Memo #
8254
INSTITUTE FILES SUPPLEMENTAL COMMENT LETTER ON NASD NON-CASH COMPENSATION PROPOSAL
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September 20, 1996
TO: CLOSED-END FUND COMMITTEE No. 32-96
SALES FORCE MARKETING COMMITTEE No. 32-96
SEC RULES COMMITTEE No. 103-96
UNIT INVESTMENT TRUST COMMITTEE No. 41-96
RE: INSTITUTE FILES SUPPLEMENTAL COMMENT LETTER ON NASD
NON-CASH COMPENSATION PROPOSAL
______________________________________________________________________________
At the behest of its Executive Committee, the Institute has filed with the SEC a
supplemental comment letter on the NASDs proposed amendments to its rules governing non-
cash and cash compensation received in connection with the sale of investment company
securities. A copy of the letter is attached.
The supplemental letter recommends that the NASD revise its proposal so as to permit
members to create in-house incentive programs that focus on a designated broad investment
objective or category, instead of requiring that all investment company securities sold by the
member be included. The letter argues that the proposed requirement that such programs
include all investment company securities sold by the member is not necessary to achieve the
goal of ensuring that sales of certain investment company securities do not receive preferential
treatment. It also points out several undesirable consequences of the proposed requirement,
including that it would prohibit NASD members from tailoring incentive programs to meet
their clients needs.
The letter suggests that the NASD, in implementing the Institutes proposed revision:
(1) require that any in-house incentive program with a specific focus be based on a broad
investment objective or category (e.g., international funds, municipal bond funds, or growth
and income funds); (2) expressly prohibit discrimination among investment companies within
the designated objective or category; and (3) maintain the proposed requirement that the credit
received for each investment company included in the arrangement must be equally weighted.
Frances M. Stadler
Associate Counsel
Attachment