[Federal Register Volume 63, Number 56 (Tuesday, March 24, 1998)]
[Notices]
[Pages 14145-14146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7517]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39767; File No. SR-AMEX-97-30]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by The American Stock Exchange, Inc., Relating to Professional
Hearing Officers, Executive Committee Review of Appeals From
Disciplinary Panel Decisions and Indemnification of Persons Serving on
Disciplinary Panels and Exchange Officials
March 17, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on August 11, 1997,\2\ the
American Stock Exchange, Inc. (``Amex'' 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 Amex. 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).
\2\ On September 11, 1997, the Amex submitted an amendment
reflecting editorial corrections to the text of Exhibit A. See
letter from William Floyd-Jones, Jr., Assistant General Counsel,
Legal & Regulatory Policy Division, American Stock Exchange, Inc.,
to Katherine A. England, Esq., Assistant Director, Market
Supervision, Division of Market Regulation, SEC, dated September 11,
1997.
On February 26, 1998, the Amex submitted an amendment
clarifying, among other things, perceived discrepancies in the
disciplinary system, recusal procedures, and vague terminology. See
letter from Janice M. Stroughter, Director of Hearings and Special
Counsel, Legal & Regulatory Policy, American Stock Exchange, Inc.,
to Katherine England, Esq., Assistant Director, Market Supervision,
SEC, dated February 25, 1998 (``Amendment No. 2'')
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I. Self-Regulatory Organizations Statement of the Terms of
Substance of the Proposed Rule Change
The text of the proposed rule change is available at the Office of
the Secretary, the Amex and at the Commission.
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 Amex 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 Amex 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
i. Professional Hearing Officers
Article V, Section 1(b) of the Exchange Constitution and the
Exchange's Rules of Procedure Applicable to Exchange Disciplinary
Proceedings currently require the Exchange to draw members of
disciplinary panels exclusively from the ranks of practicing securities
industry professionals. These rules also generally require the Chairmen
of Disciplinary Panels to be Exchange Officials. The current system for
selecting Disciplinary Panels has worked well for many years, and Panel
members have performed an invaluable service to the Exchange on a
voluntary basis.
While the current system for constituting Disciplinary Panels has
worked well, the Exchange has noted a trend toward increasing
complexity in the legal issues confronting Disciplinary Panels.
Frequently, Panels face complicated legal questions that must be
resolved promptly to ensure the timely resolution of enforcement
matters. While the Exchange provides Disciplinary Panels with an
assistant, this staff person has a non-substantive role in enforcement
proceedings and, therefore, is unable to fully participate
[[Page 14146]]
with the Panel in evaluating important legal, evidentiary and
procedural questions.
The Exchange, accordingly, is proposing to amend its Constitution
and Rules to provide for professional hearing officers to serve as
chairmen and voting members of Exchange Disciplinary Panels.\3\ The
remaining members of Disciplinary Panels would continue to be drawn
from the ranks of practicing securities industry professionals as
currently provided for in the Exchange's Constitution and Rules.
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\3\ The Amex expects that the ``professional hearing officer
will be an individual who is a lawyer who has had litigation
experience in the securities area. It is possible that such
individual, or his firm, may provide advice or services to the
Exchange on matters that do not relate to the investigation or
preparation of disciplinary matters.'' See Amendment No. 2 at p. 2.
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ii. Indemnification of Persons Serving on Disciplinary Panels and
Exchange Officials
The Exchange has noted that the indemnification provision of the
Exchange's Constitution does not specifically mention persons serving
on Disciplinary Panels and Exchange Officials. While the Exchange
believes that there are sound arguments for concluding that persons
serving on Disciplinary Panels and Exchange Officials already are
covered by the Exchange's indemnity provision, the Exchange is
proposing to amend the Constitution to make this coverage explicit in
order to help ensure that the Exchange can continue to attract and
retain the services of qualified persons to serve in these capacities.
iii. Board Review of Disciplinary Panel Decisions
Disciplinary appeals are heard by the Executive Committee of the
Board under delegated authority from the Board of Governors as
authorized by Article V, Section 1(b) of the Constitution in all
instances except where a member or member organization is expelled or
suspended for a period of one year or more. In such instance, a review
by the full Board is required. It is proposed that the Executive
Committee be the delegated authority to hear all appeals (including
matters the Board calls for review) regardless of the nature of the
respondent or the penalty. This would make the appeal process less
cumbersome, while at the same time eliminating a special review
privilege (i.e., full Board review) that exists for members and member
organizations, but not for their employees. The full Board would retain
authority to review disciplinary decisions when such review is deemed
appropriate.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \4\ of the
Act in general and furthers the objectives of Section 6(b)(7) \5\ in
particular, in that the proposed rule change provides for a fair
procedure for the disciplining of Exchange members and persons
associated with its members.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Amex does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received with respect
to the proposed rule change.
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, 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, 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 in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Amex. All submissions should refer to the file number in the caption
above and should be submitted by April 14, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-7517 Filed 3-23-98; 8:45 am]
BILLING CODE 8010-01-M
