[Federal Register Volume 63, Number 88 (Thursday, May 7, 1998)]
[Notices]
[Pages 25255-25258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12143]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39934; File No. SR-PCX-98-20]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To 
Discontinue the Exchange's SCOR Marketplace

April 30, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on April 16, 1998, the Pacific Exchange, Inc. (``PCX'' 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.\3\ The Exchange has designated this proposal as one that does 
not significantly affect the protection of investors or the public 
interest, does not impose any significant burden on competition, and by 
its terms does not become operative for 30 days after the date of the 
filing. In addition, the Exchange gave the Commission written notice of 
its intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule change. 
As a result, the proposal is effective upon filing under Exchange Act 
Section 19(b)(3)(A)(iii) and Rule 19b-4(e)(6) thereunder. 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\ 17 CFR 240.19b-4.
    \3\ The Exchange also submitted a technical amendment to the 
proposed rule change to correct typographical errors in the original 
filing. See Letter from Michael D. Pierson, Senior Attorney, 
Regulatory Policy, Exchange, to Jeffrey Schwartz, Special Counsel, 
Division of Market Regulation, Commission, dated April 28, 1998.
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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 discontinue its Small Corporate 
Offering Registration (``SCOR'') Marketplace and to remove its rules on 
the SCOR Marketplace from the Rules of the Exchange. The text of the 
proposed rule change is attached as Exhibit A.

[[Page 25256]]

II. Self-Regulatory Organizations Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 Exchange 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

Purpose
    On April 19, 1995, the Commission approved an Exchange proposal to 
permit the Exchange to list and trade SCOR securities, i.e., single 
classes of common or preferred stock that were issued pursuant to 
either Regulation A (``Reg. A'') or Rule 504 under the Securities Act 
of 1933 (``Securities Act'').\4\ The proposal was approved as a three-
year pilot program, which expired on April 19, 1998. At the time this 
proposed rule change was filed with the Commission, there were no SCOR 
securities listed or traded on the Exchange and there were no 
applications pending for participation in the SCOR program.
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    \4\ See Exchange Act Release No. 35628 (April 19, 1995) 60 FR 
20787 (April 27, 1995) (order approving SR-PSE-94-31); see also 
Exchange Act Release No. 35636 (April 21, 1995) 60 FR 20781 (April 
27, 1995) (order approving new listing fees for SCOR Securities, SR-
PSE-95-03).
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    The SCOR Marketplace was created as a secondary market for small 
companies sponsoring direct public offerings (DPOs), selling stock 
directly to investors under federal Reg. A standards, or state laws for 
SCOR issues. These federal and state programs are intended to help 
small businesses raise public capital, without following the rigorous 
filing and reporting requirements normally applied to securities 
offerings sponsored by larger companies, and without the support of a 
securities underwriter. Reg. A offerings are limited to $5 million; 
SCOR offerings to $1 million.
    The Exchange was approached in 1992 by small business advocates who 
believed that the two programs were not being fully used, in part due 
to the absence of a well regulated, liquid secondary market for the 
trading of SCOR and Reg. A stocks. At that time, secondary market 
activity in these offerings was limited to the Nasdaq Bulletin Board, 
or to a single stock broker (usually operating in the sponsoring 
company's hometown) willing to keep a physical record of potential 
buyers and sellers. The PCX spend nearly three years working with state 
and federal securities regulators to develop the SCOR Marketplace, 
which was approved by the Commission in 1995.\5\
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    \5\ See note 3 above.
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    From 1996 through the middle of 1997, 178 companies completed SCOR 
or Reg. A offerings, according to statistics complied by PCX staff. 
Many of these firms contacted the PCX about listing on the SCOR 
Marketplace. None, however, completed the listing application process 
at the Exchange, and only a handful were listed by other markets: two 
on the Nasdaq Small Cap market, one on the Toronto Stock Exchange, five 
on the OTC bulletin board, and one on the Pink Sheets. Although one 
company applied to list its SCOR securities on the PCX, it later 
withdrew its application.
    Accordingly, the Exchange has determined, after careful 
consideration, to discontinue its SCOR Marketplace.
Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Exchange Act, in general, and Section 6(b)(5), in 
particular, in that it is designed to facilitate transactions in 
securities, promote just and equitable principles of trade, and to 
protect investors and The public interest. The Exchange does not 
believe that the proposal will affect the protection of investors or 
the public interest because no securities are currently listed or 
traded under the SCOR Marketplace. In addition, the Exchange does not 
believe that discontinuing the program will impose any burden on 
competition because the rule change will not establish any new rules or 
requirements.

