[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Notices]
[Pages 32872-32873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16167]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37324 File No. SR-CHX-96-11]
Self-Regulatory Organizations; Notice of Filing of Amendment No.
3 to Proposed Rule Change by the Chicago Stock Exchange, Inc. Relating
to Examinations
June 18, 1996.
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 6,
1996, the Chicago Stock Exchange, Inc. (``CHX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
the proposed rule change, on March 18, 1996, filed Amendment No. 1 to
the proposed rule change,\1\ and on April 4, 1996, filed Amendment No.
2 to the proposed rule change.\2\ The original filing, as amended by
Amendment No. 1 and Amendment No. 2, was published for comment in
Securities Exchange Act Release No. 37067 (April 4, 1996), 61 FR 16274
(April 12, 1996). On June 3, 1996, the Exchange submitted to the
Commission Amendment No. 3 to the proposed rule change.\3\ The proposed
rule change, as amended, is described in Items I, II and III below,
which Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ See Letter from David T. Rusoff, Foley & Lardner, to Elisa
Metzger, SEC dated March 14, 1996 (``Amendment No. 1'').
\2\ See Letter from Charles R. Haywood, Foley & Lardner, to
Elisa Metzger, SEC dated April 4, 1996 (''Amendment No. 2'').
\3\ See Letter from David Rusoff, Foley & Lardner, to Elisa
Mezger, SEC dated May 31, 1996 (``Amendment No. 3'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
In the original filing as amended by Amendments Nos. 1 and 2, the
Exchange proposed to amend Rules 2 and 3 of Article VI (and the
interpretations and policies thereunder) to clarify existing rules,
adopt a new Floor Membership Exam, adopt a new Market Maker Exam, adopt
a new Co-Specialist Exam, and adopt examinations applicable to persons
conducting a customer business from the CHX trading floor. The Exchange
also proposed to adopt the Content Outline for the Examination Module
for Floor Members Engaged in a Public Business with Professional
Customers and the Content Outline for the Examination Module for Floor
Clerks of Members engaged in a Public Business with Professional
Customers (collectively, the ``Content Outline'').\4\ Finally, the
Exchange proposed technical changes to Rule 2 of Article VI,
Registration and Approval of Member and Member Organization Personnel,
including a definition of ``control person.'' Amendment No. 3 clarifies
the proposed amendments to Rule 2 of Article VI.
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\4\ The Exchange will use the Series 7A Examination that was
approved in Securities Exchange Act Release No. 32698 (July 29,
1993), 58 FR 41539 (File No. SR-NYSE-93-10). The Exchange will use
the Series 7B Examination that was approved in Securities Exchange
Act Release No. 34334 (July 8, 1994) 59 FR 35964 (File No. SR-NYSE-
94-13). The Series 7A and 7B Examinations for CHX members will be
administered by the National Association of Securities Dealers, Inc.
(``NASD'').
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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 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 Section 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
As amended, the proposed rule change clarifies current Exchange
requirements for registering personnel and makes technical changes to
the registration procedure. The proposed rule change adds a definition
of ``control person'' to Article VI, Rule 2 and specifies that all such
persons at members and member organizations must be acceptable to the
Exchange. A ``control person'' is defined as:
[A] person with the power, directly or indirectly, to direct the
management or policies of a company whether through ownership of
securities, by contract or otherwise, and at a minimum, means all
directors, general partners or officers exercising executive
responsibility (or having similar status or functions), all persons
directly or indirectly having the right to having the power to sell
or direct the sale of 5% or more of a class of voting securities, or
in the case of a partnership, having the right to received upon
dissolution, as having contributed, 5% or more of the capital.
In the original filing, the proposed amendment required that all
control persons and certain shareholders be acceptable to the Exchange.
Amendment No. 3 deleted the reference to ``certain shareholders'' and
amended the definition of ``control person'' to include those persons
who directly or indirectly have the right to vote or sell 5% or more of
a class of voting security, as opposed to 10% or more of a class of
voting security. Amendment No. 3 also clarified that in the case of a
partnership, a ``control person'' would include those persons who have
the right to receive upon dissolution, as having contributed 5%, as
opposed to 10%, or more of the capital.
Rule 2 of Article VI States that ``[e]very other employee of a
member or member organization must also be
[[Page 32873]]
acceptable to the Exchange.'' Amendment No. 3 explains the application
of the standard ``acceptable to the Exchange'' to control persons. In
the proposed rule change, the Exchange will apply the ``acceptable to
the Exchange'' standard to control persons in the same manner as it has
applied that standard to employees of members or member organizations
in the past since the rule was first adopted. While the Exchange has
not had to exercise this standard in recent years, the Exchange might
apply it if, for example, a prospective employee or control person is
subject to a statutory disqualification or if the person, while not
subject to a statutory disqualification, is barred from the banking
industry because he or she stole from customers.
In the original filing, the proposed amendments to Rule 2 of
Article VI stated that upon notice to a member or member organization
that the President of the Exchange has withheld or withdrawn approval
of the employment of any other person, the relationship between the
member or member organization and such person shall be terminated.
Amendment No. 3 deletes the reference to ``the employment of'' any such
other person.
Rule 2 of Article VI requires members or member organizations that
know or in the exercise of reasonable care should know that any
prospective employee is subject to one or more statutory
disqualifications to submit details on such prospective employee to the
Exchange and receive Exchange approval before such person becomes
associated with the member or member organization. Rule 2 also requires
that each member or member organization take reasonable care to
determine the existence of a statutory disqualification prior to
employing any prospective employee. Further, if any person already
employed by a member or member organization thereafter becomes subject
to a statutory disqualification, notice must be sent to the Exchange
promptly. Amendment No. 3 clarifies that these provisions are
applicable to control persons as well as employees of members or member
organizations.
2. Statutory Basis
The proposed rule change is consistent with section 6 of the Act in
general, and in particular, with Section 6(b)(5), in that it is
designed to promote just a equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, as well as to protect investors and the
public interest.
The proposed rule change is also consistent with Section 6(c)(3)(B)
of the Act, which provides that a national securities exchange may
examine and verify the qualifications of an applicant to become a
person associated with a member in accordance with procedures
established by the rules of the exchange, and require any person
associated with a member, or any class of such persons, to be
registered with the exchange in accordance with procedures so
established.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule 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 understands that the Commission has received comments
on SR-CHX-96-11 and Amendments Nos. 1 and 2 thereto.\5\ The Exchange
believes that issues raised by the commenter are addressed herein, and
in Amendment No. 3.\6\
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\5\ See Letters from C. Philip Curley, Attorney, Robinson Curley
& Clayton, P.C., to Jonathan G. Katz, Secretary, SEC, dated May 2,
1996 (``Comment Letters'').
\6\ The SEC notes that Amendment No. 3 was submitted in response
to the Comment Letter. The comment letter received by the SEC
regarding the CHX's proposal and Amendment No. 3 are available in
the SEC's public reference room in File No. SR-CHX-96-11.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 the 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, 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 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-96-11 and should be
submitted by July 16, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-16167 Filed 6-24-96; 8:45 am]
BILLING CODE 8010-01-M
