
[Federal Register: May 14, 2008 (Volume 73, Number 94)]
[Notices]               
[Page 27869-27873]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14my08-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57803; File No. SR-NASD-2005-114]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); 
Order Approving Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 
Thereto and Notice of Filing and Order Granting Accelerated Approval to 
Amendment No. 5 Relating to the Regulation of Compensation, Fees and 
Expenses in Public Offerings of Real Estate Investment Trusts and 
Direct Participation Programs

May 8, 2008.

I. Introduction

    On September 28, 2005, the National Association of Securities 
Dealers, Inc. (``NASD'') \1\ filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 
thereunder,\3\ proposed amendments to NASD Rule 2810. On June 12, 2006, 
NASD filed Amendment No. 1 to the proposed rule change.\4\ The proposed 
rule change was published for comment in the Federal Register on July 
17, 2006 (``Original Proposal''),\5\ and the Commission received six 
comments.\6\
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    \1\ On July 26, 2007, the Commission approved a proposed rule 
change filed by NASD to amend NASD's Certificate of Incorporation to 
reflect its name change to Financial Industry Regulatory Authority, 
Inc., or FINRA, in connection with the consolidation of the member 
firm regulatory functions of NASD and NYSE Regulation, Inc. See 
Securities Exchange Act Release No. 56146 (July 26, 2007), 72 FR 
42190 (Aug. 1, 2007).
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
    \4\ Amendment No. 1 replaced and superseded the original rule 
filing.
    \5\ See Securities Exchange Act Release No. 54118 (July 10, 
2006), 71 FR 40569 (July 17, 2006) (SR-NASD-2005-114).
    \6\ See letters from the Committee on Federal Regulation of 
Securities of the American Bar Association (Keith F. Higgins), dated 
Aug. 22, 2006; North American Securities Administrators Association 
(Patricia D. Struck), dated Aug. 11, 2006; Dominion Investor 
Services, Inc. (Kevin P. Takacs), dated Aug. 7, 2006; Investment 
Program Association (Rosemarie Thurston), dated Aug. 7, 2006; the 
Securities Division of Office of the Secretary of the Commonwealth 
of Massachusetts (Bryan Lantagne), dated Aug. 4, 2006; and Cambridge 
Legacy Group (Frank Akridge, Jr.), dated Aug. 4, 2006.
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    On April 16, 2007, NASD submitted Amendment No. 2 to the proposed 
rule change, and on November 9, 2007 and January 2, 2008, FINRA 
submitted Amendment No. 3 and No. 4, respectively, to the proposed rule 
change.\7\ The Commission published the proposed rule change, as 
amended, for comment in the Federal Register on January 31, 2008 
(``Revised Proposal''),\8\ and the Commission received six comments, 
which are discussed below in Section III.\9\ On April 11, 2008, FINRA 
submitted Amendment No. 5 to the proposed rule change.\10\
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    \7\ Each amendment replaced and superseded the earlier 
amendment. Amendment No. 4 also responded to comments on the 
Original Proposal.
    \8\ See Securities Exchange Act Release No. 57199 (Jan. 25, 
2008), 73 FR 5885 (Jan. 31, 2008) (SR-NASD-2005-114).
    \9\ See letters from R.J. O'Brien Fund Management, LLC (Annette 
A. Cazenave), dated Apr. 28, 2008 (``R.J. O'Brien''); Michael V. 
Scillia, ASG Securities, Inc., dated Feb. 24, 2008 (``Scillia''); 
Committee on Federal Regulation of Securities of the American Bar 
Association (Keith F. Higgins), dated Feb. 22, 2006 (``ABA 
Committee''); Snyder Kearney LLC, dated Feb. 21, 2008 (``Snyder''); 
David Lerner, David Lerner Associates, Inc., dated Feb. 21, 2008 
(``Lerner''); and Investment Program Association (Jack L. 
Hollander), dated Feb. 21, 2006 (``IPA'').
    \10\ Amendment No. 5 responded to comments on the Revised 
Proposal and proposed several amendments to the proposed rule 
change.
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    This notice and order solicits comment from interested persons on 
Amendment No. 5 and approves the proposed rule change, as amended, on 
an accelerated basis. The text of the proposed rule change is available 
at http://www.finra.org, the principal offices of FINRA, and the 
Commission's Public Reference Room.

