[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Notices]
[Pages 45468-45469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22054]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37592; File No. SR-PSE-96-26]


Self-Regulatory Organizations; Pacific Stock Exchange 
Incorporated; Notice of Filing of Proposed Rule Change Relating to Its 
Minor Rule Plan

August 21, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') and Rule 19b-4 thereunder, notice is hereby given that on 
August 7, 1996, the Pacific Stock Exchange Incorporated (``PSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.

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

    The PSE is proposing to amend its disciplinary rules to provide 
Exchange staff with the authority to make findings of rule violations 
and to impose fines pursuant to the Exchange's Minor Rule Plan 
(``MRP''). Below is the text of the proposed rule change. Proposed new 
language is italicized; proposed deletions are in brackets.

PACIFIC STOCK EXCHANGE INCORPORATED

RULES OF BOARD OF GOVERNORS

* * * * *
Rule 10.13(c)
    (c) The Executive Committee, the Ethics and Business Conduct 
Committee, the Options Floor Trading Committee, [and] the Equity Floor 
Trading Committee and Exchange regulatory staff designated by the 
Exchange, shall have the authority [jurisdiction] to impose a fine 
pursuant to this Rule.
* * * * *

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

[[Page 45469]]

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 MRP,\1\ which provides that 
the Exchange may impose a fine not to exceed $5,000 on any member, 
member organization, or person associated with a 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 MRP. PSE 
Rule 10.13, subsections (h)-(j), sets forth the specific Exchange rules 
deemed to be minor in nature.
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    \1\ Rule 19d-1(c)(2) under the Act 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. See 
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR 
23828 (order approving amendments to paragraph (c)(2) of Rule 19d-1 
under the Act). The PSE's MRP was approved by the Commission in 
1985. See Securities Exchange Act Release No. 22654 (November 21, 
1985), 50 FR 48853 (order approving File No. SR-PSE-85-24). In 1993, 
the Exchange amended its MRP and adopted detailed procedures 
relating to the adjudication of minor rule violations. See 
Securities Exchange Act Release No. 32510 (June 24, 1993), 58 FR 
35491. Thereafter, the Exchange has modified its MRP several times. 
See Securities Exchange Act Release Nos. 34322 (July 6, 1994), 59 FR 
35958; 35144 (December 23, 1994), 59 FR 67743 (December 30, 1994); 
and 36622 (December 21, 1995), 60 FR 67384 (December 29, 1995).
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    PSE Rule 10.13(c) currently provides that the Executive Committee, 
the Ethics and Business Conduct Committee, the Options Floor Trading 
Committee and the Equity Floor Trading Committee \2\ have jurisdiction 
to impose a fine pursuant to Rule 10.13. The Exchange is proposing to 
amend Rule 10.13(c) to specify that Exchange regulatory staff 
designated by the Exchange shall also have the authority to impose a 
fine pursuant to Rule 10.13.
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    \2\ These four committees are comprised exclusively of Exchange 
members, with one exception: the Executive Committee includes three 
members plus the Chairman of the Exchange (who is not a member).
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    Under the proposal, Regulatory staff would be authorized to make 
determinations of whether minor rule violations have occurred and to 
impose a fine under the Recommended Fine Schedule \3\ for any MRP 
violations. Nevertheless, the Exchange may follow the current procedure 
of having a committee consisting of Exchange members adjudicate a MRP 
disciplinary case if the individual situation warrants such action.\4\
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    \3\ For a discussion of the Recommended Fine Schedule, see Rule 
10.13(f) and Securities Exchange Act Release No. 34322 (July 6, 
1994).
    \4\ The Exchange anticipates that Committee review of MRP cases 
for determinations of whether violations have occurred, and the 
imposition of a fine (if any), will be limited to situations where 
the committee members' knowledge of trading practices and unwritten 
procedures would be helpful.
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    The purpose of the proposal is to make the Exchange's disciplinary 
process more efficient. The majority of MRP cases currently decided by 
committees involve facts that are easily verifiable and rules that are 
objective or technical in nature. In such situations, currently, 
Exchange committees typically reaffirm staff determinations by 
approving staff recommendations.
    Under the proposal, Exchange members and member organizations found 
in violation of a rule or rules under the MRP will continue to have a 
right of appeal under Rule 10.11,\5\ which provides for a hearing 
before three members or for a review ``on the papers.'' A further 
appeal of decisions pursuant to such hearings or reviews on the papers 
is available pursuant to Rule 10.11(e). The Exchange does not intend to 
modify its current procedure for adjudicating non-MRP disciplinary 
cases pursuant to Rule 10.3 involving the issuance of formal 
complaints. Finally, the Exchange will continue to notify its 
membership, by regulatory bulletin distributed on a quarterly basis, of 
all fines imposed pursuant to the MRP.
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    \5\ ``Appeal of Floor Citations and Minor Rule Plan Sanctions.''
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(2) Statutory Basis
    The proposal is consistent with Section 6(b) of the Act, in 
general, and Section 6(b)(5), in particular, in that it is designed to 
promote just and equitable principles of trade. The proposal is also 
consistent with Section 6(b)(7) in that it is designed to provide a 
fair procedure for the disciplining of members and persons associated 
with members.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of 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 such 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, N.W., Washington, D.C. 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 in the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
D.C. 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of the PSE. All submissions should 
refer to File No. SR-PSE-96-26 and should be submitted by September 19, 
1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-22054 Filed 8-28-96; 8:45 am]
BILLING CODE 8010-01-M