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Name Not Public

July 31, 1997

Counsel for Firm X

RE: Firm X MSRB Rule G-37 Request

Dear A:

The Fixed Income Committee (Committee) of NASD Regulation, Inc. (NASD Regulation) has reviewed your request on behalf of Firm X for exemption from the two-year business prohibition of Municipal Securities Rulemaking Board (MSRB) Rule G-37. The Committee has determined, based on the unique and unusual circumstances of this case, to grant Firm X a conditional exemption consisting of a reduced prohibition period ending on November 1, 1997.

In reviewing the facts of Firm X's request, the Committee found that the placement of C on the firm's Executive Committee did trigger the two-year prohibition under Rule G-37 for Firm X in State Y.

To determine the appropriateness of granting a conditional or unconditional exemption under the circumstances at issue, the Committee considered the five factors required to be considered under paragraph (i) of the Rule, and in particular, the first factor, i.e., whether an exemption under the circumstances would be consistent with the public interest, the protection of investors and the purposes of the Rule.

Upon review, the Committee determined that the dealer had: (1) developed and instituted procedures reasonably designed to ensure compliance with the rule; (2) had no actual knowledge of the contribution prior to or at the time of the contribution; (3) had taken all available steps to cause the person involved in making the contribution to obtain a return of the contribution; and (4) had taken such other remedial or preventative measures as were appropriate under the circumstances. The Committee further noted that the two-year prohibition did not occur from a lack of knowledge of the Rule by the persons responsible for examining the acquisition of the acquired company, but from a lack of communication to such persons regarding the intent to place the CEO on the Executive Committee.

The Committee determined, that in light of the unusual circumstances, prohibiting the dealer from conducting business in the state in question for one year would constitute a significant penalty that would discourage similar occurrences by the dealer and other dealers.

The Committee noted, however, that the conditional exemption was based on unique and unusual circumstances, including the circumstances surrounding the acquisition and placement of the CEO on the dealer's Executive Committee. This decision should not be construed to mean that a conditional exemption will be granted in future requests if the event which causes the two-year prohibition was inadvertent.

If you have any questions, please contact John H. Pilcher at (202) 728-8287.

Very truly yours,

Alden S. Adkins
Vice President and General Counsel

cc: B, Vice President and General Counsel, Firm X
Christopher A. Taylor, MSRB