and maintenance requirements for long positions in index, currency, and currency index warrants will be 100 percent of the full purchase price of the warrants.

        For short positions in index warrants, the margin requirement is 100 percent of the current market value of the warrant plus 15 percent of the current value of the underlying index. The margin requirements for short positions can be decreased to the extent that they are out-of-the-money, however, the minimum requirement for each such warrant cannot be less than the current value of the warrant plus 10 percent of the current index value.

        For short positions in currency warrants, the margin requirements follow the margin requirements presently applicable to standardized currency options. Specifically, short sales of warrants on the German mark, French franc, Swiss franc, Japanese yen, British pound, Australian dollar, and European Currency Unit will each be subject to a margin level of 100 percent of the current market value of each such warrant plus a four percent "add on." Warrants on the Canadian dollar would be subject to a one percent "add on." The "add on" required on any other foreign currency would be such other percentage as specified by the national securities exchange listing the warrant and approved by the SEC on a case-by-case basis. The required margin can be decreased to the extent that the warrant is out-of-the-money, however, the minimum requirement for each such warrant must not be less than the current value of the warrant plus .75 percent (.0075) of the value of the underlying currency (or such other percentage as specified by the national securities exchange listing the warrant and approved by the SEC).

        The margin required on currency index warrants would be an amount as determined by the national securities exchange listing the warrant and approved by the SEC.

        Index, currency warrant, and currency index warrant margin requirements also receive offset treatment for spread and straddle positions. Specifically, stock index, currency, and currency index warrants may be offset with either warrants or OCC-issued options on the same stock index, currency, or currency index, respectively, in the same manner that standardized index and currency options may be offset with other standardized index and currency options. The rules governing the margin treatment for spreads and straddles involving stock index, currency, and currency index warrants are being implemented on a one-year pilot basis. The NASD also will allow market participants to use escrow receipts to cover a short-call position in broad-based stock index warrants.

        Listing Standards

        The NASD has substantially revised the listing standards applicable to stock index warrants. Under the revised standards, issuers must have a minimum tangible net worth exceeding $250 million or have a minimum tangible net worth exceeding $150 million, provided the issuer has not issued warrants such that the aggregate original issue price of all of the issuer's stock index, currency, and currency index warrant offerings (combined with offerings by its affiliates) listed on Nasdaq or a national securities exchange exceeds 25 percent of the issuer's net worth.

        The term of the index warrants must provide that unexercised in-the-money warrants will be automatically exercised on the delisting date (if the issue is not listed on a national securities exchange) or upon expiration.

        For warrant offerings where U.S. stocks constitute 25 percent or more of the index value, issuers must use the opening prices (a.m. settlement) of the U.S. stocks to determine the final index warrant settlement value and the index warrant settlement value on the two business days preceding the day on which the final index warrant settlement value is to be determined.

        In instances where the stock index underlying a warrant is comprised of, in whole or in part, securities traded outside the United States, the foreign country securities or American Depositary Receipts (ADRs) that are not subject to a comprehensive surveillance agreement and have less than 50 percent of their global trading volume in dollar value within the United States, cannot, in the aggregate, represent more than 20 percent of the weight of the index, unless such index is otherwise approved for warrant or option trading.

        Reporting Changes In The Number Of Warrants Outstanding

        To assist in the surveillance of index warrant trading, as a condition of listing on Nasdaq, issuers would be required to notify (or make arrangements for the warrant transfer agent to notify) the NASD of any early warrant exercises by 4:30 p.m., Eastern Time, on the day the settlement value for the warrants is determined. Such notice must be filed in such form and manner as may be prescribed by the NASD from time to time.

        Reporting The Execution Of Hedging Transactions Due To Early Exercise

        The NASD will require any issuer of a stock index warrant (for which 25 percent or more of the value of the underlying index is represented by securities traded primarily in the United States) to file a report with the NASD concerning certain trades the issuer effects as a result of the early exercise of a stock index warrant to adjust a hedge that the issuer has established in connection with the issuance of such warrants. The threshold reporting level for issuer hedge transactions in stock will be set at the reporting level of the New York Stock Exchange's Daily Program Trading Report (DPTR), which is a program trade involving at least 15 stocks of $1 million or more in value. Any issuer hedge transaction effected in another market (such as options market, futures market, OTC derivatives market) must be reported regardless of its size.

        These reports will be submitted to the NASD by the close of business on the second business day following the trade date of the transaction subject to the report. All such reports must be filed as required by the NASD from time to time and must include the following information with respect to each reportable trade:

        • order-entry time;

        • product type (stock, stock option, futures contract, futures option);

        • order type (market maker on close, limit);

        • market action (buy/open, buy/close, sell/option);

        • account identifier;

        • size (total number of shares or contracts);

        • total dollar value of trade;

        • market where executed; and

        • the warrant issue hedged.

        Questions regarding the new rules applicable to stock index, currency, and currency index warrants may be directed to Thomas R. Gira, Assistant General Counsel, at (202) 728–8957; questions concerning the sales practice and margin rules applicable to index warrants may be directed to the NASD Compliance Department, at (202) 728–8221; questions regarding the listing standards applicable to Nasdaq-listed index warrants may be directed to David Irwin, Assistant Director, Policy and Practices, Nasdaq Issuer Services, at (202) 728–8102; and questions concerning the position and exercise limits and reporting requirements applicable to index warrants may be directed to NASD Market Surveillance, at (800) 925–8156.

        Text Of New Schedule To The By-Laws And Amendments To The By-Laws And Rules Of Fair Practice

        Below is the text of new Schedule J to the NASD By-Laws and the amendments to: Schedule D to the NASD By-Laws; Section 30 of the NASD Rules of Fair Practice; and the NASD Board's Policy issued under Section 2 of the NASD Rules of Fair Practice concerning Fair Dealing with Customers with Regard to Derivative Products or New Financial Products.

        (Note: New text is underlined; deletions are bracketed.)

        SCHEDULE J

        TRADING IN INDEX WARRANTS, CURRENCY INDEX WARRANTS, AND CURRENCY WARRANTS

        Sec. 1. General

        (a) Applicability—The rules in this Schedule J shall be applicable: (1) to the conduct of accounts, the execution of transactions, and the handling of orders in index warrants listed on the Nasdaq Stock Market ("Nasdaq'"): and (2) to the extent appropriate unless otherwise stated herein, to the conduct of accounts, the execution of transactions, and the handling of orders in exchange-listed stock index warrants, currency index warrants, and currency warrants by members who are not members of the exchange on which the warrant is listed or traded.
        (b) Except to the extent that specific provisions in this Schedule govern, or unless the context otherwise requires, the provisions of the By-Laws and Rules of Fair Practice and all other interpretations and policies of the Board of Governors shall also be applicable to transactions in index warrants, currency index warrants, and currency warrants.
        (c) The rules in this Schedule are not applicable to stock index warrants, currency index warrants, and currency warrants listed on national securities exchanges prior to September 28. 1995.

        Sec. 2. Definitions

        (a) The term "stock index group" means a group of stocks each of whose inclusion and relative representation in the group is determined by its inclusion and relative representation in a stock index.
        (b) The term "index warrants" means instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e.. American style") or exercisable only on their expiration date (i.e.. European style), entitling the holder there of to a cash settlement in U.S. dollars to the extent that the value of the underlying stock index group has declined below (in the case of a put warrant) or increased above (in the case of a call warrant) the pre-stated cash settlement value of the underlying stock index group.
        (c) The term "currency warrants" shall mean instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e.. American style) or exercisable only on their expiration date (i.e., European style), entitling the holder thereof to a cash settlement in U.S. dollars to the extent that the value of the underlying foreign currency has declined below (in the case of a put warrant) or increased above (in the case of a call warrant) the pre-stated cash settlement value of the underlying foreign currency. The term "foreign currency warrants" shall also include cross-rate currency warrants.
        (d) The term "currency index" means a group of currencies each of whose inclusion and relative representation in the group is determined by its inclusion and relative representation in a currency index.
        (e) The term "currency index warrants" shall mean instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e.. American style) or exercisable only on their expiration date (i.e.. European style), entitling the holder thereof to a cash settlement in U.S. dollars to the extent that the value of the underlying currency index has declined below (in the case of a put warrant) or increased above (in the case of a call warrant) the prestated cash settlement value of the underlying currency index.
        (f) The term "control" shall have the same meaning as the term "control" as set forth in Article III. Section 33(b)(2)(ZZ) of the Rules of Fair Practice.

        Sec. 3. Account Approval

        No member or person associated with a member shall accept an order from a customer to purchase or sell an index warrant, currency index warrant, or currency warrant unless the customer's account has been approved for options trading pursuant to Article III. Section 33(b)(16) of the Rules of Fair Practice.

        Sec. 4. Suitability

        The provisions of Article III. Section 33(b)(19) of the Rules of Fair Practice shall apply to recommendations by members and persons associated with members regarding the purchase or sale of index warrants, currency index warrants, or currency warrants. The term "option" as used therein shall be deemed to include such warrants for purposes of this Section.

        Sec. 5. Discretionary Accounts

        Insofar as a member or person associated with a member exercises discretion to trade in index warrants, currency index warrants, or currency warrants in a customer's account, such account shall be subject to the provisions of Article III. Section 33(b)( 18) of the Rules of Fair Practice. The term "option" as used therein shall be deemed to include such warrants for purposes of this Section.

        Sec. 6. Supervision of Accounts

        The provisions of Article III. Section 33(b)(20) of the Rules of Fair Practice shall apply to all customer accounts of a member in which transactions in index warrants, currency index warrants, or currency warrants are effected. The term "option" as used therein shall be deemed to include such warrants for purposes of this Section.

        Sec. 7. Customer Complaints

        The record-keeping requirements of Article III. Section 33(b)(17)(A) of the Rules of Fair Practice concerning the receipt and handling of customer complaints relating to options shall also apply to customer complaints relating to index warrants, currency index warrants, or currency warrants and the required records of such complaints shall be maintained together with the records pertaining to options related complaints, provided that complaints related to index warrants, currency index warrants, or currency warrants shall be clearly identified as such. The term "option" as used therein shall be deemed to include such warrants for purposes of this Section.

        Sec. 8. Communications with the Public and Customers Concerning Index Warrants. Currency Index Warrants, and Currency Warrants

        The provisions of Article III. Section 35 A of the Rules of Fair Practice shall be applicable to communications to customers regarding index warrants, currency index warrants, or currency warrants. The term "option" as used therein shall be deemed to include such warrants for purposes of this Section and the term "The Options Clearing Corporation" shall be deemed to mean the issuer of such warrants. Sections 35A(c)(5) and (d)(2XC)(v) shall also not be applicable to communications with the public regarding index warrants, currency index warrants, or currency warrants.

        Sec. 9. Maintenance of Records

        The record-keeping provisions of Article HI. Section 33(b)(17)(B) shall be applicable to customer accounts approved to trade index warrants, currency index warrants, or currency warrants. The term "option" as used therein shall be deemed to include such warrants for purposes of this

        Sec. 10. Position Limits

        Except with the prior written approval of the Corporation in each instance, no member shall effect for any account in which such member has an interest, or for the account of any partner, office, director or employee thereof, or for the account of any customer, a purchase or sale transaction in an index warrant listed on Nasdaq or on a national securities exchange if the member has reason to believe that as a result of such transaction the member, or partner, officer, director or employee thereof, or customer would, acting alone or in concert with others, directly or indirectly, hold or control an aggregate position in an index warrant issue on the same side of the market, combining such index warrant position with positions in index warrants overlying the same index on the same side of the market, in excess of the position limits established by the Corporation, in the case of Nasdaq-listed index warrants, or the exchange on which the index warrant is listed.

        In determining compliance with this Section, the position limits for Nasdaq-listed index warrants are as follows:

        (i) Fifteen million warrants with respect to warrants on the same stock index (other than the Standard & Poor's MidCap 400 Index) with an original issue price of ten dollars or less.
        (ii) Seven million five hundred thousand warrants, with respect to warrants on the Standard & Poor's MidCap 400 Index with an original issue price of ten dollars or less.
        (iii) For stock index warrants with an original issue price greater than ten dollars, positions in these warrants must be converted to the equivalent-of warrants on the same index priced initially at ten dollars by dividing the original issue price of the index warrants priced above ten dollars by ten and multiplying this number by the size of such index warrant position. After recalculating a warrant position pursuant to this paragraph (in"), such recalculated warrant position shall be aggregated with other warrant positions on the same underlying index on the same side of the market and subjected to the applicable position limit set forth in paragraph (i) or (ii) above. For example, if an investor held 100.000 Nasdaq 100 Index warrants offered originally at $20 per warrant, the size of this position for the purpose of calculating position limits would be 200.000. or 100.000 times 20/10.

        Sec. 11. Exercise Limits

        Except with the prior written approval of the Corporation, in each instance, no member or person associated with a member shall exercise, for any account in which such member or person associated with such member has an interest, or for the account of any partner, officer, director or employee thereof, or for the account of any customer, a long position in any index warrant if as a result thereof such member or partner, officer, director or employee thereof or customer, acting alone or in concert with others, directly or indirectly: (1) has or will have exercised within any five (5) consecutive business days a number of index warrants overlying the same index in excess of the limits for index warrant positions contained in Section 10 of this Schedule J: or (21 has or will have exceeded the applicable exercise limit fixed from time to time by an exchange for an index warrant not dealt in on Nasdaq. The Corporation may institute other limitations concerning the exercise of index warrants from time to time by action of the Corporation. Reasonable notice shall be given of each new limitation fixed by the Corporation. These exercise limitations are separate and distinct from any other exercise limitations imposed by the issuers of index warrants.

        Sec. 12. Reporting Requirements

        (a) Each member shall file with the Corporation a report with respect to each account in which the member has an interest, each account of a partner, officer, director or employee of such member, and each customer account of the member, which has established an aggregate position of 100.000 index warrants on the same side of the market in an index warrant issue listed on Nasdaq, combining such index warrant position with positions in index warrants overlying the same index on the same side of the market traded on Nasdaq or a national securities exchange.
        (b) Such report shall identify the person or persons having an interest in such account and shall identify separately the total number of each type of index warrant that comprises the reportable position in such account. The report shall be in such form as may be prescribed by the Corporation and shall be filed no later than the close of business on the next business day following the day on which the transaction or transactions necessitating the filing of such report occurred. Whenever a report shall be required to be filed with respect to an account pursuant to this subsection, the member filing such report shall file with the Corporation such additional periodic reports with respect to such account as the Corporation may from time to time prescribe.

        Sec. 13. Liquidation of Index Warrant Positions

        Whenever the Corporation determines that a person or group of persons acting in concert holds or controls an aggregate position (whether short or long) in index warrants overlying the same index in excess of the position limitations established by Section 10 of this Schedule J. it may, when deemed necessary or appropriate in the public interest and for the protection of investors, direct any member or all members carrying a position in index warrants overlying such index for such person or persons to liquidate such position or positions, or portions thereof, as expeditiously as possible and consistent with the maintenance of an orderly market, so as to bring such person or persons into compliance with the position limitations contained in Section 10.

        Whenever such a directive is issued by the Corporation no member receiving notice thereof shall accept and/or execute for any person or persons named in such directive any order to purchase or sell short any index warrants based on the same index, unless in each instance express approval therefore is given by the Corporation, or the directive is

        Sec. 14. Trading Halts or Suspensions

        (a) The trading in an index warrant on Nasdaq shall be halted whenever the Senior Vice President for Market Surveillance, or its designee. shall conclude that such action is appropriate in the interests of a fair and orderly market and to protect investors. Among the factors that may be considered are the following:
        (i) trading has been halted or suspended in underlying stocks whose weighted value represents 20% or more of the index value:
        (ii) the current calculation of the index derived from the current market prices of the stocks is not available:
        (iii) other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.
        (b) Trading in index warrants that has been the subject of a trading halt or suspension may resume if the Senior Vice President for Market Surveillance, or its designee. determines that the conditions which led to the halt or suspension are no longer present or that the interests of a fair and orderly market are served by a resumption of trading. In either event, the reopening may not occur until the Corporation has determined that trading in underlying stocks whose weighted value represents more than 50% of the index is occurring.

