[Federal Register Volume 59, Number 139 (Thursday, July 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17760]
[[Page Unknown]]
[Federal Register: July 21, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34390; File No. SR-NYSE-94-01]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by New York Stock Exchange, Inc., Relating to Approval of Member
Organizations in Other Than Partnership or Corporate Form Under Rule
311(f)
July 15, 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 February
22, 1994, the New York Stock Exchange, Inc. (``NYSE'' 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 NYSE is proposing to amend Rule 311(f) as follows, with italics
representing the language added:
Rule 311
(f) Every member firm shall be a partnership and every member
corporation shall be a corporation created or organized under the
laws of, and shall maintain its principal place of business in, the
United States or any State thereof. 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, and to the Constitution and Rules, of the Exchange to
the same extent and degree as are any other member organizations 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 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
The Article 1, Section 3 of the NYSE Constitution states that the
term ``member organization'' includes a ``member firm'' and ``member
corporation.'' A ``member firm'' is defined as a partnership.
Recently, the Exchange has received requests from several member
organizations to permit them to reorganize as business trusts or
limited liability companies. Neither of these organizational structures
is currently specifically included in the definition of a member
organization.
The proposed amendment would enable the Exchange, in its
discretion, and on such terms and conditions as the Exchange may
prescribe, to approve business trusts,\1\ limited liability
companies,\2\ and other organizational structures as member
organizations. However, any such entity would be required to have
characteristics essentially similar to corporations or partnerships.
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\1\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 the
use and benefit of beneficiaries. Black's Law Dictionary 180 (5th
ed. 1979).
\2\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 entity's
obligations, however, the LLC is treated as a pass-through entity
for federal income tax purposes. See Robert R. Keating et al., The
Limited Liability Company: A Study of the Emerging Entity, 47 Bus.
Law. 378 (1992).
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Noncorporate or partnership entities would have to be structured in
such a format that would qualify as a broker or dealer registered with
the Commission pursuant to the Act, since this is a prerequisite to
becoming an Exchange member organization.
The NYSE staff would review each application on a case-by-case
basis as it does with all member organization applicants. However,
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.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act in that it permits registered brokers or dealers as set forth
herein to become member organizations of the Exchange.
The proposed rule change is also consistent with Section 6(b)(5) of
the Act in that it broadens the types of entities which the Exchange
may approve as a member organization and therefore avoids possible
unfair discrimination.
Finally, it is consistent with Section 6(b)(8) of the Act in that
it serves to remove possible burdens on competition resulting from
organizational structure not necessary or appropriate in furtherance of
the purposes of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
burden in 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 not solicited, and does not intend to solicit,
comments regarding the proposed rule change. The Exchange has not
received any unsolicited written comments from members or other
interested parties.
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. 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 NYSE. All
submissions should refer to File No. SR-NYSE-94-01 and should be
submitted by August 11, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17760 Filed 7-20-94; 8:45 am]
BILLING CODE 8010-01-M
