[Federal Register Volume 61, Number 220 (Wednesday, November 13, 1996)]
[Notices]
[Pages 58272-58274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29039]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37923; File No. SR-PSE-96-39]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Stock Exchange, 
Incorporated Relating to Amending the Minor Rule Plan and the 
Recommended Fine Schedule

November 6, 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 October 
10, 1996, 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. The Exchange has designated the proposed rule change as 
constituting a ``non-controversial'' rule change under paragraph (e)(6) 
of Rule 19b-4 under the Act which renders the proposal effective upon 
receipt of this filing by the Commission.\1\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ The PSE has represented that this proposed rule change: (i) 
will not significantly affect the protection of investors or the 
public interest; (ii) will not impose any significant burden on 
competition, and (iii) will not become operative for 30 days after 
the date of this filing. The PSE also has provided at least five 
business days notice to the Commission of its intent to file this 
proposed rule change, as required by Rule 19b-4(e)(6) under the Act.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its Minor Rule Plan (``MRP'') to 
add certain rules for which violations may be adjudicated pursuant to 
Rule 10.13, and to amend its Recommended Fine Schedule to establish 
recommended fines for violations of those rules and to increase the 
recommended fines for certain rules violations already subject to the 
MRP.

[[Page 58273]]

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 MRP,\2\ 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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    \2\ 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 (June 8, 1984) (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 (November 27, 1985) (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 (July 1, 1993). Thereafter, the 
Exchange has modified its MRP several times. See Securities Exchange 
Act Release Nos. 34322 (July 6, 1994), 59 FR 35958 (July 14, 1994); 
35144 (December 23, 1994), 59 FR 67743 (December 30, 1994); and 
36622 (December 21, 1995), 60 FR 67384 (December 29, 1995). The 
Exchange currently has pending before the Commission a proposal to 
provide PSE staff with the authority to make findings of rule 
violations and to impose fines for violations of rules contained in 
the Exchange's MRP. See Securities Exchange Act Release No. 37592 
(August 21, 1996), 61 FR 45468 (August 29, 1996) (File No. SR-PSE-
96-26). See also Securities Exchange Act Release No. 37799 (October 
9, 1996) (File No. SR-PSE-96-30).
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Options Floor Rule Violations

    The Exchange is proposing to add the following Options Floor 
Decorum and Minor Trading Rule Violations to the MRP: (1) Failure to 
obtain Exchange approval for Member or Member Firm electronic devices 
or systems used for trading purposes on the Exchange Floor (with 
recommended fines of $250, $750 and $1,500 for first, second and third 
violations);\3\ (2) Failure to answer a Trading Crowd/LMM Questionnaire 
as required (Option Floor Procedure Advices (``OFPA'') B-13(c)) (with 
recommended fines of $250, $500 and $750 for first, second and third 
violations); (3) Violations of rules on visitors to the Options Floor 
(Rule 6.2(a) and OFPA F-2) (with recommended fines of $250, $500 and 
$1,000 for first, second and third violations); and (4) Misuse of 
Member badge or Member Firm identification (OFPA F-1) (with recommended 
fines of $250, $500 and $1,000 for first, second and third violations).
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    \3\ Cf. Amex Rule 590(h)(14). The PSE has informed the 
Commission that misuse of electronic devices by Exchange members, 
which was previously covered by Rule 10.13(h)(12), will be covered 
by the new rule violation added to the MRP under Rule 10.13(h)(13), 
``Failure to obtain Exchange approval for Member or Member Firm 
electronic devices or systems used for trading purposes on the 
Exchange floor.'' The new Rule cover misuses of devices because, 
pursuant to the Rule, the Exchange grants approval for classes of 
uses of such devices or systems for member use and provides members 
with notice of the approved uses of such devices or systems, 
rendering any other uses not approved as unauthorized ones. 
Telephone conversation between Michael Pierson, Senior Attorney, 
PSE, and Heather Seidel, Attorney, SEC, dated October 28, 1996.
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    The Exchange is also proposing to increase the recommended fines 
for the following rule violations, which are already included in the 
MRP: (1) increases for second and third violations of Rule 6.35, 
Commentary .03 (Failure to meet 75% Primary Appointment Zone 
Requirement) from $750 and $1,250 to $1,000 and $2,500; and (2) 
increases for second and third violations of Rule 6.37, Commentary .07 
(Failure to meet 60% In-Person Trading Requirement) from $750 and 
$1,250 to $1,000 and $2,500.

Equity Floor Rule Violations

    The Exchange is proposing to add the following Equity Floor Decorum 
and Minor Trading Rule Violation to the MRP: Failure to Clear the Post 
Properly (Rules 5.16 and Equity Floor Procedure Advice (``EFPA'') 1-B) 
(with an Official Warning and fines of $250 and $500 for first, second 
and third violations).
    The Exchange is also proposing to increase the recommended fines 
for the following rule violations, which are already included in the 
MRP: (1) increases for first and second violations of the rule on 
Equity Floor Decorum (EFPA 1-A) from $25 and $100 to $100 and $250; (2) 
increases for second and third violations of the rule on Conduct of 
Members on the Equity Floor (EFPA 1-B and Rules 5.1(g) and 5.1(h)) from 
$100 and $250 to $250 and $500; (3) increases for second and third 
violations of the rule on Conduct of Guests (EFPA 1-B) from $50 and 
$100 to $250 and $500; (4) increases for second and third violations of 
the rule on Proper Reporting of Transactions Executed at the Exchange 
(EFPA 2-C and Rules 5.12 and 5.13) from $25 and $50 to $250 and $500; 
and (5) increases for first, second and third violations of the rule on 
Staffing at the Specialist Post (prior to the opening) (Rule 5.28 (c)-
(d)) from $25, $50 and $100 to $100, $250 and $500.