        SCHEDULE D

        PART I – DEFINITIONS

        (1) through (18) No change.
        (19) "Nasdaq National Market System security" or "NNM security" means any authorized security which (i) satisfies all applicable requirements of Part II and substantially meets the criteria set forth in Part III, Sections 2 and 5 of this Schedule D and is subject therefore to a transaction reporting plan approved by the Securities and Exchange Commission; (ii) is a right to purchase such security; [or] (iii) is a warrant to subscribe to such security; or (iv) is an index warrant which substantially meets the criteria set forth in Part III, Section 2 of this Schedule D, and has been designated therefore as a national market system security pursuant to SEC Rule 11 Aa2–1.

        PART II No change.

        PART III

        Introduction No change.

        DESIGNATION OF NASDAQ NATIONAL MARKET SECURITIES

        Sec. 1. No change.

        Sec. 2. Quantitative Designation Criteria

        (a) and (b) No change,
        (c) Warrants
        (1) No change.
        (2) An index warrant may be designated for inclusion if it substantially meets the following criteria:
        (A) The minimum public distribution shall be at least 1 million warrants.
        (B) The minimum number of public holders shall be at least 400.
        (C) The aggregate market value of the outstanding index warrants shall be at least $4 million.
        (D) The issuer of the index warrants must have [assets in excess of $100 million] a minimum tangible net worth in excess of $150 million.
        (E) The term of the index warrant shall be for a period from one to five years. Any index warrant designated pursuant to this paragraph shall not be required to meet the requirements of Sections 3,4 or 5 of this Part. The Association may apply additional or more stringent criteria as necessary to protect investors and the public interest.
        (F) Limitations on Issuance—Where an issuer has a minimum tangible net worth in excess of $150 million but less than $250 million. Nasdaq will not list stock index warrants of the issuer if the value of such warrants plus the aggregate value, based upon the original issuing price, of all out standing stock index, currency index and currency warrants of the issuer and its affiliates combined that are listed for trading on Nasdaq or a national securities exchange exceeds 25% of the issuer's net worth.
        (G) A.M. Settlement—The terms of stock index warrants for which 25% or more of the value of the underlying index is represented by securities that are traded primarily in the United States must provide that the opening prices of the stocks comprising the index will be used to determine (i) the final settlement value (i.e.. the settlement value for warrants that are exercised at expiration) and (ii) the settlement value for such warrants that are valued on either of the two business days preceding the day on which the final settlement value is to be determined.
        (H) Automatic Exercise—All stock index warrants and any other cash-settled warrants must include in their terms provisions specifying (i) the time by which all exercise notices must be submitted and (ii) that all unexercised warrants that are in the money (or that are in the money by a stated amount will be automatically exercised on their expiration date or on or promptly following the date on which such warrants are delisted by Nasdaq (if such warrant issue has not been listed on a national securities exchange).
        (I) Foreign Country Securities—In instances where the stock index underlying a warrant is comprised in whole or in part with securities traded outside the United States, the foreign country securities or American Depositary Receipts ("ADRs") thereon that (i) are not subject to a comprehensive surveillance agreement, and (ii) have less than 50% of their global trading volume in dollar value within the United States, shall not, in the aggregate represent more than 20% of the weight of the index, unless such index is otherwise approved for warrant or option trading.
        (J) Changes in Number of Warrants Outstanding—Issuers of stock index warrants either will make arrangements with warrant transfer agents to advise the NASD immediately of any change in the number of warrants outstanding due to the early exercise of such warrants or will provide this information themselves. With respect to stock index warrants for which 25% or more of the value of the underlying index is represented by securities traded primarily in the United States, such notice shall be filed with the NASD no later than 4:30 p.m. Eastern Standard Time, on the date when the settlement value for such warrants is determined. Such notice shall be filed in such form and manner as may be prescribed by the NASD from time to time.
        (K) Only eligible broad-based indexes can underlie index warrants. For purposes of this subsection, eligible broad-based indexes shall include those indexes approved by the Securities and Exchange Commission to underlie index warrants or index options traded on Nasdaq or a national securities exchange.

        SECTION 30 OF THE RULES OF FAIR PRACTICE

        Sec. 1. and Sec. 2. No change.

        Sec. 3(a) through (f)(9) No change.

        Sec. 3(f)(10)

        (a) This Section sets forth the minimum amount of margin which must be deposited and maintained in margin accounts of customers having positions in index warrants, currency index warrants or currency warrants dealt in on Nasdaq or a national securities exchange. The Corporation may at any time impose higher margin requirements in respect of such positions when it deems such higher margin requirements to be advisable. The initial deposit of margin required under this Section must be made within five full business days after the date on which a transaction giving rise to a margin requirement is effected. The margin requirements set forth in this Section are applicable only to index warrants, currency index warrants and currency warrants listed for trading on Nasdaq or a national securities exchange on or after September 28. 1995.
        (b) Definitions

        The following definitions shall apply to transactions in index warrants, currency index warrants, and currency
        (1) The terms "stock index group," "index warrants," "currency war ants," currency index," and "currency index warrants" when used in reference to an index warrant, currency index warrant, or currency warrant shall have the same meanings as set forth in Section 2 of Schedule J to the By-Laws.
        (2) The term "current market value" of an index warrant, currency index warrant or currency warrant shall mean the total cost or net proceeds of the transaction on the day the warrant was purchased or sold and at any other time shall mean the most recent closing price of that issue of warrants on Nasdaq, in the case of a Nasdaq-listed index warrants, or the exchange on which it is listed on any day with respect to which a determination of current market value is made.
        (3) The term "index group value" in respect of an index warrant means the numerical index value of a particular stock index multiplied by $1.00 U.S. or other applicable index multiplier.
        (4) The term "index group value" in respect to a currency index warrant means the numerical index value of particular currency index multiplied by SI.00 U.S. or the applicable index multiplier.
        (5) The term "strike price" in respect of an index warrant, currency index warrant or currency warrant means the price at which the warrant may be exercised in accordance with its terms.
        (6) The term "spot price" in respect of a currency warrant on a particular business day means the noon buying rate in U.S. dollars on such day in New York City for cable transfers of the particular underlying currency as certified for customs purposes by the Federal Reserve Bank of New York.
        (7) The term "index call warrant" means a warrant structured as a call on the underlying stock index group. The term "index put warrant" means a warrant structured as a put on the underlying stock index group.
        (8) The term "currency index call warrant" means a warrant structured as a call on the underlying currency-index. The term "currency index put warrant" means a warrant structured as a put on the underlying currency index.
        (9) The term "currency call warrant" means a warrant structured as a call on the underlying currency. The term "currency put warrant" means a warrant structured as a put on the underlying currency.
        (10) The term "reporting authority" in respect of an index warrant means the institution or reporting service specified in the prospectus for the warrant as the official source for calculating and reporting the levels of such stock index.
        (11) The term "numerical index value" in respect of an index warrant means the level of a particular stock index as reported by the reporting authority for the index.
        (12) The term "reporting authority" in respect of a currency index warrant means the institution or reporting service specified in the prospectus for the warrant as the official source for calculating and reporting the levels of such currency index.
        (13) The term "numerical index value" in respect of a currency index warrant means the level of a particular currency index as reported by the reporting authority for the index.
        (14) The term "unit of underlying currency" in respect of a currency warrant means a single unit of the currency covered by the warrant.
        (c) Except as provided in this Section, no index warrant, currency index warrant or currency warrant carried for a customer shall be considered of any value for the purpose of computing the margin required in the account of such customer. Subject to the exceptions set forth in sub-paragraph (e) of this Section, the minimum margin on any currency warrant, currency index warrant or index warrant issued, guaranteed or carried "short" in a customer's account shall be:
        (1) In the case of an index put or call warrant. 100% of the current market value of each such warrant plus 15% of the current index group value. Such amount shall be decreased by the excess of the strike price of the warrant over the current index group value in the case of an index call warrant, or the excess of the current index group value over the strike price of the warrant in the case of an index put warrant: or
        (2) In the case of a currency put or call warrant, 100% of the current market value of each such warrant plus 4% (or such other percentage, as specified by the national securities exchange listing the warrant and approved by the Commission on a case-by-case basis) of the product of the units of underlying currency per warrant and the spot price for such currency. The add-on percentage with respect to warrants on the German Mark, French Franc, Swiss Franc, Japanese Yen, British Pound, Australian Dollar, U.S. and European Currency Unit ("ECU") shall be four percent (4%). and for the Canadian Dollar the "add-on" percentage shall be one percent (1%). Such amount shall be decreased by the excess of the strike price of the warrant over the product of the units of underlying currency per warrant and the spot price of the currency in the case of a currency call warrant, or any excess of the product of the units of underlying currency per warrant and the spot price over the strike price of the warrant in the case of a currency put warrant: or
        (3) In the case of the currency index put or call warrants. 100% of the current market value of each such warrant plus a percentage, as specified by the national securities exchange listing the warrant and approved by the Commission on a case-by-case basis. of the current index group value. Such amount shall be decreased by the excess of the strike price of the warrant over the current index group value in the case of a currency index call warrant, or any excess of the current index group value over the strike price of the warrant in the case of a currency index put warrant.

        Notwithstanding the foregoing:

        (d) The minimum margin on each currency put or call warrant, currency index put or call warrant or index put or call warrant issued, guaranteed or carried "short" in a customer's account shall be not less than 100% of the current market value of such warrant plus: (i) 10% of the current index group value in the case of an index warrant: (ii) .75% (.0075) (or such other percentage as specified by the national securities exchange listing the warrant and approved by the Commission) of the product of the units of underlying currency per warrant and the spot price of such currency, in the case of a currency warrant: or (iii) in the case of currency index warrants, a percentage of the current index group value as specified by the national securities exchange listing the warrant and approved by the Commission.
        (e)
        (1) When a "short" position in an index call warrant, currency index call warrant or currency call warrant is offset by a "short" position of equivalent underlying value in a put warrant or a put option issued by The Options Clearing Corporation on the same index or currency, or a "short" position in an index put warrant, currency index put warrant or currency put warrant is offset by a "short" position of equivalent underlying value in a call warrant or a call option issued by The Options Clearing Corporation on the same index or currency, the margin required shall be the margin on the put position or the call position, whichever is greater, plus the current market value of the other position.
        (2) When a "long" position in an index call warrant, currency index call warrant or currency call warrant is offset by a "short" position of equivalent underlying value in a call warrant or a call option issued by The Options Clearing Corporation on the same index or currency, then, provided that the "long" position expires no earlier than the "short" position, the margin required shall be the amount, if any, by which the strike price of the "long" position exceeds the strike price of the "short"
        (3) When a "long" position in an index put warrant, currency index put warrant or currency put warrant is offset with a "short" position of equivalent underlying value in a put warrant or a put option issued by The Option Clearing Corporation on the same index or currency, then, provided that the "long" position expires no earlier than the "short" position, the margin required shall be the amount, if any, by which the strike price of the "short" position exceeds the strike price of the "long" position.
        (4) The margin treatment for spread positions pursuant to subparagraphs (1), (2), and (3) above is subject to a one-year pilot program scheduled to begin September 28. 1995.
        (5) No margin is required in respect of a "short" position in an index call warrant where the customer has delivered, promptly after the warrant has been sold short, to the Member with which such position is maintained, a Market Index Warrant Escrow Receipt in a form satisfactory to the Corporation, issued by a bank or trust company pursuant to specific authorization from the customer which certifies that the issuer of the agreement holds for the account of the customer (1) cash. (21 cash equivalents. (3) one or more qualified equity securities, or (4) a combination thereof: that such deposit has an aggregate market value, at the time the warrant is sold short, of not less than 100% of the aggregate current index value: and that the issuer will promptly pay the Member sufficient funds to purchase the warrant sold short in the event of a buy-in.

        RULES OF FAIR PRACTICE

        Sec. 1. No change.

        Sec. 2. Recommendations To Customers

        Policy of the Board of Governors—Fair Dealing with Customers with Regard to Derivative Products or New Financial Products

        The Board emphasizes members' obligations for fair dealing with customers when making recommendations or accepting orders for new financial products. As new products are introduced from time to time, it is important that members make every effort to familiarize themselves with each customer's financial situation, trading experience, and ability to meet the risks involved with such products and to make every effort to make customers aware of the pertinent information regarding the products. Members must follow specific guidelines, set forth below, for qualifying the accounts to trade the products and for supervising the accounts thereafter.

        (1) For index warrants—members are obliged to comply with the [following rules, regulations and procedures applicable to options trading. In transactions with customers, members may effect transactions in index warrants only with customers whose accounts have been approved for options trading, pursuant to the standards contained in Section 33 and Appendix E of the Rules of Fair Practice. Members shall also be obliged to comply with standards in Appendix E for Discretionary Accounts (Section 18), Suitability (19), and Supervision of Accounts (Section 20) for customers that desire to trade index warrants and that have been approved for options trading] rules, regulations, and procedures applicable to index warrants and foreign currency warrants contained in Schedule J to the By-Laws.

      • 95-81 SEC Approves Rules For Reporting Customer Complaint Information; Special NASD Notices to Members

        September 26, 1995;

        Executive Summary

        On September 8, 1995, the Securities and Exchange Commission (SEC) approved a new rule under Article III, Section 50 of the Rules of Fair Practice (Rules) for reporting customer complaint information and other specified events to the NASD. The new rule requires members to report to the NASD the occurrence of 10 specified events and quarterly summary statistics concerning customer complaints. The new rule will provide important new regulatory information that will assist the NASD in the timely identification of problem members, branch offices, and registered representatives in order to more aggressively detect and investigate sales practice violations. The rule, as adopted, significantly parallels comparable provisions of New York Stock Exchange (NYSE) Rule 351, and also eliminates any regulatory duplication by exempting members that are currently subject to similar reporting requirements of another self-regulatory organization (SRO). The rule change is effective October 1, 1995. Electronic filings of specified events that occur from October 1, and thereafter, are required to be reported within 10 business days after the member knows of, or should have known of, the existence of the event. The first electronic submission of quarterly statistical data will be due January 15, 1996.

        Background

        The NASD's regulation program requires District Offices to identify and conduct intense sales practice examinations of main offices, branch offices, and individuals associated with such offices who may pose certain regulatory concerns due to, among other things, past misconduct related to abusive sales and trading practices.

        The NASD has developed an automated system that draws on the Central Registration Depository (CRD__sp_SM)__/sp_ and NASD internal regulatory systems to analyze and profile the current registered representative population. When incorporated with NASD regulatory intelligence about examinations, disciplinary actions, customer complaints, and terminations for cause, the NASD has the capacity to more precisely and expeditiously profile registered representatives that may pose regulatory risks to public investors.

        Over the past several years, the NASD has taken a number of actions to:

        • emphasize improvement in the hiring and termination practices of member firms;
        • commit additional resources to sales practice cases;
        • increase scrutiny of member supervisory systems, practices, and procedures; and
        • increase sanctions for sales practice violations.

        Members employing individuals with a history of compliance or disciplinary problems have also been made aware of their heightened standard of supervisory responsibility which demands that special supervisory practices address the particular problems of those individuals.

        To enhance these efforts further, the NASD has adopted, with SEC approval, a new customer complaint rule that significantly strengthens the NASD's regulatory and surveillance efforts by requiring member firms to report to the NASD the occurrence of certain specified events and summary statistics concerning customer complaints.

