[Federal Register Volume 60, Number 160 (Friday, August 18, 1995)]
[Notices]
[Pages 43177-43178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20478]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36096; File No. SR-Phlx-95-51]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Employee 
Trading Accounts

August 11, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 17, 1995, the 
Philadelphia Stock Exchange, Inc. (``Phlx'' 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.

    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Phlx Rule 751 to require employees 
of member organizations to receive permission from their employer 
before opening a securities trading account. Specifically, member and 
participant organizations would be prohibited from carrying an account 
or transaction for employees of a member or participant organization, 
unless the employer consents in writing. Further, the employer would 
received duplicate copies of the employees' confirmation reports and 
trading account statements. The Exchange also proposes to retitle the 
rule from ``Transactions for Clerks Entitled to Access to Floor'' to 
``Accounts of Employees of Member or Participant Organizations.''

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 an 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
    Phlx Rule 751 currently requires that a member organization 
carrying the account of a clerk entitled to access the Floor of the 
Exchange must receive prior approval from the Business Conduct 
Committee (``BCC''). Thus, the current rule impacts floor clerks only 
and does not provide for employer knowledge of a trading account.
    Accordingly, the Exchange proposes to amend Phlx Rule 751 as 
proposed above. The proposed language would replace BCC approval with 
employer consent and expand coverage to all employees associated with a 
member or participant organization. The employer also would receive 
duplicate confirmations and account statements in order to effectively 
monitor the employees' ongoing securities transactions. The Exchange 
believes that BCC approval is an ineffective monitoring mechanism 
because it provides for the initial approval for the opening of such 
accounts, but has no reporting requirements that would allow for the 
ongoing supervision of such accounts. Moreover, the Rule's current 
application to floor clerks only does not reach non-floor employees who 
are also subject to supervision requirements and for whom employee 
awareness also is needed to deter and detect abuses.\2\

    \2\ See Phlx Rule 748 (requiring members to supervise all 
accounts handled by their registered representatives); Phlx Rule 761 
(mandating that member organizations maintain written supervisory 
procedures as required by the Insider Trading and Securities Fraud 
Enforcement Act of 1988).
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    The purpose of these changes is to bolster the requirements 
respecting employee trading accounts. By increasing the employers' 
awareness of its employees' trading patterns through the use of 
employer consent and duplicate records relating to the account, the 
Exchange believes member organizations will be able to supervise their 
employees more effectively. In addition to being consistent with many 
firms' current procedures, the Exchange notes that this proposal is 
congruous with the rules of other self-regulatory organizations.\3\

    \3\ See New York Stock Exchange Rule 407; American Stock 
Exchange Rule 416; Pacific Stock Exchange Rule 9.2; and NASD Rules 
of Fair Practice, Article III, Section 28.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \4\ of the 
Act in general and furthers the objectives of Section 6(b)(5) \5\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, and to protect investors and the 
public interest by bolstering the restrictions on employee trading 
accounts and thereby improve employer supervision.

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes 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 neither solicited nor received written comments.

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. 

[[Page 43178]]
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. Sec. 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 also will be available for inspection and copying at the 
principal office of the Philadelphia Stock Exchange. All submissions 
should refer to File No. SR-Phlx-95-51 and should be submitted by 
September 8, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\

    \6\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20478 Filed 8-17-95; 8:45 am]
BILLING CODE 8010-01-M