[Federal Register Volume 63, Number 95 (Monday, May 18, 1998)]
[Notices]
[Pages 27339-27340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13098]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34 39980; File No. SR-NYSE-98-02]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. To Include Rules 392,
460.30, 80A(b), 79A.15 and 105 in Its Minor Disciplinary Fine System
under Exchange Rule 476A
May 8, 1998.
Pursuaant to Section 19(b)(1) of the Securities Exchange Act of
1934 (``Act''),\1\ notice is hereby given that on January 20, 1998, the
New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the NYSE. On March 11, 1998, the Exchange
filed Amendment No. 1,\2\ and on April 16, 1998, the Exchange filed
Amendment No. 2.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Amendment No. 1 corrects errors in exhibits to the
Exchange's filing. See Letter from James E. Buck, Senior Vice
President and Secretary, Exchange, to Michael Walinskas, Senior
Special Counsel, Division of Market Regulation, Commission, dated
March 10, 1998.
\3\ Amendment No. 2 clarifies that the Exchange, in those
instances in which an Exchange disciplinary action is not warranted,
will issue a summary fine instead of a cautionary letter as its
first regulatory action against a specialist organization. Such fine
will be issued against the specialist member organization, which,
according to the schedule of fines contained in Rule 476A, would be
result in a fine of $1,000; the second and third regulatory actions
within a rolling 12-month period would result in fines of $2,500 and
$5,000 respectively. If a specialist member organization is issued a
fine relating to Rule 79A.15 twice within a rolling 12-month period,
the Exchange will pursue formal disciplinary proceedings under Rule
476 when continued poor performance during that rolling 12-month
period warrants such action. See letter from Robert J. McSweeny,
Senior Vice President, Market Surveillance, NYSE, to Katherine A.
England, Division of Market Regulation, SEC, dated April 16, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change would revise the ``List of Exchange Rule
Violations and Fines Applicable Thereto Pursuant to Rule 476A'' by
adding the failure to comply with the provisions of Rules 392,460.30,
80A(b), 79A.15 and 105. The Exchange believes it is appropriate to make
the failure to comply with the provisions of the above-named rules
subject to the possible imposition of a fine under Rule 476A
procedures.\4\
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\4\ Concurrently with the proposed rule change, the Exchange is
seeking to amend its Rule 19d-1 reporting plan for Rule 476A
violations to include the items proposed for addition to the list of
rules subject to Rule 467A. See letter from James E. Buck, Senior
Vice President and Secretary, NYSE, to Michael Walinskas, Senior
Special Counsel, Division of Market Regulation, SEC, dated January
16, 1998.
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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 NYSE 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 NYSE 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 476A provides that the Exchange may impose a fine, not to
exceed $5,000, or any member, member organization, allied member,
approved person, or registered or non-registered employee of a member
or member organization for a minor violation of certain specified
Exchange rules.
The purpose of the Rule 476A procedure is to provide for a
meaningful sanction for a rule violation when the initiation of a
disciplinary proceeding under Rule 476 would be more costly and time-
consuming than would be warranted given the minor nature of the
violation, or when the violation calls for a stronger regulatory
response than a cautionary letter would convey. Rule 476A preserves due
process rights; identifies those rule violations which may be the
subject of summary fines; and includes a schedule of fines.
In SR-NYSE-84-27, which initially set forth the provisions and
procedures of Rule 476A, the Exchange indicated in would amend the list
of rules from time to time, as it considered appropriate, in order to
phase-in the implementation of Rule 476A as experience with it was
gained.
The Exchange is presently seeking approval to add to the List of
Rules subject to possible imposition of fines under Rules 476A
procedures, failure by members or member organizations to comply with
the provisions of: (1) Rule 392 and Rule 460.30 which require
notification to the Exchange by member organizations when they are
participating in or engaging in certain activities related to an
offering of securities listed on the Exchange; (2) Rule 80-A(b) which
prohibits entry of stop orders for the remainder of any trading day on
which `'sidecar'' procedures have been invoked; (3) Rule 79A.15 on
specialists' publishing bids or offers upon receipt of limit orders;
and (4) Rule 105 and its Guidelines with respect to specialists'
specialty stock options transactions and the reporting of such
transactions.
The purpose of the proposed change to Rule 476A is to facilitate
the Exchange's ability to induce compliance with all aspects of the
above-cited rules. The Exchange believes failure to comply with the
requirments of these rules should be addressed with an appropriate
sanction and seeks Commission approval to add violations of these
requirements to the Rule 476A List so as to have a board range of
regulatory responses available. The Exchange believes that this would
more effectively encourage compliance by enabling a prompt, meaningful
and heightened regulatory response (e.g., the issuance of a fine rather
than a cautionary letter) to a minor violation of a rule.
The Exchange wishes to emphasize the importance it places upon
compliance with the above-named rules and, in particular, Rule 79A.15,
which it adopted to reflect the provisions and certain interpretations
of SEC Rule 11Ac1-4 under the Act. The Exchange recognizes that
violations of Rule 79A.15 would likely result in violations of a
Commission rule and, therefore, proposes, when a full disciplinary
action is not warranted, to issue a summary fine instead of a
cautionary letter as its first regulatory action against a specialist
organization. While the Exchange, upon investigation, may determine
that a violation of any of these rules is a minor violation of the type
which is properly addressed by the procedures adopted under Rule 476A,
in those instances where investigation reveals a more serious violation
of the above-described rules, the Exchange will provide an appropriate
regulatory response. This includes the full disciplinary procedures
available under Rule 476.
[[Page 27340]]
2. Statutory Basis
The proposed rule change will advance the objectives of Section
6(b)(6) of the Act in that it will provide a procedure whereby member
organizations can be ``appropriately disciplined'' in those instances
when a rule violation is minor in nature, but a sanction more serious
than a warning or cautionary letter is appropriate. The proposed rule
change provides a fair procedure of imposing such sanctions, in
accordance with the requirements of Sections 6(b)(7) and 6(d)(1) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rules change will
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
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, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., 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. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
NYSE. All submissions should refer to the File No. SR-NYSE-98-02 and
should be submitted by June 8, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-13098 Filed 5-15-98; 8:45 am]
BILLING CODE 8010-01-M