        Summary Of The Approved Rule

        Subsection (a) of the rule requires member firms to file a report with the NASD when any of 10 specified events occurs. These 10 events vary significantly, ranging from situations where a court, government agency, or SRO has determined there has been a violation of the securities laws, to circumstances where a firm has received a written customer complaint alleging theft, misappropriation of funds or securities, or forgery. Subsection (b) of the rule requires each person associated with an NASD member to report promptly to the member the existence of any of the 10 conditions in Subsection (a) of the rule, and the member must report these events to the NASD within 10 business days of when the member knows, or should have known, of the event. Specified events that occur on and after October 1, 1995, are subject to this reporting requirement.

        Subsection (c) of the rule further requires members to report to the NASD statistical and summary information regarding written customer complaints received by the member firm or relating to the firm or any of its associated persons. No report is required if the member does not receive a customer complaint. The statistical and summary information regarding customer complaints is due by the 15th of the month following the calendar quarter in which the customer complaints are received by the member. (If the 15th of the month falls on a weekend or holiday, the report is due the next business day.) Initial quarterly reports are due by January 15, 1996, for the calendar quarter ending December 31, 1995. For example, if the member received a customer complaint during that calendar quarter, the member must file the required report by January 15, 1996. The NASD Regulation staff will routinely conduct on-site inspections as part of the examination process and use automated surveillance techniques to ensure full and timely compliance with this important new rule.

        Subsection (e) of the rule eliminates the possibility of any regulatory duplication by providing an exemption from filing with the NASD for members already subject to similar reporting requirements of another SRO. NYSE Rule 351 is the only such rule in place at this time.

        Systems Implementation

        By October 1, 1995, the NASD will be distributing to its members the NASD Customer Complaint System Software (CCSS), with applicable communications software (NASDnetSM) to help members comply with the reporting requirements of the new rule. CCSS will permit members to file the required information electronically with the NASD through an electronic filing mechanism similar to PC FOCUS__sp_SM.__/sp_ Along with the software, the NASD will distribute a users guide, which will help explain the software and attempt to answer most installation questions that may arise.

        For the software to operate efficiently, each member must maintain the following hardware configuration:

        • at least a 286 Personal Computer with DOS operating system;
        • 640K of RAM;
        • 2.4MB hard drive;
        • 3.5" disk drive;
        • CGA, EGA, VGA, or monochrome monitor; and
        • Hayes-compatible modem with a 1200, 2400, or 9600 baud rate.

        Any questions regarding the installation of the CCSS or NASDnet communications software can be directed to the NASD Regulatory Systems Customer Support Hotline at (800) 321-6273.

        Recision Of Schedule C, Part V

        Before adopting this new rule amendment, Part V of Schedule C to the NASD By-Laws required members to promptly notify the NASD in writing of any disciplinary action that the member had taken against any of its associated persons involving suspension, termination, the withholding of commissions or imposition of fines in excess of $2,500, or any other significant limitation on activities. As this existing disclosure requirement is incorporated into Subsection (a)(10) of the approved rule, the SEC approved the recision of Part V of Schedule C to the NASD By-Laws.

        Questions regarding this Special Notice may be directed to David Spotts or Daniel Sibears, NASD Regulatory Policy Department, at (202) 728-8221; Craig Landauer, Office of General Counsel, at (202) 728-8294; or to the members' local NASD District Office. All questions regarding system implementation may be directed to NASD Regulatory Systems Customer Support at (800) 321-6273 or (301) 208-2818.

        Text Of New Rule

        (Note: New text is underlined).

        NASD Rules of Fair Practice

        Article III, Section 50

        (a) Each member shall promptly report to the Association whenever such member or person associated with the member:

        (1) has been found to have violated any provision of any securities law or regulation, any rule or standards of conduct of any governmental agency, self-regulatory organization, or financial business or professional organization, or engaged in conduct which is inconsistent with just and equitable principles of trade; and the member knows or should have known that any of the aforementioned events have occurred;

        (2) is the subject of any written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery;

        (3) is named as a defendant or respondent in any proceeding brought by a regulatory or self-regulatory body alleging the violation of any provision of the Securities Exchange Act of 1934, or of any other federal or state securities, insurance, or commodities statute, or of any rule or regulation thereunder, or of any provision of the By-laws, rules or similar governing instruments of any securities, insurance or commodities regulatory or self-regulatory organization;

        (4) is denied registration or is expelled, enjoined, directed to cease and desist, suspended or otherwise disciplined by any securities, insurance or commodities industry regulatory or self-regulatory organization or is denied membership or continued membership in any such self-regulatory organization; or is barred from becoming associated with any member of any such self-regulatory organization;

        (5) is indicted, or convicted of, or pleads guilty to, or pleads no contest to, any criminal offense (other than traffic violations);

        (6) is a director, controlling stockholder, partner, officer or sole proprietor of, or an associated person with, a broker, dealer, investment company, investment advisor, underwriter or insurance company which was suspended, expelled or had its registration denied or revoked by any agency, jurisdiction or organization or is associated in such a capacity with a bank, trust company or other financial institution which was convicted of or pleaded no contest to, any felony or misdemeanor;

        (7) is a defendant or respondent in any securities or commodities-related civil litigation or arbitration which has been disposed of by judgement, award or settlement for an amount exceeding $15,000. However, when the member is the defendant or respondent, then the reporting to the Association shall be required only when such judgement, award of settlement is for an amount exceeding $25,000;

        (8) is the subject of any claim for damages by a customer, broker, or dealer which is settled for an amount exceeding $15,000. However, when the claim for damages is against a member, then the reporting to the Association shall be required only when such claim is settled for an amount exceeding $25,000;

        (9) is associated in any business or financial activity with any person who is subject to a "statutory disqualification" as that term is defined in the Securities Exchange Act of 1934, and the member knows or should have known of the association. The report shall include the name of the person subject to the statutory disqualification and details concerning the disqualification;

        (10) is the subject of any disciplinary action taken by the member against any person associated with the member involving suspension, termination, the withholding of commissions or imposition of fines in excess of $2,500, or otherwise disciplined in any manner which would have significant limitation on the individual's activities on a temporary or permanent basis.

        (b) Each person associated with a member shall promptly report to the member the existence of any of the conditions set forth in paragraph (a) of this rule. Each member shall report to the Association not later than 10 business days after the member knows or should have known of the existence of any of the conditions set forth in paragraph (a) of the rule.

        (c) Each member shall report to the Association statistical and summary information regarding customer complaints in such detail as the Association shall specify by the 15th day of the month following the calendar quarter in which customer complaints are received by the member. For the purposes of this paragraph, "customer" includes any person other than a broker or dealer with whom the member has engaged, or has sought to engage, in securities activities, and "complaint" includes any written grievance by a customer involving the member or person associated with a member.

        (d) Nothing contained in paragraph (a), (b) and (c) of this Section shall eliminate, reduce, or otherwise abrogate the responsibilities of a member or person associated with a member to promptly file with full disclosure, required amendments to Form BD, Forms U-4 and U-5, or other required filings, and to respond to the Association with respect to any customer complaint, examination, or inquiry.

        (e) Any member subject to substantially similar reporting requirements of another self-regulatory organization of which it is a member is exempt from the provisions of this Section.

      • 95-80 NASD Further Explains Members Obligations And Responsibilities Regarding Mutual Funds Sales Practices

        SUGGESTED ROUTING

        Senior Management
        Advertising
        Legal & Compliance
        Mutual Fund
        Training

        Executive Summary

        The obligation of NASD® members under the Rules of Fair Practice with respect to mutual fund sales practices is a continuing concern of the NASD. The proliferation of new mutual funds and varied fee structures has significantly increased the options available for investors. As a result, the mutual fund selection process has become more complex.

        To make appropriate recommendations, members and their associated persons, collectively referred to herein as "members," must know the key points regarding the mutual funds they recommend or sell. Members must ensure:

        • complete and balanced disclosure is made to investors regarding the distinctions among classes of a multi-class fund or feeders of a master-feeder fund;

        • if an expense ratio is represented as an advantage of a particular fund, it is explained in the context of and compared with other mutual fund expense ratios;

        • if a mutual fund portfolio may include financial derivatives, the potential risks involved are fully disclosed and explained;

        • when performance information is presented, the concepts of total return, yield, and distribution rates are explained to and understood by the investor;

        • any recommendation made is suitable and based on the investor's investment objectives;

        • any recommendation that a customer switch mutual funds is made with the investor's best interest in mind, rather than based on incentives received by the associated person;

        • materials designed for internal or "dealer only" use are not distributed in any manner to the public, orally or in writing; and

        • electronic communications are treated the same as any other advertising and/or sales literature, and are supervised and used only under the same parameters.

        Members who fail to carry out these obligations and responsibilities, or who do not communicate information concerning mutual funds accurately and completely, may be subject to NASD disciplinary action.

        Background

        In Notice to Members 94-16 (March 1994), the NASD reminded members of their obligations under the Rules of Fair Practice with respect to mutual fund sales practices. Members were instructed to ensure that their communications with the public (oral and written) were accurate and complete regarding disclosure of material information, SIPC coverage, breakpoints, and switching. Comprehensive internal supervisory and compliance controls are needed to ensure that mutual fund sales practices comply with all relevant NASD Rules and are consistent with just and equitable principals of trade. Previous Notices to Members 93-87 (December 1993) and 91-74 (November 1991) also addressed sales practice issues relating to the growth of mutual fund sales as a result of the reinvestment of maturing certificates of deposit or other bank depository instruments.

        Due to the development of innovative and more complex mutual fund products, and to expanding channels of distribution, additional concerns have arisen since the publication of Notice to Members 94-16. The NASD has observed, commensurate with the increasing complexity of the structure of mutual funds, an increase in the varieties of sales charges and service charges associated with fund sales. The NASD is concerned that investors may not understand the distinctions among and ramifications of these various products, their fee structures and charges. It is imperative that the associated person recommend the most suitable mutual fund, based on the goals, investment objectives, and financial status of the investor, without being influenced by incentive arrangements.

        Disclosure

        Material facts must be disclosed to investors in recommending the purchase of a mutual fund. The member must attempt to obtain information sufficient to determine the suitability of the recommendation for the investor and to evaluate whether factors concerning that mutual fund recommendation are material to the investor. As addressed in Notice to Members 94-16, material facts may include, but are not limited to, the fund's investment objective; the fund's portfolio, historical income, or capital appreciation; the fund's expense ratio and sales charges; risks of investing in the fund relative to other investments; and the fund's hedging or risk management strategies. Disclosure of these and other facts concerning a recommended investment is required because this information is material to the investor's investment decision.

        As indicated earlier, sales charges and service charges associated with fund sales have become increasingly complex. In multi-class funds, each class of the fund participates in the same underlying portfolio but may have different expenses, levels of service, and other options. Consequently, each class generates a different share price and performance record, and appears as a separate fund in newspaper fund listings.

        Master-feeder funds are two-tiered structures in which one or more registered open-end funds (feeder) invest in a single investment company (master). Similar to the various classes of a multi-class fund, the feeder funds may have various distribution configurations tailored to specific markets.

        Prospectuses disclose many of the details of these products. However, members are reminded that they must provide sufficient information for investors to understand and evaluate the structure of multi-class and master-feeder funds. As the number of share classes continues to increase, it is imperative that investors are told the differences among a front-end load, a spread load (deferred sales charge and 12b-1 fee), and a level load, and that they are instructed about why one type of fee may be higher or lower than another. Another important disclosure relates to explaining how factors such as the amount invested, the rate of return, the amount of time the investor remains in the fund, and the fund's conversion features affect an investor's overall costs.

        To the extent that members declare expense ratios as material to an investor purchasing fund shares, these expense ratios need to be explained and compared with those of other mutual funds. Expense ratios are derived by dividing a fund's annual operating expenses by average net assets. Operating expenses may include management fees, investment advisory fees, director fees, 12b-1 fees, and expenses for preparing and mailing prospectuses and financial reports.

        Concerning tax issues, members should remind investors, where appropriate, that distributions of interest, dividends, and capital gains are subject to federal income tax even though the customer chooses to have the funds reinvested. A high portfolio turnover also generates higher transaction costs and may affect taxes.

        In offering funds that invest in financial derivatives, members must make clear to investors the risks involved. For example, funds that use repurchase agreements, purchase mortgage-related securities, purchase securities on a "when issued" basis, or purchase or sell securities on a "forward commitment" basis all involve special risks. Such risks are material to an investor's decision as to whether the mutual fund is a suitable investment. Members should familiarize themselves with a fund's investment objective, portfolio techniques, and policies as noted in the prospectus, and should convey such information to investors.

        Performance Information

        When recommending mutual funds, members should make certain that investors understand the concept of total return. When explaining total return, members should ensure that investors understand that total return measures overall performance of a mutual fund, whereas current yield is based only on interest or dividend income received by the fund. Relatedly, where appropriate, members should explain to investors the difference between return of principal and return on principal.

        Members are reminded that the Securities and Exchange Commission (SEC) requires that a yield quotation in an advertisement be restricted to a quotation of current yield based on the SEC formula, as calculated in the Statement of Additional Information, and the quotation must be accompanied by quotations of total return. Thus, when presenting information to customers regarding distribution rates, members must fully explain the difference between distribution rate and current yield.

        Suitability

        A starting point in a member's recommendation of a mutual fund is to clearly define the investor's objectives and financial situation. The need for current income, liquidity, diversification, and acceptable levels of risk are important considerations common to most investors. In recommending mutual funds, the member should match the investor's objective with the stated objective and investment strategy of a particular fund. An added concern relative to funds having multiple fee structures is not only matching the type of fund to the investor's objective, but also recommending the appropriate fee structure. Article III, Section 2 of the Rules of Fair Practice states that, in recommending to the investor the purchase, sale, or exchange of any security, the member must have reasonable grounds for believing that the recommendation is suitable for such investor, based on the facts disclosed by the investor. A member should be able to demonstrate the rationale for its recommendation and suitability determination, based on the information in Article III, Sections 2 and 21 of the Rules of Fair Practice.

        Switching

        In Notice to Members 94-16, members were reminded of their obligation to ensure that any recommendation to switch mutual funds is evaluated with regard to the net investment advantage to the investor. Switching among certain fund types may be difficult to justify if the financial gain or investment objective to be achieved by the switch is undermined by the transaction fees associated with the switch. For example, if a member recommends that an investor redeem a mutual fund purchased with a front-end sales load, and then purchase another fund with a contingent deferred sales charge, it would be inappropriate to assert that no sales charge will be paid relative to the new fund purchase because the investor may redeem the shares before the contingent period ends. Additionally, many funds with contingent deferred sales charges also assess asset-based sales charges. Thus, the member must disclose that an investor who holds the fund long term may pay more than the economic equivalent of a front-end sales charge. Further, recommendations to engage in market timing transactions should be made for transactions in a single family of funds or where there are virtually no transaction costs associated with the trade.

        Members must not recommend that a customer switch from one mutual fund to another based on the compensation that the member or its associated persons will receive for effecting the switch. Members are obligated to ensure that their supervisory and compliance procedures are adequate to monitor switching of customers among funds, and should be prepared to document their reasons for switching a customer from one fund to another.

        Dealer-Use-Only Material

        Members must make certain that material intended for distribution only to dealers and registered representatives is not delivered to the public unless the material is in compliance with all Rules applicable to communication with the public.

        Fund sponsors, dealers and wholesalers often use this material to educate sales personnel about the benefits of a fund and to provide marketing ideas. This material is not required to be filed with the NASD as "sales literature" because it is considered an internal communication and thus it is exempt from NASD filing requirements. Consequently, the material is not reviewed by the NASD for compliance with applicable rules. If such material is ever passed on to investors, the material would be considered sales literature and must be filed with the NASD. The NASD will review the material under the same standards as other material used with the public.

        Members preparing and distributing dealer-use-only material are urged to label all such material clearly and prominently, indicating that it is not approved for distribution to the public, and must not be copied or used with the public. Members should limit the extent of distribution of such material and be aware of who it has been given to, including how many copies are sent to each location.

        The NASD is also concerned about oral presentations based on information contained in dealer-use-only material. This practice could present a potential regulatory problem if the material has not been filed with and reviewed by the NASD, as there can be no assurance that the information provided to investors is in accordance with applicable rules.