II. Description of the Proposed Rule Change

    As discussed in more detail in the Original Proposal and Revised 
Proposal, FINRA is proposing to amend NASD Rule 2810 to address the 
regulation of compensation, fees and expenses in public offerings of 
direct participation programs (as defined in NASD Rule 2810(a)(4)) 
(``DPPs'') and unlisted real estate investment trusts (as defined in 
NASD Rule 2340(d)(4)) (``REITs'') (collectively ``Investment 
Programs'').\11\ Specifically, the proposed rule change addresses: (1) 
Compensation limitations and the use and allocation of offering 
proceeds; (2) disclosure regarding the liquidity of prior programs 
offered by the same sponsor; (3) sales loads on reinvested dividends; 
and (4) non-cash compensation provisions regarding the appropriate 
location for training and education meetings. The proposed rule change 
also adds REITs to provisions that already apply to DPPs, but does not 
make any substantive changes to these sections.\12\
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    \11\ The DPPs and REITs that comprise Investment Programs 
typically are structured so that several affiliated entities make up 
the program. The affiliated entities include the sponsor, the trust 
or limited partnership, and a broker-dealer.
    \12\ See proposed amendments to Rule 2810(b)(3)(A), Rule 
2810(b)(4)(A), Rule 2810(b)(4)(B)(v), Rules 2810(b)(4)(D)-(G) and 
Rule 2810(b)(5). The proposed amendment to Rule 2810(b)(4)(G) also 
corrects a typographical error by citing ``subparagraph (C),'' 
instead of ``subparagraph (E)'' under the existing rule.
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III. Summary of Comments Received and FINRA Response

    In Amendment No. 5, FINRA responded to comments on the Revised 
Proposal and proposed additional amendments to the proposed rule 
change.

A. Registered Representatives Engaged in de minimis and Incidental 
Sales Activities

    The proposed amendment to Rule 2810(b)(4)(C)(ii)(c) would exclude 
from the underwriting compensation limit \13\ payments to registered 
representatives, including dual employees, engaged in the solicitation, 
marketing, distribution or sales of the offering whose functions in 
connection with that offering are solely and exclusively clerical and 
ministerial. The IPA suggested that this should be revised to permit a 
de minimis exception for payments to registered representatives whose 
functions are predominantly--i.e., at least 95 percent of the 
employee's time--clerical or ministerial, but who

[[Page 27870]]

on rare occasions may go beyond performing solely clerical and 
ministerial functions, such as answering questions.
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    \13\ The underwriting compensation payable to underwriters, 
broker-dealers, or affiliates may not exceed ten percent of the 
gross proceeds of the offering, regardless of the source from which 
the compensation is derived. See current Rule 2810(b)(4)(B)(i) and 
Notice to Members 82-51. As explained in the Revised Proposal, the 
ten percent figure currently is FINRA policy. The proposed amendment 
to Rule 2810(b)(4)(B)(ii) would expressly state that all items of 
compensation shall not exceed ten percent of the gross proceeds of 
the offering.
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    FINRA stated that the proposed amendment to Rule 
2810(b)(4)(C)(ii)(c)(2) was intended to achieve clarity and ease of 
administration by excluding only those registered representatives whose 
functions are ``solely and exclusively clerical and ministerial.'' In 
response to comments, FINRA has amended proposed Rule 
2810(b)(4)(C)(ii)(c)(3) to include registered representatives engaged 
in sales activities provided those activities are ``de minimis and 
incidental to his or her clerical or ministerial functions.'' However, 
FINRA stated that it did not intend to adopt a particular metric with 
respect to this exception, such as percentage of time spent, as it 
could serve as a tool to evade the purpose and spirit of the rule. 
FINRA stated that it expected the ``de minimis and incidental'' 
exception to be a very narrow one for registered persons whose sales 
activities are truly incidental to their job functions. FINRA noted 
that the exception in the proposed amendment to Rule 2810(b)(4)(D) for 
firms with ``ten or fewer registered representatives'' engaged in 
wholesaling is intended to apply to those firms that are most likely to 
have a need for personnel performing multiple functions.

