INSTITUTE COMMENT LETTER ON PROPOSED AMENDMENTS TO NASD CASH/NON-CASH COMPENSATION RULES

October 3, 1994 TO: BOARD OF GOVERNORS NO. 102-94 SEC RULES COMMITTEE NO. 104-94 RE: INSTITUTE COMMENT LETTER ON PROPOSED AMENDMENTS TO NASD CASH/NON-CASH COMPENSATION RULES __________________________________________________________ As we previously informed you, the NASD recently proposed amendments to its Rules of Fair Practice to revise existing provisions concerning the awarding of cash and non-cash compensation to NASD members and their associated persons in connection with sales of investment company securities. (See Memorandum to Board of Governors No. 84-94 and SEC Rules Committee No. 95-94, dated August 19, 1994.) The Institute today submitted the attached comment letter to the NASD supporting the proposed amendments. With respect to non-cash compensation, the letter indicates that the Institute is not aware of any problems that have arisen in that area. The letter states that the Institute nevertheless supports the proposed limitations on non-cash compensation because, as the NASD's Notice to Members proposing the amendments stated, such practices could lead to the perception of impropriety, which could diminish investor confidence. The letter also expresses support for the proposed disclosure requirements regarding cash compensation. Craig S. Tyle Vice President & Senior Counsel Attachment