[Federal Register Volume 59, Number 139 (Thursday, July 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17760]


[[Page Unknown]]

[Federal Register: July 21, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34390; File No. SR-NYSE-94-01]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc., Relating to Approval of Member 
Organizations in Other Than Partnership or Corporate Form Under Rule 
311(f)

July 15, 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 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. 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 NYSE is proposing to amend Rule 311(f) as follows, with italics 
representing the language added:

Rule 311

    (f) Every member firm shall be a partnership and every member 
corporation shall be a corporation created or organized under the 
laws of, and shall maintain its principal place of business in, the 
United States or any State thereof. The Exchange may, in its 
discretion, and on such terms and conditions as the Exchange may 
prescribe, approve as a member organization entities that have 
characteristics essentially similar to corporations, partnerships, 
or both. Such entities, and persons associated therewith, shall, 
upon approval, be fully, formally and effectively subject to the 
jurisdiction, and to the Constitution and Rules, of the Exchange to 
the same extent and degree as are any other member organizations and 
persons associated therewith.

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 Article 1, Section 3 of the NYSE Constitution states that the 
term ``member organization'' includes a ``member firm'' and ``member 
corporation.'' A ``member firm'' is defined as a partnership.
    Recently, the Exchange has received requests from several member 
organizations to permit them to reorganize as business trusts or 
limited liability companies. Neither of these organizational structures 
is currently specifically included in the definition of a member 
organization.
    The proposed amendment would enable the Exchange, in its 
discretion, and on such terms and conditions as the Exchange may 
prescribe, to approve business trusts,\1\ limited liability 
companies,\2\ and other organizational structures as member 
organizations. However, any such entity would be required to have 
characteristics essentially similar to corporations or partnerships.
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    \1\The term ``business trust'' is generally used to describe a 
trust in which the managers are principals, and the shareholders are 
cestuis que trust. The essential attribute is that property is 
placed in the hands of trustees who manage and deal with it for the 
use and benefit of beneficiaries. Black's Law Dictionary 180 (5th 
ed. 1979).
    \2\A limited liability company (``LLC'') combines various 
characteristics of both corporations and partnerships. For example, 
an LLC is a non-corporate entity under which neither the owners nor 
those managing the business are personally liable for the entity's 
obligations, however, the LLC is treated as a pass-through entity 
for federal income tax purposes. See Robert R. Keating et al., The 
Limited Liability Company: A Study of the Emerging Entity, 47 Bus. 
Law. 378 (1992).
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    Noncorporate or partnership entities would have to be structured in 
such a format that would qualify as a broker or dealer registered with 
the Commission pursuant to the Act, since this is a prerequisite to 
becoming an Exchange member organization.
    The NYSE staff would review each application on a case-by-case 
basis as it does with all member organization applicants. However, 
prior to approving any such organization for membership, the staff 
would have to be satisfied that: (1) the Exchange would legally have 
appropriate jurisdiction over such an entity; and (2) the permanency of 
the entity's capital is consistent with that required of other member 
organizations.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act in that it permits registered brokers or dealers as set forth 
herein to become member organizations of the Exchange.
    The proposed rule change is also consistent with Section 6(b)(5) of 
the Act in that it broadens the types of entities which the Exchange 
may approve as a member organization and therefore avoids possible 
unfair discrimination.
    Finally, it is consistent with Section 6(b)(8) of the Act in that 
it serves to remove possible burdens on competition resulting from 
organizational structure not necessary or appropriate in furtherance of 
the purposes of the Act.

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

    The Exchange believes that the proposed rule change will impose no 
burden in 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 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 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-94-01 and should be 
submitted by August 11, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17760 Filed 7-20-94; 8:45 am]
BILLING CODE 8010-01-M