        Electronic Communications

        Members are reminded that they have the same obligations under the NASD Rules of Fair Practice, specifically Article III, Section 35, relative to communications with the public sent electronically via computer as they do with regard to any other type of communication covered by these rules. Communications available to network subscribers, including items displayed over network bulletin boards, are considered to be advertising, while personalized messages sent directly to targeted individuals or groups are considered to be sales literature.

        Members also have substantial supervisory obligations in this area, as they are responsible for the content of any computer interactive communications with the public, just as they would be responsible for the content of advertising, sales literature, or correspondence. Therefore, members must establish internal controls and procedures to ensure that the approval, recordkeeping, and filing requirements are satisfied. Where relevant, members' written supervisory procedures should describe the firm's policies and practices relative to the use of electronic communications. For example, a firm may wish to prohibit its associated persons from using electronic communications for any securities-related activities, or a firm could adopt procedures to require firm personnel to obtain the firm's prior approval before using the Internet or other on-line service.

        Questions concerning this Special Notice should be directed to Clark Hooper, Vice President, Advertising/ Investment Companies Regulation Department, at (202) 728-8325 or Lawrence Kosciulek, Assistant Director, Advertising/Investment Companies Regulation Department, at (202) 728-8329.

        © National Association of Securities Dealers, Inc. (NASD), September 26, 1995. All rights reserved. NASD is a registered service mark of the National Association of Securities Dealers, Inc. Central Registration Depository (CRD), MediaSource, PC Focus, and NASDnet are service marks of the NASD. N*Aqcess, Nasdaq, Nasdaq National Market, and OTC Bulletin Board are registered service marks of The Nasdaq Stock Market, Inc. Automated Confirmation Transaction (ACT) Service, The Nasdaq SmallCap Market, and Small Order Execution System (SOES) are service marks of The Nasdaq Stock Market, Inc. NASD Notices to Members is published monthly by the NASD Communication Services Department, Jean Robinson Curtiss, Editor, NASD Communication Services, 1735 K Street, NW, Washington, DC 20006-1500, (202) 728-6900. No portion of this publication may be copied, photocopied, or duplicated in any form or by any means, except as described below, without prior written consent of the NASD. Members of the NASD are authorized to photocopy or otherwise duplicate any part of this publication without charge only for internal use by the member and its associated persons. Nonmembers of the NASD may obtain permission to photocopy for internal use through the Copyright Clearance Center (CCC) for a $3-per-page fee to be paid directly to CCC, 222 Rosewood Drive, Danvers, MA 01923. Annual subscriptions cost $225; single issues cost $25. Send a check or money order (payable to the National Association of Securities Dealers, Inc.) to NASD MediaSourceSM, P.O. Box 9403, Gaithersburg, MD 20898-9403, or to phone in an order using American Express, MasterCard, or Visa charge, call (301) 590-6578, Monday to Friday, 9 a.m. to 5 p.m., Eastern Time. Back issues may be ordered by writing NASD, Support Services Department, 1735 K Street, NW, Washington, DC 20006-1500 or by calling (202) 728-8061.

      • 95-79 Fixed Income Pricing System Additions, Changes, And Deletions As Of August 25, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Municipal
        Operations
        Systems
        Trading

        As of August 25, 1995, the following bonds were added to the Fixed Income Pricing System (FIPSSM). These bonds are not subject to mandatory quotation:

        Symbol Name

        Coupon

        Maturity

        NAE.GA NorAm Energy

        7.500

        8/1/00

        HRVD.GB Harvard Indus

        11.125

        8/1/05

        YGBR.GB Young Broadcasting

        10.125

        2/15/05

        HEIA.GA Heileman Acquis

        9.625

        1/31/04

        DICT.GA Dictaphone Corp

        11.750

        8/1/05

        USG.GI USG

        8.500

        8/1/05

        STO.GK Stone Container Corp

        12.125

        9/15/95

        THC.GA Tenet Healthcare

        9.625

        9/1/02

        THC.GB Tenet Healthcare

        10.125

        3/1/05

        DEC.GC Digital Equipment

        8.625

        11/1/12

        DEC.GD Digital Equipment

        7.750

        4/1/23

        POP.GA Pope & Talbot

        8.375

        6/1/13

        CCP.GA CCP Insurance

        10.500

        12/15/04

        CAG.GA ConAgra

        9.750

        11/1/97

        CNC.GA Conseco

        8.125

        8/29/95

        BRUO.GA Bruno's

        10.500

        8/29/95

        As of August 25, 1995, the following changes to the list of FIPS symbols occurred:

        New Symbol Old Symbol Name
        CTYA.GE CTY.GE Century Comm

        All bonds listed above are subject to trade-reporting requirements. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590–6436.

      • 95-78 Nasdaq National Market Additions, Changes, And Deletions As Of August 21, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Operations
        Systems
        Trading

        As of August 21, 1995, the following 59 issues joined the Nasdaq National Market®, bringing the total number of issues to 3,863:

        Symbol Company

        Entry Date

        SOES Execution Level

        CBXC Cybex Computer Products Corporation

        7/28/95

        500

        FLCN Falcon Drilling Company, Inc.

        7/28/95

        200

        FGAS Forcenergy Gas Exploration, Inc.

        7/28/95

        200

        KERA KeraVision, Inc.

        7/28/95

        1000

        PRCN Percon Incorporated

        7/28/95

        500

        TLCM TelCom Semiconductor, Inc.

        7/28/95

        500

        PHHM Palm Harbor Homes, Inc.

        7/31/95

        200

        INBI Industrial Bancorp, Inc.

        8/1/95

        500

        JACC Jayhawk Acceptance Corporation

        8/1/95

        1000

        KNIC L.L. Knickerbocker Co., Inc. (The)

        8/1/95

        200

        KNICW L.L. Knickerbocker Co., Inc. (The)    
          (Wts 12/7/97)

        8/1/95

        200

        ONTC ON Technology Corporation

        8/1/95

        500

        ONSI Orion Network Systems, Inc.

        8/1/95

        500

        TEMPA Sequana Therapeutics, Inc.

        8/1/95

        1000

        SFLX Smartfiex Systems, Inc.

        8/1/95

        1000

        VETS The Pet Practice, Inc.

        8/1/95

        1000

        UCMP UniComp, Inc.

        8/1/95

        200

        OSTC Ostech, Inc.

        8/2/95

        500

        PRSW Pure Software Inc.

        8/2/95

        500

        UACA Union Acceptance Corporation

        8/2/95

        200

        LVNTF Livent, Inc.

        8/3/95

        200

        OWEN Owen Healthcare, Inc.

        8/3/95

        1000

        TSBS Trenton Savings Bank FSB

        8/3/95

        500

        AMIE Ambassadors International, Inc.

        8/4/95

        1000

        MECK Mecklermedia Corporation

        8/4/95

        200

        MOOV Moovies, Inc.

        8/4/95

        1000

        RWTI Redwood Trust, Inc.

        8/4/95

        1000

        RWTIW Redwood Trust, Inc. (Wts 12/31/97)

        8/4/95

        1000

        STER Sterling Healthcare Group, Inc.

        8/4/95

        200

        SUMT Summit Medical Systems, Inc.

        8/4/95

        500

        NORPY Nord Pacific Limited (ADR)

        8/7/95

        200

        INDEW IndeNet, Inc. (Wts Cl B 8/31/98)

        8/8/95

        200

        USAD USA Detergents, Inc.

        8/8/95

        500

        NANO Nanometrics Incorporated

        8/9/95

        200

        NSCP Netscape Communications Corporation

        8/9/95

        200

        TRDX Tridex Corporation

        8/9/95

        1000

        USBR U.S. Bridge of N.Y., Inc.

        8/9/95

        200

        USBRW U.S. Bridge of N.Y., Inc. (Wts 8/8/00)

        8/9/95

        200

        WFSI WFS Financial Inc.

        8/9/95

        200

        CRPB Cerprobe Corporation

        8/10/95

        500

        CCAI Community Care of America, Inc.

        8/10/95

        1000

        ATLS Atlas Air, Inc.

        8/11/95

        200

        DTOP Desktop Data, Inc.

        8/11/95

        200

        HPRI HPR, Inc.

        8/11/95

        200

        NERXW NeoRx Corporation (Wts 4/25/98)

        8/11/95

        200

        SSHI Sunstone Hotel Investors, Inc.

        8/11/95

        1000

        GUCO Grand Union Company (The)

        8/14/95

        500

        KKRO Koo Koo Roo, Inc.

        8/14/95

        200

        CBUK Cutter & Buck Inc.

        8/15/95

        1000

        NHPI NHP Incorporated

        8/15/95

        1000

        NORM Normandy America, Inc. (Cl A)

        8/15/95

        200

        ROMC Romac International, Inc.

        8/15/95

        1000

        VNTV Vantive Corporation (The)

        8/15/95

        200

        IART Integra LifeSciences Corp.

        8/16/95

        200

        HOOK Redhook Ale Brewery, Inc.

        8/17/95

        1000

        MKIE Mackie Designs, Inc.

        8/18/95

        200

        MSADY Mid-States PLC (ADR)

        8/18/95

        200

        TRCW TransCor Waste Services, Inc.

        8/21/95

        200

        USTDV US Trust Corp. (New WI)

        8/21/95

        1000

        Nasdaq National Market Symbol And/Or Name Changes

        The following changes to the list of Nasdaq National Market securities occurred since July 27, 1995:

        New/Old Symbol New/Old Security

        Date Of Change

        USDC/USDCV USDATA Corp/USDATA Corp (WI)

        7/28/95

        IWBK/IWBK InterWest Bancorp, Inc./InterWest Savings Bank

        7/31/95

        CORE/PRAI CORE, Inc./Peer Review Analysis, Inc.

        7/31/95

        LION/LION Fidelity National Corporation/Fidelity Southern Corporation

        8/1/95

        GLCCF/LFIIF Gaming Lottery Corporation/Laser Friendly, Inc.

        8/2/95

        SQNA/TEMPA Sequana Therapeutics, Inc./Sequana Therapeutics, Inc.

        8/2/95

        MADGF/MADGF Madge Networks N.V./Madge N.V.

        8/3/95

        CPDN/APPS APPS Dental, Inc/APPS Dental, Inc.

        8/4/95

        NPCI/NPCIA NPC International, Inc/NPC International, Inc. (Cl A)

        8/9/95

        LBTYA/LBTAV Tele-Commun Inc.A (Liberty Media Grp)/Tele-Commun Inc.A (Liberty Media Grp) (WI)

        8/11/95

        LBTYB/LBTBV Tele-Commun Inc.B (Liberty Media Grp)/Tele-Commun Inc.B (Liberty Media Grp) (WI)

        8/11/95

        TCOMA/TCOMA Tele-Commun Inc. (Ser A TCI Group)/Tele-Commun Inc. (Cl A)

        8/11/95

        TCOMB/TCOMB Tele-Commun Inc. (Ser B TCI Group)/Tele-Commun Inc. (Cl B)

        8/11/95

        Nasdaq National Market Deletions

        Symbol Security

        Date

        ALMO Alamo Group Inc.

        7/28/95

        SHFLW Shuffle Master, Inc. (Wts 1/20/98)

        7/28/95

        ONEC OneComm Corp.

        7/31/95

        AMSE American Mobile Systems, Inc.

        8/1/95

        CRON Cooper Cameron Corporation

        8/1/95

        EPURW Enviropur Waste Refining and Tech., Inc. (Cl B Wts)

        8/1/95

        IMET Intermetrics, Inc.

        8/1/95

        NACC National Auto Credit Inc.

        8/1/95

        CFCN Commercial Federal Corp.

        8/2/95

        LEPGY Lep Group pic (ADR)

        8/2/95

        ABRS Amber's Stores, Inc.

        8/3/95

        BIND Bindley Western Industries, Inc.

        8/3/95

        IFSC Interferon Sciences, Inc.

        8/3/95

        OSHRF Oshap Technologies Ltd. (Rts)

        8/4/95

        UFBI UF Bancorp, Inc.

        8/7/95

        NPCIB NPC International, Inc. (Cl B)

        8/9/95

        VFIC VeriFone, Inc.

        8/10/95

        GTII Genetic Therapy, Inc.

        8/15/95

        TLIOQ Telios Pharmaceuticals, Inc.

        8/16/95

        NORM Normandy America, Inc.

        8/16/95

        BOLLE Bollinger Industries, Inc.

        8/17/95

        FTTR Fretter, Inc.

        8/18/95

        FNOW Future Now, Inc. (The)

        8/18/95

        BRNO Bruno's, Inc.

        8/21/95

        GBAN Gateway Bancorp, Inc.

        8/21/95

        Questions regarding this Notice should be directed to Mark A. Esposito, Nasdaq Market Services Director, Issuer Services, at (202) 496–2536. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590–6436.

      • 95-77 Columbus Day: Trade Date-Settlement Date Schedule

        SUGGESTED ROUTING

        Internal Audit
        Legal & Compliance
        Municipal
        Operations
        Syndicate
        Systems
        Trading

        The schedule of trade dates-settlement dates below reflects the observance by the financial community of Columbus Day, Monday, October 9, 1995. On this day, The Nasdaq Stock Market™ and the securities exchanges will be open for trading. However, it will not be a settlement date because many of the nation's banking institutions will be closed.

        Trade date

        Settlement Date

        Reg. T Date*

        Oct. 2

        Oct. 5

        Oct. 9

        3

        6

        10

        4

        10

        11

        5

        11

        12

        6

        12

        13

        9

        12

        16

        10

        13

        17

        * Pursuant to Sections 220.8(b)( 1) and (4) of Regulation T of the Federal Reserve Board, a broker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a cash account if full payment is not received within five business days of the date of purchase or, pursuant to Section 220.8(d)(1), make application to extend the time period specified. The date by which members must take such action is shown in the column titled "Reg. T Date."

        Note: October 9, 1995, is considered a business day for receiving customers' payments under Regulation T of the Federal Reserve Board. Transactions made on Monday, October 9, will be combined with transactions made on the previous business day, October 6, for settlement on October 12. Securities will not be quoted ex-dividend, and settlements, marks to the market, reclamations, and buy-ins and sell-outs, as provided in the Uniform Practice Code, will not be made and/or exercised on October 9.

        Brokers, dealers, and municipal securities dealers should use these settlement dates to clear and settle transactions pursuant to the NASD Uniform Practice Code and Municipal Securities Rulemaking Board Rule G-12 on Uniform Practice.

        Questions regarding the application of these settlement dates to a particular situation may be directed to the NASD Uniform Practice Department at (203) 375–9609.

      • 95-76 SEC Permits NASD To Discipline Members And Associated Persons Who Fail To Honor Arbitration Or Mediation Settlement Agreements

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance

        Executive Summary

        On August 10, 1995, the Securities and Exchange Commission (SEC) approved amendments to the NASD's rules to make a failure to honor a written and executed settlement agreement of a dispute arbitrated by any self-regulatory organization or mediated by the NASD® a violation of the Rules of Fair Practice. The amendments also permit the NASD to suspend or cancel the membership or registration of a member or associated person for failing to honor a written and executed settlement agreement of a dispute arbitrated or mediated by the NASD. The amendments will become effective on October 2, 1995. The text of the amendments follows this Notice.

        Background

        On August 10, 1995, the SEC approved amendments to the Resolution of the Board of GovernorsFailure to Act Under Provisions of Code of Arbitration Procedure (Resolution) to make a failure to honor a written and executed settlement agreement obtained in connection with a dispute arbitrated by any self-regulatory organization (SRO) or mediated by the NASD a violation of Article III, Section 1 of the Rules of Fair Practice. The SEC also approved amendments to Article VI, Section 3 of the By-Laws to permit the NASD to suspend or cancel the membership or registration of a member or associated person for failing to honor a written and executed settlement agreement of a dispute arbitrated or mediated by the NASD. The amendments will become effective on October 2, 1995.

