[Federal Register Volume 62, Number 20 (Thursday, January 30, 1997)]
[Notices]
[Pages 4563-4564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2256]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38205; File No. SR-NASD-96-42]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Granting Approval to Proposed Rule Change Relating
to Transfer of Limited Partnership Interests
January 24, 1997.
On November 15, 1996, NASD Regulation, Inc., (``NASD Regulation'')
submitted to the Securities and Exchange Commission (``SEC'' or
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to allow members under certain circumstances to
petition the staff of NASD Regulation for permission to modify the
standardized limited partnership transfer forms.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on December 17, 1996.\3\ No comments were received on the
proposal. This order approves the proposal.
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\3\ Securities Exchange Act Release No. 38042 (Dec. 11, 1996),
61 FR 6633 (Dec. 17, 1996). Subsequently, NASD Regulation extended
the time period for Commission action until January 31, 1997. Letter
from John Ramsay, Deputy General Counsel, NASD Regulation, to
Katherine A. England, Assistant Director, Division of Market
Regulation, SEC, dated January 21, 1997.
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Currently, all members of the National Association of Securities
Dealers, Inc. (``NASD'') are required to use standardized transfer,
registration confirmation, and distribution allocation forms
(``Forms'') when transferring any limited partnership security.\4\
After use of the Forms became mandatory, transfer agents, member firms,
and securities attorneys raised a number of questions concerning the
applicability of the Forms to certain types of transfers. For example,
it was suggested that the distribution
[[Page 4564]]
allocation form be modified to provide additional options for specific
treatment of capital transactions, capital distributions, sale or
refinancing proceeds, special distributions, liquidating distributions,
and distributions with respect to terminating transactions. In another
case, an NASD member stated that modifications to both the transfer and
distribution allocation forms were necessary to satisfy certain
conditions of purchase imposed by its limited partnership secondary
transaction department. In addition, although the Forms were intended
to be used for all purchases, sales, exchanges, and transfers of
limited partnership interests, many member firms have developed
standard one page documents for transfers that are ``not for
consideration,'' such as transfers related to a change of trustee or
custodian or transfers resulting from death, divorce, or gift. These
previously developed documents fulfill the same purpose as the new
Standardized Transfer Forms, i.e., permitting a fast and efficient
transfer of the security.
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\4\ See Securities Exchange Act Release No. 36783 (Jan. 29,
1996), 61 FR 3955 (Feb. 2, 1996).
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Finally, other miscellaneous issues have been raised in connection
with the use of the Forms, including a request to meet a requirement
that each investor demonstrate U.S. citizenship.
To address this recurring situation, NASD Regulation has proposed a
rule change that would add a new paragraph to NASD Rule 11580 that
authorizes NASD Regulation's Corporate Financing Department, in
response to a member's written request, to issue a waiver from the
requirement to use the Forms for good cause shown. This waiver would
allow the requesting member to modify the Forms as requested to meet
legal or regulatory requirements or to otherwise facilitate the
transfer of the limited partnership interests.
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities association, and, in
particular, with the requirements of Section 15A.\5\ Specifically, the
Commission believes the proposal is consistent with the Section
15A(b)(6) requirements that the rules of an association be designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, and processing information with respect to, and facilitating
transactions in securities, to prevent fraudulent and manipulative acts
and practices, and, in general, to protect investors and the public
interest.\6\
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\5\ 15 U.S.C. 78o-3.
\6\ 15 U.S.C. 78o(b)(6). In finding that the proposed rule
change is in the public interest, the Commission, consistent with
Section 3(f) of the Act, has taken into consideration the extent to
which the proposal promotes efficiency. 15 U.S.C. 78c(f).
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The Commission recognizes that there may be instances where the
current standardized forms may need to be modified to expedite the
transfer of limited partnership interests due to the variety of
partnership products available. Therefore, the Commission believes the
proposed rule change will allow NASD Regulation staff to provide the
flexibility sometimes necessary to facilitate a more efficient transfer
of limited partnership interests in particular cases where a rigid
``form over substance'' requirement might hinder the transfer process.
Nevertheless, to ensure the proposed rule change will not
unnecessarily reduce or eliminate the benefits of utilizing
standardized forms, the Commission emphasizes that waivers allowing
members to modify the Forms should be issued only under limited
circumstances. They will be issued when needed to allow members to meet
legal or regulatory requirements not sufficiently addressed in the
Forms or to otherwise facilitate the transfer of limited partnership
interests. In applying this standard, it is important that waivers not
be issued to allow members to substitute their own forms or to make
wholesale changes to the Forms, unless otherwise noted.\7\
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\7\ An overly liberal application of this exemptive authority by
NASD Regulation staff would eliminate the benefits sought by the
NASD when it proposed the use of standardized forms.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-NASD-96-42) is approved.
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\8\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-2256 Filed 1-29-97; 8:45 am]
BILLING CODE 8010-01-M
