Interpretive Release Registration of Successors to BrokerDealers and Investment Advisers 34-31661, IA-1357

with the CRO if Form BD has already b<~n
filed with the CRD: If not. file with the SEC.
Attach a copy of FOCUS Report Part 0 (or
!'art IIA for non-carrying or non.cJearing
firms) "Statement of Financial Condition"
and "Computation of Net Capital" aecttons.
Finns that are not required to file POCUS
Reports should attach a Statement of 	.
Financial Condition giving the type and
amount of the firm's assets, Ilabllltles, and
net worth. The POCUS Report and Statement
of Flnenclal Condition must reOact the
finances of the F&fIII no earlier than 10 days
before Form DOW is filed.
Non-NASO Members only should lend a
copy of Form BOW and all attachments to the
Office of Fllings, Information, and Couaumer
Services, SEC, 450 5th St., NW., Washington,
DC 20549.
Check with the States where registered for
additional filing requlnJments.
Partial Withdrawal
File Fonn BOW with the CRD. Check with
the States where registered lor additional
filing requlnJments. Amend Form BO and file
with the CRD In accordance with the
Insbuctionl to the bm.
By the Commission.
Dated: Deoember 28,1992.
~ILMcrU'lud,
Deputy Secretary.
IFR Doc. 92-31868 FlIed 12-31-92: 8:45 am)
BILLING COOl! 10100'01"
17 CFR Parts 240, 241 and 276
(Release No. 34-.11661; 1A-1357)
RIN 3235-AE54
58 FR 	7 01104/93
Registration of Successors to Broker
Dealers and Investment Advise...
AGENCY: Securities and Exchange
Commission.
AcnON: Adoption of rule amendments:
interpretive statement.
8l.iMUARY: The Commission is adopting
amendments to the rules under the
Securities Exchange Act of 1934
governing the registration of successors
to registered broker-dealers. The .
Commission also is issuing interpretive
guidance in this release regarding the
registration of successors to broker
dealers and the registration of
successors to investment advisers under
the Investment Advillers Act of 1940.
The amendments and interpretive
statement are intended to clarify which
entities may file as successors to
registered broker-dealers and advisers,
whether such filings should be in the
form of an amendment to the
predecessor's registration statement or
in the form of a new application, and
when such filings must be made.
EFFEcnVE DATES: The rule amendments
will become effective on February. 3,
1993. The interpretive positions become
effective on December 28, 1992.
FOR FURTHER INFQRIlATlON CONTACT:
Robert LD. Colby, Chief Counsel, or
Belinda A. Blaine, Branch Chief, at (202)
504-2418, Office of Chief Counsel.
Division of Market Regulation (with
respect to broker-dealer successors): Eric
C. Freed, Senior Counsel, at (202) 272
2107, Office of Disclosure and
Investment Adviser Regulation. Division
of Investment Management (with
respect to investment adviser
successors): Securities and Exchange
Commission, 450 Fifth Street, NW.,
Washington, OC 20549.
SUPPlEUENTAAY INFORMATION:
I. Background
The Securities Exchange Act of 1934
("Exchange Act") and the Investment
Advisers Act of 1940 ("Advisers Act")
respectively provide for the registration
of "successors" to registered broker
dealers and investment advisers. 1 A
successor is an unregistRl"(ld entity that
assumes and continues the business of
1 SectlGll 15(b)Ul of the Exdwlge Act (15 U.S.c.
78o(bH2)); lfICtloo 203(sl of the AdYilen Act (15 .
U.S.c. 8Ob-3(a)).
8 registered brokAr-clealer or adviser,
which then ceases its broker-dealer or
advisory activities. The purpose of the
statutory provisions is to enable the
successor to operate without an .
interruption of business by relying for a
limited period of time on the .
registration of the predecessor broker
dealer or adviser. The Commission bas
adopted several rules to effectuate the
statutory provisions of the Exchange Act
and the Advisers Act.2
In general, the statutory provisions
and rules provide that a successor may
rely on the registration of the
predecessor until such time as its own
registrationbecomes effective If it files
an application for registration within
thirty days of the succession.3 The
successor rules also provide that, in
certain limited circumstances, the
successor may file an amendment to the
predecessor's registration statement,
instead of an original application for
registration, within the prescribed time
period.4
II. Amendments to Broker-Dealer
~ccessor Rules
The Commission is adopting several
technical amendments to the broker
dealer successor rules under the
Exchange Act in order to address certain
ambiguities in the rules.1I As originally
adoptod, paragraph (a) of rule 15b1-3 8
allowed a broker-dealer that succeeded
to and continued the business of a
registered broker-dealer to operate
2 Rules 15bl-3. 15Ba2-4, 15Ba2~. aDd 15Ca2-3
under the Exchange Act (17 CFR 240.15bl-3,
UBe2-4. 15Ba2~. and 15012-3); role 203-1 under
the Advi-. Act (17 CFR 275.203-1).
