[Federal Register Volume 60, Number 162 (Tuesday, August 22, 1995)]
[Notices]
[Pages 43630-43631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20771]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36108; File No. SR-Phlx-95-49]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto by Philadelphia Stock Exchange, Inc.
Relating to Fingerprinting Requirements
August 16, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), \1\ notice is hereby given that on July 3, 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. On July 25, 1995,
the Exchange filed Amendment No. 1 to request that its minor rule
violation plan be amended to incorporate the rule proposed herein. \2\
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).
\2\ See letter from Gerald O'Connell, First Vice President,
Phlx, to Glen Barrentine, Team Leader, Division of Market
Regulation, SEC, dated July 24, 1995.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange, pursuant to Rule 19b-4 of the Act,\3\ proposes to
adopt Phlx Rule 623, Fingerprinting, as well as a corresponding Floor
Procedure Advice (``Advice'') F-25, Fingerprinting Floor Personnel.
Specifically, Phlx Rule 623 would require member organizations to
comply with Section 17(f)(2) of the Act. \4\ In addition, applicants
for membership also must be fingerprinted, as part of the Phlx's
membership application process. The Rule would further require member
organizations to submit fingerprints to the Exchange for processing.
The text of the proposed rule change is available for inspection at the
locations specified in Item IV below.
\3\ 17 CFR 240.19b-4.
\4\ 15 U.S.C. 78q(f)(2).
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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. 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 proposal is to incorporate the requirements of
Section 17(f)(2) of the Act, \5\ and Rule 17f-2 \6\ thereunder into the
Phlx's rules. The Exchange believes that including the Commission's
fingerprinting
[[Page 43631]]
requirement in the Phlx's rules should facilitate compliance by
providing Exchange members with ready reference to the requirement and
deter future violations.
\5\ Id.
\6\ 17 CFR 240.17f-2.
Proposed Phlx Rule 623 appears in the registration rules \7\ and
would require all Exchange members and clerks to be fingerprinted,
pursuant to Rule 17f-2.\8\ Because Commission provisions spell out who
must be fingerprinted as well as the exemptions from this requirement,
the Exchange did not recopy those provisions into its rules. Instead,
the proposed Exchange rule serves as a reminder and provides a citation
to the detailed requirement. The Exchange notes that its proposal is
similar to the rules of other exchanges.\9\
\7\ See, e.g., Phlx Rule 600, Addresses of Members, and Phlx
Rule 604, Registration and Termination of Registered
Representatives.
\8\ 17 CFR 240.17f-2.
\9\ See, e.g., New York Stock Exchange Rule 35, Supplementary
Material .60.
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Phlx Rule 623 also would expressly apply to applicants for Exchange
membership. Because the Commission requires an employee to be
fingerprinted prior to commencing the duties requiring fingerprinting,
fingerprinting usually occurs at the application stage. Therefore,
potential Phlx members are currently fingerprinted as part of the
application process. Specifically, once an applicant has filed an
application with the Exchange's Office of the Secretary pursuant to
Phlx By-Law Article XII, Section 12-4, clearance procedures are
conducted to verify personal data and financial viability. Fingerprints
are taken by the Exchange's Security Department, which processes them
for submission to the Federal Bureau of Investigations (``FBI'');
returned fingerprint reports are forwarded to the member organizations
for record retention in accordance with Rule 17f-2(d).\10\
\10\ 17 CFR 240.17f-2(d).
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Generally, Phlx Rules 900-942 govern membership and admission to
membership; Phlx Regulation 2 (Order and Decorum Regulations
administered pursuant to Phlx Rule 60) governs access to the trading
floor by applicants. Pursuant to proposed Phlx Rule 623, the member
organization is responsible for ensuring that the fingerprinting
requirement is met prior to the applicant or employee performing the
functions listed in Rule 17f-2.\11\ Thus, in lieu of citing applicants
themselves, the member organization sponsoring the applicant for
membership would be cited for violations for the proposed requirement.
\11\ 17 CFR 240.17f-2.
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Additionally, the fingerprint requirement also would be
incorporated as a Floor Procedure Advice, such that a minor rule plan
citation could be issued.\12\ For example, if, during the course of an
examination,\13\ staff discovers that an Exchange member or non-exempt
employee had not been fingerprinted, a citation could be immediately
issued. The issuance of a citation should alleviate situations where
fingerprint maintenance is a recurring problem, because violations by a
member or participant organization would result in escalating fines,
and, eventually, disciplinary action by the Exchange's Business Conduct
Committee (``BCC''). The Exchange believes this type of violation is
appropriate for the minor rule plan because it is objective and, thus,
violations are readily subject to verification.
\12\ The Phlx's minor rule violation enforcement and reporting
plan (``minor rule plan''), codified in Phlx Rule 970, contains
floor procedure advice with accompanying fine schedules. Rule 19d-
1(c)(2), 17 CFR 240.19d-1(c)(2), authorizes national securities
exchanges to adopt minor rule violation plans for summary discipline
and abbreviated reporting; Rule 19d-1(c)(1), 17 CFR 240.19d-1(c)(1),
requires prompt filing with the Commission of any final disciplinary
actions. However, minor rule violations not exceeding $2,500 are
deemed not final, thereby permitting periodic, as opposed to
immediate reporting.
\13\ The Exchange reviews for compliance with Rule 17f-2, 17 CFR
240.17f-2, during the course of examinations of both member and
participant organizations.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act \14\ in general, and in particular, with
Section 6(b)(5),\15\ in that it is designed to protect investors and
the public interest by facilitating compliance with Commission
fingerprinting requirements.
\14\ 15 U.S.C. 78f(b).
\15\ 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 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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
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 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. 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, N.W.,
Washington, D.C. 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-95-49
and should be submitted by September 12, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
\16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20771 Filed 8-21-95; 8:45 am]
BILLING CODE 8010-01-M
