[Federal Register Volume 60, Number 221 (Thursday, November 16, 1995)]
[Notices]
[Pages 57611-57613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28318]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36474; File No. SR-PSE-95-27]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Pacific Stock Exchange, Incorporated Relating to the
Amendment of its Minor Rule Plan To Include Certain Rules on Financial
Reporting and Cooperation in Exchange Investigations and the
Establishment of a Charge for the Late Filing of Periodic FOCUS Reports
November 9, 1995.
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
17, 1995, 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 Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposed to amend its Minor Rule Plan to include
certain rules on financial reporting and cooperation in Exchange
investigations. The Exchange is also proposing to amend its rules to
establish an administrative charge for the late filing of quarterly
FOCUS Reports. The text of the proposed rule change is as follows [new
text is italicized]:
Minor Rule Plan
Rule 10.13(a)-(i)--No change.
(j) Minor Rule Plan: Record Keeping and Other Minor Rule
Violations.
(j)(1)-(j)(4)--No change.
(j)(5) Failure to file a financial report or financial
information in the type, form, manner and time prescribed by the
Exchange. (Rule 2.12(a))
(j)(6) Delaying, impeding or failing to cooperate in an Exchange
investigation. (Rule 10.2(b))
* * * * *
Minor Rule Plan Recommended Fine Schedule (Pursuant to Rule 10.13(f))
Rule 10.13(j).
[[Page 57612]]
Record Keeping and Other Minor Rule Violations
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1st 3rd
violation 2nd violation violation
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1-4--No change:
5. Failure to file a
financial report or
financial information in
the type, form, manner
and time prescribed by
the Exchange. (Rule
2.12(a))................. $100 $250 $500
6. Delaying, impeding or
failing to cooperate in
an Exchange
investigation. (Rule
10.2(b))................. 100 250 500
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* * * * *
Financial Reports
Rule 2.12(b)(1). Each member organization shall file with the
Exchange a Report of Financial Condition on SEC Form X-17A-5 as
required by Securities and Exchange Commission Rules 17a-5 and 17a-
10. Any member who fails to file such Report of Financial Condition
in a timely manner shall be subject to late filing charges as
follows:
------------------------------------------------------------------------
Amount of
Number of days late charge
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1-30....................................................... $200.00
31-60...................................................... 400.00
61-90...................................................... 800.00
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Repeated or aggravated failure to file such Report of Financial
Condition or failure to file such report for more than ninety days
will be referred to the Ethics and Business Conduct Committee for
appropriate disciplinary action.
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's Minor Rule Plan (``MRP''),\1\ set forth in PSE Rule
10.13, provides that the Exchange may impose a fine not to exceed
$5,000 on any member, member organization, or person associated with a
member or 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.
\1\ The MRP was initially approved by the Commission in 1985.
See Securities Exchange Act Release No. 22654 (Nov. 21, 1985), 50 FR
48853 (Nov. 27, 1985). Since 1985, the MRP has been amended several
times. See, e.g., Securities Exchange Act Release No. 36158 (August
25, 1995), 60 FR 45758 (September 1, 1995).
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The Exchange is proposing to add the following provision to the MRP
as PSE Rule 10.13(j)(5): ``Failure to file a financial report or
financial information in the type, form, manner and time prescribed by
the Exchange. (Rule 2.12(a)).'' \2\ The Exchange is also proposing to
amend its Recommended Fine Schedule to establish the following
recommended fines for violations of PSE Rule 2.12(a): $100 for a first-
time violation; $250 for a second-time violation; and $500 for a third-
time violation.\3\
\2\ PSE Rule 2.12(a) states: ``Every member organization which
is not a member of another national securities exchange or
registered national securities association which is the Designated
Examining Authority for that member organization shall file with the
Exchange answers to Financial Questionnaires, Reports of Income and
Expenses and additional financial information in the type, form,
manner and time prescribed by the Exchange.''
