[Federal Register Volume 61, Number 61 (Thursday, March 28, 1996)]
[Notices]
[Pages 13915-13917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7508]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37002; File No. SR-Phlx-96-02]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to the
Adoption of Listing and Listing Maintenance Standards for Unit
Investment Trusts
March 21, 1996.
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 January
29, 1996, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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. On March 7, 1996, the Exchange submitted to the
Commission Amendment No. 1 to the proposed rule change,\1\ and on March
18, 1996 the Exchange submitted Amendment No. 2 to the proposed rule
change.\2\ The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
\1\ See Letter from Michele R. Weisbaum, Assistant General
Counsel, Phlx, to Jon Kroeper, Staff Attorney, SEC, dated March 5,
1996. See infra note 4 and text accompanying note 5 for a
description of Amendment No. 1.
\2\ See Letter from Michele R. Weisbaum, Associate General
Counsel, Phlx, to Jon Kroeper, Staff Attorney, SEC, dated March 15,
1996. Amendment No. 2 added UIT listing maintenance standards to the
proposed rule change. See infra text accompanying notes 6 and 7 for
a description of Amendment No. 2.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange, pursuant to Rule 19b-4 under the Act,\3\ proposes to
amend Phlx Rule 803 regarding Tier I listing standards in order to add
new section (i), which will set forth listing standards for unit
investment trusts (``UITs'') and amend Phlx Rule 810 to add new
subsections (a)(5) and (a)(6), which will set forth listing maintenance
standards for UITs.
\3\ 17 CFR 240.19b-4.
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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
The Exchange proposes to add new section (i) to Phlx Rule 803, the
Tier I listing criteria, to adopt listing standards applicable to UITs,
which are distinct trading components representing discrete interests
in the income, capital appreciation potential or other economic
characteristics of the securities deposited in a trust. Such a trust
may be based upon the securities of individual issuers, upon a
portfolio of stocks included in a domestic, broad-based stock market
index, or upon a portfolio or domestic money market instruments or
other debt securities. A UIT would be defined as any share, unit or
other interest in or relating to a unit investment trust, including any
component resulting from the
[[Page 13916]]
subdivision or separation of such an interest.\4\
\4\ The Commission notes that prior to listing and trading a UIT
based on an index, money market instrument, or debt securities that
the Commission has not previously reviewed, the Exchange would have
to file a proposed rule change pursuant to Rule 19b-4 under the Act.
Such a filing should, among other relevant issues, address any
issues arising under the Investment Company Act of 1940 with regard
to the listing and trading of a UIT under proposed Rule 803A(i). In
addition, the Phlx would be required to adopt appropriate
suitability standards for both the trading of any UIT which may be
separated into component parts and the component parts themselves.
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Pursuant to proposed subsection 803(i)A, UITs based upon securities
of individual issuers may be listed on the Exchange under the following
requirements. First, the issuer(s) of the security (or securities) held
by the trust must have total assets in excess of $100 million and a net
worth in excess of $10 million. Second, there must be at least one
million units held beneficially or of record by 800 round lot holders
and the UIT cannot hold in excess of 5% of the outstanding common or
capital stock of any single issuer. Third, the stated term of the trust
may not be less than three years and the units may not be subject to
redemption at the election of the trustees prior to the end of the
stated term of the trust.\5\ Fourth, the trustee of the UIT must be a
trust company or banking institution and its executive officer cannot
be an officer of the issuing sponsor. Fifth, any voting rights
conferred by the UIT interests may be divided between the separate
components of the units and must be passed through to beneficial
holders of the UIT interests and shareholder communications must be
forwarded by the trust to the holders of the voting rights, to the
extent that the UIT is reimbursed by the issuer for reasonable
expenses. Finally, the UIT must sign a listing agreement with the
Exchange which requires compliance with all other provisions of the 800
Series of Phlx Rules applicable to listed companies.
\5\ Amendment No. 1 amends proposed subsection 803(i)A(3), which
deals with the stated term of a UIT, to add the following
provisions: (1) a listed trust may have only one termination date;
(2) individual trading components of the trust units may have only
one termination claim; and, (3) only one UIT may have only one
termination claim; and, (3) only one UIT on the securities of a
single issuer may be listed at a time.
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Pursuant to proposed subsection 803(i)B, UITs based on stock
indexes or debt instruments may be listed on the Exchange under the
following requirements. First, the trust must have total assets of at
least $60 million at the time of formation and at least one million
shares, units or components that are publicly distributed to at least
400 beneficial or record holders. Second, such UITs cannot have a
stated term of less than two years; however, they may be subject to
earlier termination if the circumstances under which this may occur are
set forth in the trust's governing documents. Third, any voting rights
conferred by the UIT interests may be divided between separate
components of the units but must be passed through to the beneficial
holders of the UIT interests. Fourth, the trustee must be a trust
company or banking institution. Finally, the UIT must sign a listing
agreement with the Exchange which requires compliance with all other
provisions of the 800 Series of Rules applicable to listed
companies.\6\
\6\ See Amendment No. 1, supra note 1.
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The Exchange also is proposing to adopt listing maintenance
standards for UITs under new subsection (a)(5) and (a)(6) to Phlx Rule
810. Proposed Rule 810(a)(5) will permit the Exchange to suspend
trading in, or remove from listing, a UIT listed under Rule 803(i)A if
the financial condition and/or operating results of the issuer of the
securities held by the trust appear to be unsatisfactory, as determined
by the existence of one or more of the following criteria: (i) the net
tangible assets of the issuer of the securities held by the UIT are not
at least $2 million if the issuer has sustained losses from continuing
operations and/or net losses in two of its three most recent fiscal
years, or $4 million if it has such losses in three of its four most
recent fiscal years; (ii) the total assets and net worth of the issuer
of the securities held by the UIT are less than $25 million and $4
million, respectively; (iii) there are less than 400 record and/or
beneficial holders of the trust units (or trading components thereof);
(iv) less than 300,000 trust units (or trading components thereof)
remain outstanding; (v) the issuer of the securities held by the UIT
has sold or otherwise disposed of its principal operating assets, or
has ceased to be an operating company; (vi) the UIT and/or trustee has
failed to comply with the Phlx's listing policies or agreements; or
(vii) such other event shall occur or conditions exist which, in the
Exchange's opinion, makes further dealings on the Exchange
inadvisable.\7\
\7\ See Amendment No. 2, supra note 2.
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Proposed Rule 810(a)(6) will permit the Exchange to suspend trading
in, or remove from listing, a UIT listed pursuant to Rule 803(i)B if
one of the following criteria is met: (i) more than 60 days remain
until the termination of the UIT and there are less than 50 record and/
or beneficial holders of shares, units or trading components thereof
for 20 or more consecutive trading days; (ii) the UIT and/or trustee
has failed to comply with the Phlx's listing policies or agreements; or
(iii) such other event has occurred or condition exists which, in the
Exchange's opinion, makes further dealings on the Exchange
inadvisable.\8\
\8\ See Amendment No. 2, supra note 2.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\9\ in general, and in particular, with Section 6(b)(5) in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, as
well as to protect investors and the public interest.
\9\ 15 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
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
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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 Exchange. All submissions should refer to File
No. SR-Phlx-96-02 and should be submitted by April 18, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-7508 Filed 3-27-96; 8:45 am]
BILLING CODE 8010-01-M