Other Minor Rule Violations

    The Exchange is proposing to increase the recommended fines for 
violations of the following rules, which are already included in the 
MRP: (1) increases for first, second and third violations of the rule 
on submitting trade data to the Exchange in a timely manner (Rule 
10.2(c)) from $100, $200 and $500 to $250, $500 and $750); (2) 
increases for first, second and third violations of the rule on 
furnishing in a timely manner books, records or other requested 
information or testimony in connection with an examination of financial 
responsibility and/or operational conditions (Rule 2.12(c)) from $100, 
$250 and $500 to $250, $500 and $750; (3) increases for first, second 
and third violations of the rule on notifying the Exchange of a change 
of address where notices may be served (Rule 1.13) from $100, $250 and 
$500 to $250, $500 and $750; (4) increases for first, second and third 
violations of the rule on filing financial reports or financial 
information in the type, form, manner and time prescribed by the 
Exchange (Rule 2.12(a)) from $100, $250 and $500 to $250, $500 and 
$750; and (5) increases for first, second and third violations of the 
rule on delaying, impeding or failing to cooperate in an Exchange 
investigation (Rule 10.2(b)) from $100, $250 and $500 to $500, $1,000 
and $2,000.

Other Related Rule Changes

    The Exchange is proposing to add violations of EFPA 1-C(i) 
(Admission of Members to the Equity Floor) to those rules for which a 
summary sanction may be imposed pursuant to Rule 10.14(a).\4\
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    \4\ The Exchange may summarily sanction a member, member 
organization or person associated with a member organization, in 
lieu of commencing a ``disciplinary action'' (as that term is used 
in Rule 10.3), provided that the procedures set forth in Rule 
10.14(a) are followed.

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[[Page 58274]]

    The Exchange is also proposing to amend EFPAs 1-A, 1-B, 2-C and 3-A 
to conform with the proposed changes in recommended fine levels, and to 
eliminate references in the EFPAs to ``4th,'' ``5th,'' and 
``Subsequent'' offenses.
    In addition, the Exchange is proposing to remove the provision in 
EFPA 1-B that prohibits consumption of food and drink on the Los 
Angeles Trading Floor, and to remove the related provision from the 
MRP.
    Finally, the Exchange is proposing to add its Recommended Fine 
Schedule to the text of the MRP. Accordingly, the Exchange is proposing 
to remove a provision from Rule 10.13(f) that requires the Exchange to 
maintain this Schedule and to circulate it to the Exchange's Membership 
periodically.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\5\ in general, and Sections 6(b)(5) and 6(b)(7) of the 
Act, in particular, in that it is designed to promote just and 
equitable principles of trade and to assure that members, member 
organizations, and persons associated with members and member 
organizations are appropriately disciplined for violations of Exchange 
rules.
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    \5\ 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 burden on competition.

C. Self-Regulatory Organization's Statement on Comments 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

    This proposed rule change has been filed by the Exchange as a 
``noncontroversial'' rule change pursuant to paragraph (e)(6) of Rule 
19b-4.\6\ Consequently, the rule change shall become operative 30 days 
after the date of filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest pursuant to Section 19(b)(3)(A)(iii) of the Act \7\ and 
subparagraph (e)(6) of Rule 19b-4 thereunder.
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    \6\ 17 CFR 240.19b-4(e)(6).
    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
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    One of the changes that the PSE has proposed it to amend EFPAs 1-A, 
1-B, 2-C, and 3-A to eliminate references to ``4th'', ``5th,'' and 
``subsequent'' offenses. The Commission believes that this amendment 
does not subsequently change the Exchange's flexibility with regard to 
discipline for 4th, 5th and subsequent violations of the MRP; the 
Exchange may still impose a fine or bring a formal disciplinary action 
for violation of a rule included in the MRP.
    The Commission notes that the PSE still has general authority, 
subject to the requirements in Rule 10.13, to impose a fine, not to 
exceed $5000, on any member, member organization, or person associated 
with a member or member organization, for violation of an Exchange rule 
that is included in the MRP.\8\ In addition, Exchange Rule 10.3 
provides the PSE with the authority to bring formal disciplinary action 
for a violation of a rule included in the MRP.\9\
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    \8\ Exchange Rule 10.13(a).
    \9\ See Exchange Rule 10.3.
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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 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. Copies of such filings will also be 
available for inspection and copying at the principal office of the 
PSE. All submissions should refer to File No. SR-PSE-96-39 and should 
be submitted by December 4, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-29039 Filed 11-12-96; 8:45 am]
BILLING CODE 8010-01-M