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[19115]
August 23, 2005
TO: INTERNATIONAL MEMBERS No. 27-05
INTERNATIONAL INVESTING SUBCOMMITTEE No. 9-05
RE: SEC APPROVES NASD PROPOSAL RELATING TO RULE 2790
The Securities and Exchange Commission has approved a proposed rule change filed by
the NASD relating to Rule 2790.1 Most significantly, the SEC approved the portion of the
proposed rule change clarifying the scope of the exemption from the rule for foreign investment
companies.
Because the proposed rule change did not directly address the provision in the rule that
provides an exemption if no person owning more than 5% of the shares of the foreign
investment company is a “restricted person,” the SEC agreed with the NASD that comment
letters filed on the proposed rule change2 expressing concern regarding the 5% threshold were
not germane to the current proposal. The SEC, however, stated that it understands that the
NASD intends to continue to consider the concerns raised by commenters regarding the 5%
limitation and urged the NASD to continue in discussions with the industry in order to
determine whether additional amendments to the rule are appropriate.
Ari Burstein
Associate Counsel
1 Securities Exchange Act Release No. 52209 (August 4, 2005), 70 FR 46557 (August 10, 2005). The approval order can
be found on the SEC’s website at http://www.sec.gov/rules/sro/nasd/34-52209.pdf.
2 See Memorandum to International Members No. 20-05 and International Investing Subcommittee No. 3-05, dated
June 22, 2005 [18966].