[Federal Register Volume 59, Number 81 (Thursday, April 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-120124]
[Federal Register: April 28, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33950; File No. SR-CHX-93-33]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Approving Proposed Rule Change To Adopt Interpretation and Policy
to Exchange Rule Relating to the Filing of a Uniform Termination Notice
for Securities Industry Registration
April 21, 1994.
I. Introduction
On December 23, 1993, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``Commission'' or ``SEC''), 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 adopt Interpretation and
Policy .03 to CHX Rule 3, Article VI relating to the filing of a
Uniform Termination Notice for Securities Industry Registration (``Form
U-5''). On January 21, 1994, the CHX submitted to the Commission
Amendment No. 1 to the proposed rule change.\3\
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1991).
\3\See letter from David T. Rusoff, Attorney, Foley & Lardner,
to Louis A. Randazzo, Attorney, Office of Derivative and Exchange
Oversight, SEC, dated January 21, 1994. Amendment No. 1 made certain
clarifying amendments to the proposal.
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The proposed rule change, together with Amendment No. 1, was
noticed for comment in Securities Exchange Act Release No. 33499
(January 21, 1994), 59 FR 4127 (January 28, 1994). No comments were
received on the proposal. This order approves the proposed rule change,
including Amendment No. 1.
II. Description of the Proposal
The Exchange is adopting Interpretation and Policy .03 to CHX Rule
3, Article VI relating to the filing of a Form U-5 following the
termination of a person associated with a member.\4\ The new
Interpretation and Policy requires members for which the Exchange is
the Designated Examining Authority (``DEA'') to notify the Exchange of
the discharge or termination of any person associated with the member
by submitting to the Exchange a Form U-5 within 30 days of such
termination date. In addition, the new Interpretation and Policy
requires similar notification by other member organizations with
respect to their associated registered persons active on the Exchange
trading floor.\5\ Finally, the Interpretation and Policy requires
members to provide a copy of the notice to the person whose association
has been terminated.\6\
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\4\The Form U-5 is employed in connection with the National
Association of Securities Dealers, Inc. (NASD'') Central
Registration Depository (``CRD'') system and is used by the various
securities self-regulatory organizations (``SROs'') as part of their
registration and oversight of member organization personnel. Form U-
5 contains information relating to the circumstances surrounding the
termination of an applicant's prior employment.
\5\Conversation between David T. Rusoff, Attorney, Foley &
Lardner, and Louis A. Randazzo, Attorney, SEC, on April 5, 1994.
\6\The text of Interpretation and Policy .03 is as follows:
``Following the termination of a person associated with a member in
a registered capacity, such member shall promptly, but in no event
later than thirty calendar days after such termination, give written
notice of such termination to the Exchange on Form U-5, and
concurrently provide a copy of such notice to the person whose
association has been terminated. This requirement shall only apply
to member organizations for which the Exchange is the Designated
Examining Authority and to registered persons of other member
organizations active on the CHX trading floor.''
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The Exchange stated that requiring the submission of a Form U-5
would allow the Exchange to more precisely monitor the authority of
registered persons to act on behalf of member firms and monitor the
reasons for termination. The Exchange believes that the proposed rule
change is consistent with Section 6(b)(5) of the Act, which provides,
in pertinent part, that the rules of an exchange be designed to promote
just and equitable principles of trade, prevent fraudulent and
manipulative acts and practices, and, in general, protect investors and
the public interest.
III. Discussion
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)(5) of the Act.\7\
Section 6(b)(5) requires that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts and practices, to remove impediments to and
perfect the mechanism of a free and open market, and, in general, to
protect investors and the public interest.
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\7\15 U.S.C. 78f(b) (1988).
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The Commission believes that requiring members to report to the
Exchange on Form U-5 following the termination of an associated person
is consistent with the protection of investors and the public interest
by assisting the Exchange in its oversight of industry personnel. The
requirement for prompt submission of notices of termination should
provide the Exchange with more accurate and timely reporting of
information necessary for effective monitoring of personnel on the
Exchange floor and other persons associated with members where the CHX
is the DEA. The timely submission of this Form U-5 information should
assist the Exchange in monitoring the continuous entry, movement, and
departure of individuals associated with an Exchange member, as well as
changes in their employment histories and the reasons for the
termination. Such information will be useful to the Exchange in
carrying out its responsibilities as DEA for members. This information
also will be useful to the Exchange with respect to members where the
CHX is not the DEA, but where registered associated persons of the
member are active on the Exchange trading floor, by disclosing the
reasons for the termination of various floor personnel and ensuring
that the CHX has prompt notification of the termination.
The Commission believes that the new provision that requires a
member to provide a copy of the notice to the terminated person would
allow such terminated person an opportunity to review the statements
made on the Form U-5, which in turn, should help ensure the accuracy
and completeness of the statements made on the Form.
It is therefore ordered, pursuant to section 19(b)((2) of the
Act,\8\ that the proposed rule change (SR-CHX-93-33) is approved.
\8\15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-120124 Filed 4-26-94; 8:45 am]
BILLING CODE 8010-01-M