• 5.., e.g., paragraph (al of role Isbl-3 under the
Exchange Act: 1MIC1I0n 203(g) of the AdYilen Act.
• See. II.,., paragraph (b) of role 15bl-3 under the
Exchange Act; paragraphs (b). (c) and (d).of role
203-1 under the Advisers Act. 	.
Currently. brolr.er-dealers thIlt 8remembets·of the
Nello ... l AssocIatlon.of Securillea Dealers. IDe.
("NASO") mu.t malr.e all filiiill' with both the
Commluloo and the NASO. 111 a companion release
published today. the CoDlDlwlon announced that It
Is loinina tbe Central Regi.tratlon Deposltory
("CRD"). a computer system operated by the NASD .
that maintalDi regI".ratlon information rwgardIlII
NASO member finDI aDd tlielr registered )llII'ICIIIDa1.
Thus. eIJectlve January 25. 1993. all brolr.er-dea1erI
flllog for succaslon by application (or amendment)
will be required to file with the Commiulon
through the CRD. See Securitlel Exchange Act
Release No. 31680 (Dec. 28. 1992). Inve.tment
advisen will continue to file directly with the
Commission.
S Th_ amendments. u _II u an Interpretl",e
.tatement rep.rdlng the broker-dealer IUCC8IIOI'
rol ... were proposed for public COIDIDentln .
Securltlel Exc:haDge Act Release NO. 30959 Qui)' :7.
1992). 57 FF. 34048. No coJDJil8llt. were submitted
In connection with the proposed 8IIl8I1dmeDts or
the Interpretive .tatement. 	.
• Rule tSbl-3 wu ad.opted In 1985 punuaut to
l8ction 15(bX2XA) of the Exc:banpAct. Seit
Socuritl ... ExdIauIte Act ReI ..... No. 22468
(~tlllDber 28.19851.50 FR41687;
53 SEC DOCKET 0563

1	II
iI
il
"
II
"
II
Ii,I,I
il
II
!\
':1
\1
1 '
I
under the registration of the predecessor
for seventy-five days if, within thirty
days of the succession, it filed its own
application for registration on Fonn
BD.7 Paragraph (b) of the rule permitted
a successor broker-dealer to file an
amendment to the predecessor's Fonn
BD ifthe succession was based on a
change In the date or state of
incorooration, form of organization, or
comp08ition of a partnership.
In addition to minor revisions to the
language of the rule. the amendments
adopted today make two notable
changes. First. paragraph (a) has been
amended to provide that the
predecessor's registration terminatf3S
forty-five days after the date on which
the successor files its own application
for registration on Form BD, rather than
seventy-five days after the date of the
succession.- This amendment is
intended to address situations in which
a successor broker-dealer submits an
application within thirty days of the
succession, but because the application
is incomplete in certain minor respects.
the seventy-five day period expires
before the successor broker-dealer's
registration becomes effective. Under
the modified rule, the forty-five day
period will not begin to run until it
complete application has been filed
with the Commission.·
Second, paragraph (b) of rule 15b1-3
has been revised to clarify that
successors may register by filing an
amendment to the predecessor's Form
BD. rather than a complete application
on Form BD, only in certain limited
circumstances. discussed below in part
m. Rule 15Ca2-\J. which governs the
registration of SUCC8S8Ol'8 to govenunent
securities brokeNlealers, and rules
1511a2-4 and 15Ba2~,10 which govern
the registration of successors to
municipal securities dealers,l1 also have
'17 CFR 249.501.
-Thla 45-day period is conallteal with MCtioD
<t5(b)(l)(B] of the Exci1an@e Act. whtch provides
thaI \h. CommiWOIl baa 45 liaya In which to gr8Dt
f8ldalnldon or 10 institute ~np to determine
If reglstraliOD mould be denied. 	.
In addilloo, u dllCUlled furth. below. die
~rmutt 61. b wlthdrawal from
regiatralloD.
-Por furthar dlacusaioo of die tlmiDI
fllqulremeoll for SUCClIPOI' f11lap. _ dllCllNiOll at
pert m.n. infra. 	.
'0 Rul. 15882-8 aIao hu beea redealpaled u
ruI. lSlJa2,.4(b).
" SpeclfH:a11y. th_ ru1eI permit a IDlIDldpBl
18CUri1i .. d ..l.thaI aucx:eedl \0 m4 coDllDueslbe
buSinest of • regIIllIIed DlUD1cli* IlICUrllles deeler
lo ....y OIl the resiatratiOD 0( the pndeceaor If It
61 .. ut applicallOll c:w UlIIII8Ddmel for
reglalmlion (>Q Porm MSD (17 CI'Il Z41Ul001 (for
a munidpalleCUritl. __ IUIIa • buIr. c:w •
..pantely Id-..Illiable ~M cliYWon of a
benk). orl'orm BJ) (lor .II olber IIWIIklpel
securities dealers).
