[Federal Register Volume 59, Number 194 (Friday, October 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24844]


[[Page Unknown]]

[Federal Register: October 7, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34762; File No. SR-BSE-94-08]

 

Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order 
Granting Approval to Proposed Rule Change Relating to Additions to the 
Exchange's Minor Rule Plan

September 30, 1994.
    On May 6, 1994, the Boston Stock Exchange, Inc. (``BSE'' 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 amend its Rules and its Minor 
Rule Violation Plan (``Plan'')\3\ to provide for the imposition of 
summary finds for violation of certain specified Exchange rules and 
policy.\4\
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1993).
    \3\Rule 19d-1(c)(2) under the Act, 17 CFR 240.19d-1(c)(2), 
authorizes national securities exchanges to adopt minor rule 
violation plans for the summary discipline and abbreviated reporting 
of minor rule violations by exchange members and member 
organizations. The BSE's Plan was approved by the Commission in 
Securities Exchange Act Release No. 26737 (April 17, 1989), 54 FR 
16438 (April 24, 1989).
    \4\See letter from Karen A. Aluise, Assistant Vice President, 
BSE, to Sandy Sciole, Branch Chief, SEC, dated May 6, 1994 
(requesting amendment of the Plan).
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 34309 (July 5, 1994), 59 FR 35548 (July 12, 
1994). no comments were received on the proposal.
    The BSE's Plan, as embodied in Chapter XVIII, Section 4 of the 
BSE's Rules, provides that the Exchange may impose a fine, not to 
exceed $2500, on any member, member organization, or person associated 
with a member or member organization for any violation of an Exchange 
rule that has been deemed to be minor in nature and approved by the 
Commission for inclusion in the Plan. The rule change will add to the 
List of Exchange Rule Violations and Fines Applicable thereto Pursuant 
to Section 4 of Chapter XVIII for the imposition of fines:
    1. Failure to Promptly Respond to Exchange Blue Sheet Requests or 
File Regularly Scheduled Financial (FOCUS, SIPC) and/or Regulatory 
Reports (Specialist Performance Evaluation Questionnaire, Quarterly 
Option Report);
    2. Improper Use of the ITS Administrative Message Function; and
    3. Failure to Register Floor Employees and Complete Appropriate 
Forms.
    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).\5\ 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, and with the Section 6(b)(6) requirement that the rules of an 
exchange provide that its members are appropriately disciplined for 
violations of an exchange's rules and the Act.
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    \5\15 U.S.C. Sec. 78f(b) (1988).
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    Specifically, the Commission believes that an exchange's ability to 
effectively enforce compliance by its members and member organization 
with Commission and Exchange rules is central to its self-regulatory 
functions. The inclusion of a rule in an exchange's minor rule 
violation plan, therefore, should not be interpreted to mean that it is 
not an important rule. On the contrary, the Commission recognizes that 
the inclusion of minor violations of particular rules under a minor 
rule violation plan may make the exchange's disciplinary system more 
efficient in prosecuting more egregious and/or repeated violations of 
these rules, thereby furthering its mandates to protect investors and 
the public interest.
    The Commission believes that adding the provisions listed above to 
the Chapter XVIII of the Exchange's Rules and to the Exchange's Plan is 
consistent with Sections 6(b)(5) and 6(b)(6) in that the purpose of 
chapter XVIII is to provide for a response to a violation of Exchange 
Rules or policy when a meaningful sanction is needed, but when 
initiation of a disciplinary proceeding under the Chapter XXX is not 
suitable because such a proceeding would be more costly and time-
consuming than would be warranted given the nature of the violation. 
Chapter XVIII provides for an appropriate response to minor violations 
of certain Exchange rules, while preserving the due process rights of 
the party accused through specified, required procedures.\6\
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    \6\The Plan permits any person to contest the Exchange's 
imposition of the fine through submission of a written answer, at 
which time the matter will become a disciplinary proceeding subject 
to Chapter XXX of the BSE's Rules and, where applicable, the 
reporting provisions of Commission Rule 19d-1. Furthermore, the 
Exchange retains the option of bringing violations of rules included 
in the Plan to full disciplinary proceedings.
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    Furthermore, the Commission finds that violations of the provisions 
being added are objective and technical in nature, and are easily 
verifiable, thereby lending themselves to the use of expedited 
proceedings. Noncompliance with the provisions may be determined 
objectively and adjudicated quickly without the complicated factual and 
interpretive inquiries associated with more sophisticated Exchange 
disciplinary proceedings. If the Exchange determines that a violation 
of one of these rules is not minor in nature, the Exchange retains the 
discretion to initiate full disciplinary proceedings in accordance with 
Chapter XXX of the BSE Rules. The Commission expects the BSE to bring 
full disciplinary proceedings in appropriate cases (e.g., in cases 
where the violation is egregious or where there is a history or pattern 
of repeat violations).
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-BSE-94-08) 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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Jonathan G. Katz,
Secretary.
[FR Doc. 94-24844 Filed 10-6-94; 8:45 am]
BILLING CODE 8010-01-M