[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Notices]
[Pages 58126-58128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28622]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36482; File No. SR-PHLX-95-73]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to New
Organizational Structures for Members
November 14, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
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(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October
4, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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. On October 11, 1995, the Exchange submitted to the
Commission Amendment No. 1 to the proposed rule change,\1\ and on
November 1, 1995, the Exchange submitted Amendment No. 2 to the
proposed rule change.\2\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
\1\ See Letter from Murray L. Ross, Secretary, Phlx, to Glen
Barrentine, Senior Counsel, SEC, dated October 2, 1995. Amendment
No. 1 renumbered the rule filing.
\2\ See Letter from Murray L. Ross, Secretary, Phlx, to Glen
Barrentine, Senior Counsel, SEC, dated October 25, 1995. See infra
notes 6 and 7 for a description of Amendment No. 2.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange hereby proposes to amend the definition of ``member
firm'' found in Article I, Section 1-1(c) of its By-Laws and Rule 3 of
the Rules of the Board of Governors to include within such definition
newly recognized business entities which are essentially similar to
those forms of business concerns (i.e., partnerships and corporations)
already allowed to become member organizations. The Exchange also
proposes to amend Article I, Section 1-1(c) and Rule 3 to make the
provisions in its By-Laws and Rules that pertain to partners of
partnership member firms applicable to those persons performing similar
functions in non-partnership member firms.
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
Recently, Pennsylvania law and the laws of 46 other jurisdictions
have recognized the existence of new legal entities such as limited
liability companies (``LLCs''),\3\ limited liability partnerships
(``LLPs''),\4\ and business trusts.\5\ As of February 5, 1995,
Pennsylvania has authorized the existence of LLCs and LLPs. Presently,
the Exchange's By-Laws and Rules recognize two types of member
organizations: partnerships under the term ``member firm'' and
corporations under the term ``member corporation.''
\3\ An LLC combines various characteristics of both corporations
and partnerships. For example, an LLC is a non-corporate entity
under which neither the owners nor those managing the business are
personally liable for the entity's obligations, however, the LLC is
treated as a pass-through entity for federal income tax purposes.
See Robert R. Keatinge et al., The Limited Liability Company: A
Study of the Emerging Entity, 47 Bus. Law. 378 (1992).
\4\ An LLP differs from a traditional partnership entity in two
significant ways. First, in an LLP the liability of a partner or the
partnership is no longer joint and several among the partners;
instead, a partner generally will be personally liable only for his
or her own conduct and that of those under his or her direct
supervision. Second, an LLP is treated as a pass-through entity for
federal income tax purposes. See Sharon Kanovsky, LLPs: A New Form
of Organization, 25 Tax Advisor 409 (1994).
\5\ The term ``business trust'' is generally used to describe a
trust in which the managers are principals and the shareholders are
cestuis que trust. Its essential attribute is that property is
placed in the hands of trustees who manage and deal with it for the
use and benefit of beneficiaries. Black's Law Dictionary 180 (5th
ed. 1979).
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The proposed rule change would allow the Exchange to recognize
these new legal entities as Phlx member firms by amending the
definitions of ``member firm'' found in Article I, Section 1-1(c) of
the By-Laws and Rule 3 to encompass organizations that are essentially
similar to member firms including, but not limited to, LLCs, LLPs, and
business trusts.\6\
\6\ In Amendment No. 2 other Exchange stated that Phlx staff
will review each exchange member firm application of any entity,
such as an LLC, LLP, or business trust on a case by case basis, and
prior to approving such entity for membership, the staff will
satisfy itself that: (a) Such entity would be structured in such a
format that would qualify as a broker or dealer registered with the
SEC pursuant to the Act; (b) the Phlx would legally have appropriate
jurisdiction over such entity; and (c) the permanency of such
entity's capital is consistent with that required of other member
firms.
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The Exchange also proposes to amend Article I, Section 1-1(c) and
Rule 3 to make provisions in the Phlx By-Laws and Rules which pertain
to general, special or limited partners in partnership member firms
applicable, as appropriate, to those persons who perform essentially
similar functions as such partners in non-partnership member firms.\7\
\7\ Amendment No. 2 added this provision to the proposed rule
change. Amendment No. 2 also withdrew a proposed change to Rule 902
that would have required a member intending to form a non-
partnership member firm to submit certain specified documentation to
the Exchange, as the proposed change to Rule 3 gives the Exchange
the authority to require the submission of such documentation under
the current Rule 902.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act \8\ in that it is designed to promote just and equitable principals
of trade, to remove impediments to and perfect the mechanism of a free
and open market, and in general, to protect investors and the public
interest.
\8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx 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
The Exchange solicited comment from its membership for the proposed
change to its By-Laws in Phlx Circular 120-95 (July 20, 1995). No
written comments were 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 other 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, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent
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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, N.W., Washigton, D.C. 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-Phlx-95-73 and should be submitted by December 15, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28622 Filed 11-22-95; 8:45 am]
BILLING CODE 8010-01-M
