[Federal Register: December 28, 1998 (Volume 63, Number 248)]
[Notices]               
[Page 71535]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de98-129]

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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