[Federal Register Volume 59, Number 127 (Tuesday, July 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16189]


[[Page Unknown]]

[Federal Register: July 5, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34268; File No. SR-CHX-94-12]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Inc., Relating to Disclosure of 
Pending Formal Exchange Disciplinary Proceeding to the CRD

June 28, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice if hereby given that on May 6, 
1994, the Chicago Stock Exchange, Inc. (``CHX'') or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
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.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CHX proposes to add Rule 9 to Article XII of the Exchange's 
Rules. Rule 9 to Article XII is proposed to be provided as follows:
    The initiation of, and all significant changes in the status of, 
a formal disciplinary proceeding brought by the Exchange shall be 
reported by the Exchange to the Central Registration Depository 
operated by the National Association of Securities Dealers, Inc. For 
purposes of this Rule, significant changes in the status of a 
pending formal disciplinary proceeding shall include, but are not 
limited to, issuance of a decision by the President, the filing of 
an appeal; to and/or the issuance of a decision by, a Judiciary 
Committee, the Exchange's Executive Committee or Board of Governors.

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 governing 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 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 proposed rule change authorizes the Exchange to provide 
information to the Central Registration Depository (``CRD'')\1\ 
concerning pending formal Exchange disciplinary proceedings for 
disclosure to the public. A formal disciplinary proceeding is 
considered to be pending from the time charges are issued\2\ until the 
proceeding is completed.\3\ Currently, the Exchange discloses 
information only on final Exchange disciplinary actions to the CRD.
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    \1\The CRD is an automated industry database containing 
employment and disciplinary history of members and associated 
persons registered with self-regulatory organizations (``SROs'') and 
state securities agencies. The CRD is operated by the National 
Association of Securities Dealers, Inc. (``NASD'') with input on 
policy and other matters from federal and state agencies and other 
SROs, including the Exchange.
    \2\CHX Article XII, Rule 1(b) provides, in part, that if in the 
judgment of the President it shall appear that an accused has 
committed a default or other offense in violation of the 
Constitution or Rules of the Exchange the President shall, except as 
hereinafter provided, direct the staff to prefer written charges 
against the accused. A copy of such charges shall be served upon the 
accused. The accused shall also be served with written notice of 
when and where the charges will be heard.
    \3\See CHX Article XII, Rule 7.
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    Information concerning final disciplinary actions taken by the 
Exchange and other SROs and regulatory organizations and certain 
criminal convictions contained in the CRD has been disclosed to the 
public pursuant to the NASD's 800 number service since October 1991.\4\
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    \4\The Commission subsequently approved the NASD's procedures 
for operating its 800 number service in Securities Exchange Act 
Release No. 30629 (April 23, 1992), 57 FR 18535 (April 30, 1992) 
(File No. SR-NASD-91-39) (``800 Number Service Plan Approval 
Order'').
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    On July 1, 1993, the SEC approved an NASD rule change to make more 
information available to the general public regarding pending 
disciplinary proceedings or actions taken by federal or state 
securities agencies and SROs that relate to securities or commodities 
transactions, and regarding criminal indictments and informations.\5\
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    \5\See Securities Exchange Act Release No. 32568 (July 1, 1993), 
59 FR 36723 (July 8, 1993) (File No. SR-NASD-93-26) (``Pending Event 
Disclosure Approval Order'').
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    Information on pending SRO disciplinary proceedings, among other 
events, is currently also in the CRD, to the extent that reports are 
made by members, member organizations and associated persons pursuant 
to their reporting obligations on the Uniform Application for 
Securities Industry Registration or Transfer (Form U-4) and Form BD, 
the uniform applications form for broker-dealer registration. However, 
the Exchange does not currently report such pending events to the CRD.
    The submission of information concerning pending formal 
disciplinary proceedings directly by the Exchange would enhance the CRD 
database since the CRD would not have to rely solely on reports from 
members, member organizations and associated persons.
(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act in that it is designed to promote just 
and equitable principles of trade, to remove impediments and to perfect 
the mechanism of a free and open market and a national market system, 
and in general, to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose a burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No comments were solicited or 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 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. 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 Room, 450 Fifth Street NW., Washington, 
DC 20549. Copies of the filing will also be available for inspection 
and copying at the principal office of the CHX. All submissions should 
refer to File No. SR-CHX-94-12 and should be submitted by July 26, 
1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16189 Filed 7-1-94; 8:45 am]
BILLING CODE 8010-01-M