[Federal Register Volume 59, Number 62 (Thursday, March 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7604]
[[Page Unknown]]
[Federal Register: March 31, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33793; File No. SR-NASD-94-2]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Approving Proposed Rule Change Creating Guidelines
for Communications to the Public About Variable Life and Annuity
Products
March 21, 1994.
On January 6, 1994, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') a proposed rule
change\1\ pursuant to Section 19(b)(1) of the Securities Exchange Act
of 1934 (``Act'')\2\ and Rule 19b-4 thereunder.\3\ The rule change
creates specific guidelines (``Guidelines'') under the NASD's rule
concerning Communications With the Public.\4\ In particular, these
Guidelines impose certain requirements on members who communicate with
the public about variable life and annuity products.
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\1\The NASD amended the proposed rule change once subsequent to
its original filing on January 6, 1994. Letter from Suzanne E.
Rothwell, Associate General Counsel, NASD, to Selwyn Notelovitz,
Branch Chief, SEC (Feb. 9, 1994). The Commission's publication for
notice and comment reflected the NASD's amendment.
\2\15 U.S.C. 78s(b)(1) (1988).
\3\17 CFR 240.19b-4 (1993).
\4\NASD Manual, Rules of Fair Practice, Art. III, Sec. 35, (CCH)
2195.
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Notice of the proposed rule change together with its terms of
substance was provided by issuance of a Commission release and by
publication in the Federal Register.\5\ No comments were received in
response to the Commission release. This order approves the proposed
rule change.
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\5\Securities Exchange Act Release No. 33607 (Feb. 9, 1994), 59
FR 7279 (Feb. 15, 1994). The release number that appeared in the
Federal Register was 33067; this was subsequently corrected; 59 FR
9523 (Feb. 28, 1994).
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The increase in the number of variable life insurance and annuity
products\6\ has led to an increase in the variety of ways in which
information about these products is communicated to the public. To
ensure that its members do not mislead prospective investors, the NASD
has proposed a comprehensive set of Guidelines for communicating with
the public regarding these products. The Guidelines govern the
preparation of, and communication with the public through, advertising
and sales literatures for variable products. The Guidelines are
intended to provide a level of disclosure sufficient to assist
investors in making fair and informed investment decisions.
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\6\See e.g., Ellen E. Schultz, Investors are Flocking to Fund
Cousins; Variable Annuities, Wall St. J., Jan. 7, 1994, at R11.
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The standards set forth in the Guidelines are in addition to the
standards set forth in Article III, Section 35 to the rules of Fair
Practice (``Rules'').\7\ The NASD is issuing the Guidelines pursuant to
the Board of Governors authority to interpret the Rules.\8\
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\7\NASD Manual, Rules of Fair Practice, Art. III, Sec. 35, (CCH)
2195 (Communications with the Public).
\8\NASD Manual, By-Laws, Art. VII, Sec. 1(a)(2), (CCH) 1181.
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The Commission has determined to approve the NASD's proposal. The
Commission finds that the rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the NASD, including the requirements of Section 15A(b)(6)
of the Act.\9\ Section 15A(b)(6) requires, in part, that the rules of
the NASD be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, and to
protect investors and the public interest. These Guidelines will
provide greater protection to investors and the public interest by
adding to Section 35 of the NASD's Rules of Fair Practice comprehensive
Guidelines governing advertising and sales literature for variable
products. The Guidelines establish minimum standards and are intended
to provide a level of disclosure sufficient to assist investors in
making fair and informed investment decisions.
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\9\15 U.S.C. 78o-3(b)(6).
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change SR-NASD-94-2 be, and hereby is approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-7604 Filed 3-30-94; 8:45 am]
BILLING CODE 8010-01-M