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Where manager of mutual funds for registered broker-dealer failed to
exercise reasonable supervision over salesmen with a view to prevent-
ing their failure to grant customers the benefit of mutual fund break-
points, held, in the public interest to suspend manager from association

with any broker or dealer for 30 days

Order setting date of sanctions effective at the opening of business on

December 27, 1988....
34-26380 Clearing Corporation for Options and Securities; Application for Tem-

porary Registration as a Clearing Agency; Extension of time for

submission of comments until January 31, 1989. ....
The following releases relate to self-regulatory organization rule proposals and/or adoptions:









Release No. 33-6809/December 16, 1988
File No. 3-6952
File No. 33-14132-S
In the Matter of the Registration Statement of

On January 15, 1988, the Commission issued an
Order Fixing Time and Place of Public Hearing
Pursuant to Section 8(d) of the Securities Act of
1933, as amended, to determine whether a stop
order should issue suspending the effectiveness
of the registration statement of Centrac Associ-
ates, Inc. (“Registrant”).

In these administrative proceedings, Registrant
has submitted an Offer of Settlement, which the
Commission has determined to accept as appro-
priate and in the public interest. Registrant, solely
for the purpose of these proceedings and any
other proceedings brought by or on behalf of the
Commission or in which the Commission is a
party, and without admitting or denying the alle-
gations of the staff of the Division of Enforce-

18804 North Creek Parkway, #105
Bothell, Washington 98011


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1989, Commerce Clearing House, Inc.

When published as promulgated, U. S. Public Laws, federal regulations and decisions of administrative and
executive agencies and courts of the United States are in the public domain. However, their arrangement and
compilation, and historical, statutory, and other notes and references, along with all other material in this
publication, are subject to the copyright notice.

ment in its Statement of Matters by the Division d. that shortly after the effective date of the of Enforcement to be considered at a Public registration statement, Registrant departed from Hearing Pursuant to Section 8(d) of the Se- the underwriting agreement by delivering the curities Act of 1933, as Amended (“Statement of shares of Registrant covered by the registration Matters”), or the findings contained in this Order, statement and waived the requirement that full consents to the entry of Findings and Stop Order payment for the shares covered by the registraof the Commission suspending the effectiveness tion statement be made by wire transfer or cerof the registration statement of the Registrant. tified bank check at the time of transfer of certifiIII

cates for the shares.

IV Accordingly, on the basis of the Statement of Matters and the Offer of Settlement, the Commis- In view of the deficiencies in the registration sion makes the following findings:

statement, a Stop Order should issue suspending 1. Registrant filed a registration statement with

the effectiveness of the registration statement. the Commission on Form S-18 on May 7, 1987,

Accordingly, and amendments thereto were filed on July 8, IT IS ORDERED that the effectiveness of the 1987, August 17, 1987, September 22, 1987, and registration statement filed by the Registrant be September 25, 1987.

and it hereby is suspended; and 2. The registration statement, as amended, in- IT IS FURTHER ORDERED that when an apcludes untrue statements of material facts and propriate amendment correcting the deficiencies omits to state material facts required to be stated in the registration statement as amended and as or necessary to make the statements therein not herein provided shall have been filed, the Stop misleading, including, but not limited to, the fol- Order shall cease to be effective and the registralowing:

tion statement as amended shall become effeca. that about 37% of the stock to be sold in the

tive. firm commitment initial public underwriting By issuance of this Order, the Commission termiwould be “parked” in nominee or “directed in- nates this matter. vestment” accounts to be established with an

By the Commission. underwriter (“the underwriter”), with the understanding that the stock in such accounts would

Jonathan G. Katz not have to be paid for by such nominees, be

Secretary cause the underwriter would sell such stock to others prior to the closing date. b. that shortly after the effective date of the SECURITIES ACT OF 1933 registration statement, and in order to receive a Release No. 33-6810/December 16, 1988 check from the underwriter for a material portion Securities Uniformity of the offering proceeds, (which check was ultimately not honored), Registrant was required to ACTION: Publication of release announcing a expend about $312,500 of its offering proceeds to Memorandum of Understanding between the purchase common stock in an unrelated com- National Association of Securities Dealers and pany, a use of proceeds not described in the

the North American Securities Administrators registration statement, as amended;

Association regarding a model uniform mar

ketplace exemption from state securities registrac. that the principal owner of the underwriter, tion requirements. actively participated in the implementation of the underwriting agreement and negotiations with SUMMARY: This release publishes the MemoRegistrant relating to the underwriting, notwith randum of Understanding (MOU) on a uniform standing an Order of the National Association of model marketplace exemption that has been apSecurities Dealers, Inc., which disqualified the proved by the National Association of Securities owner of the underwriter from further associa- Dealers, Inc. (“NASD”) and the North Amertion with the underwriter; and

ican Securities Administrators Association, Inc.

