[Federal Register Volume 64, Number 33 (Friday, February 19, 1999)]
[Notices]
[Pages 8421-8422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41049; File No. SR-CSE-98-03]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Cincinnati Stock Exchange, Inc. Regarding Regulatory
Cooperation
February 11, 1999.
I. Introduction
On October 26, 1998, the Cincinnati Stock Exchange, Inc. (``CSC''
or ``Exchange'') filed with the Securities and Exchange Commission
(``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\ In its proposal, the CSE seeks to amend its disciplinary
rules to provide for regulatory cooperation by Exchange members in
connection with actions initiated by other self-regulatory
organizations (``SROs''). Notice of the proposal was published in the
Federal Register on December 18, 1998.\3\ The Commission received no
comments on the proposal. This order approves the proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 40782 (Dec. 11,
1998), 63 FR 70172.
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II. Description of the Proposal
The Exchange proposes to amend Rule 8.2 by adding subsections (f)
and (g). Subsection (f) would require members, member organizations,
persons associated with a member or member organization, and other
persons or entities over whom the Exchange has jurisdiction to testify
before another SRO and to furnish information in connection with a
regulatory inquiry, investigation, examination, or disciplinary
proceeding resulting from an agreement entered into by the Exchange
pursuant to subsection (g). Further, subsection (f) would require these
persons and entities not to impede such a proceeding. In addition, the
new subsection (g) provides that the Exchange may enter into agreements
with domestic and foreign SROs providing for the exchange of
information and other forms of mutual
[[Page 8422]]
assistance for market surveillance, investigative, enforcement, and
other regulatory purposes.
Under the proposed rule change, the Exchange also makes explicit
that persons or entities, required to furnish information or testimony
pursuant to a regulatory agreement, will be afforded the same rights
and procedural protections that such persons or entities would have if
the Exchange had initiated the request for information or testimony.
III. Discussion
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. Specifically,
the Commission believes the proposal is consistent with Section 6(b)(5)
of the Act,\4\ which requires that the rules of an exchange be designed
to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, and, in general, to protect investors
and the public interest.
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\4\ 15 U.S.C. 78f(b)(5).
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This proposal, which is similar to other exchanges' proposals that
were approved by the Commission,\5\ grew out of a meeting of the
Intermarket Surveillance Group (``ISG'') to coordinate more effectively
surveillance and investigative information sharing arrangements in the
stock and options markets.\6\ The Commission believes that the proposed
rule change achieves a reasonable balance between the need for
regulatory cooperation and protection of the procedural rights of
Exchange members and others from whom information or testimony is
requested. The rule would provide the Exchange with the authority to
seek cooperation by certain persons with respect to inquiries and
investigations resulting from regulatory agreements between the
Exchange and another SRO while explicitly providing any person or
entity required to furnish information or testimony pursuant to the
rule with the same procedural rights that they would have if the
request was pursuant to an Exchange-initiated inquiry or investigation.
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\5\ See, e.g., Securities and Exchange Act Release Nos. 39557
(Jan. 16, 1998), 63 FR 3940 (Jan. 27, 1998) (notice of filing and
immediate effectiveness of SR-CHX-97-33); and 35646 (April 25,
1995), 60 FR 21227 (May 1, 1995) (order approving SR-PSE-95-02).
\6\ The ISG is an organization of securities industry SROs
formed in 1983 to coordinate and develop intermarket surveillance
programs designed to identify and combat fraudulent and manipulative
acts and practices. To promote its purposes, members agree to
exchange such information as is necessary for ISG members to perform
their self-regulatory and market surveillance functions.
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The Commission believes that the proposed rule change will further
the interest of the public and provide for the protection of investors
by allowing the Exchange to assist other SROs conduct prompt inquiries
into possible trading violations and other possible misconduct. As the
marketplaces become more global and interlinked, the Commission
believes that it is important that the SROs coordinate their
investigatory activities to prevent fraudulent and manipulative acts
and practices in all marketplaces.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-CSE-98-03) is approved.
\7\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-4118 Filed 2-18-99; 8:45 am]
BILLING CODE 8010-01-M
