[Federal Register Volume 63, Number 250 (Wednesday, December 30, 1998)]
[Notices]
[Pages 71991-71993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34514]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40812; File No. SR-NYSE-98-44]


Self-Regulatory Organizations; Proposed Rule Change by the New 
York Stock Exchange, Inc. Relating to an Interpretation With Respect to 
Rule 344 (``Supervisory Analysts'')

December 21, 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 December 3, 1998, the New York Stock Exchange, Inc. (``NYSE'' 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 
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 proposed rule change consists of an interpretation with respect 
to the meaning and administration of Exchange Rule 344 (``Supervisory 
Analysts''). Additions are italicized; deletions are bracketed.

Rule 344

/01  Qualifications

    Supervisory Analyst candidates shall qualify by taking and 
passing the Supervisory Analyst (Series 16) Examination.

Experience

    Appropriate experience for a candidate for Supervisory Analyst 
[has been defined as] means having at least three years prior 
experience [as a securities analyst] within the immediately 
preceding six years involving securities or financial analysis.
    Examples of appropriate experience may include the following:
     Equity or Fixed Income Research Analyst;
     Credit Analyst for a securities rating agency;
     Supervising preparation of materials prepared by 
financial/securities analysts;

[[Page 71992]]

     Financial analytical experience gained at banks, 
insurance companies or other financial institutions;
     Academic experience relating to the financial/
securities markets/industry.

/02  No Change

/03  Chartered Financial Analyst (CFA)

    Successful completion of the CFA Level I Examination given by 
the Institute of Chartered Financial Analysts (in lieu of completion 
of Levels I, II and III for a full CFA designation) will suffice to 
allow a Supervisory Analyst candidate to [take a special version of 
the Supervisory Analyst's examination which is limited to Exchange 
Rules on research standards and related matters] qualify by taking 
Part 1 of the Series 16 Qualification Examination.
* * * * *

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

    In its filing with the Commission, the NYSE 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

    The purpose of the proposed rule change is to set forth an 
interpretation concerning the meaning and administration of Exchange 
Rule 344 with respect to establishing standards for the qualification 
of candidates for Supervisory Analyst designation at member 
organizations. It is intended that this interpretation will be 
published as an Interpretation Memorandum for inclusion in the 
Exchange's Interpretation Handbook.
    Exchange Rule 344 sets the standards that must be met by candidates 
for Supervisory Analyst designation at member organizations. Research 
reports issued by a member organization must, under the provisions of 
Rule 472(b) (``Communications with the Public''), be prepared or 
approved by a Supervisory Analyst.
    Rule 344 requires that, to be approved by the Exchange, Supervisory 
Analysts must provide evidence of ``appropriate experience'' and pass 
the Supervisory Analyst Examination (the ``Series 16 Examination'') or 
complete CFA Level I and pass Part I of the Series 16 Exam. The 
examination consists of two parts: Part I, Regulatory Administration, 
and Part II, Review of Security Analysis. Currently, the Exchange deems 
``three years prior experience as a securities analyst'' as 
constituting ``appropriate experience.'' The Exchange proposes to amend 
the existing interpretation to Rule 344 to require Supervisory Analyst 
candidates to have three years experience, within the most recent six 
years, involving securities or financial analysis in order to be 
qualified. Candidates will continue to be required to qualify by taking 
and passing the Series 16 Examination.
    Member organizations have expressed their belief that the current 
three year securities analyst experience requirement is too limiting in 
today's business environment where the role of the Supervisory Analyst 
has changed. Previously, a Supervisory Analyst typically performed 
actual analysis and wrote reports in addition to supervising the 
preparation of and reviewing the reports written by others. Currently, 
it is common for Supervisory Analysts to perform functions limited to 
the review of research reports written by others. Accordingly, three 
years experience as a ``securities analyst'' should not be the only 
acceptable experience that a person may have to be qualified to perform 
the job function.
    Examples of appropriate experience under the proposed revised 
interpretation include (1) equity or fixed income research analyst; (2) 
supervisor of preparation of materials by analysts; (3) credit analyst 
for a securities rating agency; certain financial analytical 
experience; and (4) certain academic experience. The Exchange believes 
that this proposed interpretation will appropriately broaden the types 
of experience that would be acceptable to qualify Supervisory Analyst 
candidates.
    The Exchange believes that the proposed rule change is consistent 
with the requirements of Section 6(c)(3)(B) of the Act.\3\ Under that 
Section, it is the Exchange's responsibility to prescribe standards of 
training, experience and competence for persons associated with 
Exchange members and member organizations. Pursuant to this statutory 
obligation, the exchange has developed standards to ensure that persons 
associated with Exchange members and member organizations as 
Supervisory Analysts are appropriately qualified and meet experience 
requirements.
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    \3\ 15 U.S.C. 78f(c)(3)(B).
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    In addition, under Section 6(c)(3)(B) of the Act, the Exchange may 
bar a natural person from becoming a member or person associated with a 
member, if such natural person does not meet such standards of 
training, experience and competence as are prescribed by the rules of 
the Exchange. Pursuant to this statutory obligation, the Exchange has 
proposed this new interpretation to establish appropriate experience 
requirements of Supervisory Analyst candidates.

B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    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 NYSE 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 proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, 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 NYSE. All 
submissions should refer to File No.

[[Page 71993]]

SR-NYSE-98-44 and should be submitted by January 20, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-34514 Filed 12-29-98; 8:45 am]
BILLING CODE 8010-01-M