[Federal Register Volume 61, Number 151 (Monday, August 5, 1996)]
[Notices]
[Pages 40689-40690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19840]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37496; File No. SR-CBOE-96-46]
Self-Regulatory Organization: Notice of Proposed Rule Change by
Chicago Board Options Exchange, Incorporated Related to Tolling of the
Time Period for Settlement of Disciplinary Cases Pursuant to
Interpretation and Policy .01(d) Under Exchange Rule 17.8
July 30, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on July
23, 1996,\1\ the Chicago Board Options Exchange, Incorporated (``CBOE''
or the ``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 CBOE. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
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\1\ The proposal was originally filed with the Commission on
July 10, 1996. The CBOE subsequently submitted Amendment No. 1 to
the filing. Amendment No. 1 was a minor technical amendment. See
Letter from Arthur B. Reinstein, Senior Attorney, CBOE, to Karl
Varner, Staff Attorney, Division of Market Regulation, SEC, dated
July 23, 1996.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to amend Interpretation and Policy .01(d) under
CBOE Rule 17.8 (``Interpretation .01(d)''), to allow Exchange staff
thirty days to respond to a Respondent's document request before
tolling the Respondent's settlement period. The text of the proposed
rule change is available at the Office of the Secretary, CBOE and at
the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CBOE 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 CBOE 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
The purpose of the proposed rule change is to amend Interpretation
.01(d) to allow the Exchange staff thirty days to respond to a
Respondent's document request before tolling the Respondent's
settlement period.
Pursuant to CBOE Rule 17.8, after a Respondent is served with a
statement of charges for an alleged rule violation, the Respondent has
120 days to attempt to resolve the charges by submitting a written
offer of settlement. Pursuant to CBOE Rule 17.4(c), within 60 days
after a statement of charges has been served, the Respondent may make a
written request for and obtain access to all documents concerning the
case that are in the investigative file of the Exchange except for
staff investigation and examination reports and materials prepared by
the staff in connection with such reports or in anticipation of a
disciplinary hearing or other privileged materials. If such a request
is made, Interpretation .01(d) provides that this 120-day time period
shall be tolled during the number of days in excess of seven calendar
days that it takes staff to provide access to documents in response to
a Respondent's request for such access.
The proposed rule change would revise Interpretation .01(d) to
provide that the 120 day time period shall be tolled during the number
of days in excess of thirty calendar days that it takes staff to
provide access to documents in response to a Respondent's request. CBOE
has found that in most cases staff needs longer than seven days to
respond to such a request. Before providing access, Exchange staff must
review and organize the file to remove privileged documents or
information that is not discoverable and to remove information that may
identify the complainant Consequently, the 120 day settlement period is
frequently tolled under Interpretation .01(d) while staff works on
responding to the access request.
Exchange staff believes that in some instances Respondents, or
their attorneys, have requested access just to gain an extension of the
settlement period through tolling. There have been occasions where
staff has spent more than 7 days preparing the investigative file for
access, but after gaining the benefit of tolling, the Respondent
submits an offer of settlement without ever reviewing the file.
CBOE believes it is important to provide a Respondent with access
to documents in accordance with Rule 17.4(c); however, CBOE wants to
discourage access requests made for the purpose of extending the 120
day settlement period. Therefore, the proposed rule change would amend
Interpretation .01(d) to toll the 120 day settlement period only if
Exchange staff takes more than 30 days to respond to a Respondent's
request. Exchange staff believes that 30 days is generally a realistic
estimate of the amount of time needed to respond to an access request.
Since in most cases staff will be able to respond within 30 days,
access requests should not typically extend the 120 day settlement
period.
Under the proposed rule change, a Respondent will still have a
sufficient amount of time to settle the matter after obtaining the
requested documents. Even if a Respondent waits until the last day the
rules allow to file a written
[[Page 40690]]
request for documents (60 days after a statement of charges has been
served) and staff takes thirty days to respond, the Respondent still
has thirty more days to submit a settlement offer within the 120 day
time period.
It is also proposed to amend Interpretation and Policy .01 under
Rule 17.8 to deal with the situation where a Respondent has elected to
proceed in an expedited manner pursuant to Rule 17.3 in an effort to
resolve a matter by entering into a letter of consent prior to the
issuance of charges. Interpretation and Policy .01(b) under Rule 17.8
provides that if an effort to reach agreement with Exchange staff upon
a letter of consent is unsuccessful and charges are issued, any time in
excess of 30 days spent in attempting to negotiate a letter of consent
is deducted from the 120-day settlement period, but that in any event a
Respondent will always have at least 14 days after service of charges
within which to submit an offer of settlement. Under the existing
provision of Interpretation .01(d), which tolls the settlement period
after seven days when a document request has been made, assuming a
Respondent makes a document request on the first day of the 14-day
settlement period, that Respondent always has at least seven days
remaining of the 14-day settlement period after the documents are
provided within which to submit an offer of settlement. In order to
continue to provide this minimum seven day period in light of the
proposal not to commence tolling the settlement period until 30 days
after a request for documents, Interpretation .01(d) is proposed to be
amended to provide that in no event will a Respondent have less than
seven days after the receipt of requested documents within which to
submit an offer of settlement.
This proposed amendment to Interpretation .01(d) will be invoked
only if, on the day a Respondent receives the requested documents, the
time left for settlement is seven days or less. In all other
circumstances, tolling of the settlement period begins once Exchange
staff has taken more than 30 days to respond to a Respondent's document
request.
The CBOE believes that the proposed rule change is consistent with
and furthers the objectives of Section 6(b)(7) of the Act in that it
improves the Exchange's procedures for the discipline of members and
persons associated with members. The proposal reduces the potential for
delay in concluding a disciplinary case by appropriately limiting a
Respondent's ability to toll the 120 day settlement period.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
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 solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of 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 such 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 in the
Commission's Public Reference Room. Copies of all such filings will
also be available for inspection and copying at the principal office of
CBOE. All submissions should refer to File No. CBOE-96-46 and should be
submitted by August 26, 1996.
For the Commission by the Division of Market Regulation,
pursuant to the delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-19840 Filed 8-2-96; 8:45 am]
BILLING CODE 8010-01-M