"The findings herein do not constitute findings as to any other person named as a respondent in any other proceeding.

(“NASAA"). As a basis for the exemption, the (“NASDAQ/NMS”) Securities. Those discusMOU sets out criteria that must be met for a sions have been successfully completed. The marketplace to receive the exemption, including MOU was approved by the NASD Board of numerical listing, corporate governance, voting Governors on May 9, 1988, and by the NASAA rights, maintenance, decertification, and infor- membership on October 10, 1988. mation sharing standards. The MOU was a prod- The Commission welcomes the development of a uct of discussion between the parties that was

uniform standard in the MOU for treating facilitated by the Securities and Exchange Com

NASDAQ/NMS and exchange-listed securities. mission (“SEC” or “Commission”). Section

The NASDAQ/NMS market has undergone con19(c) of the Securities Act of 1933 (the “Se

siderable growth and development in recent curities Act”)! directs the SEC to pursue max

years. NASDAQ/NMS Securities have become imum uniformity in Federal and State regulatory subject to real-time transaction and quotation standards.

reporting. In addition, all current NASDAQ/ FOR FURTHER INFORMATION CONTACT: NMS issues are required to be registered under Kathryn V. Natale, Assistant Director either Section 12(b) or 12 (g) of the Securities (202/272-2405), or Peter Sultan, Attorney Exchange Act of 1934 (“Act”), and are subject, (202/272-2411), Division of Market Regulation, therefore, to the period reporting, proxy and Securities and Exchange Commission, 450 5th short-swing profit requirements imposed by SecStreet, N.W., Mail Stop 5-1, Washington, D.C. tions 13, 14 and 16 of the Act. Furthermore, with 20549.

the expansion of the surveillance capabilities of


curities, the Commission believes that the NASD I. Discussion

provides investors in these securities substanGreater uniformity in securities regulation was

tially equivalent protection against abuse as is endorsed by Congress with the enactment of provided investors in exchange-traded securities. section 19(c) of the Securities Act in the Small

With the adoption by the Commission earlier this Business Investment Incentive Act of 1980 (the

year of Rule 19c-4 under the Act,3 NASDAQ/ “Investment Incentive Act”). Section 19(c) au

NMS Securities and most exchange-listed issues thorizes the SEC to cooperate with any associa

are subject to equivalent shareholder disention of state securities regulators that can assist in

franchisement protections. For these reasons,

the Commission believes that NASDAQ/NMS carrying out the declared policy of section 19(c). The declared policy of the section is that there

and exchange-listed securities trade in an enshould be greater Federal and State cooperation vironment subject to substantially equivalent disin securities matters, including: (1) maximum closure, regulatory and surveillance protections, effectiveness of regulation; (2) maximum uni

and deserve to be treated comparably. formity in Federal and State standards; (3) mini- The Commission does not regard uniform listing mum interference with the business of capital standards among securities markets as an objecformation; and (4) a substantial reduction in costs tive of Section 19(c). Nor does the Commission and paperwork to diminish the burdens of raising intend by its endorsement of uniformity in state investment capital, particularly by small busi- exemptive criteria to take a position on the costs ness, and to diminish the costs of the administra- or benefits of so-called “merit” regulation by the tion of the government programs involved. states. Uniformity in state exemptive criteria Consistent with these stated goals and policies, does appear, however, to promote the objectives the Commission has served to facilitate discus

of Section 19(c), and the Commission endorses sions between the NASD and NASAA2 on the

the MOU on this basis. scope of a uniform marketplace exemption from The text of the MOU follows. Although the MOU securities registration requirements for ex- refers to the American Stock Exchange and the change-listed securities and securities designated New York Stock Exchange as parties, these exas NASDAQ National Market System changes have not yet become signatories.