        Enforcing Settlement Agreements

        In administering its Arbitration Program, the NASD has noted that many disputes or claims for damages submitted to arbitration before the NASD, another SRO forum, or the American Arbitration Association (AAA), are settled before a hearing on the merits. The NASD also recently implemented a Mediation Program, to be administered with the Arbitration Program, designed to increase the number of claims that are settled before a hearing.

        The NASD has also noted that occasionally members and associated persons fail to honor settlement agreements reached in connection with arbitration proceedings. The NASD is concerned that a failure by a member or associated person to honor a settlement agreement imposes substantial added costs on the prevailing party or parties in the form of delayed recoveries, actions to enforce the agreements, and additional fees connected with canceling or rescheduling hearings on short notice. The NASD Arbitration Department also incurs additional costs in rescheduling hearings, and, on occasion, has had to appoint new arbitrators to hear a matter. In addition, the NASD believes that the credibility of the arbitration process suffers if members and their associated persons are able to delay the resolution of a dispute by failing to honor a settlement agreement. Finally, the NASD believes that reducing or eliminating such failures on the part of members and associated persons is an appropriate preventative measure that should not await the development of serious problems.

        The Resolution states that "it may be deemed ... a violation of Article III, Section 1 of the Rules of Fair Practice for a member or person associated with a member to ... fail to honor an [arbitration] award The Resolution was adopted in 1973 and has been used to discipline members and associated persons who fail to pay an arbitration award unless they have moved to vacate the award.1 The Resolution applies to awards rendered in NASD arbitrations, as well as arbitrations sponsored by other SROs and the AAA.

        The NASD believes that the failure by a member or associated person to honor a settlement agreement entered into in connection with an arbitration proceeding or a mediation should have the same consequences as the failure to pay an arbitration award. Therefore, the NASD is amending the Resolution to make the failure by a member or associated person to honor a written and executed settlement agreement actionable as a violation of Article III, Section 1 of the Rules of Fair Practice.2 The amendment is limited to settlement agreements that have been reduced to writing and have been executed. The amendment, therefore, will not encompass unexecuted settlements.

        Revocation And Disciplinary Proceedings

        In 1993, the NASD amended Article VI, Section 3 of the By-Laws to provide that a membership or registration could be suspended or canceled on 15-days' notice for failing to honor an arbitration award rendered in an NASD arbitration. The use of such revocation proceedings was limited to awards in NASD-sponsored proceedings because NASD oversight of the arbitration process provides greater assurance about the awards that would be enforced in such proceedings.3

        The NASD believes that the failure by a member or an associated person of a member to honor settlement agreements entered into in connection with an arbitration proceeding or mediation sponsored by the NASD should be subject to the same revocation proceedings as are arbitration awards. Accordingly, the NASD is also amending Article VI, Section 3 of the By-Laws to provide that membership or registration can be suspended or canceled on 15-days' notice for failing to honor a settlement agreement obtained in connection with an NASD arbitration or mediation. The action of the NASD under Article VI, Section 3 of the By-Laws with respect to failure to honor settlement agreements will be conducted as a revocation proceeding pursuant to the provisions of Article VI of the Code of Procedure. Article VI permits the member or associated person to request a hearing, and the final decision is reviewable by the SEC.

        While the NASD recognizes that the amendments would apply only to member firms and associated persons, not another non-member or unregistered party who fails to honor a settlement agreement, members should note that the NASD has no jurisdiction over non-members and persons not associated with members and cannot, therefore, sanction such persons for failing to honor agreements. Members and associated persons with members have a fundamental obligation to "observe high standards of commercial honor" under Article III, Section 1 of the Rules of Fair Practice and to promote investor protection by ensuring that the arbitration process is fair and efficient. Honoring settlement agreements is a component of meeting those obligations.

        In addition, there are procedural protections for members and associated persons designed to prevent unwarranted suspensions or revocations. A member or associated person receiving a notice of revocation proceedings or a disciplinary complaint may request a hearing to demonstrate that a valid reason exists for not honoring a settlement agreement. Thus, for example, if a settlement agreement contained a condition precedent to the member's performance under the agreement, that would likely constitute a complete defense to the revocation proceeding until the condition precedent occurred and the obligation of the member to perform under the agreement arose. The NASD would have the discretion not to initiate a proceeding if clear evidence of a valid reason for not honoring a settlement agreement existed.

        If a settlement agreement resulted from arbitrations conducted at other SROs or the AAA, the amended Rules do not provide for the use of the NASD's suspension or revocation proceedings. Where a party to an arbitration conducted in another forum complains to the NASD that a member or associated person failed to honor a settlement agreement, the complaint would be investigated in the same manner as any other customer complaint. Such an investigation would include obtaining copies of the records of the arbitration proceeding from the other forum and determining if there are any facts that would demonstrate that disciplinary action is warranted. If it is determined that the member or associated person may have failed to honor a settlement agreement, a formal complaint would be issued and the member or associated person would be entitled to a hearing before a panel of a District Business Conduct Committee and would be afforded a right to appeal any adverse decision to the National Business Conduct Committee, the SEC, and the courts.

        Questions regarding this Notice may be directed to Deborah Masucci, Vice President and Director, Arbitration Department, at (212) 858–8330, or Elliott R. Curzon, Assistant General Counsel, Office of General Counsel, at (202) 728–8451.


        1 Under the Federal Arbitration Act and many state statutes, such a motion to vacate must be filed within 90 days after the award is rendered.

        2 Because the NASD is the only forum currently offering mediation, the amended Resolution specifies that only settlement agreements entered into in connection with an NASD mediation are subject to the requirements. In the event other SROs adopt mediation programs, the NASD may consider expanding the scope of the Resolution.

        3 The use of Article VI of the Code of Procedure for such proceedings was initiated in connection with the NASD's adoption of an amendment to Article VI, Section 3 of the By-Laws relating to failure to pay arbitration awards. See, SR-NASD-91–73, approved by the SEC in Securities Exchange Act Rel. No. 31763 (January 28, 1993).


        Text Of Amendment To The Code Of Arbitration Procedure And By-Laws

        (Note: New text is underlined; deletions are bracketed.)

        CODE OF ARBITRATION PROCEDURE

        Resolution of the Board of Governors

        Failure to Act Under Provisions of Code of Arbitration Procedure

        It may be deemed conduct inconsistent with just and equitable principles of trade and a violation of Article III, Section 1 of the Rules of Fair Practice for a member or a person associated with a member to; (1) fail to submit a dispute for arbitration under the NASD Code of Arbitration Procedure as required by that Code[, to]; (2) fail to appear or to produce any document in his possession or control as directed pursuant to provisions of the NASD Code of Arbitration Procedure[, or]; (3) fail to honor an award [of arbitrators properly rendered pursuant to the Uniform Code of Arbitration], or comply with a written and executed settlement agreement, obtained in connection with an arbitration submitted for disposition pursuant to the procedures specified by the National Association of Securities Dealers, Inc., the New York, American, Boston, Cincinnati, [Midwest] Chicago, Pacific, or Philadelphia Stock Exchanges, the Chicago Board Options Exchange, the Municipal Securities Rulemaking Board, or pursuant to the rules applicable to the arbitration of securities disputes before the American Arbitration Association where timely motion has not been made to vacate or modify such award pursuant to applicable law[.]; or (4) fail to comply with a written and executed settlement agreement, obtained in connection with a mediation submitted for disposition pursuant to the procedures specified by the National Association of Securities Dealers. Inc.

        BY-LAWS ARTICLE VI

        Dues, Assessments and Other Charges

        Sec. 1 and 2 No change.

        Suspension or Cancellation of Membership or Registration

        Sec. 3. The Corporation after fifteen (15) days notice in writing, may suspend or cancel the membership of any member or the registration of any person in arrears in the payment of any fees, dues, assessments or other charges, or for failure to furnish any information or reports requested pursuant to Section 2 of this Article, or for failure to comply with an award of arbitrators properly rendered pursuant to Section 41 of the Code of Arbitration Procedure, where a timely motion to vacate or modify such award has not been made pursuant to applicable law or where such a motion has been denied[.], or for failure to comply with a written and executed settlement agreement obtained in connection with an arbitration or mediation submitted for disposition pursuant to the procedures specified by the Corporation.

      • 95-75 SEC Approves Amendment Regarding Trading In Anticipation Of The Issuance Of A Research Report

        SUGGESTED ROUTING

        Senior Management
        Legal & Compliance
        Operations
        Research
        Trading
        Training

        Executive Summary

        On August 9, 1995, the Securities and Exchange Commission (SEC) approved a new Interpretation to Article III, Section 1 of the Rules of Fair Practice that prohibits a member firm from purposefully adjusting an inventory position in a particular security in anticipation of the firm's issuance of a research report in that same security. The amendment took effect on August 9, 1995.1

        Background

        Historically, the NASD® has monitored the trading activity of members that precedes a particular firm's issuance of research reports on a specific security. Firms with research departments frequently prepare research reports that recommend that customers take certain actions for a particular security. In some instances, firms may establish proprietary positions in a security in anticipation of meeting expected customer demand after a research report is issued.

        In Notice to Members 94–40, the NASD solicited member comment on developing an interpretation that would clearly states that a member's purposefully establishing an inventory position in anticipation of a research report would violate just and equitable principles of trade. The NASD also sought comment on a policy that would recommend, but not require, that member firms develop and implement information barriers (Chinese Walls) to isolate research and trading activities within individual departments of the firm.

        After considering comments, the NASD Board determined to adopt an Interpretation to the Rules of Fair Practice, and it was recently approved by the SEC.

        Description

        Under the new Trading Ahead of Research Reports Interpretation to Article III, Section 1 of the Rules of Fair Practice, NASD members are prohibited from engaging in trading activity that purposefully affects the firm's inventory position in a security in anticipation of the issuance of a research report in that security. The Interpretation specifically recommends, but does not require, that member firms develop procedures that create information barriers (Chinese Walls) to isolate information on research reports to prevent the trading department from adjusting its inventory position by using advance knowledge of an upcoming research report. If a firm does not choose to establish information barriers to prevent the improper flow of information to the trading desk or some other area, the firm will have a greater burden of showing that any inventory adjustments before the research report was issued were not caused by its knowledge of the report.

        The new Interpretation applies to trading in securities listed on The Nasdaq Stock MarketSM, and to third-market trading in exchange-listed securities. Thus, NASD members must adhere to the new policy when trading Nasdaq National Market® and The Nasdaq SmallCap MarketSM securities, as well as exchange-listed securities traded in the third market. The Interpretation also applies to derivative products, including options, that underlie these securities. The Interpretation does not specifically address securities that are quoted on the OTC Bulletin Board (OTCBB®). However, when trading OTCBB securities that are the subject of a research report, members should remain cognizant of the general policy that trading based on knowledge of their impending research report could be deemed a violation of just and equitable principles of trade.

        The new Interpretation also prohibits a firm from doing indirectly what it may not do directly. Thus, the Interpretation states that a member may not purposefully establish, increase, decrease, or liquidate a position in a derivative security based on a Nasdaq® or exchange-listed security in anticipation of the firm's issuance of a research report on the security underlying the derivative position. For instance, trading in an option on a Nasdaq or exchange-listed security may be economically equivalent to trading the underlying equity.

        The Interpretation defines purposeful trading activity as any trading that is undertaken to establish or adjust a firm's inventory position in a security based on advance knowledge of a research report the firm is about to issue. Adjustment to an inventory position in anticipation of a research report means that a firm has purposefully increased, decreased, liquidated a position, or established a long or a short position. Thus, the Interpretation covers any purposeful adjustment to inventory because the firm is about to issue a research report whether the report is bullish or bearish.

        In addition, the Interpretation encourages but does not require firms to establish information barriers (i.e., also known as Chinese Wall procedures or Chinese Walls) to control the flow of information between their research and trading departments. Information barriers are risk management controls to enhance the likelihood that knowledge of upcoming events will be isolated within a single group and not disclosed to other groups that might trade on or otherwise benefit from the information. Because many firms today already use information barriers between the research and trading departments of their firms, the Interpretation encourages the use of information barriers as the preferred method of complying with the Interpretation. If a member determines not to implement information barriers, it would carry a significantly greater burden of proving that security accumulations or liquidations before the issuance of a research report had not been purposeful if an NASD investigation into the firm's buying or selling activity were initiated.

        Finally, it should be noted that the new policy does not apply to research done solely for internal firm use. Such research, however, cannot be used in any way for external distribution.

        Questions regarding this Notice may be directed to Eugene A. Lopez, Office of the General Counsel, The Nasdaq Stock Market, Inc., at (202) 728–6998, or Halley Milligan, NASD Market Surveillance Department, at (301) 590–6464.


        1 See, Securities Exchange Act Rel. No. 36077 (August 9, 1995).


        Text Of Amendments To Article III, Section 1 Of The Rules Of Fair Practice

        (Note: New text is underlined.)

        Trading Ahead of Research Reports Interpretation To Article III, Section 1 of the NASD Rules of Fair Practice

        The Board of Governors, under its statutory obligation to protect investors and enhance market quality, is issuing an Interpretation to the Rules of Fair Practice regarding a member firm's trading activities that occur in anticipation of a firm's issuance of a research report regarding a security. The Board of Governors is concerned with activities of member firms that purposefully establish or adjust the firm's inventory position in Nasdaq-listed securities, an exchange-listed security traded in the OTC market, or a derivative security based primarily on a specific Nasdaq or exchange-listed security in anticipation of the issuance of a research report in that same security. For example, a firm's research department may prepare a research report recommending the purchase of a particular Nasdaq-listed security. Prior to the publication and dissemination of the report, however, the trading department of the member firm might purposefully accumulate a position in that security to meet anticipated customer demand for that security. After the firm had established its position, the firm would issue the report, and thereafter fill customer orders from the member firm's inventory positions.

        The NASD believes that such activity is conduct which is inconsistent with just and equitable principles of trade, and not in the best interests of investors. Thus, this Interpretation prohibits a member from purposefully establishing, creating or changing the firm's inventory position in a Nasdaq-listed security, an exchange-listed security traded in the third market, or a derivative security related to the underlying equity security, in anticipation of the issuance of a research report regarding such security by the member firm.

        Article III. Section 1 of the Rules of Fair Practice states that:

        A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.

        In accordance with Article VII. Section l(a)(2) of the NASD By-Laws. the NASD Board of Governors has approved the following Interpretation of Article III, Section 1:

        Trading activity purposefully establishing, increasing, decreasing, or liquidating a position in a Nasdaq security, an exchange-listed security traded in the over-the-counter market, or a derivative security based primarily upon a specific Nasdaq or exchange-listed security, in anticipation of the issuance of a research report in that security is inconsistent with just and equitable principles of trade and is a violation of Article III. Section 1 of the Rules of Fair Practice.

        For the purposes of this Interpretation, a "purposeful" change in the firm's inventory position means any trading activities undertaken with the intent of altering a firm's position in a security in anticipation of accommodating investor interest once the research report has been published. Hence, the Interpretation does not apply to changes in an inventory position related to unsolicited order flow from a firm's retail or broker/ dealer client base or to research done solely for in-house trading and not in any way used for external publication.

        Under this Interpretation, the Board recommends, but does not require-that member firms develop and implement policies and procedures to establish effective internal control systems and procedures that would isolate specific information within research and other relevant departments of the firm so as to prevent the trading department from utilizing the advance knowledge of the issuance of a research report. Firms that choose not to develop "Chinese Wall" procedures bear the burden of demonstrating that the basis for changes in inventory positions in advance of research reports was not purposeful.

