[Federal Register Volume 59, Number 130 (Friday, July 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16572]


[[Page Unknown]]

[Federal Register: July 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34301; File No. SR-NYSE-94-09]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc. to Amend Rule 321 to Clarify 
the Term ``Control'' and Amend Rules 113, 122 and 321 to Delete the 
Word ``Affiliate'' and Insert the Word ``Subsidiary''

July, 1, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on March 
15, 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. 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 proposed rule change is intended to clarify the term 
``control'' for purposes of Rule 321 and to delete the word 
``affiliate'' and insert the word ``subsidiary'' in Rules 113, 122 and 
321 in order to minimize confusion and avoid potential problems which 
could arise as a result of differing definitions of the term 
``affiliate.''

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 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 Commission recently approved amendments to Exchange Rule 321 
(``Formation or Acquisition of Affiliates'') as part of a rule package 
designed to allow members and member organizations greater flexibility 
in structuring their affiliates while maintaining appropriate 
regulatory safeguards.\1\
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    \1\See Securities Exchange Act Release No. 32823 (August 31, 
1993), 58 FR 47164 (September 7, 1993).
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    Rule 321 requires a member or member organization to obtain 
Exchange approval for the formation or acquisition of an affiliate and 
to comply with certain reporting and other requirements. Rule 321.10 
defines ``affiliate'' as an entity engaged in a securities or kindred 
business that is controlled by the member or member organization within 
the meaning of Exchange Rule 2, except for paragraph (iii) of Rule 2. 
As such, control would currently be presumed if a member or member 
organization owns 25% or more of the voting securities of an entity or 
is entitled to receive 25% or more of the net profits. Control would 
currently not be presumed for purposes of Rule 321.10, if an associate 
person is a director, general partner or principal executive officer of 
another entity.\2\
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    \2\See supra note 5 for text of proposed rule change to NYSE 
Rule 321.10.
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    The Exchange does not feel it is appropriate to continue to exclude 
situations where a member or member organization is a general partner 
of other entities from being subject to the rule. Since general partner 
status represents control it should therefore be included in the 
presumption of ``control'' for purposes of Rule 321. It is proposed 
that Rule 321.10 be amended to exclude only Directors and Principal 
Executive Officers from the presumption of control and not General 
Partners.
    Further, Rule 321 is, in effect, applicable only to subsidiaries 
and not other types of affiliates.\3\ Some confusion as to which 
entities are subject to the rule has arisen because of the word 
``affiliate's'' general and often broad usage.
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    \3\The term ``affiliate'' is defined in NYSE Rule 321 as ``an 
entity engaged in a securities, or kindred business that is 
controlled by a member or member organization * * *.''
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    The Securities Act of 1933 and the Securities Exchange Act of 1934 
and the rules thereunder define affiliate as follows: ``an `affiliate' 
or person `affiliated' with, a specified person, is a person that 
directly, or indirectly through one or more intermediaries, controls or 
is controlled by, or is under common control with, the person 
specified.''\4\ As such, under the statutory definitions, an affiliate 
can be a parent company, subsidiary or ``sister'' company, while 
current Rule 321 is only applicable to subsidiaries. Similarly, the 
term ``affiliate'' is used to include other than subsidiaries in the 
legal and accounting fields.
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    \4\See, e.g., Regulation D under the Securities Act of 1933, 17 
CFR 230.501 (1993); and Regulation 12B under the Securities Exchange 
Act of 1934, 17 CFR 240.12b-2 (1993).
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    In order to minimize confusion and avoid potential problems which 
could arise as a result of differing definitions of the term 
``affiliate,'' it is proposed that Rule 321 as well as Rules 113 and 
122 (that refer to an affiliate within the meaning of Rule 321) be 
amended to delete the word ``affiliate'' and insert the word 
``subsidiary.''\5\
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    \5\The text of the proposed rule change to NYSE Rule 321.10 is 
as follows, with language to be deleted in brackets and language to 
be added in italics:
    .10 Definition of subsidiary [affiliate].--For purposes of this 
rule, the term ``subsidiary'' [``affiliate''] means an entity 
engaged in a securities or kindred business that is controlled by a 
member or member organization within the meaning of Rule 2 of the 
Constitution and Rules. [except that it shall not include paragraph 
(iii) of said Rule 2.] However, control shall not be presumed, for 
purposes of this rule, merely because a member is a director or 
principal executive officer of another person.
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2. Statutory Basis
    The proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to the Exchange 
in that the amendments are designed, in accordance with Section 6(b)(1) 
of the Act, to enhance the Exchange's capacity to carry out the 
purposes of the Act and to compel and enforce compliance by its members 
and persons associated with its members, with the provisions of the 
Act, the rules and regulations thereunder and the rules of the 
Exchange.

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

    The Exchange believes that the proposed rule change will impose no 
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

    The Exchange has not solicited, and does not intend to solicit, 
comments regarding the proposed rule change. The Exchange has not 
received any unsolicited written comments from members, member 
organizations or other interested parties.

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, 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, 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-94-09 and should be 
submitted by July 29, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16572 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M