[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24947-24948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11516]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35667; File No. SR-CHX-95-06]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by The Chicago Stock Exchange, Incorporated Relating to Article
V, Rule 3, Which Pertains to the Registration and Fingerprinting of
Floor Employees, and the Imposition of an Initial Registration Fee on
Clerks
May 3, 1995.
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 March 1,
1995, the Chicago Stock Exchange, Incorporated (``CHX'' 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 (``SRO''). The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add interpretation and policies .10, .02
and.03 under Rule 3 of Article V of the Exchange's Rules and to add a
new clerk's fee.
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
Rule 3 of Article V of the Exchange's rules states that employees
of members or member organizations may not be admitted to the Floor
unless such employees are registered with and approved by the Exchange.
The registration process currently requires completion of an
application card and data sheet that call for disclosure of very
limited information. Currently, only Floor employees that accept orders
from the public and applicants for membership are required to submit a
completed Uniform Application for Securities Industry Registration or
Transfer (``Form U-4'') to the Exchange.\1\
\1\Form U-4 is used by the various securities SROs as part of
their registration and oversight of member organization personnel.
Specifically, Form U-4 is the uniform form for licensing
salespersons within the states and various SROs. An individual
applying for registration must file Form U-4 with the Central
Registration Depository (``CRD'') operated by the National
Association of Securities Dealers (``NASD''). Thereafter, the
registered person is obligated to update this information as changes
occur. The CRD is a computer data base containing current
registration information as well as the regulatory and enforcement
actions taken against securities industry personnel for access by
the Commission, state regulators and certain SROs.
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Under the proposal, all Floor employees will be required to submit
a Form U-4 in order to become registered. The Form U-4 requires
detailed disclosure of background information, including information
regarding employment and disciplinary history, and is the standard
industry form submitted to SROs for individuals required to be
registered (including securities salespersons and traders). The Form U-
4 also requires this information to be updated whenever the information
submitted becomes inaccurate or incomplete. The Exchange also has
imposed a requirement that a member (or member organization) shall
promptly give written notice of termination of a Floor employee to the
Exchange on the Uniform Termination Notice for Securities Industry
Registration (Form U-5)\2\ and concurrently provide a copy
[[Page 24948]] of such notice to the person who has been terminated.
\2\Form U-5 contains information relating to the circumstances
surrounding the termination of an applicant's prior employment, and
must be completed and submitted to the NASD, and other SROs
requiring such a submission under their respective rules, whenever a
registered employee is terminated.
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Requiring each Floor employee to submit the Form U-4 will enable
the Exchange to fulfill its regulatory responsibilities better by
identifying those individuals who are subject to a statutory
disqualification under Section 3(a)(39) of the Act.\3\ The Exchange is
required to make a determination in each case where an individual who
is subject to a statutory disqualification (e.g., is suspended or
barred by an SRO, or has been convicted of any felony or certain
enumerated misdemeanors) seeks admission to or continuance in
membership, participation in, or association with a member or member
organization. In addition, Rule 19h-1\4\ under the Act requires that
the Exchange provide detailed information to the Commission whenever it
determines to admit or continue in membership or participation or
association with a member or member organization, any person who is
subject to a statutory disqualification.
\3\15 U.S.C. 78c(a)(39) (1988).
\4\17 CFR 240.19h-1 (1994).
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Additional provisions of the proposal will require all Floor
Employees of members and member organizations and all Exchange members
to be fingerprinted and to submit such fingerprints to the Exchange for
identification, background checking, and appropriate processing. The
proposed amendments to require fingerprinting of all Exchange members
and floor clerks also will help in identifying persons who are subject
to a statutory disqualification as well as enhance overall security on
the Exchange Floor.
Fingerprinting currently is required for each partner, director,
officer or employee of broker-dealers pursuant to Rule 17f-2\5\ under
the Act, with certain exceptions. Floor clerks are not required by Rule
17f-2 to submit fingerprints because they do not physically handle
monies or securities.\6\ The Exchange, however, now has determined that
all floor members and floor employees should be fingerprinted to help
to ensure the security of the CHX staff, members, and the Exchange
facility. The requirement to fingerprint members and floor employees is
consistent with the requirements of other exchanges.\7\
\5\17 CFR 240.17f-2 (1994)
\6\See 17 CFR 240.17f-2(a)(1)(i).
\7\See, e.g., NYSE Rule 35.60 (requiring fingerprinting of all
floor employees of members and member organizations and all
employees of members and member organizations who have submitted
registration applications for admission to the floor).
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The requirements of the amended rules to submit Form U-4 and
fingerprints will apply to all current and prospective Floor employees
and members.
Finally, the proposed rule change imposes an initial registration
fee on clerks of $50.
2. Statutory Basis
The CHX believes that the proposed rule change is consistent with
Section 17(f)(2) of the Act, which requires (with certain exceptions)
fingerprinting of each partner, director, officer or employee of
broker-dealers.
The rule change also is consistent with Section 6(c)(2) of the Act
because having more comprehensive background information submitted on
Form U-4 will enable the Exchange to identify individuals who are
subject to statutory disqualification under Section 3(a)(39) of the
Act.
The rule change advances the objectives of Rule 19h-1 under the
Act, which requires detailed reporting to the Commission of the
Exchange's determination to admit to, or continue in, membership or
participation or association with a member, persons subject to
statutory disqualification.
Finally, the proposed rule change is consistent with Section
6(b)(5) of the Act, which provides, in pertinent part, that the rules
of the Exchange be designed to prevent fraudulent and manipulative
acts, to promote just and equitable principles of trade and to protect
the investing public.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose a burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
No comments were solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of 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 such 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 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 CHX. All
submissions should refer to File No. SR-CHX-95-06 and should be
submitted by May 31, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11516 Filed 5-9-95; 8:45 am]
BILLING CODE 8010-01-M
