[Federal Register Volume 59, Number 136 (Monday, July 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17349]
[[Page Unknown]]
[Federal Register: July 18, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34353; File No. SR-CHX-94-17]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Stock Exchange, Inc. Relating to New
Organizational Structures.
July 12, 1994.
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 July 7,
1994, the Chicago Stock Exchange, Inc. (``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. 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 CHX proposes to submit the following rule proposal to amend
Article II, Section 1 of the Exchange's Constitution, and amend Article
I, Rule 1 of the Exchange's rules. The CHX proposes the following
changes:\1\
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\1\With respect to the following language, brackets indicates
material to be deleted and italicizing indicates new material.
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CONSTITUTION
Article II
Membership
Number and Ownership of Members
Sec. 1. The number of equity memberships shall not exceed 465.
Memberships may be owned by individuals, partnerships, [and]
corporations and other organizations, under such conditions and
qualifications as shall be prescribed in the Rules of the Exchange
(these and all other Rules of the Exchange adopted by the Board of
Directors being hereinafter referred to as the ``Rules'').
RULES
Article I
Rule 1. An applicant for membership shall meet, and a member shall
continue to meet, the following basic qualifications:
Citizenship, Age, and Form of Organization
(a) If an individual, an applicant or member shall be of an age so
as to be responsible for his or her contracts under the laws of the
State or Country in which he or she engages in the securities business.
If a partnership, an applicant or member shall have at least two
general partners. If a corporation, an applicant or member shall be
organized under the laws of one of the states of the United States,
under the Canada Corporations Act or the incorporation statute of a
Canadian province, or under a comparable statute of such other Country
in which the corporation is domiciled. The Exchange may, in its
discretion, and on such terms and conditions as the Exchange may
prescribe, approve as a member organization entities that have
characteristics essentially similar to corporations, partnerships or
both. Such entities, and persons associated therewith, shall, upon
approval, be fully, formally and effectively subject to the
jurisdiction of, and to the Constitution and Rules of, the Exchange to
the same extent and degree as are any other members organized as a
corporation or partnership and persons associated therewith.
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 governing 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
The purpose of the proposed change is to amend the Exchange's
Constitution and rules relating to the admission of entities with new
organizational structures as members. Specifically, the proposed
amendments permit the Exchange, in its discretion, and on such terms
and conditions as the Exchange may prescribe, to approve business
trusts,\2\ limited liability companies\3\ or other organizational
structures as member organizations so long as the characteristics of
the entity in question are essentially similar to those of corporations
or partnerships. Currently, memberships on the Exchange can be owned by
individuals, partnerships and corporations.\4\ Recent changes to state
corporate laws, however, have expanded the types of organizational
structures available. This change merely permits these new
organizational structures to qualify for Exchange membership if the
Exchange deems it appropriate.\5\
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\2\The term ``business trust'' is generally used to describe a
trust in which the managers are principals, and the shareholders are
cestuis que trust. The essential attribute is that property is
placed in the hands of trustees who manage and deal with it for use
and benefit of beneficiaries. Black's Law Dictionary 180 (5th ed.
1979).
\3\A limited liability company (``LLC'') combines various
characteristics of both corporations and partnerships. For example,
an LLC is a non-corporate entity under which neither the owners nor
those managing the business are personally liable for the entities
obligations, however, the LLC is treated as a pass-through entity
for federal income tax purposes. See Robert R. Keatinge et al., The
limited Liability Company: A Study of the Emerging Entity, 47 Bus.
Law. 378 (1992).
\4\The Exchange stated that noncorporate or partnership entities
would have to be structured in such a format that would qualify as a
broker or dealer registered with the SEC pursuant to the Act, since
this is a prerequisite to becoming an Exchange member organization.
Telephone conversation between David Rusoff, Attorney, Foley &
Lardner, and Louis A. Randazzo, Attorney, SEC, on July 11, 1994.
\5\The Exchange stated that CHX staff would review each Exchange
member organization application on a case-by-case basis, and prior
to approving any such organization for membership, the staff would
have to be satisfied that: (1) The Exchange would legally have
appropriate jurisdiction over such an entity; and (2) the permanency
of the entity's capital is consistent with that required of other
member organizations. Telephone conversation between David Rusoff,
Attorney, Foley & Lardner, and Louis A. Randazzo, Attorney, SEC, on
July 11, 1994.
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(2) Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act in that it is designed to promote just and equitable principles of
trade, to remove impediments and to perfect the mechanism of a free and
opened market and a national market system, and, in general, to protect
investors and the public interest.
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.
C,. Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
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 other 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. Person 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 Room, 450 Fifth Street, NW., Washington,
DC 20549. Copies of the 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-94-17 and should be submitted by August 8,
1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
[FR Doc. 94-17349 Filed 7-15-94; 8:45 am]
BILLING CODE 8010-01-M
