[Federal Register Volume 62, Number 86 (Monday, May 5, 1997)]
[Notices]
[Pages 24531-24532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38552; File No. SR-Phlx-97-17]


Self-Regulatory Organizations: Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. To Amend By-Law Article III, Section 
3-5(b) Respecting the Eligibility of Persons To Serve on the Nominating 
Committee

April 28, 1997.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 15, 1997, the Philadelphia Stock Exchange, Inc. (``PHLX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule changes from interested persons 
and to grant accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PHLX hereby proposes to amend its By-Law Article III, Section 
3-5(b) respecting the eligibility of persons to serve on the Nominating 
Committee. The PHLX has requested approval of the proposed rule change 
on an accelerated basis.\3\
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    \3\ Letter from Murray Ross, Vice President and Secretary, PHLX, 
to Ivette Lopez, Esq., Assistant Director, Office of Market 
Supervision, Division of Market Regulation, SEC, dated April 23, 
1997.
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    The text of the proposed rule change is as follows.

(Brackets represent deletions; italics represent additions)
By-Law Article II, Section 3-5
    (a) No change
    (b) The Nominating Committee shall consist of not less than [nine] 
seven persons, each of whom shall be, [either] a member of the 
Corporation or a general partner or officer of a member organization or 
such other person who is considered to be qualified. At least one 
member appointed to the Nominating Committee shall, at the time of his 
appointment, not be a member of the Board of Governors. In appointment 
of the Committee members, the Chairman of the Board shall have due 
regard for representation on the Committee of the various functions and 
activities of the Corporation and its members. The Chairman of the 
Board shall also designate the Chairman of the Committee.

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. The text of these statements may be examined at 
the places specified in Item III below. The self-regulatory 
organization has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspect of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    PHLX By-Law Article III, Section 3-5(b) sets forth the eligibility 
requirements for service on the Nominating Committee. The By-Law 
presently requires that the Committee consist of a minimum of nine 
persons who shall be either PHLX members or general partners or 
officers of members organizations. The proposed By-Law amendment 
reduces the minimum number of Committee members to seven and allows 
consideration of non-members who are qualified persons to be eligible 
for Board appointment to the Committee.
    PHLX is currently in the process of a major review of corporate 
governance initiatives. In conjunction with these initiatives, PHLX 
proposes to change the eligibility requirements to serve on its 
Nominating Committee. Reducing the minimum number of members on the 
Committee will promote a more cohesive and collaborative Committee, 
thereby facilitating the deliberative process. Additionally, the 
amendments will be conducive to achieving greater diversity on the 
Committee, which may constructively influence the process in selecting 
nominations to the Board of Governors.
    By adding the provision that ``any other person who is considered 
qualified may be appointed to the Committee,'' the Chairman may now 
recommend appointment of public governors and other non-member 
affiliated representatives to the Committee. Inclusion of individuals 
other than only PHLX members should provide greater diversity to the 
Nominating Committee with concomitant benefits to the Committee's 
deliberative process. Thus, By-Law amendment will promote the 
governance initiatives of the PHLX, which include the transition to a 
Board reflecting 50% public governor representation.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \4\ of the 
Act in general, and in particular, with Section 6(b)(3),\5\ in that it 
is designed to promote the opportunity to assure a fair representation 
of PHLX members in the selection of directors and the administration of 
affairs, and with Section 6(b)(5) \6\ in that it is designed to promote 
just and equitable principles of trade, prevent fraudulent and 
manipulative acts and practices, 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 national market system, as well as to protect 
investors and the public interest.
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    \4\ 15 U.S.C. Sec. 78f.
    \5\ 15 U.S.C. Sec. 78f(b)(3).
    \6\ 15 U.S.C. Sec. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The PHLX 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

    In accordance with PHLX By-Law Article XXII, Section 22-2, the 
proposed amendment was noticed to the membership by Circular 97-69 on 
March 27, 1997. No written requests or

[[Page 24532]]

other comments have been filed with the PHLX Secretary.

III. 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. Sec. 552, will be available for inspection and copying in 
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 PHLX. All submissions 
should refer to File No. SR-Phlx-97-17 and should be submitted by May 
27, 1997.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission has reviewed carefully the PHLX's proposed rule 
change and believes, for the reasons set forth below, the proposal is 
consistent with Section 6 of the Act \7\ and the rules ad regulations 
thereunder. Specifically, the Commission believes the proposal is 
consistent with Section 6(b)(3),\8\ in that it is designed to promote 
the opportunity to assure a fair representation of PHLX members in the 
selection of directors and the administration of affairs. The PHLX's 
recent corporate governance initiatives include increasing the number 
and proportion of non-industry and public governors, and restructuring 
key committees. Increasing diversity on the Nominating Committee 
permits the PHLX to move forward with this process and to provide more 
balance on the Committee. The Commission also finds that the proposal 
is consistent with Section 6(b)(5) \9\ in that it is designed to 
promote just and equitable principles of trade, prevent fraudulent and 
manipulative acts and practices, 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 national market system, as well as to protect 
investors and the public interest.\10\ Specifically, permitting the 
appointment of public and non-member governors for the Nominating 
Committee is appropriate in light of the serious regulatory 
responsibilities and quasi-public nature of a self-regulatory 
organization. In light of these responsibilities, it is important that 
constituencies other than members participate in the Nominating 
Committee. Reducing the minimum number of members of the Nominating 
Committee may make it more efficient and less unwieldy. The 
effectiveness of a more streamlined Committee will be especially 
important in implementing the necessary PHLX corporate governance 
changes.
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    \7\ 15 U.S.C. Sec. 78f.
    \8\ 15 U.S.C. Sec. 78f(b)(3).
    \9\ 15 U.S.C. Sec. 78f(b)(5).
    \10\ In approving the proposal, the Commission has considered 
the proposal's impact on efficiency, competition, and capital 
formation. 15 U.S.C. Sec. 78c(f).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication thereof 
in the Federal Register. The PHLX is presently in the process of 
reorganizing its corporate governance structure to better reflect its 
self-regulatory and public responsibilities. This By-Law change is 
instrumental to the process. Furthermore, the PHLX has presented the 
proposal to its membership, the most likely commenters on the proposed 
rule change. The Commission understands that the PHLX did not receive 
any objections concerning the proposal. The Commission believes, 
therefore, that granting accelerated approval of the proposed rule 
change is appropriate and consistent with Section 6 of the Act.\11\
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    \11\ 15 U.S.C. Sec. 78f.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-97-17) is hereby 
approved on an accelerated basis.

    \12\ 15 U.S.C. Sec. 78f.
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 15 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-11609 Filed 5-2-97; 8:45 am]
BILLING CODE 8010-01-M