[Federal Register Volume 59, Number 130 (Friday, July 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16568]
[[Page Unknown]]
[Federal Register: July 8, 1994]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34299; File No. SR-Amex-94-02]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to Rescission
of Rules 560 and 570, and Amendment of Rule 550, Commentary .02
July 1, 1994.
On February 16, 1994, the American Stock Exchange, Inc. (``Amex''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``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 rescind Rules 560 and 570, and
to amend Commentary .02 to Rule 550 to delete its reference to Rules
560 and 570.
---------------------------------------------------------------------------
\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1993).
---------------------------------------------------------------------------
The proposed rule change was published for comment in Securities
Exchange Act Release No. 33750 (March 10, 1994), 59 FR 12386 (March 16,
1994). No comments were received on the proposal.
In light of the Commission's rescission of Rule 10b-2, promulgated
under the Act,\3\ the Exchange is rescinding its Rules 560 and 570.
Rule 10b-2, adopted by the Commission in 1937, was part of a
comprehensive package of antifraud provisions.\4\ Its purpose was to
prevent persons participating in the distribution of a security from
stimulating the purchase on an exchange of such security by paying
compensation to any person for soliciting such purchases.
---------------------------------------------------------------------------
\3\See Securities Exchange Act Release No. 32100 (April 2,
1993), 58 FR 18145 (April 8, 1993).
\4\See Securities Exchange Act Release No. 1330 (August 4,
1937).
---------------------------------------------------------------------------
In 1942, the Commission amended Rule 10b-2 to permit an exemption
for special offerings under a plan filed with the Commission by an
exchange.\5\ The Amex's plan, contained in Rule 560, permits special
offerings, at a fixed price and for a fixed period of time, on the
Exchange where the quantity of stock involved cannot be absorbed in the
regular auction market within a reasonable time and at a reasonable
price. Rule 560 permits a person making a special offering to pay a
special commission to a broker for a purchasing customer.\6\
---------------------------------------------------------------------------
\5\See Securities Exchange Act Release No. 3146 (February 6,
1942).
\6\Rule 560 specifies a minimum share size of 1,000 shares, with
a value of $25,000. By today's standards, 1,000 shares of stock with
a value of $25,000 is not a quantity of stock that cannot readily be
absorbed in the regular auction market. Rule 560 predates special
Amex block trading rules, such as Rule 24, which defines a block of
stock as 10,000 shares or more.
---------------------------------------------------------------------------
In 1953, the Commission amended Rule 10b-2 to expand the scope of
its exemption by eliminating the requirements that the compensation
paid be a ``special commission.''\7\ Amex Rule 570, which permits
distributions of stock of the type addressed under Exchange Act Rule
10b-2, requires that compensation be paid in accordance with the terms
of a Commission approved plan for an exchange distribution, and that
the payer not know or have reasonable grounds to believe that
transactions violating the terms of an approved plan are taking place.
---------------------------------------------------------------------------
\7\See Securities Exchange Act Release No. 4922 (August 20,
1953).
---------------------------------------------------------------------------
In proposing the rescission of Rule 10b-2, the Commission stated
that the significant changes that have taken place in the securities
markets since Rule 10b-2's adoption, and the coverage of other
antifraud and antimanipulation provisions of the federal securities
laws, such as Rule 10b-5 and Rule 10b-6, made it appropriate to rescind
Rule 10b-2.\8\ The Exchange is rescinding Rules 560 and 570, its plans
adopted in response to Rule 10b-2, because they are obsolete. The
Exchange also is amending Rule 550 (which pertains to secondary
distributions) to delete a reference to the Special Offering and
Exchange Distribution rules.\9\
---------------------------------------------------------------------------
\8\The Commission recently issued a concept release to solicit
comments on a broad range of issues relating to antimanipulation
regulation of securities offerings under the Act, including Rule
10b-6. See Securities Act Release No. 7057, Securities Exchange Act
Release No. 33924, International Series Release No. 657 (April 19,
1994), 59 FR 21681 (April 26, 1994).
\9\The Commission approved the rescission of analogous New York
Stock Exchange rules. See Securities Exchange Act Release No. 32822
(August 31, 1993), 58 FR 47484 (September 9, 1993).
---------------------------------------------------------------------------
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the requirements of Section 6(b).\10\ In particular,
the Commission believes the proposal is consistent with the Section
6(b)(5) requirements that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts, and, in general, to protect investors and the
public interest.\11\
---------------------------------------------------------------------------
\10\15 U.S.C. 78(f) (1988).
\11\15 U.S.C. 78f(b)(5) (1988).
---------------------------------------------------------------------------
The Commission believes that the rescission of Exchange Rules 560
and 570, and the amendment to Exchange Rule 550 (which deletes any
reference to the substance of Exchange Rules 560 and 570), is
appropriate because these Exchange Rules were adopted in response to
recently rescinded Rule 10b-2 under the Act. The Commission believes
that the activities with which these Exchange rules are concerned are
sufficiently addressed by the general antifraud and antimanipulation
provisions of the federal securities laws as discussed in the
Commission's release rescinding Rule 10b-2 of the Act. Furthermore, the
Commission believes that it is consistent with the Act to allow the
Exchange to delete obsolete and redundant rules.
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Amex-94-02) is approved.
\12\15 U.S.C. 78s(b)(2) (1988).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16568 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M