3 See Securities Exchange Act Release No. 25891 (July 7, 1988), 53 FR 26376.

115 U.S.C. 77a et seq.

2 NASAA is an association of securities administrators from each of the 50 states, the District of Columbia, Puerto Rico, and ten Canadian provinces.

of the Purpose of, and Statutory Basis for the (B) institute proceedings to determine whether Proposed Rule Change

the proposed rule change should be disapproved. The purpose of this amendment is to clarify the IV. Solicitation of Comments obligations of individuals subject to a written

Interested persons are invited to submit written interim notice of revocation or who have other

data, views and arguments concerning the forewise ceased to be members of the Exchange, but

going. Persons making written submissions retain open positions in a market maker account.

should file six copies thereof with the Secretary, Paragraph (c) of Exchange Rule VI, Section 77, is

Securities and Exchange Commission, 450 Fifth amended to reflect that a Letter of Guarantee is

Street, N.W., Washington, D.C. 20549. Copies of not considered revoked until a final letter of

the submission, all subsequent amendments, all revocation (as opposed to an interim revocation)

written sta emerts with respect to the proposed is filed. The proposed Commentary .01 provides

rule change that are filed with the Commission, that such individuals may only effect closing

and all written communications relating to the transactions in such accounts during the period between the effective date of a written interim and any person, other than those that may be

proposed rule change between the Commission notice of revocation or the date the individual

withheld from the public in accordance with the ceased to be a member of the Exchange and the

provisions of 5 U.S.C. 552, will be available for effective date of the final written notice of revoca

inspection and copying in the Commission's Pubtion.

lic Reference Section, 450 Fifth Street, N.W., The Exchange believes the proposed rule change Washington, D.C. Copies of such filing will also is consistent with Section 6(b)(5) of the Securities be available for inspection and copying at the Exchange Act of 1934 (“the Act”), in that it will principal office of the above-mentioned self-reguserve to protect investors and the public interest latory organization. All submissions should refer by more clearly communicating a market maker's to the file number in the caption above and should obligation to effect only closing transactions be submitted by [insert date 21 days after the date when no longer a member of the Exchange. of this publication.] (B) Self-Regulatory Organization's Statement For the Conmission by the Division of Market on Burden on Competition

Regulation, pursuant to delegated authority. The Exchange does not believe that the proposed

Jonathan G. Katz rule change imposes a burden on competition.

Secretary (C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change

SECURITIES EXCHANGE ACT OF 1934 Received from Members, Participants or

Release No. 34-26198/October 19, 1988 Others

File Nos. S?-CBOE-88-14; SR-NASD-88-46; Written comments on the proposed rule change

SR-NYSE-88-22; SR-NYSE-88-23; were neither solicited nor received.

SR-NYSE-88-24; and SR-AMEX-88-24
III. Date of Effectiveness of the Proposed Rule
Change and Timing for Commission Action

Self-Regula ory Orgnizations, Chicago Board

Options Exchange, Inc.; National Association Within 35 days of the date of the publication of of Securities Dealers, Inc.; New York Stock this notice in the Federal Register or within such Exchange, .nc.; American Stock Exchange, longer period: (i) as the Commission may desig- Inc; Order Approving Proposed Rule Changes nate up to 90 days of such date if it finds such and Notice of Filing and Order Granting longer period to be appropriate and publishes its Acceleratec Approval to Proposed Rule reasons for so finding; or (ii) as to which the self- Changes Relating to Market Circuit Breaker regulatory organization consents, the Commis- Proposals sion will:

Pursuant to Section 19(b) of the Securities Ex(A) by order approve such proposed rule change; change Act of 1934 (“Act”)1 and Rule 196-4 or

thereunder," the New York Stock Exchange, Inc. (“NYSE”), the Chicago Board Options Ex- declines 400 points from the previous day's change, Inc. (“CBOE"), the American Stock close.4 Under the NYSE's proposal, trading Exchange, Inc. (“AMEX”), and the National would resume following a halt pursuant to proAssociation of Securities Dealers. Inc. cedures similar to those used by the NYSE to (“NASD") (collectively, the self-regulatory or- open trading on "Expiration Fridays," the days ganizations ("SROs”)] have filed with the Se- that stock options, stock index options, and curities and Exchange Commission ("Commis- stock index futures expire simultaneously sion”) proposed rule changes to implement The NYSE proposes to implement Rule 80B for a certain procedures that will be activated during one year pilot period. The NYSE originally stated volatile market conditions.