B. Calculating Items of Underwriting Compensation

    Two commenters stated that proposed amendments to Rules 
2810(b)(4)(C)(ii)(a)-(c) could result in double counting certain items 
for purposes of the underwriting compensation limit.\14\ For example, 
these commenters stated that payments received by a member that would 
be counted as underwriting compensation under the proposed amendment to 
Rule 2810(b)(4)(C)(ii)(a) would have to be counted again for purposes 
of the proposed amendments to Rules 2810(b)(4)(C)(ii)(b)-(c) when the 
member re-allows the payments to its registered representatives.
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    \14\ ABA Committee and IPA.
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    FINRA responded that it did not intend that items of compensation 
already required to be counted under proposed amendments to Rule 
2810(b)(4)(C)(ii)(a) be double-counted for purposes of the underwriting 
compensation limit. In response to these comments, FINRA has revised 
the proposed amendments to Rules 2801(b)(4)(C)(ii)(b)-(c).\15\
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    \15\ The ABA Committee also requested that the language in the 
proposed amendment to Rule 2810(b)(4)(B)(ii) be modified slightly to 
rearrange some commas and clarify that trail commissions are not 
paid with offering proceeds. FINRA has revised the text accordingly.
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C. Allocation of Compensation to Dual Employees in Connection With More 
Than One Offering

    Two commenters addressed proposed guidance with respect to 
allocation of payments to dual employees for purposes of the 
underwriting compensation limit where the dual employees receive 
payments for services in connection with more than one offering.\16\ 
Footnote 36 of the Revised Proposal provided guidance (``Guidance'') 
\17\ that if a dual employee receives compensation for services 
provided in connection with more than one public offering, or for 
private placements in addition to offerings of Investment Programs, 
payments to such employees may be reasonably allocated between the 
offerings based on the time periods in which the employee was engaged 
in the offerings, if they are distinct, or based on the relative size 
of the offerings.
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    \16\ ABA Committee and IPA.
    \17\ The Guidance appeared in the purpose section of the Revised 
Proposal and not the proposed rule text.
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    The ABA Committee and IPA sought clarification as to whether the 
Guidance would apply only to dual employees to whom the exceptions from 
the underwriting compensation set forth in the proposed amendment to 
Rule 2810(b)(4)(D) are available. FINRA responded that its Corporate 
Financing Department (the ``Department'') will allocate compensation 
among multiple offerings with regard to all relevant payments and 
expenses, not just those for dual employees.
    The IPA also stated that the concepts addressed in the Guidance 
should be incorporated into the proposed amendments to Rule 2810 with 
general application to payments to dual employees among multiple 
offerings, not just the exceptions in Proposed Rule 2810(b)(4)(D). The 
ABA Committee suggested that the Guidance should allow the allocation 
of the salary of any registered representative.
    FINRA responded that it will continue its longstanding practice, 
with respect to a registered representative receiving compensation for 
services provided in connection with more than one public offering, or 
for private placements in addition to offerings of Investment Programs, 
of allowing payments to such registered representatives to be allocated 
between the offerings on a reasonable basis taking into account 
relevant factors, including the time periods spent on particular 
offerings, the relative sizes of the offerings and the number of 
investors in each. FINRA noted that, in the course of its review of 
particular offerings, information and representations by members with 
respect to such factors will vary. As a result, FINRA determined not to 
codify these factors and their respective weights in the proposed rule 
change, but rather will continue its current review practices that 
permit reasonable basis allocations.

