[Federal Register Volume 60, Number 25 (Tuesday, February 7, 1995)]
[Notices]
[Pages 7252-7253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2970]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35305; File No. SR-PHLX-94-61]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc., Relating to Floor
Procedure Advice F-8, Failure To Comply With an Exchange Inquiry
January 31, 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 November
21, 1994, the Philadelphia Stock Exchange, Inc. (``PHLX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the self-
regulatory organization.\1\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
\1\On November 30, 1994, the PHLX amended its proposal to
clarify that the proposed two-day period for compliance with
Exchange Examinations Department requests would apply, for example,
to requests for books and records, rather than to requests for
financial information, which are governed by PHLX Rule 703(e). See
Letter from Edith Hallahan, Special Counsel, PHLX, to Michael
Walinskas, Branch Chief, Office of Market Supervision (``OMS''),
Division of Market Regulation (``Division''), Commission, dated
November 30, 1994 (``November 30 Letter''). On January 31, 1995, the
PHLX amended its proposal to delete references to foreign currency
option (``FCO'') participants and participant organizations in Floor
Procedure Advice (``Advice'') F-8, ``Failure to Comply with an
Exchange Inquiry.'' See Letter from Edith Hallahan, Special Counsel,
Regulatory Services, PHLX, to Michael Walinskas, Branch Chief, OMS,
Division, Commission, dated January 30, 1995 (``January 30
Letter''). However, Advice F-8 continues to apply to FCO
participants and participant organizations. Specifically, the PHLX
notes in its January 30 Letter that PHLX Rule 13, ``Foreign Currency
Options Participant'' provides that FCO participants are subject to
the provisions of the Exchange's rules that are applicable to a
member of the Exchange and each reference to a member of the
Exchange in the PHLX's rules is deemed to pertain also to FCO
participants.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Currently, Advice F-8 requires Exchange members to comply promptly
with any request for information made by the Exchange's Market
Surveillance Department in connection with any investigation within the
Exchange's disciplinary jurisdiction. The Exchange proposes to amend
Advice F-8 to require members to comply with Exchange requests for
information in connection with any regulatory inquiry, investigation,
or examination relating to the Exchange's disciplinary jurisdiction or
regulatory obligations. The PHLX also proposes to amend the Advice to
require that information requested by the Exchange's Examinations
Department be received within two business days from the date of the
original request in order to satisfy the prompt compliance requirement
of Advice F-8. Finally, the PHLX proposes to amend Advice F-8 to reduce
the fine for a first violation of the Advice from $500 to $200, and to
provide that each additional request for information not furnished
within the allotted time period may be considered as a separate
occurrence for purposes of the Advice's fine schedule.\2\ The text of
[[Page 7253]] the proposed rule change is available at the Office of
the Secretary, PHLX, and at the Commission.
\2\Under the Advice F-8's fine schedule, as amended, the
Exchange will impose a fine of $200 for the first occurrence, $1,000
for the second occurrence, $2,500 for the third occurrence, and a
sanction discretionary with the Exchange's Business Conduct
Committee for the fourth and subsequent occurrences.
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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
Currently, Advice F-8 requires cooperation with requests for
information made by the Exchange's Market Surveillance Department and
contains a fine schedule for violations. The Advice is administered
under the Exchange's minor rule violation enforcement and reporting
plan (``minor rule plan''),\3\ which the PHLX also proposes to amend.
Advice F-8 serves as an important tool in the Exchange's effort to
conduct investigations expeditiously, requiring members to respond
promptly to such requests. Prompt compliance with Market Surveillance
requests is currently defined as ten business days. This Advice was
adopted in order to expedite the Exchange's investigation process by
enabling the Exchange to summarily reprimand any failure to respond to
such requests.\4\
\3\The PHLX's minor rule plan, codified in PHLX Rule 970,
contains floor procedure advices with accompanying fine schedules.
Rule 19d-1(c)(2) under the Act authorizes national securities
exchanges to adopt minor rule violation plans for summary discipline
and abbreviated reporting; Rule 19d-1(c)(1) requires prompt filing
with the Commission of any final disciplinary action. However, minor
rule violations not exceeding $2,500 are deemded not final, thereby
permitting periodic, as opposed to immediate, reporting.
\4\See Securities Exchange Act Release No. 26899 (June 7, 1989),
54 FR 25526 (June 15, 1989) (order approving File No. SR-PHLX-89-
20).
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The PHLX proposes to extend the requirements of Advice F-8 to
include Examinations Department requests, for which compliance will be
required within two business days, as well as other regulatory
inquiries. The purpose of this change is to facilitate the Exchange's
ability to promptly collect regulatory information, with the deterrent
of a preset fine schedule.
With respect to the fine schedule accompanying Advice F-8, the
proposed language regarding separate occurrences is intended to deter
delays in compliance with an Exchange request by counting a repeat
request for information as a separate occurrence. If each successive
request for the same information is treated as a separate occurrence
and thus as a successive violation subject to the next highest fine,
the Exchange believes that prompt compliance is encouraged. The PHLX
also proposes to reduce the fine for a first occurrence from $500 to
$200 to reflect the potential for increased application of such fines.
The Exchange believes that the proposed changes to Advice F-8 are
consistent with the types of provisions currently included in the
Exchange's minor rule plan. Moreover, extending the requirements of
Advice F-8 regarding prompt compliance with Exchange inquiries to
include Examinations Department and other regulatory requests should
enhance the Exchange's ability to meet its regulatory obligations
expeditiously. For example, under Advice F-8, as amended, a member will
be required to comply with an Examinations Department request for books
and records within two business days from the date of the original
request.\5\
\5\See November 30 Letter, supra note 1.
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For the above reasons, the Exchange 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, prevent fraudulent and manipulative
acts and practices, as well as to protect investors and the public
interest, by bolstering the Exchange's ability to receive certain
information from its members promptly.
(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 received or requested.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of 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 reason for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(a) By order approve such 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. Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to the file
number in the caption above and should be submitted by February 28,
1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-2970 Filed 2-6-95; 8:45 am]
BILLING CODE 8010-01-M
