[Federal Register Volume 63, Number 28 (Wednesday, February 11, 1998)]
[Notices]
[Pages 7033-7034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3371]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39619; File No. SR-PHLX-98-01]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Concerning Notice to Persons Who are the Subject of a
Report to the Exchange Business Conduct Committee
February 3, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that
on February 3, 1998, the Philadelphia Stock Exchange, Inc. (``PHLX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1) (1994).
\2\ 17 CFR 240.19b-4 (1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PHLX proposes to amend Exchange Rule 960.2 to adopt new
subsection (e), Notice and Statement, to codify the Exchange's practice
of notifying persons who are the subject of an investigative report,
which will be reviewed by the Business Conduct Committee, and to give
those persons the opportunity to submit a written statement to the
Business Conduct Committee prior to the Business Conduct Committee's
review of the investigative report. The text of the proposed rule
change is below. Brackets represent deletions; italicizing represents
additions.
Complaint and Investigation
Investigation and Authorization of Complaint
Rule 960.2 (a)-(d) No change.
(e) Notice and Statement. Prior to submitting its report, the staff
shall notify the person(s) who is (are) the subject of the report
(``Subject'') of the general nature of the allegations and of the
specific provisions of the Exchange Act, rules and regulations
promulgated thereunder, or constitutional provisions, by-laws or rules
of the Exchange or any interpretation thereof or any resolution of the
Board regulating the conduct of business on the Exchange, that appear
to have been violated. The staff shall also inform the Subject that the
report will be reviewed by the Committee. The Subject may then submit a
written statement to the Committee concerning why no disciplinary
action should be taken. To assist a Subject in preparing such a written
statement, he shall have access to any documents and other materials in
the investigative file of the Exchange that were furnished by him or
his agents.
[(e)] (f) Determination to Initiate Charges.
No change.
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 PHLX 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 PHLX 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
In April of this year, the Exchange's Board of Governors adopted
the recommendation of the Governance
[[Page 7034]]
Committee appointed by the Board of Governors to codify the Exchange's
practice of using ``Wells'' letters with respect to the Business
Conduct Committee process. Prior to submitting any investigative report
to the Business Conduct Committee, in which the staff of the Exchange
is recommending that there is a reasonable basis to believe that a
violation within the disciplinary jurisdiction of the Exchange has
occurred, the staff will notify the person who is the subject of the
report of the general nature of the allegations and the specific rule
or by-law that appears to have been violated. The staff will also
inform the subject that the report will be reviewed by the Business
Conduct Committee and that the subject may submit a written statement
to the Business Conduct Committee concerning why he believes that no
disciplinary action should be taken. This practice is often referred to
as a ``Wells'' submission and is used by the Commission in its
enforcement program. The Exchange has always adhered to this practice
and is now merely codifying it as an Exchange rule.\3\ Although no time
frame is specified within the rule, a reasonable amount of time
depending on the circumstances of the matter is afforded the subject
and the deadline for submission is always included in the notice to the
subject.
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\3\ See Rule 17.2(d) of the Chicago Board Options Exchange
(``CBOE'') which is similar to this rule.
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The proposed rule change is consistent with Section 6 of the Act in
general, and in particular, with Section 6(b)(7), in that it provides a
fair procedure for the disciplining of members and persons associated
with members because it codifies an existing practice which affords
rights to members and associated persons of notice and opportunity to
comment prior to the staff submitting a report to the Business Conduct
Committee which may result in enforcement proceedings against such
member or associated person.
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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from February 3, 1998,
the date on which it was filed, and the Exchange provided the
Commission with written notice of its intent to file the proposed rule
change at least five business days prior to the filing date, the
proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder.\4\
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\4\ 17 CFR 240.19b-4(e)(6)(1997).
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At any time within 60 days of the filing of the 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, including whether the proposed rule
change is consistent with the Act. 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 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 in the
Commission's Public Reference Room. Copies of the filing will also be
available for inspection and copying at the PHLX's principal offices.
All submissions should refer to File No. SR-PHLX-98-01 and should be
submitted by March 4, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12)(1997).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-3371 Filed 2-10-98; 8:45 am]
BILLING CODE 8010-01-M