D. Analysis of Employee Compensation

1. Per Employee Analysis in All Investment Programs
    The proposed amendment to Rule 2810(b)(4)(D) would have excepted 
from the underwriting compensation limit, subject to the Department's 
determination, some portion of the non-transaction-based payments to a 
registered representative dual employee of an Investment Program with 
``fewer than ten people engaged in wholesaling.'' The ABA Committee 
suggested that the exception should instead be available to smaller 
members that have fewer than ten registered representatives engaged in 
wholesaling with respect to an Investment Program in order to avoid the 
inclusion of persons who are not registered in the calculation.\18\
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    \18\ The ABA Committee also stated that the rule should be 
amended to clarify that it applies to a dual employee of a ``member 
and the sponsor, issuer or other affiliate.''
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    The IPA also asked FINRA to clarify the proposed rule to provide 
that in determining whether there are fewer than ten people engaged in 
wholesaling, only those persons engaged in wholesaling for a particular 
Investment Program should be counted, rather than all registered 
representatives who are employed by a sponsor or affiliate and engaged 
in wholesaling some other product of the sponsor or affiliate.
    The Revised Proposal explained that the Department would engage in 
the same detailed job function analysis with respect to certain 
compensation associated with smaller Investment Programs as it would 
with respect to certain compensation of the ten highest paid executives 
in any Investment Program. Accordingly, a member could provide detailed 
per-employee information to the Department from which the Department 
could conclude that certain salary and other non-

[[Page 27871]]

transaction-based compensation provided to the employee could be 
allocated to issuer expenses.
    In response to these comments, FINRA has amended the exception to 
clarify that for every program or REIT filed for review, the Department 
will engage in the detailed per-employee analysis. The proposed 
amendment to Rule 2810(b)(4)(D) would apply to ``ten or fewer 
registered representatives'' engaged in wholesaling if they are dual 
employees in a smaller Investment Program and to the ten highest paid 
executives in any Investment Program.\19\ FINRA also clarified that the 
rule would only apply to ``ten or fewer registered representatives [of 
an Investment Program] engaged in wholesaling.'' FINRA also clarified 
that the rule applied to a dual employee of a ``member and the sponsor, 
issuer or other affiliate.'' \20\
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    \19\ The wholesaling exception discussed in the Revised Proposal 
would have been available to an Investment Program with ``fewer than 
ten people'' engaged in wholesaling. In response to comments, FINRA 
stated that allowing the exception for ``ten or fewer'' registered 
representatives rather than ``fewer than ten'' would be consistent 
with the goal of clarity and ease of administration.
    \20\ Telephone conversation among Gary Goldsholle, Vice 
President and Associate General Counsel, FINRA; Joseph Price, Vice 
President, Corporate Financing, FINRA; Adam Arkel, Assistant General 
Counsel, FINRA; Lourdes Gonzalez, Assistant Chief Counsel--Sales 
Practices, Commission; and Michael Hershaft, Special Counsel, 
Commission (May 7, 2008).
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    The ABA Committee also suggested that the calculation of the number 
of persons engaged in wholesaling should only include those registered 
representatives directly contacting other members to solicit new 
selling agreements with respect to the specific Investment Program. 
FINRA disagreed. As discussed in the Revised Proposal, the Department 
expects to conduct accurate and efficient reviews of the individual's 
job functions to determine whether the exceptions in proposed amendment 
to Rule 2810(b)(4)(D) would be available. FINRA stated that it does not 
believe it is useful or appropriate to conduct a two-step analysis of 
each registered representative's functions (to analyze every registered 
representative's activities to determine whether ten or fewer were 
engaged in wholesaling with regard to a specific Investment Program, 
and then to analyze the job functions of up to ten registered 
representatives to determine what portion of payments to them should be 
included in the underwriting compensation calculation).
2. Top Ten Executives
    The proposed amendment to Rule 2810(b)(4)(D) would except from the 
underwriting compensation limit, subject to the Department's 
determination, some portion of the non-transaction-based payments to a 
registered representative dual employee who is one of the top ten 
highest paid executives based on non-transaction-based compensation in 
any Investment Program. The ABA Committee sought clarification as to 
whether the executives to whom this exception would be available must 
be registered representative dual employees. As discussed above, FINRA 
has amended the exception to make this clarification.
    Two commenters stated that the exception should not require that 
the dual employees must be executives or have executive titles.\21\ 
Further, both commenters suggested that the top-ten calculation should 
be based on non-transaction-based compensation ``in connection with'' 
an Investment Program.\22\
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    \21\ ABA Committee and IPA.
    \22\ Id.
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    FINRA responded that the term ``executive'' is not intended as a 
formal job designation or title, but rather as a characterization of 
the registered representative dual employee's role in the Investment 
Program. As explained in the Revised Proposal, the Department believes 
that it can identify and evaluate a small group of individuals 
performing executive job functions within an Investment Program. 
However, FINRA disagreed with the suggestion of amending the rule to 
base the top ten executive calculation on non-transaction-based 
compensation ``in connection with'' a particular Investment Program. As 
with firms with up to ten registered representatives engaged in 
wholesaling, FINRA does not believe it is useful or appropriate to 
conduct a two-step analysis for each executive (to determine the extent 
to which each executive's compensation varies and is attributable to 
particular programs in order to identify the relevant executives 
eligible for the exception, and then to determine what portion of 
payments to them should be included in the underwriting compensation 
calculation).