\3\ For a discussion of the Exchange's Recommended Fine
Schedule, see Securities Exchange Act Release No. 34322 (July 6,
1994), 59 FR 35958 (July 14, 1994).
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The Exchange is also proposing to add the following provision to
the MRP as PSE Rule 10.13(j)(6): ``Delaying, impeding or failing to
cooperate in an Exchange investigation. (Rule 10.2(b)).'' \4\ The
Exchange is also proposing to amend its Recommended Fine Schedule to
establish the following recommended fines for violations of PSE Rule
10.2(b): $100 for a first-time violation; $250 for a second-time
violation; and $500 for a third-time violation.
\4\ PSE Rule 10.2(b) states: ``No member or person associated
with a member shall impede or delay an Exchange investigation with
respect to possible violations within the disciplinary jurisdiction
of the Exchange nor refuse to furnish testimony, documentary
materials or other information requested by the Exchange during the
course of its investigation. Failure to furnish such testimony,
documentary materials or other information requested by the Exchange
pursuant to this Rule on the date or within the time period required
by the Exchange shall be considered obstructive of an Exchange
inquiry or investigation and subject to formal disciplinary
action.''
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The Exchange believes that the rules proposed to be added to the
MRP are either objective or technical in nature and are easily
verifiable, thereby lending themselves to the use of expedited
proceedings. The Exchange further believes that violations of such
rules may require sanctions more severe than a warning or cautionary
letter, but that full disciplinary proceedings (pursuant to PSE Rule
10.3) would, in general, be unsuitable because they would be costly and
time consuming in view of the minor nature of the violations.
Nevertheless, the Exchange notes that if a rule violation is
particularly egregious or if the individual situation warrants such
action, the Exchange may proceed with formal disciplinary action
pursuant to PSE Rule 10.3, rather than with the MRP procedures under
PSE Rule 10.13.
In addition, the Exchange is proposing to amend PSE Rule 2.12(b)(1)
to establish an administrative charge for member organizations that are
late in filing their periodic FOCUS Reports with the Exchange.\5\ The
proposed rule change would add a reference to Rule 17a-5 to the text of
PSE Rule 2.12(b)(1), making the late filing of periodic FOCUS Reports
subject to the same ``late charge'' schedule that currently applies to
the late filing of annual FOCUS Reports required by Rule 17a-10 under
the Act.\6\
\5\ The Exchange's plan filed pursuant to Rule 17a-5(a)(4) under
the Act require PSE member organizations that are not exempt from
Rule 15c3-1 under the Act (``Net Capital Rule'') to file periodic
FOCUS Reports with the Exchange if the PSE is their designated
examining authority (``DEA''). See 17 CFR 17a-5(a)(4); Securities
Exchange Act Release No. 11935 (December 17, 1975), 40 FR 59706
(December 30, 1975) (order approving the PSE's plan pursuant to Rule
17a-5). In 1993, the SEC approved certain changes to the Net Capital
Rule, including the elimination of an exemption for certain equity
exchange specialists, effective as of April 1, 1994. See Securities
Exchange Act Release No. 32737 (August 11, 1993), 58 FR 43555
(August 17, 1993). Consequently, as of April 1, 1994, a number of
Exchange specialists became obligated to file FOCUS reports with the
Exchange. Prior to April 1994, no PSE member organizations were
required to file such reports with the Exchange.
\6\ 17 CFR 17a-10.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\7\
[[Page 57613]]
in general, and Sections 6(b)(5) and 6(b)(6), in particular, in that it
is designed to promote just and equitable principles of trade, to
protect investors and the public interest, and to provide that members
of the Exchange are appropriately disciplined for violations of
Exchange rules.
\7\ 15 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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, NW., Washington, DC 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 relating 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 at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the Exchange. All
submissions should refer to File No. SR-PSE-95-27 and should be
submitted by December 7, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28318 Filed 11-15-95; 8:45 am]
BILLING CODE 8010-01-M
