[Federal Register Volume 59, Number 65 (Tuesday, April 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8080]
[[Page Unknown]]
[Federal Register: April 5, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33824; File No. SR-NYSE-94-2]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to an
Interpretation With Respect to Rule 409 (``Statements of Accounts to
Customers'')
March 28, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 22, 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. On March 2, 1994, the
NYSE submitted to the Commission Amendment No. 1 to the proposal.\2\
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\15 U.S.C. 78s(b)(1).
\2\See letter from Patricia Dorilio, Senior Special Counsel,
Rule and Interpretive Standards, NYSE to Cheryl Dunfee, Attorney,
Exchange Branch, Division of Market Regulation, Commission, dated
March 1, 1994. This letter enclosed four new pages to the proposal.
The NYSE sent new pages 3, 4, 13, and 14 to replace those in the
original proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change consists of an interpretation with respect
to the meaning and administration of existing Exchange Rule 409
(``Statements of Accounts to Customers'').
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 aspect 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 proposed rule change is to set forth an
interpretation concerning the meaning and administration of Exchange
Rule 409 with respect to the establishment of standards for Exchange
members and member organizations holding foreign customer accounts. It
is intended that this interpretation will be published as an
Interpretation Memorandum for inclusion in the Exchange Interpretation
Handbook.
Exchange Rule 409 addresses the requirement of member organizations
to send statements of accounts and confirmations to customers. One of
the purposes of Rule 409 is to ensure that member organization's
communications to customers are sent to appropriate and/or authorized
persons.
Rule 409(b)(2) provides that customer mail (i.e. statements,
confirmations and other communications) may not be addressed to any
member, member organization or in care of an employee of any member
organization. This, in effect, prohibits the receipt and retention by a
member, member organization, registered representative or other
associated person, of customer mail. The rule, however, does permit the
Exchange to waive the rule's requirements, upon written request. The
Exchange has received requests from member organizations to permit them
to hold mail for certain foreign customers who have represented in
writing that they do not wish to receive such correspondence. Reasons
for such requests have included inefficient local mail services
(resulting in misrouted mail or opened mail) or unstable political
climates. In order to review and approve such requests, the Exchange
has established guidelines. The Exchange is proposing this written
interpretation to codify the procedures and standards for reviewing
requests from member organizations to hold foreign customer mail.
The proposed interpretation provides that the Exchange will
consider written requests from members and member organizations for the
implementation of procedures for temporarily holding foreign customer
mail. Such requests will be required to provide certain details and
representations concerning supervisory procedures that the member or
member organization will have in place with respect to holding mail.
Specifically, members and member organizations will be required to
obtain, at least on an annual basis, a written request from the
customer to have mail temporarily held at the premises of the firm and
providing appropriate reasons for such request. Additionally, the
organization's written procedures must address, at a minimum that: such
accounts will receive frequent supervisory review with special
attention given to discretionary accounts; the communications will be
reviewed annually by the compliance/internal audit department or by
person(s) delegated such responsibility pursuant to Exchange Rule 342
(independent of the branch), and such review will include a test that
the communications are held pursuant to written customer instructions;
a log of the communications will be maintained which shows the date of
transmittal of the communications to the customer; and that endeavors
will be made to orally communicate the substance of the communications
directly to the customer and that a written record is kept of all
meetings and conversations with the customer.
The Exchange believes that this proposed interpretation will give
members and member organizations the flexibility to hold mail upon
customer request, while providing appropriate safeguards through
enhanced supervisory procedures.
2. Statutory Basis
The proposed rule change is consistent with the requirements of
Section 6(b)(5) of the Act, which requires that the rules of the
Exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and in
general, to protect investors and the public interest, in that it
establishes standards that enable members and member organizations to
meet customer requests yet provide customer protection through
appropriate monitoring and supervision.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal does not impose any 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
Comments were neither solicited nor received.
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, 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. 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-94-2 and should be
submitted by April 26, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8080 Filed 4-4-94; 8:45 am]
BILLING CODE 8010-01-M