[Federal Register Volume 61, Number 19 (Monday, January 29, 1996)]
[Notices]
[Pages 2848-2850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1565]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36755; File No. SR-Amex-95-46]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to the
Exchange's Arbitration Rules
January 22, 1996.
On November 28, 1995, the American Stock Exchange, Inc. (``Amex''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to modify its arbitration rules concerning class
action claims, the initiation of a claim, document exchanges, filing
fees, and the enforceability of arbitration awards.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on December 14, 1995.\3\ No comments were received on the
proposal. This order approves the proposal.
\3\ Securities Exchange Act Release No. 36566 (Dec. 8, 1995), 60
FR 64191.
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As described more fully below, the Exchange has proposed amendments
to its arbitration procedures that were developed primarily by the
Securities Industry Conference on Arbitration.\4\
\4\ Amex Rule 600(d)(iii) corresponds to Securities Industry
Conference on Arbitration Uniform Code of Arbitration (``SICA UCA'')
Section 1(d) (iii) (as amended Jan. 20, 1994); Amex Rule 607(c)
corresponds to SICA UCA Section 20(c) (as amended Jan. 7, 1993 and
Oct. 21, 1994); Amex Rule 620(e) corresponds to SICA UCA Section
30(e) (as amended Oct. 21, 1994).
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The Commission has carefully reviewed the Exchange's proposal to
amend Amex Rules 600 (Arbitration), 606 (Initiation of Proceedings),
607 (General Provision Governing Prehearing Proceeding), 620 (Schedule
of Fees), and add a new rule, 624 (Failure to Honor Award). The
Commission concludes that this proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange, and, in particular, with
the requirements of Section 6(b).\5\
\5\ 15 U.S.C. 78f(b).
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Amex Rule 600(d)(iii) currently bars members, allied members,
member organizations, and associated persons from seeking to enforce an
agreement to arbitrate against a customer where that customer has
initiated in court a putative class action or is a member of a putative
or certified class with respect to any claims encompassed by the class
action. Amex Rule 600, however, currently omits specific reference to
claims filed by members, allied members, member organizations, and
associated persons against other members, allied members, member
organizations, and associated persons. The proposed amendment clarifies
that all class actions, including claims involving members, allied
members, member organizations, and associated persons, are ineligible
for submission to the Exchange's arbitration facility.
The Commission finds that the proposed amendment to Amex Rule
600(d)(iii) is consistent with Section 6(b)(5) \6\ because it is
designed to promote just and equitable principles of trade, prevent
unfair discrimination between customers, issuers, brokers, or dealers,
and, in general, protect investors and the public interest. Over the
years, the courts have developed procedures and expertise for managing
class action litigation, and, therefore, duplicating the often complex
procedural safeguards necessary for these lawsuits is unnecessary. In
addition, access to the courts for class action litigation should be
preserved for claims filed by members, allied members, member
organizations, and associated persons against other members, allied
members, member organizations, and associated persons as well as for
claims involving investors. Hence, this rule change should provide a
sound procedure for the management of class action disputes, should
promote the efficient resolution of these types of class action
disputes, and should prevent wasteful litigation over the possible
applicability of agreements to arbitrate between members, allied
members, member organizations, and associated persons, notwithstanding
the exclusion of class action claims from Amex arbitration.
\6\ 15 U.S.C. 78f(b)(5).
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Currently, Amex Rule 606(c)(6) provides that decisions concerning
the right to arbitrate are made by the Director of Arbitration, subject
to appeal to the Exchange's Board of Governors. In order to conform the
Exchange's rules to the Uniform Code of Arbitration, the Exchange
proposes to delete Amex Rule 606(c)(6). The Exchange believes decisions
concerning the right to arbitrate a claim should be made by the panel
of arbitrators selected to hear the matter, instead of the Director of
Arbitration.
The Commission finds that the proposed deletion of Amex Rule
606(c)(6) is consistent with Section 6(b)(5) because it is designed to
prevent unfair discrimination between customers, issuers, brokers, or
dealers and, in general, protect investors and the public interest.
Impartiality is an important aspect of the arbitration process. By
allowing a panel of arbitrators to make the determination of whether or
not a claim may be submitted to the Exchange's arbitration facility,
the proposed rule change should further improve the arbitration
process's appearance of impartiality.
Amex Rule 607(c) currently requires all parties to serve on each
other copies of documents in their possession that they intend to
present at the hearing and to identify witnesses they intend to present
at the hearing not less than ten calendar days prior to the first
scheduled hearing date. The Exchange proposes to amend this rule to
allow parties to: (1) Provide a list of documents that have been
produced previously to the other side, instead of providing the actual
documents; (2) require the list identifying witnesses to include the
address and business affiliation of the witnesses listed; and (3)
require prehearing exchanges of documents and the list of documents
previously produced to occur twenty days in advance of the hearing,
instead of ten days as is presently required.
The Commission finds that the proposed amendments to Amex Rule
607(c) are consistent with Section 6(b)(5) because they are designed to
promote just and equitable principles of trade, prevent unfair
discrimination between customers, issuers, brokers, or dealers, and, in
general, protect investors and the public interest.\7\ The proposed
amendments should increase the efficiency of the arbitration process
because they: (1) Eliminate duplicative prehearing document exchange;
(2) should assist parties in the process of preparing and organizing
their cases by providing them with advance notice regarding the
background of witnesses and the location of nonparty witnesses; (3)
should reduce the number of instances of surprise; and (4) should
provide the parties with a more reasonable time frame in which to
address last minute discovery requests.
\7\ 15 U.S.C. 78f(b)(5).
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Amex Rule 620(e) presently provides that the nonrefundable filing
fee for a dispute that does not specify a money claim is $250, while
Amex Rule 620(i) charges industry parties a $500 nonrefundable filing
fee when the dispute does state a money claim. The proposed amendment
to Amex Rule
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620(e) would unify the nonrefundable filing fee for all industry claims
at $500.
The Commission finds that this proposed amendment is consistent
with Section 6(b)(4) \8\ because it provides for the equitable
allocation of reasonable fees among its members and other persons using
its facilities. Moreover, a uniform filing fee removes any temptation
for industry parties to purposely omit the monetary amount of their
claims in order to reduce the nonrefundable filing fee from $500 to
$250.\9\
\8\ 15 U.S.C. 78f(b)(4).
\9\ See Securities Exchange Act Release No. 35167 (Dec. 28,
1994), 60 FR 1816 (approving File No. SR-NASD-94-75 and publishing
the NASD's determination that there have been situations in which
industry parties have purposely not disclosed the monetary amount of
their claim in order to reduce the nonrefundable filing fee from
$500 to $250).
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The Exchange is proposing to add a new rule, Amex Rule 624. This
new rule would provide that the failure of a member firm or registered
representative to honor an arbitration award, including those issued at
another self-regulatory organization or by the American Arbitration
Association, would subject the firm or registered representative to
disciplinary proceedings at the Exchange.
The Commission finds that the addition of proposed Amex Rule 624 to
the Exchange's arbitration rules is consistent with Section 6(b)(6)
\10\ because it provides for appropriate disciplinary action for
violating the provisions of the Act, the rules and regulations
thereunder, or the rules of the Exchange. By establishing the
enforceability of arbitration awards, this proposal should increase the
effectiveness of the arbitration process.
\10\ 15 U.S.C. 78f(b)(6).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-Amex-95-46) is approved.
\11\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-1565 Filed 1-26-96; 8:45 am]
BILLING CODE 8010-01-M
