[Federal Register Volume 60, Number 54 (Tuesday, March 21, 1995)]
[Notices]
[Pages 14991-14993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6937]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35497; File No. SR-PSE-95-2]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Stock Exchange Incorporated Relating to 
Obligations for Regulatory Cooperation

March 15, 1995.
    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 
8, 1995, the Pacific Stock Exchange, Incorporated (``PSE'' 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. On March 3, 1995, the Exchange submitted to the 
Commission Amendment No. 1 to the proposed rule change, which is also 
described below.\1\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

    \1\See letter from Michael D. Pierson, Senior Attorney, PSE, to 
Jennifer S. Choi, Attorney, Division of Market Regulation, SEC, 
dated March 2, 1995. Amendment No. 1 adds .02 of the Commentary to 
the proposed rule change.
---------------------------------------------------------------------------

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

    The Exchange is proposing to amend its rules to require regulatory 
cooperation by members, member organizations, and others over whom the 
Exchange has jurisdiction pursuant to Rule 10.1(b) in connection with 
certain investigations and proceedings that are initiated by other 
exchanges or self-regulatory organizations. The text of the proposed 
rule change is as follow [new text is italicized]:
Rule 10.2

Regulatory Cooperation

    (d) No member, member organization, person associated with a number 
or member organization, or other person or entity over whom the 
Exchange has jurisdiction pursuant to Rule 10.1(b), shall refuse to 
appear and testify before another exchange or self-regulatory 
organization in connection with a regulatory investigation, 
examination, or disciplinary proceeding or refuse to furnish 
documentary materials or other information or otherwise impede or delay 
such investigation, examination or disciplinary proceeding if the 
Exchange requests such information or testimony in connection with an 
inquiry resulting from an agreement entered [[Page 14992]] into by the 
Exchange pursuant to Rule 14.1. The requirements of this Rule 10.2(d) 
shall apply regardless of whether the Exchange has initiated an 
investigation pursuant to Rule 10.2(a) or a disciplinary proceeding 
pursuant to Rule 10.3.
Commentary
    .01  The terms ``exchange'' and ``self-regulatory organization,'' 
as used in Rule 10.2(d), shall include, but are not limited to, any 
member of affiliate member of the Intermarket Surveillance Group.
    .02  Any person or entity required to furnish information or 
testimony pursuant to Rule 10.2(d) shall be afforded the same rights 
and procedural protections as that person or entity would have if the 
Exchange had initiated the request for information or testimony.

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 Exchange is proposing to amend its Rule 10.2, relating to 
Exchange investigations. The proposed amendment would provide the 
Exchange with the authority to compel its members, member 
organizations, and others over whom the Exchange has jurisdiction 
pursuant to Rule 10.1(b) to testify or furnish documentary materials in 
connection with regulatory investigations or examinations by other 
exchanges or self-regulatory organizations under certain circumstances.
    Specifically, the Exchange is proposing to adopt new Rule 10.2(d) 
to provide that no member, member organization, person associated with 
a member or member organization, or other person or entity over whom 
the Exchange has jurisdiction, shall refuse to appear and testify 
before another exchange or self-regulatory organization in connection 
with a regulatory investigation, examination, or disciplinary 
proceeding or refuse to furnish documentary materials or other 
information or otherwise impede or delay such investigation or 
examination. Under the proposed rule change, this requirement would 
apply whenever the Exchange requests such information or testimony in 
connection with an inquiry resulting from an agreement entered into by 
the Exchange pursuant to Rule 14.1\2\ The proposal further provides 
that the requirements of Rule 10.2(d) shall apply regardless of whether 
the Exchange has initiated an investigation pursuant to Rule 10.2(a) or 
a disciplinary proceeding pursuant to Rule 10.3.\3\

    \2\Rule 14.1 provides that the Exchange may enter into 
agreements with domestic and foreign self-regulatory organizations 
providing for the exchange of information and other forms of mutual 
assistance for market surveillance, investigative, enforcement, and 
other regulatory purposes.
    \3\Under the proposed rule, the Exchange would always act as an 
intermediary between another SRO and the Exchange member, member 
organization, or other designated person from whom information or 
testimony is being sought, for any inquiry made pursuant to an 
agreement under Rule 14.1. See letter from Michael D. Pierson, 
Senior Attorney, PSE, to Jennifer S. Choi, Attorney, Division of 
Market Regulation, SEC, dated March 2, 1995.
---------------------------------------------------------------------------

    Under the proposed rule change, the Exchange defines in the 
Commentary the terms ``exchange'' and ``self-regulatory organization,'' 
for purposes of Rule 10.2(d), to include, but not be limited to, any 
member or affiliate member of the Intermarket Surveillance Group.\4\ 
Moreover, the Exchange in .02 of the Commentary makes explicit that 
persons or entities, required to furnish information or testimony 
pursuant to a regulatory agreement, will be afforded the same rights 
and procedural protections that such persons or entities would have if 
the Exchange had initiated the request for information or testimony.

    \4\On July 14, 1983, the Intermarket Surveillance Group 
(``ISG'') was formed to, among other things, coordinate more 
effectively surveillance and investigative information sharing 
arrangements in the stock and options markets. See Intermarket 
Surveillance Sharing Group Agreement, July 14, 1983. The members of 
ISG are the American Stock Exchange, Inc., the Boston Stock 
Exchange, Inc., the Chicago Board Options Exchange, Inc., the 
Chicago Stock Exchange, Incorporated, the Cincinnati Stock Exchange, 
Inc., the National Association of Securities Dealers, Inc., the New 
York Stock Exchange, Inc., the Pacific Stock Exchange, Inc., and the 
Philadelphia Stock Exchange, Inc.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act in that it is designed to prevent fraudulent and manipulative acts 
and practices and to perfect the mechanism of a free and open market.

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

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

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

    No written comments were either 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 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 Exchange. All 
submissions should refer to File No. SR-PSE-95-2 and should be 
submitted by April 11, 1995.

    [[Page 14993]] For the Commission, by the Division of Market 
Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-6937 Filed 3-20-95; 8:45 am]
BILLING CODE 8010-01-M