NASD Wants to Add Limited Partnerships to Bulletin Board

The National Assn. of Securities Dealers said it plans to list limited partnerships on its electronic bulletin board to increase the amount of price information available on these thinly traded investments.

The OTC Bulletin Board, which is owned and operated by a subsidiary of the NASD, is designed to give price information on stocks too small or illiquid to trade on the Nasdaq Stock Market or any U.S. exchange. It provides more continuous information on small stocks than the “pink sheets,” which are published once a day by the National Quotation Bureau.

More than 360 firms make markets in the more than 4,700 bulletin board stocks. The NASD’s plan to add limited partnerships, which requires approval from the Internal Revenue Service, would make it easier for securities firms to get price information on partnerships.

The NASD hopes to add limited partnerships to the bulletin board by the end of this year. But the timing depends largely on regulatory approvals that are beyond the NASD’s control, said Charles Bennett, director of corporate finance at the self-regulatory organization.

Currently, there is no centralized market for limited partnerships, most of which are organized to invest in oil, gas, real estate or cable television. This makes them difficult to sell or value.

“We don’t believe that investors are in a position to get the best price for their securities,” Bennett said. “It’s a real fragmented market with not a lot of competition.”

The NASD found only about two dozen firms that buy and sell partnership units in the secondary market. Of those, only seven are truly active in the area, Bennett said. By centralizing price information in one place, the NASD hopes to protect investors who need to sell because of a sudden change in personal circumstances.

“It’s really an investor protection question and not an opportunity to build a new marketplace,” Bennett said.

Preserving the tax status of a limited partnership has been the key obstacle to forming an active secondary market for them.