[Federal Register Volume 60, Number 83 (Monday, May 1, 1995)]
[Notices]
[Pages 21227-21228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10605]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35646; File No. SR-PSE-95-02]
Self-Regulatory Organizations; Pacific Stock Exchange Inc.; Order
Granting Approval to Proposed Rule Change Relating to Obligations for
Regulatory Cooperation
April 25, 1995.
On February 8, 1995, the Pacific Stock Exchange Incorporated
(``PSE'' 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 its rules to require
regulatory cooperation by members, member organizations, and others
over whom the Exchange has jurisdiction with certain investigations and
proceedings that are initiated by another self-regulatory organization
(``SRO'') pursuant to a regulatory agreement. On March 3, 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 Michael D. Pierson, Senior Attorney, PSE, to
Jennifer S. Choi, Attorney, Division of Market Regulation, SEC,
dated March 2, 1995. Amendment No. 1 added .02 of the Commentary to
the proposed rule change.
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The proposed rule change, including Amendment No. 1, was published
for comment in Securities Exchange Act Release No. 35497 (Mar. 15,
1995), 60 FR 14991 (Mar. 21, 1995). No comments were received on the
proposal.
The Exchange is proposing to amend Rule 10.2, relating to Exchange
[[Page 21228]] investigations to add new subsection (d) and .01 and .02
of the Commentary to require members, member organizations, persons
associated with a member or member organization, and other persons or
entities over whom the Exchange has jurisdiction pursuant to Rule
10.1(b) to testify before another SRO and to furnish information in
connection with a regulatory inquiry, investigation, examination, or
disciplinary proceeding resulting from an agreement entered into by the
Exchange pursuant to Rule 14.1.\4\ The proposed rule change would
further require these persons and entities not to impede such a
proceeding. Moreover, the proposal provides that the rule would apply
regardless of whether the Exchange initiated an investigation pursuant
to Rule 10.2(a) or a disciplinary proceeding pursuant to Rule 10.3.
\4\Rule 14.1 provides that the Exchange may enter into
agreements with domestic and foreign self-regulatory organizations
providing for the exchange of information and other forms of mutual
assistance for market surveillance, investigative, enforcement, and
other regulatory purposes.
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Under the proposed rule change, the Exchange also makes explicit
that persons or entities, required to furnish information or testimony
pursuant to a regulatory agreement, will be afforded the same rights
and procedural protections that such persons or entities would have if
the Exchange had initiated the request for information or testimony.
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\ The Commission
believes the proposal is consistent with the section 6(b)(5)
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, and, in general, to protect investors and the public
interest.
\5\15 U.S.C. 78f(b) (1988 & Supp. v. 1993).
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This proposal, which is similar to a proposal by the Chicago Board
Options Exchange, Inc. that was recently approved by the Commission,\6\
grew out of a meeting of the Intermarket Surveillance Group (``ISG'')
to coordinate more effectively surveillance and investigative
information sharing arrangements in the stock and options markets.\7\
The Commission believes that the proposed rule change achieves a
reasonable balance between the need for regulatory cooperation and
protection of the procedural rights of Exchange members and others from
whom information or testimony is requested. The rule would provide the
Exchange with the authority to seek cooperation by certain persons with
respect to inquiries and investigations resulting from regulatory
agreements between the Exchange and another SRO while explicitly
providing any person or entity required to furnish information or
testimony pursuant to the rule with the same procedural rights that
they would have if the request was pursuant to an Exchange initiated
inquiry or investigation. In furtherance of the policy to protect
procedural rights, the Exchange provides in Commentary .02 to Rule 10.2
that the Exchange will always act as an intermediary between another
SRO and the exchange member, member organization, or other designated
person from whom information or testimony is being sought for any
inquiry made pursuant to an agreement under Rule 14.1.
\6\See Securities Exchange Act Release No. 35403 (Feb. 22,
1995), 60 FR 10884 (Feb. 28, 1995) (approving File No. SR-CBOE-94-
39).
\7\The members of ISG are the American Stock Exchange, Inc., the
Boston Stock Exchange, Inc., the Chicago Board Options Exchange,
Inc., the Chicago Stock Exchange, Incorporated, the Cincinnati Stock
Exchange, Inc., the National Association of Securities Dealers,
Inc., the New York Stock Exchange, Inc., the Pacific Stock Exchange
Incorporated, and the Philadelphia Stock Exchange, Inc.
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The Commission believes that it the proposed rule change will
further the interest of the public and provide for the protection of
investors by allowing the Exchange to assist other SROs conduct prompt
inquiries into possible trading violations and other possible
misconduct. As the marketplaces become more global and interlinked, the
Commission believes that is important that the SROs coordinate their
investigatory activities to prevent fraudulent and manipulative acts
and practices in all marketplaces.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-PSE-95-02) 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\
\9\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-10605 Filed 4-28-95; 8:45 am]
BILLING CODE 8010-01-M