      • 95-74 SEC Approves Amendments To Advertising And Sales Literature Filing And Review Requirements

        SUGGESTED ROUTING

        Senior Management
        Advertising
        Government Securities
        Legal & Compliance

        Executive Summary

        On August 9, 1995, the Securities and Exchange Commission (SEC) approved amendments to Article III, Section 35 of the NASD® Rules of Fair Practice and Section 8 of the Government Securities Rules (collectively, the Rules) to broaden the definitions of, and revise the approval and filing requirements for, advertising and sales literature.1 The amendments also revise the rules relating to recommendations in communications with the public. The amendments became effective on August 9, 1995.

        Background And Description Of Amendments

        Article III, Section 35 of the Rules of Fair Practice and Section 8 of the Government Securities Rules govern members' communications with the public regarding general securities and government securities, respectively. The Rules contain definitions, internal approval and recordkeeping requirements, and filing requirements and standards applicable to the content of such communications. To codify existing rule interpretations, rectify inconsistencies, and clarify issues that have been the source of member misunderstanding, the NASD is amending the Rules to revise the definitions of, and the internal approval and timeliness of filing requirements for, advertising and sales literature and the scope of rules relating to "Recommendations."

        Amendments To Definitions

        The NASD is amending the definitions of "Advertisement" and "Sales Literature" in Article III, Subsections 35(a)(1) and (2) of the Rules of Fair Practice and Subsections 8(a)(1) and (2) of the Government Securities Rules to include electronic messages. The NASD has consistently applied its standards for communications with the public to electronic messages sent via computer. Thus, the inclusion of the term "electronic" in the definition of "Advertisement" clarifies the applicability of the Rules to communications available to all computer or electronic network subscribers, including items displayed over network bulletin boards. The new definition of "Advertisement" does not, however, include communications posted by members of the public on electronic bulletin boards sponsored by NASD members; it has never applied to communications by the general public.

        The inclusion of the term "electronic" in the definition of "Sales Literature" is intended to clarify the applicability of the Rules to messages sent directly to targeted individuals or groups. The new definition of "Sales Literature" does not, however, include a personalized message sent to a particular individual via electronic mail. Such messages are not treated as sales literature but generally as correspondence under Article III, Section 27(d) of the Rules of Fair Practice.2

        The NASD is also amending the definition of "Sales Literature" in Article III, Subsection 35(a)(2) of the Rules of Fair Practice and Subsection 8(a)(2) of the Government Securities Rules to include telemarketing scripts. Members often file telemarketing scripts for review with the NASD Advertising Regulation Department that are to be read to prospects and existing customers or delivered electronically through a telemarketing service. These scripts differ from other forms of telephone prospecting and customer contact in that they are always followed up by the caller or callers. The NASD considers these scripts as comparable to a form letter delivered orally and, by including them in the definition, believes it will reduce confusion among members and promote more consistent application of the Rules.

        Member Review Of Advertising And Sales Literature

        The NASD is also amending Article III, Subsection 35(b)(1) of the Rules of Fair Practice and Subsection 8(b)( 1) of the Government Securities Rules to require that each item of advertising and sales literature be approved internally before use only by a registered principal. Before these amendments, the Rules allowed a registered principal to perform the review or delegate this responsibility to a designee. The Rules contained no guidelines for the level of experience, expertise, or qualification that the designee must have to assume this compliance responsibility and, in some cases, individuals less qualified than principals have been designated by registered principals to provide internal approval. The amendments eliminate the potential for inconsistent internal standards applied by different members for the review of communications with the public.

        The NASD is also amending Article III, Subsection 35(b)(1) of the Rules of Fair Practice and Subsection 8(b)(1) of the Government Securities Rules to require that advertising and sales literature be approved internally by members before being filed with the NASD Advertising Regulation Department. Before these amendments, the Rules for review of advertisements and sales literature required that the material be approved internally by the member before first use, but did not require that material be approved internally by the member before being filed with the NASD. Some members have acknowledged that their internal review sometimes occurs after the NASD response is received. This practice places the NASD in the role of providing the initial compliance review, a role that should, in the NASD's view, be maintained within the member firms' compliance departments. The amendments will ensure that members submit material that conforms to the applicable Rules. It is anticipated that the amendments will reduce the amount of refiling requested by the NASD Advertising Regulation Department due to extensive deficiencies in the original filings.

        Filing Requirements

        The NASD is also amending Article III, Subsections 35(c)(1), (2), (3)(A), and (4) to the Rules of Fair Practice and Subsections 8(c)( 1)(A) and (B), (c)(2), and (c)(3) of the Government Securities Rules to require that where filings are required to be submitted with certain time frames, the member provide the actual or expected date of first use or publication of the item filed. Before these amendments, the rules required that material be filed within 10 days of first use or 10 days before use, depending on the status of the firm and the subject matter of the communication. Members would file communications for review in various stages of a document's production, ranging from first drafts to finished products, and it was often impossible to determine the date of first use unless the information was provided voluntarily by the member or requested by the NASD reviewer. Because of the extensive volume of filings the NASD Advertising Regulation Department reviews each month, it is impractical to contact members routinely and request that they provide the date of use for each piece filed and, consequently, the NASD has been unable to determine systematically if member firms were meeting their filing obligations. The amendments will enable the NASD to enforce the existing Rules more effectively and consistently.

        In addition, the NASD is deleting Article III, Subsection 35(c)(3)(B) to the Rules of Fair Practice. This provision was always intended to be temporary in that it applied the pre-filing requirements of Subsection 35(c)(3)(A) for one year to those firms that had been filing advertisements for less than one year when the pre-filing provisions became effective. The provision ensured that such firms continued to pre-file advertisements for at least one year from the date their first advertisements were filed. As such, the provision became obsolete one year from its effective date.

        Standard For Recommendations

        Finally, the NASD is amending Article III, Subsection 35(d)(2)(B) to the Rules of Fair Practice and Subsection 8(d)(2)(B) to the Government Securities Rules to specify that the requirement to disclose the price of a security applies only to communications on behalf of corporate equities and to delete the price disclosure requirement entirely from the Government Securities Rules. Before these amendments, the literal language of the Rules would have required price disclosure with respect to all securities products in all communications deemed to be recommendations. However, the NASD has a longstanding practice of not requiring price disclosure on communications for securities products other than corporate equities. Nevertheless, both the Rules of Fair Practice and the Government Securities Rules prohibit members from omitting material information in communications with the public. Therefore, if inclusion of the price of the security is necessary to make the material not misleading, then the member is required to include the price.

        Questions regarding this Notice may be directed to Thomas Pappas, Assistant Director, Advertising/ Investment Companies Regulation Department, at (202) 728–8330, and Robert J. Smith, Attorney, Office of General Counsel, at (202) 728–8176.


        1 See, Securities Exchange Act Rel. No. 36076 (August 9, 1995).

        2 Such personalized electronic correspondence is also distinguished from interactive electronic conversations, either through direct links or so-called "chat rooms." Interactive conversations will not generally be regarded as correspondence; however, members should be aware that such "conversations" can easily be recorded or reduced to hard copy. Finally, all communications, whether advertising, sales literature, correspondence, or conversations, regardless of the medium, are subject to the anti-fraud provisions of the federal securities laws, SEC rules, and the rules of the NASD.


        Text Of Amendments To Article III, Section 35 Of The Rules Of Fair Practice And Section 8 Of The Government Securities Rules

        (Note: New text is underlined; deletions are bracketed.)

        ARTICLE III Rules of Fair Practice

        Sec. 1 through 34 No change.

        Communications With the Public

        Sec. 35.

        (a) Definitions
        (1) Advertisement—For purposes of this section and any interpretation thereof, "advertisement" means material published, or designed for use in, a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, telephone directories (other than routine listings), electronic or other public media.
        (2) Sales literature—For purposes of this section and any interpretation thereof, "sales literature" means any written or electronic communication distributed or made generally available to customers or the public, which communication does not meet the foregoing definition of "advertisement." Sales literature includes, but is not limited to, circulars, research reports, market letters, performance reports or summaries, form letters, telemarketing scripts, seminar texts, and reprints or excerpts of any other advertisement, sales literature or published article.
        (b) Approval and Recordkeeping
        (1) Each item of advertising and sales literature shall be approved by signature or initial, prior to use or filing with the NASD, by a registered principal f (or his designee)] of the member.
        (2) No change.
        (c) Filing Requirements and Review Procedures
        (1) Advertisements and sales literature concerning registered investment companies (including mutual funds, variable contracts and unit investment trusts) not included within the requirements of Subsection (c)(2) of this section, and public direct participation programs (as defined in Article III, Section 34 of the Rules of Fair Practice) shall be filed with the Association's Advertising Regulation Department within 10 days of first use or publication by any member. The member must provide with each filing the actual or anticipated date of first use. Filing in advance of use is recommended. Members are not required to file advertising and sales literature which have previously been filed and which are used without change. Any member filing any investment company advertisement or sales literature pursuant to this Subsection that includes or incorporates rankings or comparisons of the investment company with other investment companies shall include a copy of the ranking or comparison used in the advertisement or sales literature.
        (2) Advertisements concerning collateralized mortgage obligations registered under the Securities Act of 1933, and advertisements and sales literature concerning registered investment companies (including mutual funds, variable contracts and unit investment trusts) that include or incorporate rankings or comparisons of the investment company with other investment companies where the ranking or comparison category is not generally published or is the creation, either directly or indirectly, of the investment company, its underwriter or an affiliate, shall be filed with the Association's Advertising Regulation Department for review at least 10 days prior to use (or such shorter period as the Department may allow in particular circumstances) for approval and, if changed [or expressly disapproved] by the Association, shall be withheld from publication or circulation until any changes specified by the Association have been made, or [in the event of disapproval], if expressly disapproved, until the advertisement has been refiled for, and has received, Association approval. The member must provide with each filing the actual or anticipated date of first use. Any member filing any investment company advertisement or sales literature pursuant to this Subsection shall include a copy of the data, ranking or comparison on which the ranking or comparison is based.
        (3)
        (A) Each member of the Association which has not previously filed advertisements with the Association (or with a registered securities exchange having standards comparable to those contained in this section) shall file its initial advertisement with the Association's Advertising Department at least ten days prior to use and shall continue to file its advertisements at least ten days prior to use for a period of one year. The member must provide with each filing the actual or anticipated date of first use.
        (B) [Each member which, on the effective date of this section, had been filing advertisements with the Association (or with a registered securities exchange having standards comparable to those contained in this section) for a period of less than one year shall continue to file its advertisements, at least ten days prior to use, until the completion of one year from the date the first advertisement was filed with the Association or such exchange.]
        [(C)] Except for advertisements related to municipal securities, direct participation programs or investment company securities, members subject to the requirements of subparagraphs (c)(3)(A) or (c)(3)(B) of this section may, in lieu of filing with the Association, file advertisements on the same basis, and for the same time periods specified in those subparagraphs, with any registered securities exchange having standards comparable to those contained in this section.
        (4) Notwithstanding the foregoing provisions, any District Business Conduct Committee of the Association, upon review of a member's advertising and/or sales literature, and after determining that the member has departed and there is a reasonable likelihood that the member will again depart from the standards of this section, may require that such member file all advertising and/or sales literature, or the portion of such member's material which is related to any specific types or classes of securities or services, with the Association's Advertising Department and/or the District Committee, at least ten days prior to use. The member must provide with each filing the actual or anticipated date of first use.

        The Committee shall notify the member in writing of the types of material to be filed and the length of time such requirement is to be in effect. The requirement shall not exceed one year, however, and shall not take effect until 30 days after the member receives the written notice, during which time the member may request a hearing before the District Business Conduct Committee, and any such hearings shall be held in reasonable conformity with the hearing and appeal procedures of the Code of Procedure.
        (5) through (7) No change.
        (d) Standards Applicable to Communications With the Public
        (1) No change.
        (2) Specific Standards

        In addition to the foregoing general standards, the following specific standards apply:
        (A) No change.
        (B) Recommendations: In making a recommendation, whether or not labeled as such, a member must have a reasonable basis for the recommendation and must disclose [the price at the time the recommendation is made, as well as] any of the following situations which are applicable:
        (i) that the member usually makes a market in the securities being recommended, or in the underlying security if the recommended security is an option, and/or that the member or associated persons will sell to or buy from customers on a principal basis;
        (ii) that the member and/or its officers or partners own options, rights or warrants to purchase any of the securities of the issuer whose securities are recommended, unless the extent of such ownership is nominal;
        (iii) that the member was manager or co-manager of a public offering of any securities of the recommended issuer within the last 3 years.
        The member shall also provide, or offer to furnish upon request, available investment information supporting the recommendation. Recommendations on behalf of corporate equities must provide the price at the time the recommendation is made.

        A member may use material referring to past recommendations if it sets forth all recommendations as to the same type, kind, grade or classification of securities made by a member within the last year. Longer periods of years may be covered if they are consecutive and include the most recent year. Such material must also name each security recommended and give the date and nature of each recommendation (e.g., whether to buy or sell), the price at the time of the recommendation, the price at which or the price range within which the recommendation was to be acted upon, and indicate the general market conditions during the period covered.

        Also permitted is material which does not make any specific recommendation but which offers to furnish a list of all recommendations made by a member within the past year or over longer periods of consecutive years, including the most recent year, if this list contains all the information specified in the previous paragraph. Neither the list of recommendations, nor material offering such list, shall imply comparable future performance. Reference to the results of a previous specific recommendation, including such a reference in a follow-up research report or market letter, is prohibited if the intent or the effect is to show the success of a past recommendation, unless all of the foregoing requirements with respect to past recommendations are met.
        (C) through (N) No change.

        GOVERNMENT SECURITIES RULES

        Sec. 1 through Sec. 7 No change.

        Communications With the Public

        Sec. 8

        (a) Definitions
        (1) Advertisement—For purposes of this section and any interpretation thereof, "advertisement" means material published, or designed for use in, a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, telephone directories (other than routine listings), electronic or other public media.
        (2) Sales Literature—For purposes of this section and any interpretation thereof, "sales literature" means any written or electronic communication distributed or made generally available to customers or the public that does not meet the foregoing definition of "advertisement." Sales literature includes, but is not limited to, circulars, research reports, market letters, performance reports or summaries, form letters, standard forms of option worksheets, telemarketing scripts, seminar texts, and reprints or excerpts of any other advertisement, sales literature, or published article.
        (b) Approval and Recordkeeping
        (1) Each item of advertising and sales literature shall be approved by signature or initial, prior to use or filing with the NASD, by a registered principal [(or designee)] of the member.
        (2) No change.
        (c) Filing Requirements and Review Procedures
        (1) Members shall file advertisements for review with the Association's Advertising Regulation Department as follows:
        (A) Advertisements containing government securities (as defined in Section 3(a)(42) of the Securities Exchange Act of 1934) other than collateralized mortgage obligations shall be filed by members with the Association's Advertising Department within 10 days of first use or publication; and
        (B) advertisements concerning collateralized mortgage obligations shall be filed with the Association's Advertising Regulation Department for review at least 10 days prior to use (or such shorter period as the Department may allow in particular circumstances) for approval and, if changed [or expressly disapproved] by the Association, shall be withheld from publication or circulation until any changes specified by the Association have been made or, [in the event of disapproval] if expressly disapproved, until the advertisement has been refiled for, and has received, Association approval. The member must provide with each filing concerning government securities and collateralized mortgage obligations the actual or anticipated date of first use.
        (2) Each member of the Association that has not previously filed advertisements with the Association shall file its initial advertisement concerning government securities with the Association's Advertising Department at least 10 days prior to use and shall continue to file its advertisements concerning government securities at least 10 days prior to use for a period of one year. The member must provide with each filing the actual or anticipated date of first use.
        (3) Notwithstanding the foregoing provisions, any District Business Conduct Committee of the Association, upon review of a member's government securities advertising and/or sales literature, and after determining that the member will again depart from the standards of this section, may require that such member file all government securities advertising and/or sales literature, or the portion of such member's material that is related to any specific types or classes of securities or services, with the Association's Advertising Department and/or the District Committee, at least 10 days prior to use. The member must provide with each filing the actual or anticipated date of first use.

