[Federal Register Volume 63, Number 143 (Monday, July 27, 1998)]
[Notices]
[Pages 40150-40151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19984]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40229; File No. SR-NYSE-98-20]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to an
Interpretation of Article IV, Section 14 of the Exchange Constitution
July 17, 1998.
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 10,
1998, 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 Exchange proposes to interpret Article IV, Section 14 of the
Exchange Constitution to provide that decisions of the Director of
Arbitration regarding jurisdiction and hearing situs are not subject to
review by the Exchange's Board of Directors.
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 its 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 resolution is to interpret Article IV,
Section 14 of the Exchange Constitution so that decisions of the
Director of Arbitration on issues of jurisdiction and hearings situs
are not subject to review by the Exchange's Board at the request of a
member, member organization, allied member or approved person. This
section of the Exchange Constitution provides that where the Board has
delegated its powers to an officer or employee, ``a member, member
organization, allied member of approved person affected by a decision
of any officer or employee * * * may require a review by the Board of
such decision.'' No explicit exception is made for actions taken by the
Director of Arbitration. Moreover, this provision is not applicable to
persons other than members, member organizations, or allied members of
approved persons affected by a decision of the Director of Arbitration.
However, Exchange Rule 621 and applicable law provide for the review of
the Director's decisions by arbitrators or the courts. In addition, the
Board has the authority to interpret the Constitution.\1\
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\1\ Article IV, Section 13.
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The Director of Arbitration is ``charged with the duty of
performing all ministerial duties in connection with matters submitted
for arbitration.'' \2\ These duties include making the initial
decisions regarding jurisdiction and hearing situs.\3\ Exchange Rule
613 deals with the situs of a hearing and provides that ``[t]he time
and place for the initial hearing shall be determined by the Director
of Arbitration and each hearing thereafter by the arbitrators.''
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\2\ Exchange Rule 635.
\3\ Exchange Rules 600 and 613.
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Article XI, Section 1 of the Exchange Constitution and Exchange
Rule 600 establish the jurisdiction of the Exchange's arbitration
forum.\4\ When a claim is submitted for arbitration at the Exchange,
the Director of Arbitration, as part of the ``ministerial duties in
connection with matters submitted for arbitration,'' determines whether
the claim submitted falls within the parameters of the Exchange's
jurisdiction.
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\4\ ``Any controversy between parties who are members, allied
members or member organizations and any controversy between a
member, allied member or member organization and any other person
arising out of the business of such member, allied member or member
organization, or the dissolution of a member organization, shall at
the instance of any such party, be submitted for arbitration in
accordance with the provisions of this Constitution and such rules
as the Board may from time to time adopt.'' (Article XI, Sec. 1).
``Any dispute, claim or controversy between a customer or non-
member and a member, allied member, member organization and/or
associated person arising in connection with the business of such
member, allied member, member organization and/or associated person
in connection with his activities as an associated person shall be
arbitrated under the Constitution and Rules of the New York Stock
Exchange, Inc. as provided by any duly executed and enforceable
written agreement or upon the demand of the customer or non-
member.'' Exchange Rule 600.
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The arbitrators are empowered to interpret and determine the
applicability of all provisions of the Arbitration Rules \5\ and
thereby the Exchange believes they can overturn decisions of the
Director of Arbitration regarding situs of he first hearing. Decisions
of the Director Arbitration regarding jurisdiction are subject to
review by the courts.\6\
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\5\ See Exchange Rule 621.
\6\ Spear, Leeds & Kellogg v. Central Life Assurance Co., 85
F.3d 21 (2d Cir. 1996).
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The NYSE notes that in the past, members have requested, and the
Board has granted, review of the Director of Arbitration's decisions on
jurisdiction and hearing situs.
The Exchange notes that interlocutory procedural decisions are
rarely appealable in judicial and arbitral
[[Page 40151]]
processes. Generally, they are reserved for consideration as part of
any overall review of the lowest court's or arbitrator's decision. This
reservation occurs in part because interlocutory appeals are frequently
employed by parties simply to gain tactical advantage in the dispute.
In addition, a substantive resolution of the conflict will often moot
the procedural issues.
Inasmuch as this review by the Board of staff action is in the
nature of an interlocutory appeal, the arbitrators and the courts may
subsequently review the Board's decision. This may result in an
unnecessary delay in the final resolution of an arbitration claim.
The Exchange notes that as a matter of statutory interpretation,
when two statutes speak to the same subject matter, and one is general
and the other is specific, the specific is usually interpreted to
qualify or control the general. In this case, the Exchange Constitution
and Rules, as well as the statutory framework within which alternative
dispute resolution processes operate, create a specific scheme for
review of administrative decisions of the Director of Arbitration.\7\
The Exchange believes that this specific scheme obviates the need for
review of the Director's decisions under the Exchange Constitution's
general scheme for Board review of staff actions. Accordingly, the
Exchange believes it is well within the norms of statutory construction
for the Board to interpret the specific scheme for the review of the
decisions of the Director to displace the general scheme.
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\7\ See NYSE Rule 621; see also Federal Arbitration Act, 9
U.S.C. 1 et seq.
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2. Statutory Basis
The Exchange believes that the proposed change is consistent with
Section 6(b)(5) of the Act \8\ in that it promotes just and equitable
principles of trade by insuring that members and member organizations
and the public have a fair and impartial forum for the resolution of
their disputes.
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\8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the publication of this notice is 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, 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, 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. Copies of such filing will also be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-NYSE-98-20 and
should be submitted by August 17, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-19984 Filed 7-24-98; 8:45 am]
BILLING CODE 8010-01-M