115 U.S.C. $ 78s(b) (1982). 217 C.F.R. $ 240.195-4 (1988).

that the rule would not become effective until all The NYSE proposals were published for com- other U.S. stock and options exchanges, the ment in the Federal Register.3 No comments NASD, and U.S. futures markets that trade fuwere received on the NYSE proposed rule tures on stock index groups (and options on such changes. The CBOE, NASD, and AMEX pro- futures), adopt corresponding rules, and such posals were filed on September 20, 1988, October rules receive all necessary regulatory approvals 7, 1988, and October 14, 1988, respectively, and and become effective. The NYSE subsequently have not previously been published for comment amended its filing to make its rule effective upon in the Federal Register.

approval by the Commission.? I. Description of the Proposals A. The circuit breaker proposals

In support of its proposal, the NYSE argues that

Rule 80B's trading halts would help promote (1) File No. SR-NYSE-88-23 contains the stability in the stock market by providing market NYSE's proposed Rule 80B and corresponding participants with time to re-establish an equiamendments to NYSE Rules 717 and 750 that librium between buying and selling interest and provide for a temporary halt in the trading of all by helping to ensure that all market participants stocks, stock options, and stock index options on have a reasonable opportunity to become aware the NYSE if the Dow Jones Industrial Average of and to respond to significant market price (“DJIA") reaches certain trigger values. Trading movements. The NYSE's proposal also responds would halt for one hour if the DJIA declines 250 to a recommendation contained in the Interim or more points from its previous day's closing Report of the Working Group on Financial Marlevel; once trading has been reopened, trading kets (“Working Group”) issued in May, 1988 by would halt for an additional two hours if the DJIA the Under Secretary for Finance of the Depart

3 File No. SR-NYSE-88-22 was noticed in Securities Ex- ("SPZ") that would be transformed into a one-hour NYSEchange Act Release No. 26061 (September 6, 1988), 53 FR CME coordinated trading halt if the DJIA declines 250 35396; File No. SR-NYSE-88-23 was noticed in Securities points and the NYSE suspends trading. Upon reopening, Exchange Act Release No. 26062 (September 6, 1988), 53 CME trading would halt for two hours if the SPZ were to fall FR 35399; and File No. SR-NYSE-88-24 was noticed in another 20 points, the DJIA declined 400 points, and the Securities Exchange Act Release No. 26115 (September 26, NYSE suspended trading for two hours. Letter from Todd 1988), 53 FR 39393. The releases contain the full text of the E. Petzel, Vice President, Financial Research, CME, to Jean NYSE's proposed rules.

A. Webb, Secretary, Commodity Futures Trading Commis* If the 250-point trigger is reached within one hour of the sion ("CFTC"), dated September 1, 1988. See letters to Jean scheduled close of trading for a day, or if the 400-point trigger A. Webb, Secretary, CFTC, from Paul J. Draths, Vice is reached within two hours of the scheduled close of the President and Secretary, Chicago Board of Trade ("CBT"), trading day, trading will halt for the remainder of the day. If, dated July 29, 1988; Michael Braude, President, Kansas City however, the 250-point trigger is reached between one hour Board of Trade (“KCBT”), dated August 10, 1988; and and one-half hour before the scheduled closing, or if the 400- Milton M. Stein, Vice President, Regulation and Surpoint trigger is reached between two hours and one hour veillance, New York Futures Exchange (“NYFE'), dated before the scheduled closing, the NYSE would retain the September 2, 1988. power to use abbreviated reopening procedures either to 7 Letter from Richard A. Grasso, President and Chief permit trading to reopen before the scheduled closing or to Operating Officer, NYSE, to Richard Ketchum, Director, establish closing prices. The NYSE has stated that it will file Division of Market Regulation, Commission, dated October these reopening procedures with the Commission for ap- 17, 1988. The AMEX also imposed such a contingency in its proval and will circulate them to members and member proposed rule change, described infra. The AMEX subseorganizations before these procedures are implemented. quently amended its filing to make its rule effective upon the

5 See Securities Exchange Act Release No. 25804 (June adoption of substantively identical rules by the NYSE, 15, 1988), 53 FR 23474.

CBOE, and NASD. Letter from Claire P. McGrath, Staff 6 The futures exchanges have proposed analogous trading Attorney, AMEX, to Howard Kramer, Assistant Director, halts. For example, the Chicago Mercantile Exchange Division of Market Regulation, Commission, dated October ("CME”) proposed a 30-point price limit for its Standard 17, 1988. and Poor's 500 Stock Index (“S&P 500") futures contract

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