53 SEC DOCKET 0564
I>-u reviaecl tl) be consistent with
amended rule 15b1-3.
m. Interpretive Position on Broker
Dealer aDd Investment Adviser
Successions
A. GenemJ
As discussed above. the purpose of
the successor rules under both the
Exchange Act and the Advisers Act Is to
facilitate the legitimate tranRfer of
business between two or more entities.12
The successor rules therefore Rre
intended to be used only where there is
a direct and substantial business nexus
between the predecessor and the
successor. They are not designed to
allow registered broker-dealers or
advisers to sell their registrations,
eliminate substantial liabilities, spin off
personnel, or to facilitate the transfer of
the registration of a "shell" organization
that does not conduct any business.13
To ensure that there is a legitimate
connection between the predecessor and
SUCC8SS0r, no entity may rely on the
SUCC8lloSOr rules unless it is acquiring or
assuming substantially all of the assets
and liabilities of the predecessor's
brokeMiealer or advisory business.14
Although under this standard the
successor need not acquire every asset
and liability of the predecessor, it may
not exclude any significant asset or 	.
liability.llI Therefore, an entity that is
U Th •. lolerpreIlY. po.llloas let forth in thla
"""""" apply 10 bolb broker-d.....er. and iDY8llmenl
IdY..... Comp8ftlble Ire&tmeRI afbroktv-deahn
and adylser..... compUaoC8 burd .... 011
regl.1raDta \hal mainIaID dual npatnlloos. Uld
.impUfies the reYiew of regi.lraUoo mat.rial. by
CommluloD ItaIl
U Sea Securitla !lccbeDp As:t R8IMM No.. 2%488
(sept 28. 1985).50 FR 41867.
s, An enllly', statui und8r the IUCC8SI(W ru ....
however. " DOl determfualiY. of whether II will be
held lIabl. for lb. ae:u of III predecessor. See
generaly. lIiccianfltll& Y. ,.W. eonl "Co~ 11118~
19901 Fed. Sec. L Rep. (ecH), 94.7118 Oul, 7,
1989); SecurtIies Ex.chanp Acl RaJ .... No. 25531
(March 30. 1988) (1UCC8IIOT brokar-deaJer held
liabl. for the predecessor'. flUture. prior 10 lb.
,uCC8llloD. to IDIlntaiD Ih. required bal_ af CllIJI
or qualified securitleelD III .-v. 8CCOUDt Iot'lhe
",clUllve benefit of cu.IllIIIlerW); HutllOn 	.
Mana,ement Co .. (nYestln""1 Advlaers Ad Rel No.
1078 (Aug. 17. 1987) (1UCC8IIOT inyeslmeal adril8'
b.ld liabl. for pr&d8C8llOt'. ylDlatioDi of I8ctIoa
10(0 or tbelnYeslm8tlt Company Act of 1940'.
.. The predecesaor'. liablllll ••, for .......pl.. may
include: Cultom. claiou. monies or securilles due
to CUllom.... or other bmker-doalen or advisen.
UDSIIlilfJed judpleD.... and oulSlandlng fee. Ilr
fiDeI. 10 a few Ins..-. the .&alf of the
QlmmiNioD bas BJ8Dled nlHlcUOD r.lIef 10 allow
._lOra to rely 011 mi. 15bl-3 withoul asanmlns
a .pacific uaet or liabllIly of the pred8C8UOf. See.
e.s .. Alpha Manos_ent Inc. (DN:ealber 21, 1989)
'anllabla on LEXlS\ (permlttinll a "'~CCllSlOr broker·
dlllll.r 10 m. UI appllcatioD und .... paragraph (al of
Rul. Ubt-3 wlthoul lICqulrinll the aha.. of a
.ublldlary DolQeaed ID brolr...·dealer.ctlYlllesl:
ami Frurd:Jin PIIIIIUIClaI S.rvIcn, Inc~ 11987-18811
Fed. Sec. L Rep. (<DI) , 78,529 Oul, z. 1.,)
(allowlnlla .UCC8UO' 10 pl'OCAllBd und. par88t'llph
not assuming subslantially all of the
assets and liabilities of its pred9C"..ssar is
not entitled to rely on the successor
rules. and must wait until its own
registration becomes effective before 	.)engaging in business as a broker-dealer
or investment adviser.
