[Federal Register Volume 61, Number 43 (Monday, March 4, 1996)]
[Notices]
[Pages 8319-8321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4888]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36884; File No. SR-Amex-96-02]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange,
Inc. Relating to a Gratuity Fund Interpretation
February 23, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 16, 1996 the
American Stock Exchange, Inc. (``Amex'' 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.
\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Board of the American Stock Exchange, Inc. has made an
interpretation of Article IX of the Exchange Constitution with respect
to the Gratuity Fund eligibility of individuals who inherited their
regular memberships.
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 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.
[[Page 8320]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Effective May 16, 1995, the Commission approved various amendments
to the Exchange Constitution and Rules relating to the Gratuity
Fund.\2\ These changes, among other things, include options principal
members and options principal and regular member lessees in the
Gratuity Fund, increase the Gratuity Fund benefit to $125,000, subject
to a ``phase-in'' schedule for new Gratuity Fund Participants
(``Participants''), and include a two-year ``active'' requirement for
participation.\3\ The changes also include a grandfathering provision,
which provides that all individuals who were regular members or regular
member lessors on June 10, 1993 are grandfathered with respect to the
``active'' requirement (i.e., they are deemed to have met it, even
though they were never active for a two-year period).\4\
\2\ See Securities Exchange Act Release No. 35723 (May 16,
1995), 60 FR 27353 (May 23, 1995) (Order approving File No. SR-Amex-
95-08).
\3\ Id.
\4\ Individuals who owned options principal memberships on May
16, 1995 were given a one-time opportunity to elect to ``opt-in'' or
``opt-out'' of the Gratuity Fund, and those who choose to ``opt-in''
are grandfathered with respect to the ``active'' requirement as
well. See Securities Exchange Act Release No. 36585 (Dec. 13, 1995),
60 FR 65701 (Dec. 20, 1995) (Order approving File No. SR-Amex-95-
49). An election to ``opt-out'' is irrevocable for the rest of the
person's life, unless he or she subsequently buys a regular
membership. Id. In addition, those individuals who were either
regular or options principal member lessees on May 16, 1995 have the
right to ``opt-out'' of the Gratuity Fund for the duration of their
lease. Id.
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Except for those who are grandfathered, inactive owners of
memberships are not Gratuity Fund Participants, and thus are generally
not subject to assessments upon the death of a Participant.\5\ The
Constitution, however, does require that each membership pay at least
one assessment upon the death of a Gratuity Fund Participant.\6\
Accordingly, a non-Participant does have to pay an assessment when
there is no lessee or nominee on the seat who is a participant.\7\
\5\ Inactive members are those that do not meet all Exchange
requirements to be active on the Floor. See Para. 9176 of the Amex
Guide (``Membership Requirements and Admissions Procedures'').
\6\ See Amex Constitution, Article IX, Section 4.
\7\ Id.
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An ambiguity arose making it appropriate to interpret these
provisions. Pursuant to Article II, Section 2 of the Exchange
Constitution, the Exchange's Board of Governors has the authority to
interpret the Exchange Constitution and Rules.
It has for many years been the case that an individual who
inherited a regular seat (after collecting a Gratuity Fund benefit)
would not be eligible to participate in the Gratuity Fund himself or
herself unless he or she fulfilled all membership requirements (except
taking the Floor examinations), including paying the $2,500 transfer
fee. This was considered analogous to the beneficiary selling the
inherited seat and purchasing a new one.\8\
\8\ It is the Exchange's understanding that the New York Stock
Exchange treats individuals who inherit memberships in the same
manner.
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There are currently ten beneficiaries who inherited their
memberships prior to June 10, 1993, and chose to retain the memberships
and lease them out. Of the ten, five beneficiaries qualified for
membership and paid the $2,500 transfer fee, and five did not. The five
who did not take steps to qualify for membership and pay the $2,500
transfer fee were still required to pay a Gratuity Fund assessment
every time that a regular member or regular member lessor died.\9\
\9\ Note that under the new rules, the ambiguity being dealt
with here is not likely to arise. Pursuant to Article IX, Section
23(a), an individual must be a regular member or regular member
lessor on June 10, 1993 to be grandfathered from the requirement
that one must have been an ``active'' member to be a Gratuity Fund
Participant. A previously active exchange member, however, would
again become a participant in the Gratuity Fund upon becoming a
lessor so long as no more than five years has elapsed since such
individual last participated in the fund. Typically, however, it can
be expected that those who inherit seats upon the death of the owner
will not have previously been active Exchange members themselves, so
that if they hold on to the seats as owners they will not be
eligible to be Participants under the new rules, and thus will not
be subject to assessments unless there is no lessee or nominee
Participant on the seat.
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The question has now arisen whether the beneficiaries who did not
take steps to qualify for membership must still pay Gratuity Fund
assessments in light of the Gratuity Fund provisions which were adopted
in May 1995.\10\ It is arguably inappropriate for the Exchange to
continue to assess these non-Participants for contributions since other
non-Participants do not have to pay assessments if there is a
Participant affiliated with a seat.
\10\ See Securities Exchange Act Release No. 35723, supra, note
2.
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On December 14, 1995 the Exchange's Board of Governors adopted an
interpretation of Article IX of the Exchange Constitution regarding the
situation described above. This interpretation provides that the
Exchange will continue to take the position that each of the five
individuals is not a Gratuity Fund Participant, but that the Exchange
should treat them equally with other owners who are non-Participants,
and not subject them to assessments, so long as the membership is
leased to (or has a nominee who is) a Participant in the Gratuity Fund.
This interpretation is retroactive to May 16, 1995, the date that the
new rules were implemented.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\11\ in general and furthers the objectives of Section 6(b)(5) \12\ in
particular in that it is designed to promote just and equitable
principles of trade and to protect investors and the public interest.
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not 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
The foregoing rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule and, therefore, has become effective
pursuant to Section 19(b)(3)(A) of the Act \13\ and subparagraph (e) of
Rule 19b-4 thereunder.\14\
\13\15 U.S.C. 78s(b)(3)(A).
\14\17 CFR 240.19b-4.
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At any time within sixty days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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, N.W.,
[[Page 8321]]
Washington, D.C. 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. Sec. 552, will
be available for inspection and copying at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such filing also will be available for inspection and copying
at the principal office of the American Stock Exchange. All submissions
should refer to File No. SR-Amex-96-02 and should be submitted by March
25, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
\15\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-4888 Filed 3-1-96; 8:45 am]
BILLING CODE 8010-01-M