E. Issuer Expenses

1. Overhead Expenses
    Both the ABA Committee and the IPA stated that the proposed 
amendment to Rule 2810(b)(4)(C)(i) should be revised to clarify that 
issuer expenses, not just overhead expenses, that are reimbursed or 
paid for with offering proceeds must be included for purposes of the 
cap on organization and offering expenses. FINRA has revised the 
proposed amendment to Rule 2810(b)(4)(C)(i) to make this clarification.
2. Services for the Issuer
    The ABA Committee stated that the proposed amendment to Rule 
2810(b)(4)(C)(i)(c) should clearly specify the scope of services 
provided by employees or agents of the sponsor or issuer that must be 
included for purposes of the cap on organization and offering expenses. 
When proceeds of an offering are used to pay issuer expenses, these 
payments or reimbursements must be identified in filings with the 
Department. FINRA responded that if the rule limited the scope of 
payments that could be made to employees or agents of the sponsor or 
issuer for performing services for the issuer to only those activities 
specifically described in the rule, some otherwise legitimate payments 
or reimbursements using offering proceeds would be prohibited. 
Accordingly, FINRA has not revised the proposed amendments to Rule 
2810(b)(4)(C)(i)(c), other than to clarify that the proposed rule 
refers to services for the issuer.

F. Liquidity and Marketability Disclosure

    The IPA expressed concern that the proposed amendments to Rule 
2810(b)(3)(D) would impose upon members a burdensome due diligence 
review requirement with respect to the liquidity and marketability of 
an Investment Program. In its response, FINRA recognized the burdens 
associated with these requirements, but noted that the proposed 
amendment to Rule 2810(b)(3)(D) is intended to permit members to rely 
upon the liquidity and marketability information as provided to the 
member by the sponsor or general partner of an Investment Program, 
provided that the member does not know or have reason to know that the 
information is inaccurate. Accordingly, FINRA has not revised the 
proposed amendment to Rule 2810(b)(3)(D).

G. Reinvested Dividends

    One commenter expressed concern regarding the prohibition set forth 
in the proposed amendment to Rule 2810(b)(4)(B)(vi) against sales loads 
on reinvested dividends for Investment Programs.\23\ After considering 
the comment, FINRA determined to maintain the prohibition on sales 
loads on reinvested dividends. FINRA emphasized that commenters on the 
Original Proposal supported this

[[Page 27872]]

amendment \24\ and the amendment is intended to conform Rule 2810 to 
similar changes made to Rule 2830 with respect to sales loads on 
reinvested dividends for sales of mutual funds. Further, so as to avoid 
the indirect payment of sales loads on reinvested dividends for 
Investment Programs, FINRA has amended proposed Rule 2810(b)(4)(B)(ii) 
to clarify that the calculation of ``ten percent of the gross proceeds 
of the offering'' excludes securities purchased through the 
reinvestment of dividends.
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    \23\ Lerner.
    \24\ Massachusetts Securities Division and NASAA.
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H. Due Diligence Services

