[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