[Federal Register Volume 59, Number 58 (Friday, March 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7052]
[[Page Unknown]]
[Federal Register: March 25, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33779; File No. SR-NYSE-93-38]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to Additions to
the ``List of Exchange Rule Violations and Fines Applicable Thereto
Pursuant to Rule 476A''
March 17, 1994.
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 October
21, 1993, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
This proposal would revise the Rule 476A Violations List for
imposition of fines for minor violations of rules and/or policies by
adding to the list Exchange Rules 304(h)(2), 345.12, 346(b) and (e),
346(f), 352(b) and (c), 440C and 472(c).\1\
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\1\The NYSE also has requested approval, under Rule 19d-1(c)(2),
17 CFR 240.19d-1(c)(2), to amend its Rule 19d-1 Minor Rule Violation
Enforcement and Reporting Plan to include Exchange Rules 304(h)(2),
345.12, 346(b) and (e), 346(f), 352(b) and (c), 440C and 472(c). See
letter from James E. Buck, Senior Vice President and Secretary,
NYSE, to Diana Luka-Hopson, Branch Chief, Exchange Regulation,
Division of Market Regulation, Commission, dated October 20, 1993.
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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
1. Purpose
Rule 476A\2\ provides that the Exchange may impose a fine ranging
from $500 to $2,500 on an individual, and a fine ranging from $1,000 to
$5,000 on a member organization for a minor violation of certain
specified Exchange rules.
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\2\Rule 476A was approved by the Commission on January 25, 1985
in Securities Exchange Act Release No. 21688, 50 FR 5025 (February
5, 1985). Subsequent additions of rules to the Rule 476A Violations
List were made in: Securities Exchange Act Release No. 22037 (May
14, 1985), 50 FR 21008 (May 21, 1985); Securities Exchange Act
Release No. 22415 (September 17, 1985), 50 FR 38600 (September 23,
1985); Securities Exchange Act Release No. 22490 (October 1985), 50
FR 41084 (October 8, 1985); Securities Exchange Act Release No.
23104 (April 11, 1986), 51 FR 13307 (April 18, 1986); Securities
Exchange Act Release No. 24985 (October 5, 1987), 52 FR 41643
(October 29, 1987); Securities Exchange Act Release No. 25763 (May
27, 1988), 53 FR 20925 (June 7, 1988); Securities Exchange Act
Release No. 27878 (April 4, 1990), 55 FR 13345 (April 10, 1990);
Securities Exchange Act Release No. 28003 (May 8, 1990), 55 FR 20004
(May 14, 1990); Securities Exchange Act Release No. 28505 (October
2, 1990), 55 FR 41288 (October 10, 1990); Securities Exchange Act
Release No. 28995 (March 21, 1991), 56 FR 12967 (March 28, 1991);
Securities Exchange Act Release No. 30280 (January 22, 1992), 57 FR
3452 (January 29, 1992); Securities Exchange Act Release No. 30536
(March 31, 1992), 57 FR 12357 (April 9, 1992); and Securities
Exchange Act Release No. 32421 (June 7, 1993), 58 FR 32973 (June 14,
1993).
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The purpose of the Rule 476A procedure is to provide for a response
to a rule violation when a meaningful sanction is appropriate but when
initiation of a disciplinary proceeding under Rule 476 is not suitable
because such a proceeding would be more costly and time-consuming than
would be warranted given the minor nature of the violation. Rule 476A
provides for an appropriate response to minor violations of certain
Exchange rules while preserving the due process rights of the party
accused through specified, required procedures. The list of rules which
are eligible for 476A procedures specifies those rule violations which
may be the subject of fines under the rule and also includes a schedule
of fines.
In SR-NYSE-84-27, which initially set forth the provisions and
procedures of the Rule 476A, the Exchange indicated it would amend the
list of rules from time to time, as it considered appropriate, in order
to phase-in the implementation of Rule 476A as experience with it was
gained. The Exchange's regulatory divisions have amended the list since
its initial implementation to include either existing rules or newly
approved ones, which are appropriate for inclusion in this particular
disciplinary process when violations occur.
The Exchange is presently seeking approval to add certain Exchange
rules to the list of rules subject to possible imposition of fines
under Rule 476A procedures. The types of rules covered generally
include reporting, required approvals, record retention and conduct of
accounts for which determinations of violations can be made
objectively. They are as follows:
Rule 304(h)(2)--Requires member organizations to supply
the Exchange with information relating to the existence of any
statutory disqualification as defined in the Act to which an approved
person or any person associated with the approved person may be
subject.
Rule 345.12--Requires applications (Form U-4) for all
natural persons required to be registered with the Exchange to be filed
upon the candidate's employment and to be kept current.
Rule 346(b) and (3)--Rule 346(b) requires members, allied
members and employees of member organizations to receive prior written
consent of their employer to engage in any other business activity or
to be employed or compensated by any other person. Rule 346(e) provides
that persons delegated supervisory responsibilities must devote their
full time to the business of the member organization during business
hours, unless otherwise permitted by the Exchange (Rule 346.10).
Rule 346(g)--Provides that no member, member organization,
allied member, approved person or employee of any person in a control
relationship with a member or member organization shall be associated
with any person subject to a statutory disqualification as defined in
the Act.
Rule 352(b) and (c)--Prohibits a member, member
organization, allied member, registered representative or officer from
guaranteeing any customer against loss in any account and from sharing
in profits or losses in a customer's account.
Rule 440C--States that no member or member organization
should ``fail to deliver'' against a short sale until a diligent effort
has been made to borrow necessary securities to make delivery.
Rule 472(c)--Requires members and member organizations to
retain communications with customers and the public (e.g.,
advertisements, research reports, sales literature) for at least three
years. The communications must also contain the name of the person who
prepared the material, the name of the person approving its issuance,
and be readily available to the Exchange upon request.
2. Statutory Basis
The proposed rule change will advance the objectives of section
6(b)(6) of the Act in that it will provide a procedure whereby members,
allied members, employees and member organizations can be
``appropriately disciplined'' in those instances when a rule violation
is minor in nature, but a sanction more serious than a warning or
cautionary letter is appropriate. The proposed rule change provides a
fair procedure for imposing such sanctions, in accordance with the
requirements of sections 6(b)(7) and 6(d)(1) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is 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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the 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 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the NYSE. All
submissions should refer to File No. SR-NYSE-93-38 and should be
submitted by April 15, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-7052 Filed 3-24-94; 8:45 am]
BILLING CODE 8010-01-M