        The Committee shall notify the member in writing of the types of material to be filed and the length of time such requirement is to be in effect. The requirement shall not exceed one year, however, and shall not take effect until 30 days after the member receives the written notice, during which time the member may request a hearing before the District Business Conduct Committee, and any such hearings shall be held in reasonable conformity with the hearing and appeal procedures of the Code of Procedure.
        (4) through (5) No change.
        (d) Standards Applicable to Communications With the Public
        (1) No change.
        (2) Specific Standards

        In addition to the foregoing general standards, the following specific standards apply:
        (A) No change.
        (B) Recommendations: In making a recommendation, whether or not labeled as such, a member must have a reasonable basis for the recommendation made and must disclose [the price at the time the recommendation is made, as well as] any of the following situations which are applicable:
        (i) through (iii) No change.

      • 95-73 NASD Requests Comment On Member Obligations To File Certain Exchange Offers That Result In Public Distributions;

        Comment Period Expires October 15, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Legal & Compliance
        Syndicate

        Executive Summary

        The NASD® is proposing to amend the Corporate Financing Rule, Article III, Section 44, of the NASD Rules of Fair Practice (Rule) to require that certain registered and unregistered exchange offers and related information must be filed with the NASD Corporate Financing Department (Department) when members are engaged in "solicitation activities" in connection with such transactions. The NASD has determined that the Rule should provide guidance to members in determining when their exchange-offer activities result in their "participation in a public distribution," and thus become subject to NASD rules and oversight. In view of the record amount of merger and acquisition activity that has occurred in the past two years, the NASD believes that the proposed amendments to the Rule will provide certainty and eliminate confusion regarding the application of the Rule to exchange offers. The proposed amendments describe member participation in certain types of exchange offers that must comply with the substantive provisions of the Rule, including those that relate to underwriting compensation and other distribution terms and arrangements.

        The Corporate Financing Committee (Committee) has considered whether certain types of merger and acquisitions transactions should be subject to NASD regulation and believes that the Rule should apply only to exchange offers in which a member firm engages in solicitation activities of security holders on behalf of the issuer when securities are issued. With regard to exchange offers, the Rule is applicable only to members acting as financial advisors to the issuer of securities, but not to those that are advisors to the target company or to any shareholder group. Thus, the Rule will apply to exchange offers registered on SEC Form S-4 where the member is acting as dealer/ manager to solicit consents to the proposed business reorganization, and to a member that solicits security holders in exchange offers exempt from registration under Section 3(a)(9) of the Securities Act of 1933. The Committee also determined that the Rule should not apply to exchange transactions where the member does not engage in solicitation activities on behalf of the issuer, or to mergers, particularly those that involve stock-for-stock exchanges, or spin-offs of any type.

        The NASD realizes the time-sensitive nature of many exchange offers and thus has instructed the staff to expedite their review of any such filings made with the Department. Generally, the staff can be expected to issue a comment letter within 48 hours of receipt of the filing of an exchange offer.

        Analysis Of Provisions Of Proposed Rule Change

        Following is an analysis of how the proposed amendments will modify the provisions of the Rule.

        Filing Requirements For Exchange Offers

        The NASD has determined to add new Subsections (b)(9)(H) and (b)(9)(I) to the Rule to specify that members that participate in specified exchange transactions must file them with the Department for review. Transactions subject to the Rule would be exchange offers that are either:

        • exempt from registration under Section 3(a)(9) of the Securities Act of 1933, when the member's participation involves solicitation activities to facilitate the exchange of securities; or

        • registered on Form S-4 with the Securities and Exchange Commission (SEC), when the member is acting in the capacity as dealer/manager to facilitate the exchange of securities by soliciting investors (collectively, Exchange Offers).

        However, notwithstanding these criteria, any exchange offer or merger and acquisition transaction that falls under the provisions of Schedule E to the NASD By-Laws, will continue to be subject to filing with the Department. Specifically, the Rule is being amended to state clearly that filing is required for distributions of securities where Schedule E applies. The SEC and NASD have long held the view that pre-offering review is vital to protect investors when the member and issuer are in a control relationship or have a conflict of interest that is addressed through the application of Schedule E. Furthermore, all of the conditions in Notice to Members 88–100 would require filing of the merger with the NASD. Specifically, in that Notice, the NASD expressed its special concerns regarding the merger of blank-check companies in the penny stock market with privately held holding companies of members, indirectly creating a publicly held NASD member without having to fully comply with Schedule E to the By-Laws.

        All exchange offers exempt from registration under Section 3(a)(9) wherein the member is engaged in solicitation activities must be filed with the Department and are fully subject to the Rule. Solicitation activities by a member include solicitation of or other forms of direct contact with security holders, including these activities:

        • being named as a dealer/manager;

        • performing tasks that are permitted to be performed by investor relations firms (i.e., ascertaining what action security holders intend to take with respect to the exchange offer);

        • contacting security holders to inquire whether they have received the offering materials or answering unsolicited contacts; or

        • participating in meetings with security holders or their advisors before or after an exchange offer begins.

        If the member's "participation" however, does not involve solicitation activities, but is limited to functions that may include, among other things, delivery of a "fairness opinion," advising the issuer as to the structure and terms of the exchange offer, assisting the issuer in the preparation of the offering documents to be sent to security holders, or other functions that do not include direct solicitation of or other forms of direct contact with security holders, the transaction would be exempt from filing and compliance with the Rule.

        The application of the Rule to offerings of securities registered on Form S-4 is expressly limited to only those distributions where the member is engaged by the company to act as dealer/manager and solicit consents on behalf of the company to the proposed reorganization and to otherwise facilitate the exchange of securities. In such exchange offers, the member generally acts as a financial advisor to help structure the transaction and will receive a fee, as well as distribution-related compensation for services rendered. The NASD believes that when a member is retained to act as a dealer/manager by a company to solicit consents, the member is then involved in distribution-related activities in connection with registered exchange offers which should be regulated under the Rule. As is set forth below, all other transactions that require securities to be registered on Form S-4 are exempt from the Rule.

        Exemptions From The Provisions Of The Rule

        The NASD also proposes to adopt new Sections (C)(8)(I) and (C)(8)(J) to clarify that there are exemptions from the filing requirements and compliance with the other provisions of the Rule for certain merger and acquisition transactions in which the role of the member is to act as financial advisor to the board of directors of the acquirer, or the target company, including providing general financial advice on the structure of the transaction, and under certain circumstances, issuing a fairness opinion. Thus, in transactions where the securities to be issued are registered with the SEC on Form S-4 in connection with a merger or similar form of business combination, the members' activities are exempt from the Rule.

        The proposed amendments also provide for an exemption from compliance with the Rule for spin-off transactions. In the case of a typical spin-off, reverse spin-off, or similar transaction of a subsidiary company to existing security holders, the security holders receive shares of the subsidiary as a dividend or distribution. These transactions involve no investment decision by the shareholders and, consequently, the parent's financial advisor is not generally involved in any public solicitation in connection with the spin-off.1

        Transactions Subject To The Rule But Exempt From Filing

        Proposed new Section (b)(7)(F) to the Rule provides for an exemption from the filing requirements for Exchange Offers where the securities to be issued or being acquired are listed on the Nasdaq National Market®, the New York Stock Exchange (NYSE), or the American Stock Exchange (AMEX), or for securities distributions of certain seasoned companies. These transactions are exempt from the filing requirements only, and not from compliance with the Rule.

        Exemption For Securities Listed On Nasdaq National Market, NYSE, Or AMEX

        The NASD believes that it is appropriate to exempt from the filing requirements Exchange Offers where securities to be issued, or are being acquired, are listed on the Nasdaq National Market, the NYSE, or AMEX, thereby permitting the shareholder to readily obtain an alternative marketable investment.2 The NASD believes that this situation is analogous to a cash tender offer, which is outside the scope of the Rule, where the outstanding shares are purchased for cash. Further, the listing standards for Nasdaq National Market-, NYSE-, and AMEX-listed companies ensure that independent directors of the board will evaluate the offer, and that sufficient information will be distributed to shareholders and made available to the markets so investors can make a decision regarding whether to sell or hold the securities it holds or will receive.

        Exemption For Seasoned Securities

        The NASD also believes that an exemption from the filing requirements should be available for Exchange Offers by seasoned issuers that would qualify to register securities on Forms S-3, F-3, or F-10 as those forms were in effect prior to October 21, 1992, (for Forms S-3 and F-3) and June 21, 1991, (for Form F-10). This provision would generally require that the company have a three-year history as a public-reporting company, and be in compliance with the current year's periodic reporting requirements of the Securities Exchange Act of 1934 (relating to timely filing of 10-Qs and 10-Ks). In addition, to qualify for this exemption from filing, the minimum required market value of a company's voting stock must be as follows: Form S-3 $150 million (or $100 million market value of voting stock and three million shares annual trading volume); and Form F-3 $300 million (held worldwide). For Form F-10, Canadian issuers must have (CN) $360 aggregate value of voting stock and a public float of (CN) $754 million.

        Regulation Of Financial Advisory "Tail Fee" Arrangements

        The proposed amendments to the Rule include new Section (c)(6)(B)(xiii) that provides that it is an unreasonable term and arrangement when proposed in connection with an Exchange Offer for any agreement or arrangement between a member and a company to contain a "tail fee," if the tail fee has a duration of more than two years from the date the member's services are terminated. However, a member may demonstrate, on the basis of information satisfactory to the NASD, that an arrangement of more than two years is not unfair or unreasonable under the circumstances.

        A tail fee is an arrangement or agreement in which the company is obligated to compensate a member in the event the Exchange Offer is not completed and the company subsequently consummates a similar transaction. The NASD evaluated the appropriateness of such an arrangement and agreed to adopt the common industry practice that tail fees should generally be permitted, but limited to a two-year period, calculated from the date the member's services were terminated. The NASD believes that a shorter period of time does not adequately protect a member that may have expended considerable time and effort working on an exchange offer, when a company determines to terminate the services of the member, and nonetheless completes the Exchange Offer. In Exchange Offers, unlike traditional corporate underwritings, the real benefit derived by the company is the creativity of the strategic advice given by the member for the particular transaction that may include, among other things, assisting the company in defining objectives, performing valuation analyses, formulating restructuring alternatives, and structuring the Exchange Offer. Also, a member providing financial advice in the case of an exchange offer will generally have provided considerable ongoing financial advisory services to the company.

        The NASD believes, however, that NASD staff should be able to grant exceptions to the two-year limitation upon demonstration of fairness of the arrangements. The Committee determined, therefore, that the provision should give the staff authority to grant such exceptions upon request, and under circumstances where the member can demonstrate that the creativity of the strategic advice has a potential benefit to the company for more than two years. In the case of offerings exempt from filing but subject to compliance with the Rule where the tail fee arrangement is longer than two years, the member must still comply with this provision of the Rule and, therefore, must request an opinion of the staff as to whether a tail fee with a longer arrangement is permissible under the Rule, even though it is not required to make a formal filing.

        Interpretation Regarding Reimbursement Of Certain Expenses In Exchange Offers

        Certain types of fees and expense reimbursement arrangements typically negotiated for or received in connection with Exchange Offers are not deemed to be inconsistent with or prohibited by Subsection (C)(6)(B)(iii) of the Rule. With regard to fees, the only compensation that is permitted under this provision of the Rule relates to situations where a member acting as a financial advisor receives a "time and efforts" or similar fee for the services it rendered in connection with an Exchange Offer that is not completed, and the financial advisor does not, therefore, receive the agreed upon success fee. Reimbursement of certain expenses, including, but not limited to, travel costs, document production, and legal fees of the financial advisor, are also typically provided for in the agreements, whether or not the transaction is consummated. The NASD does not believe that these and similar types of reimbursement arrangements in Exchange Offers should be prohibited by the Rule, since their arrangements are not viewed to be directly connected with the issuance of securities.

        Request For Comments

        The NASD asks members and other interested parties to comment on the proposed modifications to the Rule. Comments should be addressed to:

        Joan C. Conley Corporate Secretary National Association of Securities Dealers, Inc. 1735 K Street, NW Washington, DC 20006–1500

        Questions concerning this Notice may be directed to Charles L. Bennett, Director, or Carl R. Sperapani, Assistant Director, NASD Corporate Financing Department, at (301)208–2700.


        1 If, however, a spin-off is followed by a traditional public offering by the spun-off company to raise capital, the company's initial public offering would be subject to the Corporate Financing Rule's filing requirements.

        2 In developing the definition of "limited partnership roll-up transaction" in Article III, Section 34, the SEC approved a similar exemption for freely tradable securities.


        Text Of Proposed Amendments To The Corporate Financing Rule

        Underwriting Terms and Arrangements

        (Note: New text is underlined.) Sec. 44

        (a) Definitions No change.
        (b) Filing Requirements
        (1) through (6) No change.
        (7) Offerings Exempt From Filing

        Notwithstanding the provisions of paragraph (1) above, documents and information related to the following public offerings need not be filed with the NASD for review, unless subject to the provisions of Schedule E to the By-Laws. However, it shall be deemed a violation of this Section or Article III, Section 34 of these Rules of Fair Practice, for a member to participate in any way in such public offerings if the underwriting or other arrangements in connection with the offering are not in compliance with this Section or Section 34, as applicable:
        (A) through (E) No change.
        (F) exchange offers (as defined in subparagraph (9)(H) below) where:
        (i) the securities to be issued or the securities being acquired are listed on the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange: or
        (ii) the company issuing securities qualifies to register securities with the Securities and Exchange Commission on Forms S-3. F-3 or F-10. under the requirements for those forms set forth in subparagraph (C) of this paragraph.
        (8) Exempt Offerings

        Notwithstanding the provisions of paragraph (1) above, the following offerings are exempt from this Section, Schedule E to the By-Laws, and Article III, Section 34 of the Rules of Fair Practice. Documents and information relating to the following offerings need not be filed for review:
        (A) through (F) No change.
        (G) tender offers made pursuant to Regulation 14D adopted under the Securities Exchange Act of 1934, as amended; [and]
        (H) securities issued pursuant to a competitively bid underwriting arrangement meeting the requirements of the Public Utility Holding Company Act of 1935, as amended;
        (I) securities of a subsidiary or other affiliate distributed by a company in a spin-off, reverse spin-off or similar transaction to its existing security holders exclusively as a dividend or other distribution: and
        (J) securities registered with the Securities and Exchange Commission on Form S-4 in connection with a merger or similar form of business combination.
        (9) Offerings Required to be Filed

        Documents and information relating to all other public offerings including, but not limited to, the following must be filed with the NASD for
        (A) through (F) No change.
        (G) securities offered pursuant to Regulation A or Regulation B adopted under the Securities Act of 1933, as amended; [and]
        (H) exchange offers, exempt from registration under Section 3fa)(9) of the Securities Act of 1933 (if the member's participation involves active solicitation activities) or registered with the Securities and Exchange Commission on Form S-4 (if the member is acting as a dealer-manager) (collectively, "exchange offers"):
        (I) any exchange offer or. merger and acquisition transaction which involves offerings of securities subject to Schedule E of the By-Laws, including but not limited to any such offerings and any corporate reorganization involving a member or its parent that results in the direct or indirect public ownership of a member and offerings required to be filed pursuant to sub-paragraph (H) of this paragraph: and
        (J) any offerings of a similar nature that are not exempt under paragraphs (7) or (8) of this Subsection.
        (c) Underwriting Compensation and Arrangements
        (1) through (5) No change.
        (6) Unreasonable Terms and Arrangements
        (A) No member or person associated with a member shall participate in any manner in a public offering of securities after any arrangement proposed in connection with the public offering, or the terms and conditions relating thereto, has been determined to be unfair or unreasonable pursuant to this Section or inconsistent with any By-Law or any Rule of Fair Practice, or other rule or regulation, of the NASD.
        (B) Without limiting the foregoing, the following terms and arrangements, when proposed in connection with the distribution of a public offering of securities, shall be unfair and unreasonable:
        (i) through (x) No change.
        (xi) for a member or person associated with a member to accept, directly or indirectly, any non-cash sales incentive item including, but not limited to, travel bonuses, prizes and awards, from an issuer or an affiliate thereof in excess of $50 per person per issuer annually. Notwithstanding the foregoing, a member may provide non-cash sales incentive items to its associated persons provided that no issuer, or an affiliate thereof, including specifically an affiliate of the member, directly or indirectly, participates in or contributes to providing such non-cash sales incentive; [or]
        (xii) for a member to participate with an issuer in the public distribution of a non-underwritten issue of securities if the issuer hires persons primarily for the purpose of distributing or assisting in the distribution of the issue, or for the purpose of assisting in any way in connection with the underwriting, except to the extent in compliance with 17 C.F.R. ยง240.3a4-l and applicable state law: or
        (xiii) when proposed in connection with an Exchange Offer, any agreement or arrangement in which the issuer grants to the member the right to receive a "tail fee" in the event that the Exchange Offer is not completed and the company subsequently consummates a similar transaction if the tail fee arrangement has a duration of more than two (2) years from the date the member's services are terminated; provided, however, that a member may demonstrate on the basis of information satisfactory to the NASD that an arrangement of more than two (2) years is not unfair or unreasonable under the circumstances.

