[Federal Register Volume 61, Number 220 (Wednesday, November 13, 1996)]
[Notices]
[Pages 58272-58274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29039]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37923; File No. SR-PSE-96-39]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Stock Exchange,
Incorporated Relating to Amending the Minor Rule Plan and the
Recommended Fine Schedule
November 6, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October
10, 1996, the Pacific Stock Exchange Incorporated (``PSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the self-regulatory
organization. The Exchange has designated the proposed rule change as
constituting a ``non-controversial'' rule change under paragraph (e)(6)
of Rule 19b-4 under the Act which renders the proposal effective upon
receipt of this filing by the Commission.\1\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ The PSE has represented that this proposed rule change: (i)
will not significantly affect the protection of investors or the
public interest; (ii) will not impose any significant burden on
competition, and (iii) will not become operative for 30 days after
the date of this filing. The PSE also has provided at least five
business days notice to the Commission of its intent to file this
proposed rule change, as required by Rule 19b-4(e)(6) under the Act.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend its Minor Rule Plan (``MRP'') to
add certain rules for which violations may be adjudicated pursuant to
Rule 10.13, and to amend its Recommended Fine Schedule to establish
recommended fines for violations of those rules and to increase the
recommended fines for certain rules violations already subject to the
MRP.
[[Page 58273]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in sections A, B and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend its MRP,\2\ which provides that
the Exchange may impose a fine not to exceed $5,000 on any member,
member organization, or person associated with a member organization,
for any violation of an Exchange rule that has been deemed to be minor
in nature and approved by the Commission for inclusion in the MRP. PSE
Rule 10.13, subsections (h)-(j), sets forth the specific Exchange rules
deemed to be minor in nature.
---------------------------------------------------------------------------
\2\ Rule 19d-1(c)(2) under the Act authorizes national
securities exchanges to adopt minor rule violation plans for the
summary discipline and abbreviated reporting of minor rule
violations by exchange members and member organizations. See
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR
23828 (June 8, 1984) (order approving amendments to paragraph (c)(2)
of Rule 19d-1 under the Act). The PSE's MRP was approved by the
Commission in 1985. See Securities Exchange Act Release No. 22654
(November 21, 1985), 50 FR 48853 (November 27, 1985) (order
approving File No. SR-PSE-85-24). In 1993, the Exchange amended its
MRP and adopted detailed procedures relating to the adjudication of
minor rule violations. See Securities Exchange Act Release No. 32510
(June 24, 1993), 58 FR 35491 (July 1, 1993). Thereafter, the
Exchange has modified its MRP several times. See Securities Exchange
Act Release Nos. 34322 (July 6, 1994), 59 FR 35958 (July 14, 1994);
35144 (December 23, 1994), 59 FR 67743 (December 30, 1994); and
36622 (December 21, 1995), 60 FR 67384 (December 29, 1995). The
Exchange currently has pending before the Commission a proposal to
provide PSE staff with the authority to make findings of rule
violations and to impose fines for violations of rules contained in
the Exchange's MRP. See Securities Exchange Act Release No. 37592
(August 21, 1996), 61 FR 45468 (August 29, 1996) (File No. SR-PSE-
96-26). See also Securities Exchange Act Release No. 37799 (October
9, 1996) (File No. SR-PSE-96-30).
---------------------------------------------------------------------------
Options Floor Rule Violations
The Exchange is proposing to add the following Options Floor
Decorum and Minor Trading Rule Violations to the MRP: (1) Failure to
obtain Exchange approval for Member or Member Firm electronic devices
or systems used for trading purposes on the Exchange Floor (with
recommended fines of $250, $750 and $1,500 for first, second and third
violations);\3\ (2) Failure to answer a Trading Crowd/LMM Questionnaire
as required (Option Floor Procedure Advices (``OFPA'') B-13(c)) (with
recommended fines of $250, $500 and $750 for first, second and third
violations); (3) Violations of rules on visitors to the Options Floor
(Rule 6.2(a) and OFPA F-2) (with recommended fines of $250, $500 and
$1,000 for first, second and third violations); and (4) Misuse of
Member badge or Member Firm identification (OFPA F-1) (with recommended
fines of $250, $500 and $1,000 for first, second and third violations).
---------------------------------------------------------------------------
\3\ Cf. Amex Rule 590(h)(14). The PSE has informed the
Commission that misuse of electronic devices by Exchange members,
which was previously covered by Rule 10.13(h)(12), will be covered
by the new rule violation added to the MRP under Rule 10.13(h)(13),
``Failure to obtain Exchange approval for Member or Member Firm
electronic devices or systems used for trading purposes on the
Exchange floor.'' The new Rule cover misuses of devices because,
pursuant to the Rule, the Exchange grants approval for classes of
uses of such devices or systems for member use and provides members
with notice of the approved uses of such devices or systems,
rendering any other uses not approved as unauthorized ones.
Telephone conversation between Michael Pierson, Senior Attorney,
PSE, and Heather Seidel, Attorney, SEC, dated October 28, 1996.
---------------------------------------------------------------------------
The Exchange is also proposing to increase the recommended fines
for the following rule violations, which are already included in the
MRP: (1) increases for second and third violations of Rule 6.35,
Commentary .03 (Failure to meet 75% Primary Appointment Zone
Requirement) from $750 and $1,250 to $1,000 and $2,500; and (2)
increases for second and third violations of Rule 6.37, Commentary .07
(Failure to meet 60% In-Person Trading Requirement) from $750 and
$1,250 to $1,000 and $2,500.