Because the successor rules are
intended to allow an unregistered 	<
succ.essor to rely on the registration of
its predecessor for a limited period of
time, they do not apply to
reorganizations that involve only
registered entities. In those situations,
the registered entities need not use the
successor rules because they can
continue to rely on their existing
registrations. For instance, iftwo
registered broker-dealers merge. the
surviving broker-dealer would file an
amendment to its Form BD, while the
acquired brokeMiealer would file to
withdraw its registration on Form
BDW.1& Furthermore. if a person or
entity acquires some or all of the shares
of a registered adviser. or if one
registered adviser purchases or
otherwise assumes part or aU of tho
business assets or personnel of another
registered adviser, there would be no
need to rely on the successor
provisions.17 	.
In addition. the successor rules do not
apply to situations in which the
pred8C8$$OJ' intends lo continue to
80gage in broker-dealer or advisory
. activities. IS Otherwise. confusion may
result as to the identitif3S and
registration statuses of the parties. Thus.
if a registered broker-dealer or adviser
shifts a portion of its business
operations to a new unregistered entity,
(e) wllhoullSlUllliu8 DDkoOWll CGDdDfl8Dl
lJabllllie:r of lb. predecessor. Th. pred_
rep_led thaI it would retaiD adequate fund. In
eacrow 10 m8llt any sueh coutlnll"ftl lIabllltle:r).
'-17 CFR 249.51>1a.
"In the eaae 01 lb. purdsu. of the baaiD_
as.., or penonnel of one f88l.tend adYi_ JJ,
anotber. the purchaslD8 advlaer would ilia ..
ameadment 10 Form AnV It7 CPR 271U) 10 reflect
any chana- In III openltiOlll. whllelhe other
advl_ would m.llilb. Form AnV-W (17 CFR
279.3) or au amendmenl 10 Its Form AD\' •
dependlu8 on whelher 11 remained in Ibo advllory
bu.ln...
or course. Ih«e" poeral.Iy DO dilf8f'8DC81Jl
.u ..... nc. bel_ til. acquisition of au eatity·.
me. and lb. 8CquJslUon of Its UI8U. bul In tha
"tter ca.1he pr __ 01 a _ 	IIltity that wlll-=t
as lbe btokcw·clNleI at adYl_ D8C8II1 ..... reIiMot
on Ih. 'UCC8llOr NI.. Th••uccaslGl rul .. pulI1lel
...1. corporal....... In thi. rvgard, under whl.ch 11
Ia necellU'y 10 incorporale or regI,'.r a new
corporallon. whII. no slmiler aelion I, fIIqldred If
Ih. ownenlUp of an exisliIlB corporalico chaoaes
'"See s.nerally P.W. Home" Co .• Inc. 3lI UC
104 (19&7) (finding that. brolr.er-deeler did not
.ueceed 10 lb. regl 	tlon of anoth. brolr..-deel....
where Ih. llnl brok 	conlinued to exlal u
a COrporal. entity with lb. ability 10 re ......
bualn .... and where the a~ulriD8 broker-d 	.
failed 10 IICqDInt all or the _Is of lb. firat hrok.,,·
deal.rl.

but remains in the broker-dealer or 	the predece88O!' must cease operating as
advisory business, the new entity must 	a broker-deal8l' or adviser.
file a complete application for 	1. Change in FORD ofOrgenization
registration and refrain from doing
business until its application is 	An int8J'Ral corpoNte reorganization
approved by the Commission pursuant 	or restructuring in which broker-dealer
'0. 	to section 15(b)(1) of the EXchange Act 	or advisory activities 8I'Q transferred
or section 203(c)(2) of the Advisers 	from one entity to another within the
Act.1e 	same organization, but that does not
result in a change of control of the
B. Succession by Amendment 	broker-dealer or adviser, would be filed
In limited circumstances, the 	by amendment.23 .
successor rules permit the successor to 	2. Change in Legal Status
file an amendment to the predecessor's
Form BD or Form ADV, rather than its 	A succession resulting from a change
own original application for 	in the state of incorporation or a change
registration. 2o The only successions that 	in the form of business, such as from a
may be completed by filing an 	partnership to a corporation, does not
amendment are those that are the result 	typically involve a change of control.
