[Federal Register Volume 60, Number 105 (Thursday, June 1, 1995)]
[Notices]
[Pages 28639-28640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13307]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35761; File No. SR-NASD-95-19]
Self-Regulatory Organizations: Notice of Filing of Proposed Rule
change by National Association of Securities Dealers, Inc. Relating to
Limited Partnership Rollup Transactions
May 24, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on May
4, 1995 the National Association of Securities Dealers, Inc. (``NASD''
or ``Association'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the NASD.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the terms of Substance
of the Proposed Rule Change
The NASD is herewith filing a proposed rule change to add new
paragraph 7 to Subsection (b)(2)(B)(vii)d. of Article III, Section 34
of the Rules of Fair Practice and to add new paragraph (vii) to
Subsection (14)(D) to Part I of Schedule D to the By-Laws to exclude
investment companies and business development companies from the
definition of ``limited partnership rollup transaction.'' The specific
text of the rule change would apply to ``a transaction involving only
[[Page 28640]] entities registered under the Investment Company Act of
1940 or any Business Development Company as defined in Section 2(a)(48)
of that Act.''
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The NASD has prepared summaries, set forth in Section
(A), (B), and (C) below, of the most significant aspects of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Federal legislation regulating limited partnership rollups
(``Rollup Reform Act'') was signed into law on December 17, 1993, and
contained a mandate for the NASD to adopt its own rollup rule. The
NASD's rule regulating rollups (``Rollup Rule'') was approved by the
SEC on August 15, 1994 \1\ and amended Article III, Section 34 of the
NASD Rules of Fair Practice to prohibit NASD members and associated
persons from participating in a ``limited partnership rollup
transaction'' unless the transaction includes specified provisions to
protect the rights of limited partners. The Rollup Rule further amended
Part III of Schedule D to the By-Laws to prohibit the authorization for
quotation on the Nasdaq National Market of any security resulting from
a ``limited partnership rollup transaction'' unless the transaction is
conducted in accordance with certain specified procedures designed to
protect the rights of dissenting limited partners. The NASD Roll Up
Rule was designed to conform to the federal roll up legislation.
\1\ See, Securities Exchange Act Release No. 34533 (August 15,
1994); 59 FR 43147 (August 22, 1994).
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Subsequent to approving the NASA's Rollup Rule, the SEC adopted new
Rule 3b-11 to exclude from the definition of ``limited partnership
rollup transaction,'' among other things, transactions involving
entities registered under the Investment Company Act of 1940 (the
``1940 Act'') or any Business Development Company as defined in Section
2(a)(48) of the 1940 Act.\2\ In its adopting release, the SEC stated
that it was adopting the new Rule in order to define related terms used
in the federal rollup definition ``. . . for purposes of, among other
things, the SRO rules.''
\2\ See, Securities Act Release No. 7113; Securities Exchange
Act Release No. 35036 (December 2, 1994); 59 JR 63676 (December 8,
1994).
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The SEC has requested that the NASD amend the Rollup Rule to
conform the NASD's definition of ``limited partnership rollup
transaction'' to the definition adopted by the SEC. The proposed rule
change amends the Rollup Rule by adding as an exclusion for investment
companies and business development companies to the definition of
``limited partnership rollup transaction''new paragraph 7 to Subsection
(b)(2)(B)(vii)d. to Article III, Section 34 of the Rules of Fair
Practice and new paragraph (vii) to Subsection 14(D) to Part I of
Schedule D. Thus, if the proposed rule change is adopted, investment
companies and business development companies would be excluded from the
purview of the Rollup Rule. Investment Companies and Business
Development Companies are already subject to extensive regulation under
the 1940 Act and have not been perceived as entities connected with the
types of abusive limited partnership rollup transactions for which
investor protection provisions of the rollup rules were sought.
The NASD believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(6) of the Act,\3\ which require that
the rules of the association be designed to prevent fraudulent and
manipulative acts and promote just and equitable principles of trade in
that the proposed rule change provides for regulatory consistency in
the definition of ``limited partnership rollup transaction'' and
appropriately excludes investment companies and business development
companies from unnecessary, and potentially burdensome, additional
regulation.
\3\ 15 U.S.C. Sec. 78o-3.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The NASD does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received from Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. by order approve such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission,and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at a principal office of the NASD.
All submissions should refer to File No. SR-NASD-95-19 and should be
submitted by June 22, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-13307 Filed 5-31-95; 8:45 am]
BILLLING CODE 8010-01-M