Equity Floor Rule Violations
The Exchange is proposing to add the following Equity Floor Decorum
and Minor Trading Rule Violation to the MRP: Failure to Clear the Post
Properly (Rules 5.16 and Equity Floor Procedure Advice (``EFPA'') 1-B)
(with an Official Warning and fines of $250 and $500 for first, second
and third violations).
The Exchange is also proposing to increase the recommended fines
for the following rule violations, which are already included in the
MRP: (1) increases for first and second violations of the rule on
Equity Floor Decorum (EFPA 1-A) from $25 and $100 to $100 and $250; (2)
increases for second and third violations of the rule on Conduct of
Members on the Equity Floor (EFPA 1-B and Rules 5.1(g) and 5.1(h)) from
$100 and $250 to $250 and $500; (3) increases for second and third
violations of the rule on Conduct of Guests (EFPA 1-B) from $50 and
$100 to $250 and $500; (4) increases for second and third violations of
the rule on Proper Reporting of Transactions Executed at the Exchange
(EFPA 2-C and Rules 5.12 and 5.13) from $25 and $50 to $250 and $500;
and (5) increases for first, second and third violations of the rule on
Staffing at the Specialist Post (prior to the opening) (Rule 5.28 (c)-
(d)) from $25, $50 and $100 to $100, $250 and $500.
Other Minor Rule Violations
The Exchange is proposing to increase the recommended fines for
violations of the following rules, which are already included in the
MRP: (1) increases for first, second and third violations of the rule
on submitting trade data to the Exchange in a timely manner (Rule
10.2(c)) from $100, $200 and $500 to $250, $500 and $750); (2)
increases for first, second and third violations of the rule on
furnishing in a timely manner books, records or other requested
information or testimony in connection with an examination of financial
responsibility and/or operational conditions (Rule 2.12(c)) from $100,
$250 and $500 to $250, $500 and $750; (3) increases for first, second
and third violations of the rule on notifying the Exchange of a change
of address where notices may be served (Rule 1.13) from $100, $250 and
$500 to $250, $500 and $750; (4) increases for first, second and third
violations of the rule on filing financial reports or financial
information in the type, form, manner and time prescribed by the
Exchange (Rule 2.12(a)) from $100, $250 and $500 to $250, $500 and
$750; and (5) increases for first, second and third violations of the
rule on delaying, impeding or failing to cooperate in an Exchange
investigation (Rule 10.2(b)) from $100, $250 and $500 to $500, $1,000
and $2,000.
Other Related Rule Changes
The Exchange is proposing to add violations of EFPA 1-C(i)
(Admission of Members to the Equity Floor) to those rules for which a
summary sanction may be imposed pursuant to Rule 10.14(a).\4\
---------------------------------------------------------------------------
\4\ The Exchange may summarily sanction a member, member
organization or person associated with a member organization, in
lieu of commencing a ``disciplinary action'' (as that term is used
in Rule 10.3), provided that the procedures set forth in Rule
10.14(a) are followed.
---------------------------------------------------------------------------
[[Page 58274]]
The Exchange is also proposing to amend EFPAs 1-A, 1-B, 2-C and 3-A
to conform with the proposed changes in recommended fine levels, and to
eliminate references in the EFPAs to ``4th,'' ``5th,'' and
``Subsequent'' offenses.
In addition, the Exchange is proposing to remove the provision in
EFPA 1-B that prohibits consumption of food and drink on the Los
Angeles Trading Floor, and to remove the related provision from the
MRP.
Finally, the Exchange is proposing to add its Recommended Fine
Schedule to the text of the MRP. Accordingly, the Exchange is proposing
to remove a provision from Rule 10.13(f) that requires the Exchange to
maintain this Schedule and to circulate it to the Exchange's Membership
periodically.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\5\ in general, and Sections 6(b)(5) and 6(b)(7) of the
Act, in particular, in that it is designed to promote just and
equitable principles of trade and to assure that members, member
organizations, and persons associated with members and member
organizations are appropriately disciplined for violations of Exchange
rules.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
This proposed rule change has been filed by the Exchange as a
``noncontroversial'' rule change pursuant to paragraph (e)(6) of Rule
19b-4.\6\ Consequently, the rule change shall become operative 30 days
after the date of filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest pursuant to Section 19(b)(3)(A)(iii) of the Act \7\ and
subparagraph (e)(6) of Rule 19b-4 thereunder.
---------------------------------------------------------------------------
\6\ 17 CFR 240.19b-4(e)(6).
\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
---------------------------------------------------------------------------
One of the changes that the PSE has proposed it to amend EFPAs 1-A,
1-B, 2-C, and 3-A to eliminate references to ``4th'', ``5th,'' and
``subsequent'' offenses. The Commission believes that this amendment
does not subsequently change the Exchange's flexibility with regard to
discipline for 4th, 5th and subsequent violations of the MRP; the
Exchange may still impose a fine or bring a formal disciplinary action
for violation of a rule included in the MRP.
The Commission notes that the PSE still has general authority,
subject to the requirements in Rule 10.13, to impose a fine, not to
exceed $5000, on any member, member organization, or person associated
with a member or member organization, for violation of an Exchange rule
that is included in the MRP.\8\ In addition, Exchange Rule 10.3
provides the PSE with the authority to bring formal disciplinary action
for a violation of a rule included in the MRP.\9\
---------------------------------------------------------------------------
\8\ Exchange Rule 10.13(a).
\9\ See Exchange Rule 10.3.
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 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. Copies of such filings will also be
available for inspection and copying at the principal office of the
PSE. All submissions should refer to File No. SR-PSE-96-39 and should
be submitted by December 4, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-29039 Filed 11-12-96; 8:45 am]
BILLING CODE 8010-01-M
