[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