[Federal Register Volume 60, Number 78 (Monday, April 24, 1995)]
[Notices]
[Pages 20132-20133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9980]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35614; File No. SR-CHX-95-05]
Self-Regulatory Organizations; Chicago Stock Exchange,
Incorporated; Order Granting Approval to Proposed Rule Change Relating
to the Authority of the Committee on Floor Procedure
April 17, 1995.
On February 10, 1995, the Chicago Stock Exchange, Incorporated
(``CHX'' or ``Exchange'') submitted to the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend CHX Rule 3 of Article
XII to provide the Committee on Floor Procedure with the same authority
over persons associated with a member as it currently has over members.
On March 1, 1995, the Exchange submitted to the Commission Amendment
No. 1 to the proposed rule change.\3\
\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1994).
\3\See letter from David Rusoff, Foley & Lardner, to Jennifer
Choi, SEC, dated February 27, 1995. The original filing incorrectly
referenced Rule 3 of Article IV of the Exchange Rules as the rule to
be amended. Amendment No. 1 altered the proposed rule change to
reference Rule 3 of Article XII as the correct rule to be
amended. [[Page 20133]]
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The proposed rule change, including Amendment No. 1 thereto, was
published for comment in Securities Exchange Act Release No. 35449
(Mar. 7, 1995), 60 FR 13492 (Mar. 13, 1995). No comments were received
on the proposal.
At present, Rule 3 of Article XII provides the Committee on Floor
Procedure with the authority to summarily fine members and exclude them
from the Exchange premises under certain circumstances. The Rule
provides that the Committee on Floor Procedure or an appropriately
designated subcommittee has the authority to summarily fine and exclude
from the Exchange a member whose conduct is deemed to be improper and
to recommend investigations pursuant to Rule 1 of Article XII\4\
regarding any conduct on the floor of the Exchange. Specifically, any
member of the Floor Committee or a member of its appropriately
designated subcommittee may summarily fine any member for conduct
classified as Class B\5\ in an amount not to exceed $100. For conduct
classified as Class A offenses,\6\ any member of the Floor Committee or
a member of its appropriately designated subcommittee with the
concurrence of two other floor officials (floor governors if
immediately available) may summarily fine a member in an amount not to
exceed $2,500 and summarily exclude a member from the Exchange for no
longer than the remainder of the trading day.
\4\Under Rule 1 of Article XII, any default, misconduct or other
offense alleged to have been committed by a member, member
organization or any other person or organization subject to the
Exchange's jurisdiction that comes to the attention of the president
shall be investigated by the staff and a written report of such
investigation shall be made to the president. In addition, if the
president decides from such a report that such member, member
organization, or other person or organization has committed a
default or other offense in violation of the Constitution or Rules
of the Exchange, the president shall direct the staff to prefer
written charges against the accused, a copy of which will be served
upon the accused.
\5\Class B violations involve minor offenses such as dress code
and smoking violations. See .01 of the Interpretations and Policies
to Rule 3 of Article XII.
\6\Class A represents more serious violations than Class B and
includes such conduct as fighting, threatening speech, and other
conduct that is detrimental to the interest or welfare of the
Exchange. See .01 of the Interpretations and Policies to Rule 3 of
Article XII.
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For either class of offenses, a member, who has been adversely
affected by any action taken under Rule 3, except for a summary
exclusion,\7\ by any person or body, other than the full Floor
Procedure Committee, may appeal to the full Floor Procedure Committee
within five days of receiving notice of the action by making a written
request. Upon appeal, the full Floor Procedure Committee may increase
or decrease the amount of a summary fine or the length of an exclusion
from the Exchange. The Floor Procedure Committee, however, may not fine
a member in an amount in excess of $2,500 or exclude a member from the
Exchange in excess of five full business days. The decision of the
Floor Procedure Committee is deemed final with respect to any action
involving no more than a $100 fine.
\7\A member summarily excluded has the right to petition for
reinstatement after a sufficient ``cooling-off'' period has elapsed.
See .02 of the Interpretations and Policies to Rule 3 of Article
XII.
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By written request, a member may appeal a determination of the full
Floor Procedure Committee involving more than a $100 fine to the
Executive Committee. The Executive Committee will review the report of
the action as certified by the Secretary unless it decides to open the
record for additional evidence. Upon review, the Executive Committee
may increase or decrease the amount of a summary fine or the length of
an exclusion. The Executive Committee, however, may not fine a member
in an amount in excess of $2,500 or exclude a member from the Exchange
in excess of five full business days.
The Exchange proposes to amend Rule 3 and interpretation .02
thereunder to extend the application of the rule to persons associated
with a member.\8\ Therefore, under the proposed rule change, the
Committee on Floor Procedure would exercise the same authority over
members and persons associated with a member.
\8\The Exchange does not specifically define the term
``associated person'' in its Rules. For purposes of Rule 3, Article
XII, the Exchange refers to an associated person as defined in
Section 3(a)(21) of the Securities Exchange Act of 1934. Telephone
conversation with David Rusoff, Foley & Lardner, and Jennifer Choi,
Attorney, SEC, dated February 27, 1995. Section 3(a)(21) defines an
``associated person of a member'' as any ``partner, officer,
director, or branch manager of such member (or any person occupying
a similar status or performing similar functions), any person
directly or indirectly controlling, controlled by, or under common
control with such member, or any employee of such member.''
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The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the requirements of Section 6(b).\9\ The Commission
believes the proposal is consistent with the Section 6(b)(6)
requirements that the rules of an exchange provide for the appropriate
discipline of its members and persons associated with its members for
violation of the Act, the rules promulgated thereunder, or the rules of
the exchange because the rule change provides that members and persons
associated with a member may be summarily fined or excluded from the
Exchange premises for conduct that the Exchange deems improper.
Moreover, the Commission believes the proposal is consistent with the
Section 6(b)(1) requirements that an exchange have the capacity to
enforce compliance by its members and persons associated with its
members, with the provisions of the Act, the rules promulgated
thereunder, and the rules of the exchange because under the proposed
rule change, the Exchange's Committee on Floor Procedure would have the
authority to enforce compliance by members and persons associated with
a member, with the rules that it deems important in the fair
administration of the Exchange.
\9\15 U.S.C. 78f(b) (1988 & Supp. v 1993).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CHX-95-05) is approved.
\10\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9980 Filed 4-21-95; 8:45 am]
BILLING CODE 8010-01-M
