[Federal Register Volume 61, Number 61 (Thursday, March 28, 1996)]
[Notices]
[Pages 13915-13917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7508]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37002; File No. SR-Phlx-96-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to the 
Adoption of Listing and Listing Maintenance Standards for Unit 
Investment Trusts

March 21, 1996.
    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 January 
29, 1996, 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. On March 7, 1996, the Exchange submitted to the 
Commission Amendment No. 1 to the proposed rule change,\1\ and on March 
18, 1996 the Exchange submitted Amendment No. 2 to the proposed rule 
change.\2\ The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.

    \1\ See Letter from Michele R. Weisbaum, Assistant General 
Counsel, Phlx, to Jon Kroeper, Staff Attorney, SEC, dated March 5, 
1996. See infra note 4 and text accompanying note 5 for a 
description of Amendment No. 1.
    \2\ See Letter from Michele R. Weisbaum, Associate General 
Counsel, Phlx, to Jon Kroeper, Staff Attorney, SEC, dated March 15, 
1996. Amendment No. 2 added UIT listing maintenance standards to the 
proposed rule change. See infra text accompanying notes 6 and 7 for 
a description of Amendment No. 2.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, pursuant to Rule 19b-4 under the Act,\3\ proposes to 
amend Phlx Rule 803 regarding Tier I listing standards in order to add 
new section (i), which will set forth listing standards for unit 
investment trusts (``UITs'') and amend Phlx Rule 810 to add new 
subsections (a)(5) and (a)(6), which will set forth listing maintenance 
standards for UITs.

    \3\ 17 CFR 240.19b-4.
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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 proposes to add new section (i) to Phlx Rule 803, the 
Tier I listing criteria, to adopt listing standards applicable to UITs, 
which are distinct trading components representing discrete interests 
in the income, capital appreciation potential or other economic 
characteristics of the securities deposited in a trust. Such a trust 
may be based upon the securities of individual issuers, upon a 
portfolio of stocks included in a domestic, broad-based stock market 
index, or upon a portfolio or domestic money market instruments or 
other debt securities. A UIT would be defined as any share, unit or 
other interest in or relating to a unit investment trust, including any 
component resulting from the

[[Page 13916]]
subdivision or separation of such an interest.\4\

    \4\ The Commission notes that prior to listing and trading a UIT 
based on an index, money market instrument, or debt securities that 
the Commission has not previously reviewed, the Exchange would have 
to file a proposed rule change pursuant to Rule 19b-4 under the Act. 
Such a filing should, among other relevant issues, address any 
issues arising under the Investment Company Act of 1940 with regard 
to the listing and trading of a UIT under proposed Rule 803A(i). In 
addition, the Phlx would be required to adopt appropriate 
suitability standards for both the trading of any UIT which may be 
separated into component parts and the component parts themselves.
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    Pursuant to proposed subsection 803(i)A, UITs based upon securities 
of individual issuers may be listed on the Exchange under the following 
requirements. First, the issuer(s) of the security (or securities) held 
by the trust must have total assets in excess of $100 million and a net 
worth in excess of $10 million. Second, there must be at least one 
million units held beneficially or of record by 800 round lot holders 
and the UIT cannot hold in excess of 5% of the outstanding common or 
capital stock of any single issuer. Third, the stated term of the trust 
may not be less than three years and the units may not be subject to 
redemption at the election of the trustees prior to the end of the 
stated term of the trust.\5\ Fourth, the trustee of the UIT must be a 
trust company or banking institution and its executive officer cannot 
be an officer of the issuing sponsor. Fifth, any voting rights 
conferred by the UIT interests may be divided between the separate 
components of the units and must be passed through to beneficial 
holders of the UIT interests and shareholder communications must be 
forwarded by the trust to the holders of the voting rights, to the 
extent that the UIT is reimbursed by the issuer for reasonable 
expenses. Finally, the UIT must sign a listing agreement with the 
Exchange which requires compliance with all other provisions of the 800 
Series of Phlx Rules applicable to listed companies.

    \5\ Amendment No. 1 amends proposed subsection 803(i)A(3), which 
deals with the stated term of a UIT, to add the following 
provisions: (1) a listed trust may have only one termination date; 
(2) individual trading components of the trust units may have only 
one termination claim; and, (3) only one UIT may have only one 
termination claim; and, (3) only one UIT on the securities of a 
single issuer may be listed at a time.
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    Pursuant to proposed subsection 803(i)B, UITs based on stock 
indexes or debt instruments may be listed on the Exchange under the 
following requirements. First, the trust must have total assets of at 
least $60 million at the time of formation and at least one million 
shares, units or components that are publicly distributed to at least 
400 beneficial or record holders. Second, such UITs cannot have a 
stated term of less than two years; however, they may be subject to 
earlier termination if the circumstances under which this may occur are 
set forth in the trust's governing documents. Third, any voting rights 
conferred by the UIT interests may be divided between separate 
components of the units but must be passed through to the beneficial 
holders of the UIT interests. Fourth, the trustee must be a trust 
company or banking institution. Finally, the UIT must sign a listing 
agreement with the Exchange which requires compliance with all other 
provisions of the 800 Series of Rules applicable to listed 
companies.\6\

    \6\ See Amendment No. 1, supra note 1.
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    The Exchange also is proposing to adopt listing maintenance 
standards for UITs under new subsection (a)(5) and (a)(6) to Phlx Rule 
810. Proposed Rule 810(a)(5) will permit the Exchange to suspend 
trading in, or remove from listing, a UIT listed under Rule 803(i)A if 
the financial condition and/or operating results of the issuer of the 
securities held by the trust appear to be unsatisfactory, as determined 
by the existence of one or more of the following criteria: (i) the net 
tangible assets of the issuer of the securities held by the UIT are not 
at least $2 million if the issuer has sustained losses from continuing 
operations and/or net losses in two of its three most recent fiscal 
years, or $4 million if it has such losses in three of its four most 
recent fiscal years; (ii) the total assets and net worth of the issuer 
of the securities held by the UIT are less than $25 million and $4 
million, respectively; (iii) there are less than 400 record and/or 
beneficial holders of the trust units (or trading components thereof); 
(iv) less than 300,000 trust units (or trading components thereof) 
remain outstanding; (v) the issuer of the securities held by the UIT 
has sold or otherwise disposed of its principal operating assets, or 
has ceased to be an operating company; (vi) the UIT and/or trustee has 
failed to comply with the Phlx's listing policies or agreements; or 
(vii) such other event shall occur or conditions exist which, in the 
Exchange's opinion, makes further dealings on the Exchange 
inadvisable.\7\

    \7\ See Amendment No. 2, supra note 2.
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    Proposed Rule 810(a)(6) will permit the Exchange to suspend trading 
in, or remove from listing, a UIT listed pursuant to Rule 803(i)B if 
one of the following criteria is met: (i) more than 60 days remain 
until the termination of the UIT and there are less than 50 record and/
or beneficial holders of shares, units or trading components thereof 
for 20 or more consecutive trading days; (ii) the UIT and/or trustee 
has failed to comply with the Phlx's listing policies or agreements; or 
(iii) such other event has occurred or condition exists which, in the 
Exchange's opinion, makes further dealings on the Exchange 
inadvisable.\8\

    \8\ See Amendment No. 2, supra note 2.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\9\ in general, and in particular, with Section 6(b)(5) in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, as 
well as to protect investors and the public interest.

    \9\ 15 U.S.C. 78f(b).
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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 longer 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

[[Page 13917]]
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-Phlx-96-02 and should be submitted by April 18, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-7508 Filed 3-27-96; 8:45 am]
BILLING CODE 8010-01-M