      • 95-72 Fixed Income Pricing System Additions, Changes, And Deletions As Of July 28, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Municipal
        Operations
        Systems
        Trading

        As of July 28, 1995, the following bonds were added to the Fixed Income Pricing System (FIPSSM). These bonds are not subject to mandatory quotation:

        Symbol

        Name

        Coupon

        Maturity

        CE.GB

        Calif energy

        9.875

        6/30/03

        HRRA.GA

        Harrah's Oper

        8.375

        4/15/96

        HRRA.GB

        Harrah's Oper

        10.875

        4/15/02

        GGE.GA

        Griffin Gaming & Entmt

        0.

        6/30/00

        PAGE.GC

        Page Network

        10.125

        8/1/07

        NBRD.GA

        Nabisco

        6.850

        6/15/05

        REVL.GG

        Revlon Consumer Pr

        10.875

        7/15/10

        OI.GI

        Owens-Ill

        10.000

        8/1/02

        CELS.GB

        Commnet Cellular Inc

        11.250

        7/1/05

        GLD.GA

        Santa Fe Pacific Gold

        8.375

        7/1/05

        LEA.GA

        Lear Seating

        8.250

        2/1/02

        As of July 28, 1995, a change was made to the name of the following FIPS bond:

        Symbol

        New Name

        Old Name

        CELS.GA

        Cellular Inc.

        Commnet Cellular Inc.

        As of July 28, 1995, the following changes to the list of FIPS symbols

        occurred:

        New Symbol

        Old Symbol

        Name

        *AKS.GA

        AKST.GA

        AK Steel

        *MRV.GA

        MRVL.GA

        Marvel (Parent) Hldgs Inc

        CTYA.GA

        CTY GA

        Century Comm

        *CTYA.GB

        CTY GB

        Century Comm

        CTYA.GC

        CTY GC

        Century Comm

        CTYA.GD

        CTY GD

        Century Comm

        *A mandatory FIPS bond.

        All bonds listed above are subject to trade-reporting requirements. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistant Director, NASD Market Surveillance, at (301) 590-6436.

      • 95-71 Nasdaq National Market Additions, Changes, And Deletions As Of July 27, 1995

        SUGGESTED ROUTING

        Senior Management
        Corporate Finance
        Institutional
        Legal & Compliance
        Operations
        Systems
        Trading

        As of July 27, 1995, the following 72 issues joined the Nasdaq National Market, bringing the total number of issues to 3,829:

        Symbol

        Company

        SOES Entry Date

        Execution Level

        BRGP

        Business Resource Group

        6/28/95

        500

        NERAY

        Nera AS (ADR)

        6/28/95

        1000

        NEIB

        Northeast Indiana Bancorp, Inc.

        6/28/95

        500

        SOSS

        SOS Staffing Services, Inc.

        6/28/95

        200

        BDMI

        BDM International, Inc.

        6/29/95

        1000

        FBBC

        First Bell Bancorp, Inc.

        6/29/95

        500

        ININ

        InStent Inc.

        6/29/95

        500

        ICNI

        Integrated Communication Network, Inc.

        6/29/95

        500

        PRDM

        Paradigm Technology, Inc.

        6/29/95

        200

        SGVB

        SGV Bancorp, Inc.

        6/29/95

        200

        CFIC

        Community Financial Corp.

        6/30/95

        1000

        DRTE

        Dendrite International, Inc.

        6/30/95

        1000

        DSLGF

        Discreet Logic, Inc.

        6/30/95

        500

        GTPS

        Great American Bancorp, Inc.

        6/30/95

        200

        HEMT

        HF Bancorp, Inc.

        6/30/95

        200

        INFR

        Inference Corp. (Cl A)

        6/30/95

        200

        MTRA

        Metra Biosystems, Inc.

        6/30/95

        200

        MBLM

        MobileMedia Corp.

        6/30/95

        1000

        SFED

        SFS Bancorp, Inc.

        6/30/95

        500

        SEER

        Seer Technologies, Inc.

        6/30/95

        500

        CRONV

        Cooper Cameron Corp. (WI)

        7/5/95

        1000

        FMBD

        First Mutual Bancorp, Inc.

        7/5/95

        500

        WORK

        Work Recovery Inc.

        7/5/95

        500

        CAMD

        California Micro Devices Corp.

        7/6/95

        200

        CTND

        Caretenders Health Corp.

        7/6/95

        200

        LGTO

        Legato Systems, Inc.

        7/6/95

        1000

        MCCI

        MIDCOM Communications, Inc.

        7/7/95

        200

        OSHRF

        Oshap Technologies Ltd. (Rts)

        7/7/95

        200

        FKKY

        Frankfort First Bancorp, Inc.

        7/10/95

        500

        NFLID

        Nutrition For Life Int'l, Inc. (New)

        7/11/95

        200

        NFLIW

        Nutrition For Life Int'l, Inc. (Wts 7/11/98)

        7/11/95

        200

        ONTK

        OnTrak Systems, Inc.

        7/11/95

        1000

        BNCC

        BNCCORP, Inc.

        7/13/95

        200

        HOWT

        Howtek, Inc.

        7/13/95

        1000

        MTIN

        Martin Industries, Inc.

        7/13/95

        1000

        TINTA

        Tele-Communications International, Inc. (Cl A)

        7/13/95

        200

        LBTAV

        Tele-Comm, Inc. (Ser A Liberty Media Group WI)

        7/13/95

        200

        ALGSF

        Algoma Steel, Inc.

        7/14/95

        500

        NVDM

        Novadigm, Inc.

        7/14/95

        1000

        SIHBF

        Sun International Hotels Ltd. (Ser B)

        7/14/95

        200

        HABC

        Habersham Bancorp

        7/17/95

        200

        MTMC

        Micros to Mainframes, Inc.

        7/18/95

        200

        MTMCW

        Micros to Mainframes, Inc. (Wts 10/26/97)

        7/18/95

        200

        PIXT

        PixTech, Inc.

        7/18/95

        500

        PROG

        Programmer's Paradise, Inc.

        7/18/95

        1000

        CHDX

        U.S.-China Industrial Exchange, Inc.

        7/18/95

        200

        DSWLF

        Deswell Industries, Inc.

        7/19/95

        200

        DSWWF

        Deswell Industries, Inc. (Wts)

        7/19/95

        200

        PBYP

        Play By Play Toys & Novelties, Inc.

        7/19/95

        500

        AHEZV

        American Health Properties, Inc. (Dep. Shrs. WI)

        7/19/95

        200

        EXGN

        Exogen, Inc.

        7/20/95

        200

        IMNT

        IMNET Systems, Inc.

        7/20/95

        500

        ROCF

        Rockford Industries, Inc.

        7/20/95

        200

        MASK

        Align-Rite International, Inc.

        7/21/95

        200

        IMSC

        Integrated Measurement Systems, Inc.

        7/21/95

        200

        MSFI

        MS Financial, Inc.

        7/21/95

        500

        UNSN

        Unison Software, Inc.

        7/21/95

        500

        ENER

        Energy Conversion Devices, Inc.

        7/24/95

        200

        CMTI

        Community Medical Transport, Inc.

        7/25/95

        500

        CMTIW

        Community Medical Transport, Inc. (Wts 10/3/99)

        7/25/95

        500

        DLBI

        DLB Oil & Gas, Inc.

        7/25/95

        500

        MNMD

        MiniMed Inc.

        7/25/95

        200

        TAGS

        Tarrant Apparel Group

        7/25/95

        1000

        RDHS

        Logan's Roadhouse, Inc.

        7/26/95

        1000

        OKSBP

        Southwest Bancorp, Inc. (Pfd A)

        7/26/95

        200

        ACRS

        Across Data Systems, Inc.

        7/27/95

        1000

        ATEA

        Astea International, Inc.

        7/27/95

        500

        CBCP

        Capital Bancorp

        7/27/95

        500

        EQSB

        Equitable Federal Savings Bank

        7/27/95

        200

        GSES

        GSE Systems, Inc.

        7/27/95

        500

        RNREF

        RenaissanceRe Holdings, Ltd.

        7/27/95

        200

        TSMAF

        Tesma International, Inc. (Cl A Sub. Vot.)

        7/27/95

        200

        Nasdaq National Market Symbol and/or Name Changes

        The following changes to the list of Nasdaq National Market securities occurred since June 28, 1995:

        New/Old Symbol

        New/Old Security

        Date Of Change

        APRAV/ABBY

        Apria Healthcare Group, Inc. (WI)/Abbey Healthcare Group, Inc.

        6/29/95

        DANB/DANBV

        Dave & Buster's, Inc./Dave & Buster's, Inc. (WI)

        6/30/95

        SBSE/SBSE

        SBS Technologies, Inc./SBS Engineering, Inc.

        6/30/95

        LECE/TJSY

        Leasing Edge Corp./TJ Systems Corp.

        6/30/95

        OTCM/OTCM

        Royce Micro-Cap Trust, Inc./Royce OTC Micro-Cap Fund, Inc.

        7/3/95

        ALRIZ/ALRZV

        Allergan Ligand Retinoid Ther (Uts 6/3/20)/Allergan Ligand Retinoid Ther (Uts 6/5/97 WI)

        7/10/95

        APRA/APRAV

        Apria Healthcare Group, Inc./Apria Healthcare Group, Inc. (WI)

        7/10/95

        CFCX/CTBX

        Center Financial Corporation/Centerbank

        7/10/95

        SAMC/ASTI

        Samsonite Corp./Astrum International Corp.

        7/17/95

        RBPAA/RBPAA

        Royal Bancshares of Pennsylvania (Cl A)/Royal Bank of Pennsylvania (Cl A)

        7/17/95

        INDE/INDE

        IndeNet, Inc./Independent Telemedia Group, Inc.

        7/18/95

        BHIKF/BZHKF

        B.H.I. Corporation/Belize Holdings, Inc.

        7/19/95

        CRON/CRONV

        Cooper Cameron Corp./Cooper Cameron Corp. (WI)

        7/19/95

        QLTIF/QLTIF

        QLT Phototherapeutics, Inc./Quadra Logic Technologies, Inc.

        7/19/95

        CDSI/CPTD

        Computer Data Systems, Inc./Computer Data Systems, Inc.

        7/20/95

        RSTO/RSTOV

        Rose's Stores, Inc./Rose's Stores, Inc. (WI)

        7/21/95

        RIDE/RIDE

        Ride Inc./Ride Snowboard Company

        7/25/95

        AHEPZ/AHEZV

        American Health Properties, Inc. (Dep. Shrs.)/American Health Properties, Inc. (Dep. Shrs. WI)

        7/26/95

        OKSBP/OKSPV

        Southwest Bancorp, Inc. (Pfd A)/Southwest Bancorp, Inc. (Pfd A WI)

        7/26/95

        RHBC/RHBC

        RehabCare Group, Inc./RehabCare Corporation

        7/27/95

        VVTV/VVTVA

        ValueVision International, Inc. (Cl A)/ValueVision International, Inc. (Cl A)

        7/27/95

        Nasdaq National Market Deletions

        Symbol

        Security

        Date

        PMSV

        Pharmacy Management Services, Inc.

        6/28/95

        TMNI

        Transmedia Network, Inc.

        6/28/95

        BTOP

        Bestop, Inc.

        6/29/95

        HOME

        Homedco Group, Inc.

        6/29/95

        BRIN

        Broadcast International, Inc.

        6/30/95

        LLSL

        Lakeland First Financial Group, Inc.

        6/30/95

        SOLD

        ADESA Corp.

        7/3/95

        AMRE

        American Recreation Co. Hldgs., Inc.

        7/3/95

        ASFL

        American Savings of Florida F.S.B.

        7/3/95

        DEER

        Deerbank Corp.

        7/3/95

        HUBCP

        HUBCO, Inc. (Ser A Pfd)

        7/3/95

        NFSF

        N F S Financial Corp.

        7/3/95

        GLBCP

        TCF Financial Corp. (Pfd A)

        7/3/95

        GLBCW

        TCF Financial Corp. (Wts 7/1/95)

        7/3/95

        WATTA

        Watts Industries, Inc. (Cl A)

        7/5/95

        ADLRQ

        All For A Dollar, Inc.

        7/6/95

        FMDDQ

        F & M Distributors, Inc.

        7/6/95

        FFSB

        FF Bancorp, Inc.

        7/6/95

        LOTS

        Lotus Development Corporation

        7/6/95

        SNSC

        Swing-N-Slide Corporation

        7/6/95

        USWDA

        U.S. Wireless Data, Inc.

        7/6/95

        FCOB

        First Commercial Bancorp, Inc.

        7/7/95

        RHAB

        Rehability Corporation

        7/7/95

        VARLW

        Vari-L Company, Inc. (Wts 4/20/97)

        7/7/95

        CMMD

        Command Security Corporation

        7/10/95

        PSFC

        Plains Spirit Financial Corp.

        7/10/95

        SNRS

        Sunrise Technologies International, Inc.

        7/10/95

        SSFT

        Scientific Software Intercomp, Inc.

        7/11/95

        BCNJ

        Bancorp New Jersey, Inc.

        7/12/95

        WILLA

        John Wiley & Sons, Inc. (Cl A)

        7/12/95

        TRNI

        Trans-Industries, Inc.

        7/13/95

        CRAYQ

        Cray Computer Corp.

        7/17/95

        XNVAZ

        Xenova Group plc (Uts)

        7/17/95

        LECE

        Leasing Edge Corp.

        7/20/95

        RRRR

        Renaissance Communications Corp.

        7/20/95

        SPNSF

        Sapiens International Corp. N.V.

        7/20/95

        UNMGW

        UniMark Group, Inc. (Wts 8/12/99)

        7/20/95

        EVTCW

        Environmental Technologies Corp. (Wts 12/17/97)

        7/21/95

        RIMGW

        Rimage Corp. (Wts 7/21/95)

        7/21/95

        ARTL

        The Aristotle Corp.

        7/21/95

        EZEMA

        E-Z-EM, Inc. (Cl A)

        7/24/95

        EZEMB

        E-Z-EM, Inc. (Cl B)

        7/24/95

        SDNBR

        SDNB Financial Corp. (Rts 7/21/95)

        7/24/95

        USDCR

        USDATA Corporation (Rts)

        7/24/95

        SOLQD

        Solo Serve Corporation (New)

        7/25/95

        TIGR

        Tiger Direct, Inc.

        7/25/95

        SPTNQ

        SportsTown, Inc.

        7/27/95

        Questions regarding this Notice should be directed to Mark A. Esposito, Nasdaq Market Services Director, Issuer Services, at (202) 496-2536. Questions pertaining to trade-reporting rules should be directed to Bernard Thompson, Assistan