[Federal Register Volume 63, Number 56 (Tuesday, March 24, 1998)]
[Notices]
[Pages 14145-14146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7517]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39767; File No. SR-AMEX-97-30]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by The American Stock Exchange, Inc., Relating to Professional 
Hearing Officers, Executive Committee Review of Appeals From 
Disciplinary Panel Decisions and Indemnification of Persons Serving on 
Disciplinary Panels and Exchange Officials

March 17, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 11, 1997,\2\ the 
American Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Amex. 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).
    \2\ On September 11, 1997, the Amex submitted an amendment 
reflecting editorial corrections to the text of Exhibit A. See 
letter from William Floyd-Jones, Jr., Assistant General Counsel, 
Legal & Regulatory Policy Division, American Stock Exchange, Inc., 
to Katherine A. England, Esq., Assistant Director, Market 
Supervision, Division of Market Regulation, SEC, dated September 11, 
1997.
    On February 26, 1998, the Amex submitted an amendment 
clarifying, among other things, perceived discrepancies in the 
disciplinary system, recusal procedures, and vague terminology. See 
letter from Janice M. Stroughter, Director of Hearings and Special 
Counsel, Legal & Regulatory Policy, American Stock Exchange, Inc., 
to Katherine England, Esq., Assistant Director, Market Supervision, 
SEC, dated February 25, 1998 (``Amendment No. 2'')
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I. Self-Regulatory Organizations Statement of the Terms of 
Substance of the Proposed Rule Change

    The text of the proposed rule change is available at the Office of 
the Secretary, the Amex and at the Commission.

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 Amex 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 Amex 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
i. Professional Hearing Officers
    Article V, Section 1(b) of the Exchange Constitution and the 
Exchange's Rules of Procedure Applicable to Exchange Disciplinary 
Proceedings currently require the Exchange to draw members of 
disciplinary panels exclusively from the ranks of practicing securities 
industry professionals. These rules also generally require the Chairmen 
of Disciplinary Panels to be Exchange Officials. The current system for 
selecting Disciplinary Panels has worked well for many years, and Panel 
members have performed an invaluable service to the Exchange on a 
voluntary basis.
    While the current system for constituting Disciplinary Panels has 
worked well, the Exchange has noted a trend toward increasing 
complexity in the legal issues confronting Disciplinary Panels. 
Frequently, Panels face complicated legal questions that must be 
resolved promptly to ensure the timely resolution of enforcement 
matters. While the Exchange provides Disciplinary Panels with an 
assistant, this staff person has a non-substantive role in enforcement 
proceedings and, therefore, is unable to fully participate

[[Page 14146]]

with the Panel in evaluating important legal, evidentiary and 
procedural questions.
    The Exchange, accordingly, is proposing to amend its Constitution 
and Rules to provide for professional hearing officers to serve as 
chairmen and voting members of Exchange Disciplinary Panels.\3\ The 
remaining members of Disciplinary Panels would continue to be drawn 
from the ranks of practicing securities industry professionals as 
currently provided for in the Exchange's Constitution and Rules.
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    \3\ The Amex expects that the ``professional hearing officer 
will be an individual who is a lawyer who has had litigation 
experience in the securities area. It is possible that such 
individual, or his firm, may provide advice or services to the 
Exchange on matters that do not relate to the investigation or 
preparation of disciplinary matters.'' See Amendment No. 2 at p. 2.
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ii. Indemnification of Persons Serving on Disciplinary Panels and 
Exchange Officials
    The Exchange has noted that the indemnification provision of the 
Exchange's Constitution does not specifically mention persons serving 
on Disciplinary Panels and Exchange Officials. While the Exchange 
believes that there are sound arguments for concluding that persons 
serving on Disciplinary Panels and Exchange Officials already are 
covered by the Exchange's indemnity provision, the Exchange is 
proposing to amend the Constitution to make this coverage explicit in 
order to help ensure that the Exchange can continue to attract and 
retain the services of qualified persons to serve in these capacities.
iii. Board Review of Disciplinary Panel Decisions
    Disciplinary appeals are heard by the Executive Committee of the 
Board under delegated authority from the Board of Governors as 
authorized by Article V, Section 1(b) of the Constitution in all 
instances except where a member or member organization is expelled or 
suspended for a period of one year or more. In such instance, a review 
by the full Board is required. It is proposed that the Executive 
Committee be the delegated authority to hear all appeals (including 
matters the Board calls for review) regardless of the nature of the 
respondent or the penalty. This would make the appeal process less 
cumbersome, while at the same time eliminating a special review 
privilege (i.e., full Board review) that exists for members and member 
organizations, but not for their employees. The full Board would retain 
authority to review disciplinary decisions when such review is deemed 
appropriate.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \4\ of the 
Act in general and furthers the objectives of Section 6(b)(7) \5\ in 
particular, in that the proposed rule change provides for a fair 
procedure for the disciplining of Exchange members and persons 
associated with its members.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received with respect 
to the proposed rule change.

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 reason 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, 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, 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 in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to the file number in the caption 
above and should be submitted by April 14, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-7517 Filed 3-23-98; 8:45 am]
BILLING CODE 8010-01-M