[Federal Register Volume 63, Number 243 (Friday, December 18, 1998)]
[Notices]
[Pages 70172-70173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40782; File No. SR-CSE-98-03]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Cincinnati Stock Exchange, Inc. Regarding Regulatory 
Cooperation

December 11, 1998.
    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 October 26, 1998, the Cincinnati Stock Exchange, Inc. (``CSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') 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).
    \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 Exchange hereby proposes to amend its disciplinary jurisdiction 
rules to provide explicitly for regulatory cooperation by exchange 
members in connection with certain investigations and proceedings 
initiated by other self-regulatory organizations. The text of the 
proposed rule change is available at the Office of the Secretary, CSE 
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 CSE 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 CSE has prepared summaries, set forth in sections A, 
B, and C below, of the most significant parts of such statements.

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

1. Purpose
    Currently, Chapter VIII, Rule 8.2 of the Exchange's Rules requires 
a member and persons associated with a member to appear and testify, 
and to respond in writing to interrogatories and to furnish documentary 
materials and other information requested by the Exchange in connection 
with: (i) an investigation initiated pursuant to paragraph (a) of Rule 
8.2, or (ii) a hearing or appeal conducted pursuant to Chapter VIII or 
preparation by the Exchange in anticipation of such a hearing or 
appeal. While the Exchange believes that the current rule provides 
adequate authority to require a member and persons associated with a 
member to provide information to other regulatory organizations, the 
Exchange believes that clarifying this provision to expressly provide 
for such information is desirable, especially because other self-
regulatory organizations have recently amended their rules to clarify 
their information-sharing authority.\3\
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    \3\ See, e.g., Securities Exchange Act Release Nos. 39557 (Jan. 
16, 1998), 63 FR 3940 (Jan. 27, 1998) (notice of filing and 
immediate effectiveness of SR-CHX-97-33); and 35646 (April 25, 
1995), 60 FR 21227 (May 1, 1995) (order approving SR-PSE-95-02).
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    The proposed rule change would expressly provide that no member or 
person associated with a member or other person or entity subject to 
the jurisdiction of the Exchange shall refuse to appear and testify 
before another exchange or other self-regulatory organization in 
connection with a regulatory investigation, examination or disciplinary 
proceeding, or refuse to furnish documentary materials or other 
information, or otherwise impede or delay such investigation, 
examination or disciplinary proceeding if the Exchange requests such 
information or testimony in connection with an inquiry resulting from 
an agreement entered into by the Exchange and another self-regulatory 
organization for the sharing of information and other forms of mutual 
assistance, including but not limited to members and affiliate members 
of the Intermarket Surveillance Group.\4\ The proposed rule change 
would explicitly provide that the Exchange may enter into agreements 
with domestic and foreign self-regulatory organizations providing for 
the exchange of information and other forms of mutual assistance for 
market surveillance, investigative, enforcement or other regulatory 
purposes. The requirements of the proposed rule would apply regardless 
of whether the Exchange has initiated a formal investigation or 
disciplinary proceeding, so long as the Exchange has been notified of 
the request and then requests in writing that the person or entity 
provide the information requested.
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    \4\ The Intermarket Surveillance Group (``ISG'') is an 
organization of securities industry self-regulatory organizations 
formed in 1983 to coordinate and develop intermarket surveillance 
programs designed to identify and combat fraudulent and manipulative 
acts and practices. To promote its purposes, members agree to 
exchange such information as is necessary for ISG members to perform 
their self-regulatory and market surveillance functions.
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    The proposed rule change would also provide that any person or 
entity required to furnish information or testimony pursuant to the new 
rule shall be afforded the same rights and procedural protections as 
that person or entity would have if the Exchange had

[[Page 70173]]

initiated the request for information or testimony.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
in general, and furthers the objectives of Section 6(b)(5) \5\ in 
particular in that it is designed to promote just and equitable 
principles of trade and to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Specifically, 
the proposed rule change will foster regulatory cooperation among self-
regulatory organizations and thereby promote better regulated and 
fairer markets.
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    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The CSE 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 comments were solicited or received in connection with 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 reasons 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 
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. 
Sec. 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 principle office of the 
CSE. All submissions should refer to File No. SR-CSE-98-03 and should 
be submitted by [insert date 21 days from the date of publication].

    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. 98-33556 Filed 12-17-98; 8:45 am]
BILLING CODE 8010-01-M