Self-Regulatory Organizations; Filing and Immediate Effectiveness of Proposed Rule Change by National Association of Securities Dealers, Inc. Relating to Amendments to the Guidelines Regarding Communications With the Public About Collateralized Mortgage Obligations (CMOs) December 17, 1993. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 ("Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on December 3, 1993, 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 NASD has designated this proposal as one constituting a stated policy, practice or interpretation of an existing rule of the NASD under section 19(b)(3)(A)(i) of the Act, which renders the rule effective upon the Commission's receipt of this filing. 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 proposing to amend its Guidelines Regarding Communications With the Public About Collateralized Mortgage Obligations ("CMOs'') at Article III, Section 35 of the Rules of Fair Practice ("CMO Guidelines'') to require members to offer educational material on CMOs to their customers. Below is the text of the proposed rule change. Proposed new language is italicized; proposed deletions are in brackets. Guidelines Regarding Communications With the Public About Collateralized Mortgage Obligations (CMOs) * * * * * Educational Material In order to ensure that customers are adequately informed about CMOs members are required to [should] offer to customers educational material which covers the following matters: A discussion of CMO characteristics as investments and their attendant risks An explanation of the structure of a CMO, including the various types of tranches A discussion of mortgage loans and mortgage securities Features of CMOs, including: credit quality, prepayment rates and average lives, interest rates (including effect on values and prepayment rates), tax considerations, minimum investments, transactions costs and liquidity Questions an investor should ask before investing, and a glossary of terms that may be helpful to an investor considering an investment. * * * * * 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 Sections (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 In rule filing SRÄNASDÄ93Ä63, which was effective upon filing with the Securities and Exchange Commission on November 3, 1993,®1¯ the NASD amended the CMO Guidelines to state that members should offer educational material concerning CMOs to their customers. A more complete description of the nature of the educational material provision may be found in that rule filing. ®1¯ Securities Exchange Act Release No. 33169 (Nov. 9, 1993), 58 FR 60742 (Nov. 16, 1993). Subsequent to the filing of SRÄNASDÄ93Ä63, the NASD's Office of General Counsel determined that the provision stating that members "should'' offer educational material to their customers was intended to be mandatory as approved by the NASD Board of Governors on September 20, 1993. Accordingly, the NASD is amending the Guidelines to state that members are required to offer to customers educational material concerning CMOs. The NASD believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act in that the amendment to the Guidelines relating to educational material will enhance public knowledge and information on a complex securities product and will, therefore, enhance the protection of investors and the public interest by improving the baseline of standards to guide sales practices relating to CMOs. (B) Self-Regulatory Organization's Statement on Burden on Completion 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 The foregoing rule change has become effective upon filing with the Commission pursuant to section 19(b)(3)(A)(i) of the Act and subparagraph (e) of Rule 19bÄ4 thereunder in that it constitutes a stated policy, practice or interpretation of an existing rule of the NASD. At any time within 60 days of the filing of a rule change pursuant to section 19(b)(3)(A) of the Act, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 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, NW., Washington, DC 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 the principal office of the NASD. All submissions should refer to the file number in the caption above and should be submitted by January 13, 1994. For the Commission, by the Division of Market Regulation, pursuant to delegated authority, 17 CFR 200.30Ä3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. 93Ä31496 Filed 12Ä23Ä93; 8:45 am] BILLING CODE 8010Ä01ÄM [Rel. No. ICÄ19960; 812Ä8728]