[Federal Register Volume 59, Number 62 (Thursday, March 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 94-7604]

[[Page Unknown]]

[Federal Register: March 31, 1994]


[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 

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.

    \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) 

    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.

    \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).

    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.

    \6\See e.g., Ellen E. Schultz, Investors are Flocking to Fund 
Cousins; Variable Annuities, Wall St. J., Jan. 7, 1994, at R11.

    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\

    \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.

    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.

    \9\15 U.S.C. 78o-3(b)(6).

    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\

    \10\17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-7604 Filed 3-30-94; 8:45 am]