[Federal Register Volume 63, Number 28 (Wednesday, February 11, 1998)]
[Notices]
[Pages 7033-7034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3371]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39619; File No. SR-PHLX-98-01]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Concerning Notice to Persons Who are the Subject of a 
Report to the Exchange Business Conduct Committee

February 3, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that 
on February 3, 1998, the Philadelphia Stock Exchange, Inc. (``PHLX'' 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.
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    \1\ 15 U.S.C. 78s(b)(1) (1994).
    \2\ 17 CFR 240.19b-4 (1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PHLX proposes to amend Exchange Rule 960.2 to adopt new 
subsection (e), Notice and Statement, to codify the Exchange's practice 
of notifying persons who are the subject of an investigative report, 
which will be reviewed by the Business Conduct Committee, and to give 
those persons the opportunity to submit a written statement to the 
Business Conduct Committee prior to the Business Conduct Committee's 
review of the investigative report. The text of the proposed rule 
change is below. Brackets represent deletions; italicizing represents 
additions.

Complaint and Investigation

Investigation and Authorization of Complaint
    Rule 960.2 (a)-(d) No change.
    (e) Notice and Statement. Prior to submitting its report, the staff 
shall notify the person(s) who is (are) the subject of the report 
(``Subject'') of the general nature of the allegations and of the 
specific provisions of the Exchange Act, rules and regulations 
promulgated thereunder, or constitutional provisions, by-laws or rules 
of the Exchange or any interpretation thereof or any resolution of the 
Board regulating the conduct of business on the Exchange, that appear 
to have been violated. The staff shall also inform the Subject that the 
report will be reviewed by the Committee. The Subject may then submit a 
written statement to the Committee concerning why no disciplinary 
action should be taken. To assist a Subject in preparing such a written 
statement, he shall have access to any documents and other materials in 
the investigative file of the Exchange that were furnished by him or 
his agents.
    [(e)] (f) Determination to Initiate Charges.
    No change.

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 PHLX 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 PHLX 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

    In April of this year, the Exchange's Board of Governors adopted 
the recommendation of the Governance

[[Page 7034]]

Committee appointed by the Board of Governors to codify the Exchange's 
practice of using ``Wells'' letters with respect to the Business 
Conduct Committee process. Prior to submitting any investigative report 
to the Business Conduct Committee, in which the staff of the Exchange 
is recommending that there is a reasonable basis to believe that a 
violation within the disciplinary jurisdiction of the Exchange has 
occurred, the staff will notify the person who is the subject of the 
report of the general nature of the allegations and the specific rule 
or by-law that appears to have been violated. The staff will also 
inform the subject that the report will be reviewed by the Business 
Conduct Committee and that the subject may submit a written statement 
to the Business Conduct Committee concerning why he believes that no 
disciplinary action should be taken. This practice is often referred to 
as a ``Wells'' submission and is used by the Commission in its 
enforcement program. The Exchange has always adhered to this practice 
and is now merely codifying it as an Exchange rule.\3\ Although no time 
frame is specified within the rule, a reasonable amount of time 
depending on the circumstances of the matter is afforded the subject 
and the deadline for submission is always included in the notice to the 
subject.
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    \3\ See Rule 17.2(d) of the Chicago Board Options Exchange 
(``CBOE'') which is similar to this rule.
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    The proposed rule change is consistent with Section 6 of the Act in 
general, and in particular, with Section 6(b)(7), in that it provides a 
fair procedure for the disciplining of members and persons associated 
with members because it codifies an existing practice which affords 
rights to members and associated persons of notice and opportunity to 
comment prior to the staff submitting a report to the Business Conduct 
Committee which may result in enforcement proceedings against such 
member or associated person.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from February 3, 1998, 
the date on which it was filed, and the Exchange provided the 
Commission with written notice of its intent to file the proposed rule 
change at least five business days prior to the filing date, the 
proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder.\4\
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    \4\ 17 CFR 240.19b-4(e)(6)(1997).
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    At any time within 60 days of the filing of the 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, including whether the proposed rule 
change is consistent with the Act. 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. Copies of the filing will also be 
available for inspection and copying at the PHLX's principal offices. 
All submissions should refer to File No. SR-PHLX-98-01 and should be 
submitted by March 4, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12)(1997).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-3371 Filed 2-10-98; 8:45 am]
BILLING CODE 8010-01-M