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

    The foregoing rule change shall become operative 30 days after the 
date of filing, pursuant to subparagraph (e)(6)(iii) of Exchange Act 
Rule 19b-4. At any time within 60 days of the date of filing of such 
proposed rule change, the Commission may summarily abrogate the 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 Exchange Act.\6\
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    \6\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. The 
proposal likely will not affect efficiency, competition, or capital 
formation given that no securities are traded on the SCOR 
Marketplace and none were likely to do so in the near future. 15 
U.S.C. 78c(f).
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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 Exchange Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, N.W., 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 Exchange. All submissions should refer to File 
No. SR-PCX-98-20 and should be submitted by May 28, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).

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[[Page 25257]]

Jonathan G. Katz,
Secretary.

Exhibit A

Text of the Proposed Rule Change \8\

RULE 3

LISTINGS

para. 356  General Provisions and Definitions

    Rule 3.1(a).  No change.
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    \8\ Proposed new text is italicized, deleted text is bracketed.
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    Rule 3.1(b)  Definitions. The following terms used in Rules 3.2 
through 3.5 shall, unless otherwise indicated, have the meanings herein 
specified:
* * * * *
    [(14) The term ``Small Corporate Offering Registration Securities'' 
(``SCOR Securities'') means a single class of an issuer that has been 
designated as common stock and/or preferred stock issued pursuant to:
    (i) Regulation A under the Securities Act of 1933 (``Securities 
Act'') and using the prescribed form as applicable; or
    (ii) Rule 504 under the Securities Act and using Form U-7 of the 
North American Securities Administrators Association (``NASAA'') (or 
state variation of such form with substantially similar requirements).
    (15) Once SCOR Securities have been accepted for listing on the 
Exchange, all securities of that class shall be considered to be SCOR 
Securities for purposes of this rule 3.1(b)(14), except those 
securities of the class that are subject to restrictions (i.e., 
securities restricted pursuant to federal or state securities laws, by 
any other law, by agreement, or in any other manner) that make them 
ineligible for trading on the Exchange.]
* * * * *

para. 3567  Applications to List

    Rule 3.2(a)  No change.
* * * * *

Listing Requirements

General
    Rule 3.2(b) The Exchange has a [multi-tiered] two-tier listing 
structure. Any security listed pursuant to this Rule 3.2, paragraphs 
(c) through (j), and any equity option listed in accordance with Rule 
3.6 and any index product listed in accordance with Rules 7 or 8 shall 
be designated as a Tier I security except for any security listed under 
Tier II [or SCOR] listing requirements; provided, however, that a 
security that is convertible into or carries a right to subscribe to 
purchase common stock will be a Tier II security unless the common 
stock into which it is convertible qualifies for inclusion under the 
Tier I designation. Furthermore, in cases where a company's security 
does not qualify for inclusion under the Tier I designation, yet the 
security is listed or has been approved for listing on either the New 
York Stock Exchange (``NYSE''), American Stock Exchange (``AMEX'') 
(except for so-called ``ECM'' securities), or NASDAQ National Market 
System (``NASDAQ/NMS''), the Exchange may list such security under Tier 
II in reliance upon the listing requirements of the applicable exchange 
(or association).
    A listing under the Tier I designation generally signifies that the 
company has achieved maturity and high status in its industry in terms 
of assets, earnings and shareholder interest and acceptance. The Tier 
II designation is limited, except for specific circumstances as 
discussed above, to the listing of common stock, preferred stock, bonds 
and debentures, and warrants. A listing under the Tier II designation 
generally signifies that the company has limited commercial operations, 
lower capitalization, and lacks a demonstrated earnings history. [Any 
security listed under the SCOR listing requirements constitute a third 
tier, however, solely for purposes of the application of ``exchange 
listing'' exemptions applicable to ``issuer'' transactions under the 
securities laws of the various states and territories of the United 
States, SCOR securities are not deemed to be ``listed'' on the 
Exchange.]
* * * * *

Designation of Tier I Securities Initial Listing Requirements

Common Stock--Select Market Companies
    Rule 3.2(c)  No change.
* * * * *

Basic Listing Requirements

* * * * *
    No change.

Alternate Listing Requirements

* * * * *
    No change.

Preferred Stock and Similar Issues

    Rule 3.2(d)  No change.
* * * * *

Bonds and Debentures

    Rule 3.2(e)  No change.
* * * * *

Warrants

    Rule 3.2(f)  No change.
* * * * *

Contingent Value Rights (``CVRs'')

    Rule 3.2(g)  No change.
* * * * *

Unit Investment Trusts (``UTs'')

    Rule 3.2(h)  No change.
* * * * *

Limited Partnerships

    Rule 3.2(i)  No change.
* * * * *

Other Securities

    Rule 3.2(j)(1)  No change.
* * * * *
    Paragraphs (k) through (m). Reserved.

