[Federal Register Volume 61, Number 114 (Wednesday, June 12, 1996)]
[Notices]
[Pages 29776-29777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14906]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37281; File No. SR-Amex-96-14]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the American Stock Exchange, Inc. Relating to the Exchange
Board of Governors
June 6, 1996.
I. Introduction
On April 18, 1996, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``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 Articles II, III and XII of the Exchange
Constitution relating to the Board of Governors (``Board''). The
proposed amendments would permit the appointment of a second Vice-
Chairman, allow for the inclusion of the second highest ranking
Exchange executive officer on the Board, and permit certain Governors
to be eligible for nomination to a third term. Notice of the proposed
rule change appeared in the Federal Register on April 29, 1996.\3\ No
comment letters were received on the proposed rule change. This order
approves the Amex's proposal.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 37138 (April 23,
1996), 61 FR 18765 (April 29, 1996).
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II. Description of Proposal
A. Board Position Amendments
Article II, Section 2 of the Exchange Constitution currently calls
for the appointment of one Vice-Chairman from among the Exchange
members serving on the Board, and it has been customary over the years
to alternate between the trading floor and ``upstairs'' communities as
the source of that Vice-Chairman. Given the importance of both these
communities to the Exchange, the Amex believes that it is desirable to
be able to have one Vice-Chairman from each constituency. Accordingly,
the proposed amendments will permit (but not require the appointment of
two member Vice-Chairmen, and will specify that if there are two Vice-
Chairmen, one must come from the trading floor and one from
upstairs.\4\
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\4\ Proposed Article II, Section 2 provides that the Board shall
elect ``one or more'' Vice-Chairmen of the Board. The Amex believes
that when read together with Article II, Section 3(b), it is clear
that there may be only two Vice-Chairmen. Indeed, this approval
order only permits the appointment of a maximum of two Vice-
Chairmen. The Exchange, however, has represented that it will revise
Article II, Section 2 to clarify that a maximum of two Vice-Chairmen
may be appointed. See Letter from Claudia Crowley, Special Counsel,
Legal & Regulatory Policy, Amex, to Glen Barrentine, Division of
Market Regulation, Commission, dated April 26, 1996.
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The Exchange would also like to create a new position of Executive
Vice-Chairman, who will be the second highest ranking officer of the
Exchange and who will serve as a member of the Board of Governors. The
Executive Vice-Chairman would be appointed by the Chairman of the
Board, subject to approval by the affirmative vote of a majority of the
entire Board. If the Executive Vice-Chairman position is not filled and
the Exchange has a President, then the President will serve on the
Board. If at any time neither of those offices are filled, then the
Chief Executive would be the only non-elected \5\ member of the Board.
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\5\ The term ``non-elected'' in this context means not elected
by the membership. The Chief Executive, or Chairman of the Board, is
elected by the Board of Governors. See Amex Constitution, Article
II, Section 2.
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B. Third Term Amendment
It has become apparent to the Exchange that at times the special
limitations in the Constitution relating to which kind of Governors can
serve third terms at any given time could be a limitation on having the
best possible slate of public Governor candidates. Accordingly, it is
proposed that the Exchange increase from two to three the maximum
number of third term Governors who can be representatives of the
public. There is no change to the overall limitation that no more than
four third-term Governors may be serving at one time.
C. Committee Amendments
The Exchange is also proposing to amend Article XII, Section 2 of
the Exchange Constitution, Composition of the Emergency Committee. This
Section currently provides that the Emergency Committee is to be
composed of the Chairman of the Board of Governors, the Vice-Chairman
of the Board, and the three senior members of the Board who are
regular, options principal, associate or allied members of the
Exchange. The proposed amendment would change the composition of the
Committee such that any Executive Vice-Chairman or President would be
on the Committee. Moreover, if there are two Vice-Chairmen, both would
serve on this Committee.
Finally, the Exchange is proposing to amend Article II, Section
4(a) of the Constitution, Executive Committee, to ensure that if there
are two Vice-Chairmen, both are included on the Executive Committee.
[[Page 29777]]
III. Discussion
The Commission finds that the proposed rule changes are consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange and,
specifically, with the requirements of Section 6(b).\6\ In particular,
the Commission believes that the proposal is consistent with Sections
6(b)(3) and 6(b)(5) of the Act, respectively, in that is assures fair
representation of exchange members in the selection of its directors
and administration of its affairs,\7\ and is consistent with the
protection of investors and the public and with the maintenance of fair
and orderly markets.\8\
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\6\ 15 U.S.C. Sec. 78f(b).
\7\ 15 U.S.C. Sec. 78f(b)(3). Section 6(b)(3) of the Act also
provides that one or more directors be representative of issuers and
investors and not associated with a member of the exchange or a
broker-dealer. Article II, Section 1(a)(2) of the Amex Constitution
provides that at least 12 Board members must be representatives of
the public. This rule proposal does not change this requirement in
the Exchange Constitution.
\8\ 15 U.S.C. Sec. 78f(b)(5).
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More specifically, the Commission finds that the Amex's proposal to
permit the appointment of two member Vice-Chairmen, one from the
trading floor and one from the upstairs community, serves to codify the
Exchange's custom of equal representation between upstairs members and
floor members and is, therefore, consistent with the fair
representation requirement of Section 6(b)(3).
Regarding the creation of the Executive Vice-Chairman position, the
Commission believes that this should permit the Exchange to improve the
administration of its affairs, and is thus consistent with Section
6(b)(3).
With respect to increasing from two to three the maximum number of
third term Governors who can be representatives of the public, the
Commission believes that the proposal appropriately balances the
Exchange's competing interests of needing to retain certain governors
with special levels of expertise on its Board, while at the same time
continuing to promote diversity of Board representation among the
different categories of member firms and, more importantly, the public.
The Commission notes that the Exchange will continue to have a
prohibition against more than four governors serving a third term and
that this should ensure continued diversity of viewpoints on the
Exchange's Board, while giving the Exchange the flexibility to extend
the number of terms of its public Board members for sound business
reasons.
Finally, the Commission believes that the changes to the Emergency
Committee and the Executive Committee are appropriate in light of the
creation of the Executive Vice-Chairman and additional Vice-Chairman
positions. In this regard, the Commission believes that these changes
do not substantially alter the composition of these Committees.
Accordingly, the Commission believes that the proposal is consistent
with the requirements of Sections 6(b)(3) and 6(b)(5) of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-Amex-96-14) is approved.
\9\ 15 U.S.C. Sec. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-14906 Filed 6-11-96; 8:45 am]
BILLING CODE 8010-01-M