of a formal change in the structure or 	Therefore. such a succession may
legal status of the broker-dealer or 	generally be completed by amending the
adviser: i.e., successions that involve 	predecessor's Form BD or Form ADV
the creation of a new legal entity, but no 	promptly after the suceession.z4
practical change in the control or 	3. Change in Composition of a
operations of the broker-dealer or 	Partnership
adviser.21 Whether an actual change of A change in the composition of a	control has occurred depends upon the partnership (by death. withdrawal. or	facts and circumstances of the particular inclusion of a partner) that results in the	transaction. For purposes of the dissolution of the partnership under	successor rules, however, the - local law , but does not result in a	presumption of "control" in the change in control of the partnership,	instructions to Form BD and Form ADV would be completed by filing an	offers some guidance. zz amendment to the predecassor's Form	The types of successions that may be BD or Form ADV in order to reflect the	effected by filing an amendment are changes in the partnership.	listed below. In all of these situations,
C. Succession by Application
'"15 U.S.c. 78o(bJ(1), 8Ob-3(c)(2). In addition, In·all other successions, the successor	the resistered broker-dealer or adviser would be
required to promptly file an amendment on Form 	may operate under the registration of
BO or Form AnV to renect any chanses In Its 	. 	the predecessor for a limited period of
operations. Like dual successions. discussed below, 	time only if it files its own complete	this type of reorsanlzation I. cI ...lfied as a ..partial application for registration on Form BD	acquisition" under the CRD system. See n.28, Infro,
and accompanylns text. 	. or Form ADV. The follOWing are
"'See, ~.g., Rule 15bl-3(b) under the Exchanse 	examples of the types of reorganizations
Act, Rule 203-1(bHd) under the Advisers AcL 	that must be completed by filing an
In the cue of a. broker-dealer. the am8Ddment to 	application.211
Form 80 would Include pase 1 (the execution
pase). (Illse 2 (indicatlns that the applicant Is a 10 For example, an unregistered entity that	successor), Schedule 0, and any other pases 8aJulres substantiaily all of the assets and liabilities	contain ins Information that Is no looser accurate as 	of a registered entity owned by the same parent	a result of the chanse in the form of orpnlzatlon 	corporation may file an amendment to Its	of the broker-dealer. See rule 15b3-1(b) (17CFR 	predecessor's registration, provided that It (the	
240.15b3-1(b)) under the Exchanse Act In the case 	survlvlnS entity) continues to be wholly-owned by	of an investment adviser. the amendment to Form 	the parent corporation. In contrast, a corporate	
AnV would Include pase 1. pase 2, Schedule a and 	reorsanlzation Involvlns a chanse of l::)nlrol, such	
any other pages contalnins information required to 	as a chansa In the beneficial owners or the broker	
be updated by rule 204-1(b) (17 CFR 275.204-1(b)) 	dealer or advisory operation, must be filed by	
under the Advisers Act. 	application. as discussed In part m.e, infro.
• , The successor rules provide that a succession 	.. Other chanses In legal status that· may be
that Is hued solely upon certain events. such as a 	completed by l11111ll an amendment Include: (II A
chanse In form of orsanlzatlon. may be effected by 	chanse &om seneral corporation to 5 corporation
amendment. See, 8.g .• rule 15bl-3(b) under the 	status under subchapter 5 of the Internal Revenue
Exchanse Act (as amended); Rule 203-1(d) under 	Code of 1988. as amended: end (II) a chanse In a
the Advisers Act. A succession that Involves a 	reslatered enllty's name that resulll In the
change in control Is not hued solely upon an event 	dissolution of the entity under loca1law. If a name
enum8l1lted In the rules. and therefore cannot be 	chanse does not alter the entity's leplstatus.
effected by amendm8Dt. 	however, the successor rules do not apply. Instead•
•• Under the Advisera Act, a chanse of control of 	the reslstered entity would be required to promptly
an adviser resulllin the ..... IBJ1IIIent .. of Its 	file an amendment to Form BO or Form AOV to
advisory contracts. Rule 202(a)(l}-1 under the 	refiect Its new name. See rule 15b3-1(b) under the
Advisers Act (17 cFR 275.202(a)(l}-t). The adviser 	Exchansa Act; rule 204-1(b) under the Advisers
" Act. 	. 	.	must obtain client consent to the ...Isnment under
section 205(a)(2) of the Advisers Act (15 U.s.c. 	I. Unless otherwise Indicated, the titles below
8Ob-5(a)(2)). 	correspond to the clasaificatloo or the succession
1. Acquisitions
In a typical succession, an
unregistered entity purchases or
assumes substantially all of the assets
and liabilities of a registered broker
dealer or adviser, and the unregistered
entity then operates the business of the
broker-dealer or adviser.28 Under the
successor rules, the new entity must file
a complete application within thirty
days of the succession. while the
predecessor must file for withdrawal
from registration on Form BOWar Form
ADV-W.27
2. Consolidations
If two or more registered entities
consolidate their firms and conduct
their business through a new
unregistered entity, which assumes
substantially ali of the assets and
liabilities of the predecessor entities, the
new entity would be required to file a
complete application on Form BD or
Foi'm ADV, while the predecessor firms
would each be required to file for
withdrawal from registration on the
appropriate form.
