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 SRNASD9363, 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 SRNASD9363, 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
19b4 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 200.303(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 9331496 Filed 122393; 8:45 am]

BILLING CODE 801001M

[Rel. No. IC19960; 8128728]
