[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Notices]
[Pages 63888-63889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30526]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37974; File No. SR-PHLX-96-42]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Philadelphia Stock Exchange, Inc., Relating to Limiting
Time for Submission of Settlement Offers
November 22, 1996.
On September 27, 1996, the Philadelphia Stock Exchange, Inc.
(``PHLX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') a proposed rule change pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder.\2\ The proposed rule change amends PHLX
Rule 960.7, ``Offers of Settlement,'' to limit the time when a
respondent may submit a written settlement offer to the PHLX's Business
Conduct Committee (``BCC'') to within 120 calendar days immediately
following the date of service of the statement of charges upon the
respondent.
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\1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1995).
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Notice of the proposed rule change was published for comment in the
Federal Register on October 23, 1996.\3\ No comments were received on
the proposal. This order approves the proposed rule change.
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\3\ Securities Exchange Act Release No. 37838 (October 17,
1996), 61 FR 55062.
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Currently, PHLX Rule 960.7 allows a respondent in any proceeding
under the PHLX's disciplinary rules to submit a written settlement
offer to the Exchange's BCC at any time during the course of the
proceeding. The Exchange proposes to amend PHLX Rule 960.7 to limit the
time when a respondent may submit a written settlement offer to the BCC
to within 120 calendar days immediately following the date of service
of the statement of charges upon the respondent in accordance with PHLX
Rule 960.11, ``Service of Notice and Extension of Time Limits.'' Under
the proposal, the Exchange may schedule a hearing during the 120-day
period immediately following the date of service of the statement of
charges or as soon as practicable thereafter.
The purpose of the proposal is to adopt a time limit during which
respondents involved in a disciplinary matter before the PHLX's BCC may
submit settlements offers. Because PHLX Rule 960.7 currently allows
settlement offers to be submitted at any time, the BCC was concerned
that respondents could intentionally submit inadequate offers of
settlement for the sole purpose of delaying a scheduled hearing until
the offer is reviewed by the full BCC. The proposal will allow the BCC
to schedule hearings after the 120-day period knowing that there will
not be last minute requests for continuances based upon late offers of
settlement.
Under proposed Interpretation and Policy .01, the BCC may schedule
a hearing during the 120-day period immediately following the date of
service of the statement of charges on the respondent.\4\ The BCC will
continue to have the ability to entertain settlement offers after the
120-day period if its review does not delay the scheduled hearing in
the matter.
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\4\ Under PHLX Rule 960.5, ``Hearing,'' a respondent must be
given at least 15 business days notice of the time of a hearing.
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The PHLX believes that the proposed rule change is consistent with
Section 6 of the Act in general, and in particular, with Section
6(b)(5), in that it is designed to promote just and equitable
principles of trade, to prevent
[[Page 63889]]
fraudulent and manipulative acts and practices, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, as
well as to protect investors and the public interest by allowing for
more expeditious completion of disciplinary matters.
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of Section 6(b)(5) \5\ in that it is
designed to prevent fraudulent and manipulative acts and practices and
to protect investors and the public interest. The Commission also
believes that the proposal is consistent with Section 6(b)(7) of the
Act because it provides a fair procedure for disciplining members.\6\
Specifically, by limiting the time allowed for the submission of
settlement offers, the Commission believes that the proposal should
facilitate the PHLX's efforts to provide prompt, effective, and
meaningful discipline for violations of Exchange rules and the federal
securities laws. In addition, by minimizing opportunities for delay,
the proposal should help to preserve evidence and the availability of
witnesses, thereby enhancing the quality, consistency, and fairness of
the Exchange's disciplinary proceedings and enabling the PHLX to better
enforce compliance by its members with the Exchange's rules and the
federal securities laws. By facilitating the prompt resolution of
disciplinary proceedings, the proposal also will promote efficiency in
the use of the Exchange's resources.
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\5\ 15 U.S.C. Sec. 78f(b)(5) (1988).
\6\ In approving this rule, the Commission has considered the
proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. Sec. 78c(f).
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The PHLX states that because PHLX Rule 960.7 currently allows
settlement offers to be submitted at any time, the Exchange's BCC was
concerned that respondents could intentionally submit inadequate offers
of settlement for the sole purpose of delaying a scheduled hearing
until the offer is reviewed by the full BCC. The Commission believes
that the proposed time limit for submitting settlement offers should
allow the PHLX's disciplinary proceedings to progress promptly by
preventing members from submitting inadequate settlement offers in
order to delay a hearing.
At the same time, the Commission believes that the proposal
protects members' rights to fair procedures in Exchange disciplinary
proceedings. Specifically, the proposal allows respondents to submit
settlement offers \7\ up to 120 days following the date of service of a
statement of charges upon the respondent.\8\ Although a hearing may be
scheduled during the 120-day period, PHLX Rule 960.5 provides that a
respondent must be given at least 15 business days notice of the time
of a hearing. Accordingly, the Commission believes that the proposal
preserves a respondent's right to submit settlement offers and provides
a respondent with adequate time to submit settlement offers, thereby
providing a fair procedure for the disciplining of members, consistent
with Section 6(b)(7).
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\7\ A respondent may submit more than one settlement offer
during the 120-day period. Telephone conversation between Michele R.
Weisbaum, Vice President and Associate General Counsel, PHLX, and
Yvonne Fraticelli, Attorney, Office of Market Supervision, Division
of Market Regulation, Commission, on October 2, 1996.
\8\ The proposal allows the BCC to consider settlement offers
submitted after the 120-day period as long as consideration of an
offer does not delay the hearing in the matter.
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Finally, the Commission notes that the rules of the Chicago Board
Options Exchange, Inc. (``CBOE'') also provide a 120-day period for
submitting settlement offers.\9\
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\9\ See CBOE Rule 17.8(a), ``Offers of Settlement.''
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-PHLX-96-42) is approved.
\10\ 15 U.S.C. Sec. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-30526 Filed 11-29-96; 8:45 am]
BILLING CODE 8010-01-M
