[Federal Register Volume 59, Number 165 (Friday, August 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21061]


[[Page Unknown]]

[Federal Register: August 26, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34566; File No. SR-NYSE-94-09]

 

Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change 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''

August 19, 1994.
    On March 15, 1994, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to clarify the term ``control'' 
for the purposes of Rule 321 and to delete the word ``affiliate'' and 
insert the word ``subsidiary'' in Rules 113, 122, and 321.\3\
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1993).
    \3\The rule change substitutes the word ``subsidiary'' for the 
term ``affiliate'' in Commentaries .10 through .25 in Rule 321.
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 34301 (July 1, 1994),59 FR 35162 (July 8, 
1994). No comments were received on the proposal.
    Currently, NYSE Rule 321 requires a member or member organization 
to obtain Exchange approval for the formation or acquisition of an 
affiliated company. The term ``affiliate'' is defined in NYSE Rule 
321.10 as ``an entity engaged in a securities, or kindred business that 
is controlled by a member or member organization'' (emphasis added). 
The Exchange is amending NYSE Rule 321, as well as Rules 113 and 122 
(that refer to an affiliate within the meaning of Rule 321), by 
substituting the term ``subsidiary'' for the term ``affiliate.'' The 
Exchange believes that this non-substantive change will minimize 
confusion and avoid potential problems which could arise as a result of 
differing definitions of the term ``affiliate'' and clarify that the 
Rules do not apply to parent or sister companies.\4\
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    \4\For example, the Act defines an ``affiliate'' as ``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'' (emphasis added). See 17 CFR 240.12b-2 (1993).
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    In addition, the Exchange is amending the definition of ``control'' 
for purposes of NYSE Rule 321.10. Currently, control is 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. 
Under NYSE Rule 2, however, control would also be presumed if an 
associated person is a director, general partner or principal executive 
officer or another entity.\5\ The Exchange believes it is appropriate 
to include general partner status in the presumption of control for 
purposes of Rule 321.10.
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    \5\Under NYSE Rule 2, a person is presumed to control another 
person if such person directly or indirectly; (1) has the right to 
vote 25 percent or more of the voting securities, (2) is entitled to 
receive 25 percent or more of the net profits, or (3) is a director, 
general partner or principal executive officer (or persons occupying 
a similar status or performing similar functions) of the other 
person.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b).\6\ In particular, 
the Commission believes the proposal is consistent with the Section 
6(b)(5) requirements that the rules of an exchange be designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts, and, in general, to protect investors and the 
public.
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    \6\15 U.S.C. Sec. 78f(b) (1988).
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    Specifically, the Commission believes substituting the term 
``subsidiary'' for the term ``affiliate'' is a non-substantive change 
that will clarify to members which formations or acquisitions require 
prior Exchange approval under NYSE Rule 321. In addition, the 
Commission believes that including general partner status in the 
presumption of control for purposes of NYSE Rule 321 is consistent with 
other Exchange Rules and will facilitate Exchange oversight of 
functionally equivalent transactions.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-NYSE-94-09) is approved.

    \7\15 U.S.C. Sec. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\17 CFR 200.30-3(a)(12) (1993).
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[FR Doc. 94-21061 Filed 8-25-94; 8:45 am]
BILLING CODE 8010-01-M