3. Dual Successions 28
Succesions in which one registered
entity subdivides its business into two
or more new unregistered entities are
known as "dual successions," and may
be effected by application under the
successor rules. A dual succesJion may
occur, for instance, when a cl~ng
broker-dealer decides to separate its
own retail broker functions from its
clearing broker functions by oreating
two new entities. In that case, the
successors in combination must acquire
substantially all of the assets and
liabilities of the predecessor, Each
successor must then file a complete
application on Form BD within thirty
days olthe succession, while the
predecessor broker-dealer must file an
application for withdrawal on Form
BDW.z9
under the CRD's "mass transfer" prosram. which
detennloes whether registered representatives of a
broker-dealer may have their registrations
transferred to another entity •
•• However, If no chanse In control occurs in
connection with the transaction (e.g .• the beneficial
owners of the adviser or broker-dealer remain the
same). the succession could be effected by filillll an
amendment. See part 111.B. supra.
175ee nale 15b6-1 under the Exchang41 Act(17
CFR 240.15btl-l); rulo 203-2 under the Advisors
Act (17 CFR 275.;;'03-21.
•• Under the CRD's mass transfer program, this
type of reorsanlzatlon Is classified as a "pertlai
8aJuisltlon.'·
... Both successors In a dual succltSSion must file
orisInal applications for resistration. J'llllIU'dlltSS of
whether there Is a chanse in control of the broker
dealer or advisory operation.
53 SEC DOCKET 0565

4. Division of Dual Registrants 30 	IV. Effects on Competition and 	PART 24o-GENERAL RULES AND
For business reasons, an entity
registered as both an investment adviser
and as a broker-dealer may wish to
~parate its services by transferring
etther the brok.er-dealeror advisory
activities to a new unregistered entity. If
that unregistered entity acquires 	.
substantially all of the assets and
liabilities of the broker-dealer or
advisory operation or division, and
there is a change of control of that
operation or division, the unregistered
entity would be a successor required to
file by application. 31
D. Timing Requirements
In order to temporarily rely on its
predecessor's registration, a successor
must file the required application or
amendment within thirty days of the
succession.32 Occasionally, situations
arise in which a successor broker-dealer
or adviser submits an application within
thirty days of the succession. but
beca~se ~e application is incomplete in
certam mmor respects, the aprlication
is not considered "filed" unti after the
thirty-day period has expired.33
Notwithstanding the fact that the filing
requirements technically have not been
met. the Commission would pennit a
successor that submits a substantially
complete application or amendment
within thirty days of the succession to	': rely on its predecessor's registration
under the successor rules. A successor
entity, however, will not be permitted to
"lock in" the thirty-day window period
by submitting an application that is
incomplete in major respects. or by
otherwise failing to file an application
that represents a good faith attempt at
compliance with the successor rules."
3"ln the case oC a division 01 dual registreIWI. the
CRD calesorY will be based 011 the type 01 broker
dealer reorganization.
31 The predecessor also would be required 10 file
Fonn BOW or ADV-W. See. 8.B .• Alpha
Manasement Inc. (December 21. 1989) (a\'llilable on
LEXIS).
,. Rule 15bl-3 under Ihe Exchange Act; I8ctlon
203(g) oC the Advilen Act
33 Rule 0-3 under the Exchange Acl (t 7 CFR
240.0-3) provides that a report or application is not
"riled" Cor purposes oC the Act until It fully
complies witb all oC Ihe requlremanl' of the
applicable rule or provi,lon oC the statute. While .
there Is no comparable rule under the Advtsera Act.
Ibe Commission likewise does nol consider
incomplele documents 10 be "filed" under the
Advisers Act.
,. As disculsed above. the Commission II
amending paragraph (a) oC rule 15b1.,.3 under the
ExchanGe Acllo provide that the regl.lnlt1on 01 a
predecessor broker-dealer ceases 10 be effective 81
the registration oC the successor broker-4ealer Corty
fi ve days aIIer the application Cor regilltration on
Fonn BO is filed by !he .ucceuot'. rather than
.....enty-five days aIler the 'UCC8IIloo. Thenfore.
because Ihe Commission mUll act on app/lcallons
Cor registratlon within forty-five day. (see nole 8.
53 SEC DOCKET 0566
Regulatory Flexibility Act
Considerations
Section 23(a)(2) of the Exchange
Act 35 requires the Commission, in
adopting rules under the Ex~ange Act,
to consider the anticompetitive effects
of such rules. if any. and to balance any
anticompetitive bripact against the
regulatory benefits gained in tenns of
furthering the purposes of the Exchange
Act. The Commission believes that the
clarifying amendments to the broker
dealer successor rules will not result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Ad..