    One commenter sought guidance as to what levels of detail and 
itemization, as required by the proposed amendment to Rule 
2810(b)(4)(B)(vii), would be appropriate for an invoice prepared by a 
law firm conducting on behalf of a member due diligence services that 
are intended to be reimbursed as issuer expenses.\25\ FINRA responded 
that industry best practices may be effective in establishing a 
threshold for itemization rather than additional rulemaking. The 
commenter also sought guidance as to whether it would be permissible 
for the issuer or sponsor to reimburse the law firm directly, so that 
the member need not go through the extra step of first itself paying 
the law firm and then seeking reimbursement from the issuer or 
sponsor.\26\ FINRA responded that a law firm could not provide bona 
fide due diligence in an offering if its client was the issuer or 
sponsor rather than the broker-dealer. The method of reimbursement for 
due diligence services should be irrelevant so long as it does not 
undermine the law firm's duties to its client, the broker-dealer.\27\

IV. Solicitation of Comments
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    \25\ Snyder.
    \26\ Id.
    \27\ FINRA also addressed two other comments. Scillia suggested 
that the five percent limitation on issuer expenses that currently 
exists in NASD Rule 2810 precludes offerings of smaller DPPs. FINRA 
disagreed with this comment. FINRA stated that the five percent 
limitation on issuer expenses pertains to the amount that may be 
used from offering proceeds. An issuer can spend additional funds 
from other sources. Thus, FINRA believes that the sponsor of a 
smaller DPP or REIT can absorb the higher fixed overhead costs owing 
to the small size of the offering. Finally, the five percent 
limitation on issuer expenses in the proposed rule change is not new 
and is consistent with the standards in existing NASD Rule 2810, 
which was approved by the SEC. See e-mail from Gary Goldsholle, Vice 
President and Associate General Counsel, FINRA, to Michael Hershaft, 
Special Counsel, Commission (May 7, 2008).
    With respect to the letter from R.J. O'Brien, FINRA stated that 
the comments were beyond the scope of the filing as the proposed 
rule change does not impose any new requirements with respect to 
commodity pool trail commissions. The issues raised in this letter 
were addressed by the SEC in an approval order issued in a prior 
rulemaking proceeding. See Securities Exchange Act Release No. 50335 
(Sept. 9, 2004), 69 FR 55855 (Sept. 16, 2004) (SR-NASD-2004-136). 
Id.
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    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 5, including whether Amendment No. 5 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASD-2005-114 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2005-114. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of FINRA. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASD-2005-114 and should be 
submitted on or before June 4, 2008.

V. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the provisions of Section 15A(b)(6) of the 
Act,\28\ which require, among other things, that FINRA rules must be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest.\29\ The Commission notes 
that the proposed rule change would codify FINRA's longstanding policy 
of applying certain regulatory requirements in NASD Rule 2810 to REITs.
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    \28\ 15 U.S.C. 78o-3(b)(6).
    \29\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes that clarifying the standards for 
determining the fairness and reasonableness of compensation, treating 
the use and allocation of offering proceeds in a more explicit and 
objective manner, requiring disclosure regarding the liquidity of prior 
programs offered by the same sponsor, prohibiting sales loads on 
reinvested dividends and enabling bona fide training and education 
meetings to take place at appropriate locations, are measures designed 
to prevent fraudulent practices, promote just and equitable principles 
of trade, and protect investors and the public interest.

Accelerated Approval of Amendment No. 5

    The Commission finds good cause for approving Amendment No. 5 to 
the proposed rule change prior to the thirtieth day after the amendment 
is published for comment in the Federal Register pursuant to Section 
19(b)(2) of the Act. Amendment No. 5 clarifies several provisions of 
the proposed rule change, including calculating and allocating 
compensation, requiring issuer compensation to be included in the cap 
on organization and offering expenses, and providing greater 
specificity regarding the prohibition on sales loads on reinvested 
dividends. The Commission believes that these changes will provide 
greater clarity with respect to the applicability of and compliance 
with the proposed rule change, while continuing to protect investors 
and the public interest. Accordingly, the Commission finds that the 
accelerated approval of Amendment No. 5 is appropriate.

[[Page 27873]]

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that the proposed rule change, as amended (SR-NASD-2005-114), 
be, and hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-10704 Filed 5-13-08; 8:45 am]

BILLING CODE 8010-01-P