Designation of Tier II Securities

Initial Listing Requirements

Common Stock--Development Stage Companies
    Rule 3.2(n)  No change.
* * * * *

Basic Listing Requirements

    No change.
* * * * *

Alternate Listing Requirements

    No change.
* * * * *
    Rule 3.2(o)  No change.
* * * * *

Bonds and Debentures

    Rules 3.2(p)  No change.
* * * * *

Warrants

    Rule 3.2(q)  No change.
* * * * *
    [Rule 3.2(r)--Deleted]
    Paragraphs (r), (s) and (t). Reserved.
* * * * *

para. 3573  Corporate Governance and Disclosure Policies

    Rule 3.3.  The Exchange shall require that specific corporate 
governance and disclosure policies be established by domestic issuers 
of any equity security listed pursuant to Rule 3.2. The Exchange, 
however, will not require an issuer of such security under [either] the 
Tier II [or SCOR] designation[s] to comply with the provision for an 
audit committee as set forth in this Rule 3.3(b).
* * * * *

Corporate Governance

    Rule 3.3(a)  No change.
* * * * *

[[Page 25258]]

    Rule 3.3(b)  No change.
* * * * *
    Rule 3.3(c)  No change.
* * * * *
    Rule 3.3(d)  No change.
* * * * *
    Rule 3.3(e)  No change.
* * * * *
    Rule 3.3(f)  No change.
* * * * *
    Rule 3.3(g)  No change.
* * * * *
    Rule 3.3(h)  No change.
* * * * *
    Paragraphs (i) through (s). Reserved.

Disclosure Policies

    Rule 3.3(t)  No change.
* * * * *

para.3579  Suspension of Issuer Withdrawal from Listing

    Rule 3.4(a).  No change.
    Rule 3.4(b).  No change.

para.3585  Maintenance Requirements and Delisting Procedures

    Rule 3.5(a).  No change.
* * * * *

Tier I Securities

Maintenance Requirements

Common Stock--Select Market Companies
    Rule 3.5(b)  No change.
* * * * *

Preferred Stock and Similar Issues

    Rule 3.5(c)  No change.
* * * * *

Bonds and Debentures

    Rule 3.5(d)  No change.
* * * * *

Warrants

    Rule 3.5(e)  No change.
* * * * *

Contingent Value Rights (``CVRs'')

    Rule 3.5(f)  No change.

Unit Investment Trusts (``UITs'')

* * * * *
    Rule 3.5(g)  No change.
* * * * *
    Paragraphs (h) through (l). Reserved.

Tier II Securities

Maintenance Requirements

Common Stock--Development Stage Companies
    Rule 3.5(m)  No change.
* * * * *

Preferred Stock and Similar Issues

    Rule 3.5(n)  No change.
* * * * *

Bonds and Debentures

    Rule 3.5(o)  No change.
* * * * *

Warrants

    Rule 3.5(p).  No change.
* * * * *
    Paragraphs (q) and (r).  Reserved.
    [Rule 3.5(r)--Deleted]

Other Reasons for Suspending or Delisting

    Rule 3.5(s)  No change.
* * * * *

Delisting Procedures

    Rule 3.5(t)  No change.
* * * * *

Options

para. 3591

    Rule 3.6   No change.
    Rule 3.6(a)  No change.
* * * * *
    Rule 3.6(b)  No change.
* * * * *
    Rule 3.6(c)  No change.
* * * * *
    Rule 3.6(d)  No change.
* * * * *
* * * * *

para.3598  Withdrawal of Approval of Underlying Securities

    Rule 3.7(a).  No change.
* * * * *
    Rule 3.7(b).  No change.
* * * * *
[SCOR Marketplace \9\
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    \9\ This fee schedule was part of a previous Exchange rule 
filing. See Exchange Act Release No. 35636 (April 21, 1995) 60 FR 
20781 (April 27, 1995) (order approving new listing fees for SCOR 
Securities, SR-PSE-95-03).
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Original Listings
    The Original Listing fees are fixed fees and issuers are not 
charged by the number of shares being listed.

Common Stock--$5,000.00
Preferred Stock--$5,000.00
Processing Fee
*Per Original Listing Application--$500.00
Name Change--$250.00
Change in Par Value--$250.00

    * This is a fixed charge for the review of potential listings 
and is non-refundable. Issues approved for listing may have this 
charge credited toward the original listing fee.
Substitution of Original Listing
Per Application: Fixed charge of $750.00

    Substitution may occur as a result of a change in state of 
incorporation, reincorporation under laws of same state, a reverse 
stock split, recapitalizations, or similar events.
Listing of Additional Shares
Per Application: $.0025 per share
Minimum charge of $500.00
Maximum charge of $2,500.00
Maximum charge of $5,000.00 per annum
Annual Maintenance Fee
For one issue--$1,000.00
For each additional issue--$500.00

    Payable January of each year following listing.
Conversion Fee
Conversion from the SCOR Marketplace to Tiers I or II.
Common Stock--$15,000.00

[FR Doc. 98-12143 Filed 5-6-98; 8:45 am]
BILLING CODE 8010-01-M