[Federal Register Volume 60, Number 160 (Friday, August 18, 1995)]
[Notices]
[Pages 43177-43178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20478]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36096; File No. SR-Phlx-95-51]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to Employee
Trading Accounts
August 11, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 17, 1995, the
Philadelphia Stock Exchange, Inc. (``Phlx'' 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.
\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx Rule 751 to require employees
of member organizations to receive permission from their employer
before opening a securities trading account. Specifically, member and
participant organizations would be prohibited from carrying an account
or transaction for employees of a member or participant organization,
unless the employer consents in writing. Further, the employer would
received duplicate copies of the employees' confirmation reports and
trading account statements. The Exchange also proposes to retitle the
rule from ``Transactions for Clerks Entitled to Access to Floor'' to
``Accounts of Employees of Member or Participant Organizations.''
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 an 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
Phlx Rule 751 currently requires that a member organization
carrying the account of a clerk entitled to access the Floor of the
Exchange must receive prior approval from the Business Conduct
Committee (``BCC''). Thus, the current rule impacts floor clerks only
and does not provide for employer knowledge of a trading account.
Accordingly, the Exchange proposes to amend Phlx Rule 751 as
proposed above. The proposed language would replace BCC approval with
employer consent and expand coverage to all employees associated with a
member or participant organization. The employer also would receive
duplicate confirmations and account statements in order to effectively
monitor the employees' ongoing securities transactions. The Exchange
believes that BCC approval is an ineffective monitoring mechanism
because it provides for the initial approval for the opening of such
accounts, but has no reporting requirements that would allow for the
ongoing supervision of such accounts. Moreover, the Rule's current
application to floor clerks only does not reach non-floor employees who
are also subject to supervision requirements and for whom employee
awareness also is needed to deter and detect abuses.\2\
\2\ See Phlx Rule 748 (requiring members to supervise all
accounts handled by their registered representatives); Phlx Rule 761
(mandating that member organizations maintain written supervisory
procedures as required by the Insider Trading and Securities Fraud
Enforcement Act of 1988).
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The purpose of these changes is to bolster the requirements
respecting employee trading accounts. By increasing the employers'
awareness of its employees' trading patterns through the use of
employer consent and duplicate records relating to the account, the
Exchange believes member organizations will be able to supervise their
employees more effectively. In addition to being consistent with many
firms' current procedures, the Exchange notes that this proposal is
congruous with the rules of other self-regulatory organizations.\3\
\3\ See New York Stock Exchange Rule 407; American Stock
Exchange Rule 416; Pacific Stock Exchange Rule 9.2; and NASD Rules
of Fair Practice, Article III, Section 28.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \4\ of the
Act in general and furthers the objectives of Section 6(b)(5) \5\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, and to protect investors and the
public interest by bolstering the restrictions on employee trading
accounts and thereby improve employer supervision.
\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes 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 neither solicited nor received written comments.
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.
[[Page 43178]]
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. Sec. 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 also will be available for inspection and copying at the
principal office of the Philadelphia Stock Exchange. All submissions
should refer to File No. SR-Phlx-95-51 and should be submitted by
September 8, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20478 Filed 8-17-95; 8:45 am]
BILLING CODE 8010-01-M