In addition. the Commission has
prepared a Final Regulatory Flexibility
Analysis ("FRFA") pursuant to the
requirements of the Regulatory
Flexibility Act.311 regarding the revisions
to the rules. A copy of the FRFA may
be obtained from Belinda Blaine Branch
Chief, Office of Chief Counsel. Division
of Marat Regulation. Securities and·
Exchange Commission. 450 Fifth Street
NW .• Washington. OC 20549.· 	,
List of Subjects
17 CFR. Parts 240 and 241
Registration of brokers and dealers
Registration of government securitie~
brokers and government securities
dealers. Registration of non-bank
municipal securities dealers; Reporting
and recordkeeping requirements.
Securities. Broker-Dealers.
17 CFR'Part 276
Investment advisers. Reporting and
recordkeeping requirements, Securities.
Stalutory Basis and Text of Proposed
Amendments
In accordance with the foregoing. title
17. chapter n of the Code of Federal
Regulations is amended as follows:
supro}. the registration oC the predecessor will not
expire during the period lhat the successor needs
10 rely on .uch registration. Neither the Advisers
Act nor the roles thereunder specify when the
regatnllion of the predecauor expires. However.
. Form ADV-W musl be filed 10 withdraw the
r8llislration oCthe predeceuor. aDd Form ADV-W
oocomes effective on the 60th day aIIer liling. See
Rule 203-2(b} lmder Ihe Advisers Act. ThereCore.
the predllQlSllOr'. recisiratlon wlllexpire only aIler
the successor has established III own registration.
which. 81 under the Exchange Act, wlll occur
within Corty-five days after the filing oC Ibe
.UCC8UOr application. See soction 203(cK2) or Ihe
Advisers Act (15 U.s.c. 8Ob-3(c)(2» .
'"15 U.S.c. 78w(a)(2).
•• S U.S.c. 603.
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
. 	1. The authority citation for part 240
continues to read as follows:
Authority: lS U.S.C. 77c. 77d. 77g. 77}.
77s. 77eee. 77888. 77nnn. 77sSa. 77Ut. 78c,
78d, 781, 781; 781. 78m, 78n. 780. 78p. 785.
78w. 78x, 7811(d). 79q. 79t. 80a-20. 808-23.
80a-29. 80a-37, 8Ob-3, BOb-4, and BOb-tt.
unless otherwise noted.
2. By revising § 240.25bl-3 to read as
follows:
§240.15b1-3 	~l$tRdIon of HCC8HOI' to
,~broker Of' .....
(a) In the event that a broker or dealer
sucoeeds to and continues the business
Qf a broker or dealer registered pursuant
to section 15(b) of the Act. the
registration of th!t predecessor shall be
deemed to remaili effectIve as the
registration of the succeSsor if the
successor. within 30 days after such
succession. files an application for
registration on Fonn BD, and the
predecessor files a notice of withdrawal
from .registration on Form BDW;
ProVIded. however. That the registration
of the predecessor broker or dealer will
cease to be effective as the registration
of the successor broker or dealer 45 days
after the application for registration on
Form BD is filed by such successor.
(b) Notwithstanding paragraph (a) of
this section, if a broker or dealer
succeeds to and continues the business
of a registered predecessor broker or
dealer. and the s\.ccession is based
solely on a change in the predecessor's
date or state of incorporation, form of
organization, or composition of a
partnership, the successor may, within
30 days after the succession. amend the
registration of the predecessor broker or
dealer on Form BD to reflect these
changes. This amendment sholl be
deemed an application for registration
filed by the predecessor and adopted by
the successor.
3. By revising § 240.15Ba2-4 to read
as follows: .§ 240.15882..... 	Registration of IUC:cessor
to reglltered municipal securltles dealer.
(a) !n the event that a municipal
securIties dealer succeeds to and
continues the business of a registered
municipal securities dealer, the
registration of the predecessor shall b8
deemed to remain effective as the
registration of the successor if the
successor. within 30 days after such
succession. files an application for
registration on Form MSD, in the case
of a municipal securities dealer that i&
Q bonk or a separately identifiable
department or division ora bank. or
•

T Form BD, in the case ofany other
municipal securities dealer, and the
predecessor files a notice of withdrawal
from registration on Form MSDW or
Ferm BDW, as the case may be;
Provided, however, That the registration
of the predecessor dealer will cease to
be effective as the registration of the
successor dealer 4S days after·the
application for registration on Form
MSD or Form BD is filed by such
successor.
(b) Notwithstanding paragraph (a) of
this section. if a municipal securities
dealer succeeds to and continues the
business of a registered predecessor
. municipal securities dealer, and the
succession is based solely on a change
in the predecessor's date or state of
incorporation, form of organization. or
composition of a partnership, the
successor may. within 30 days after the
succession, amend the registration of
the predecessor dealer on Form MSD, in
the case of a predecessor municipal
securities dealer that is a bank or a
separately identifiable department or
division of a bank, or on Form BD, in
the case of any other municipal
securities dealer. to reflect these
changes. This amendment shall be
deemed an application for registration
filed by the predecessor and adopted by
the successor.
