[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: 94-16572]
[[Page Unknown]]
[Federal Register: July 8, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34301; File No. SR-NYSE-94-09]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by New York Stock Exchange, Inc. to Amend Rule 321 to Clarify
the Term ``Control'' and Amend Rules 113, 122 and 321 to Delete the
Word ``Affiliate'' and Insert the Word ``Subsidiary''
July, 1, 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 March
15, 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 proposed rule change is intended to clarify the term
``control'' for purposes of Rule 321 and to delete the word
``affiliate'' and insert the word ``subsidiary'' in Rules 113, 122 and
321 in order to minimize confusion and avoid potential problems which
could arise as a result of differing definitions of the term
``affiliate.''
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 Commission recently approved amendments to Exchange Rule 321
(``Formation or Acquisition of Affiliates'') as part of a rule package
designed to allow members and member organizations greater flexibility
in structuring their affiliates while maintaining appropriate
regulatory safeguards.\1\
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\1\See Securities Exchange Act Release No. 32823 (August 31,
1993), 58 FR 47164 (September 7, 1993).
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Rule 321 requires a member or member organization to obtain
Exchange approval for the formation or acquisition of an affiliate and
to comply with certain reporting and other requirements. Rule 321.10
defines ``affiliate'' as an entity engaged in a securities or kindred
business that is controlled by the member or member organization within
the meaning of Exchange Rule 2, except for paragraph (iii) of Rule 2.
As such, control would currently be presumed if a member or member
organization owns 25% or more of the voting securities of an entity or
is entitled to receive 25% or more of the net profits. Control would
currently not be presumed for purposes of Rule 321.10, if an associate
person is a director, general partner or principal executive officer of
another entity.\2\
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\2\See supra note 5 for text of proposed rule change to NYSE
Rule 321.10.
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The Exchange does not feel it is appropriate to continue to exclude
situations where a member or member organization is a general partner
of other entities from being subject to the rule. Since general partner
status represents control it should therefore be included in the
presumption of ``control'' for purposes of Rule 321. It is proposed
that Rule 321.10 be amended to exclude only Directors and Principal
Executive Officers from the presumption of control and not General
Partners.
Further, Rule 321 is, in effect, applicable only to subsidiaries
and not other types of affiliates.\3\ Some confusion as to which
entities are subject to the rule has arisen because of the word
``affiliate's'' general and often broad usage.
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\3\The term ``affiliate'' is defined in NYSE Rule 321 as ``an
entity engaged in a securities, or kindred business that is
controlled by a member or member organization * * *.''
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The Securities Act of 1933 and the Securities Exchange Act of 1934
and the rules thereunder define affiliate as follows: ``an `affiliate'
or person `affiliated' with, a specified person, is a person that
directly, or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, the person
specified.''\4\ As such, under the statutory definitions, an affiliate
can be a parent company, subsidiary or ``sister'' company, while
current Rule 321 is only applicable to subsidiaries. Similarly, the
term ``affiliate'' is used to include other than subsidiaries in the
legal and accounting fields.
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\4\See, e.g., Regulation D under the Securities Act of 1933, 17
CFR 230.501 (1993); and Regulation 12B under the Securities Exchange
Act of 1934, 17 CFR 240.12b-2 (1993).
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In order to minimize confusion and avoid potential problems which
could arise as a result of differing definitions of the term
``affiliate,'' it is proposed that Rule 321 as well as Rules 113 and
122 (that refer to an affiliate within the meaning of Rule 321) be
amended to delete the word ``affiliate'' and insert the word
``subsidiary.''\5\
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\5\The text of the proposed rule change to NYSE Rule 321.10 is
as follows, with language to be deleted in brackets and language to
be added in italics:
.10 Definition of subsidiary [affiliate].--For purposes of this
rule, the term ``subsidiary'' [``affiliate''] means an entity
engaged in a securities or kindred business that is controlled by a
member or member organization within the meaning of Rule 2 of the
Constitution and Rules. [except that it shall not include paragraph
(iii) of said Rule 2.] However, control shall not be presumed, for
purposes of this rule, merely because a member is a director or
principal executive officer of another person.
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2. Statutory Basis
The proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to the Exchange
in that the amendments are designed, in accordance with Section 6(b)(1)
of the Act, to enhance the Exchange's capacity to carry out the
purposes of the Act and to compel and enforce compliance by its members
and persons associated with its members, with the provisions of the
Act, the rules and regulations thereunder and the rules of the
Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
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 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, member
organizations 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, 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. 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-94-09 and should be
submitted by July 29, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16572 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M
