[Federal Register Volume 63, Number 248 (Monday, December 28, 1998)]
[Notices]
[Page 71535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34254]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40816; File No. SR-NASD-98-81]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Granting Approval to Proposed Rule Change Relating
to Application of the Corporate Financing Rule to Certain Offerings by
Charitable Organizations
December 21, 1998.
I. Introduction
On October 29, 1998, the National Association of Securities
Dealers, Inc. (``NASA''), through its wholly-owned subsidiary 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\ proposed rule change to amend NASD Rule 2710
(``Corporate Financing Rule'') to exempt certain offerings by
charitable organizations from the pre-offering filing requirements. The
Commission published the proposed rule change for comment in the
Federal Register on November 19, 1998.\3\ No comments were received.
This order approves the proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 40676 (November 12,
1998), 63 FR 64303.
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II. Description of the Proposal
Rule 2710 currently subjects ``church bond'' offerings to a filing
requirement with the Corporate Financing Department of NASD Regulation
(``Department'') so that the Department has an opportunity to determine
whether compensation terms and arrangements are fair and reasonable for
purposes of the rule. According to NASD Regulation, the aggregate
underwriting compensation received by church bond broker/dealers has
been significantly below the maximum amount of underwriting
compensation that is permitted under Rule 2710.
Under the proposal, offerings of securities by a church or other
charitable institution that are exempt from SEC registration pursuant
to Section 3(a)(4) of the Securities Act of 1933 (``Securities Act'')
\4\ would be exempt from the filing requirements, but not the
substantive requirements, of the Corporate Financing Rule. NASD
Regulation proposes to implement the proposed rule change on the date
of SEC approval.
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\4\ 15 U.S.C. 77c(a)(4). The Commission emphasizes that in order
for the proposed exemption to apply the offering must qualify under
Section 3(a)(4) of the Securities Act, which requires that the
offering not be for pecuniary profit, and no part of the net
earnings can inure to the benefit of any person, private
stockholder, or individual.
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III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 15A(b) of the Act
and the rules and regulations thereunder applicable to a national
securities association in general and, in particular, the requirements
of Section 15A(b)(6) of the Act.\5\ Section 15A(b)(6) requires, among
other things, that the Association's rules be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest.\6\
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\5\ 15 U.S.C. 78o-3(b)(6).
\6\ In approving this proposed rule change, the Commission notes
that it has also considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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The Commission believes that it is resonable to eliminate the
filing requirement in Rule 2710 for certain church bond offerings to
allow NASD Regulation to better allocate its staff resources. The
Commission notes that NASD Regulation has not recently identified any
problems with these offerings and that the proposed exemption relates
only to the filing requirements, but not the substantive requirements,
of Rule 2710. The Commission also notes that only the offerings that
are exempt under Section 3(a)(4) of the Securities Act would be covered
under the proposed exemption.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-NASD-98-81) be, and hereby
is, approved.
\7\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-34254 Filed 12-24-98; 8:45 am]
BILLING CODE 8010-01-M