• 240.15882-6 [Removed end reatII'ftd)
4. By removing and reserving
§ 240. 15B82-6.
5. By revising §240.15Ca2-3 to read
as follows:
t 24O.15Ca2-3 	Regi8tn1t1on of IUCCHlor
to reolltered government MCUrIIIM broker
or government MCurItIM cIeII .....
(a) In the event that a government
securities broker or government
securities dealer succeeds to and
continues the business of a govemment
securities broker or govemment
securities dealer registered pursuant to
section 15C(a)(l)(A) of the Act. the
registration of the predecessor shall be
deemed to remain effective as the
registration of the successor if the
successor, within 30 days after such
succession, files an application for
registration on Form BD, and the
predecessor files a notice of withdrawal
from registratipn on Form BDW; .
Provided, however, That the registration
of the predecessor government
securities broker or government
securities dealer will cease to be
effective as the registration of the
successor government securities broker
or government securities dealer 45 days
after the application for registration on
Form BD is filed by such successor.
(b) Notwithstanding paragraph (a) of
this section, if a government securities
broker or government securities dealer
succeeds to and continues the business
of a predecessor government s.ecurities
broker" or government securities dealer
that is registered pUrsuant to section
15C(a)(l)(A) of the Act. and the
succession is based solely on a change
in the predecessor's date or state of
incorporation. fonn of organization. or
composition of a partnership, th"
successor may. within 30 days aft4trthe
succession. amend the regisb'atiOll of
the predecessor b_er or dealer. On 	.
Form BD to reflect these ch~. Thill
amendment shan be deemed. 1m
application for registration filed by the
predecessor and adopted by the
successor.
PART 241-1NTERPRE'tIVERasASE!
RELATING TO THE SECURITt£S
EXCHANGE ACT OF 1934 AND
GENERAL RULES AND R£GUl.AnONS
THEREUNDER
Part 241 is amended by adding this
- Interpretive Release [Releal!8 No. 34
31661) to the lists of Interpretive
Releases.
[Rei•••• No. 34-31662; File No. SR-NASD
92-40) 	/
58 FR 	3'10 01/05193
S4t1f-Regulak>ry OrganlZ8tlon~; Order
Appro¥Jng Proposed Rule Change by
National Aaactatlon of securities
~mc.fletatlng to "the Payment
of~. or Anyihfng of Value by
Membereto Others
December 28,1992.
On November 2, 1992 the National
Association of Securities Dealers, Inc.
("NASO'i or "Association") filed with
the Securities and Exchange
Commission ("SeC" or "Commission")
pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
("Act"),1 and Rule 1~b-4 thereunder,2 a
proposed rule change consisting of
PART 276--1NTERPRmve RELEASES amendments to A~icle II~, Section 10(a)
RELATING TO THE INVESTMENT 	. 	of the Rules of Fau Practice.
The proposed rule change was
ADVISERS ACT OF 1940 AND
GENERAL RULES AND REGULATIONS
THEREUNDER
Part 276 is amended by adding this
Interpretive Release [Release No. IA
1357] to the list. of Interpretive
Releases.
Dated: December 28, 1992.
By the Commission.
MUBaret H. Md'arland,
Deputy Secretary.
'
IFR Doc. 92-31867 Flied 12-31-92; 8:45 am)
8IWNQ CODE .,0-01....
published for comment in Securities'
Exchange Act Release No. 31486
(November 19,1992),57 FR 55607
(November 25, 1992). No comments
were received.
Article III, Section 10(a) of the
NASD's. Rules of Fair Practice currently
sets a limit of $50 per person per year
for the payment of anything of value,
including gifts and gratuities, by a
member or associated person of a
member to another person where the
payment is in relation to the business of
the employer of the person receiving the
payment or gratuity. The rule protects
against improprieties which might ori.se
in connection with the giving by
members or associated persons of
substantial gifts or monetary payments
to certain persons without their
employer's ·knowledge.
Prior to 1969, Section 10 completely
prohibited the payment of gratUities or
anything of value to employees of
others. The current $50 limitation was
increased from $25 in 1984.3 Because of
the amount of time that has elapsed
since the dollar limitation was last
adjusted, the NASD is proposing to
increase the dollar limitation .for the
payment of gratuities or anything of
value to $100 per person per y.ear.
'15 U.S.C. 78s(b}(1),(1OO1l}.
"17 CFR 240.19b-4 (1992).
S See Securities Exchange Acl Release No. 21074
(June 20, 1OO4), 49 FR 26330 (fune 26, 1984).
53 SEC DOCKET 0567