[Federal Register Volume 64, Number 89 (Monday, May 10, 1999)]
[Notices]
[Pages 25096-25097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11599]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41350; File No. SR-PCX-99-02]
Self-Regulatory Organizations; Pacific Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to Matters
Subject to Arbitration
I. Introduction
On February 3, 1999, the Pacific Stock Exchange, Inc. (``PCX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a proposed rule change pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Exchange Act'') \1\
and Rule 19b-4 thereunder.\2\ The proposed rule change would amend PCX
Rule 12.1 to allow for claims related to employment, including sexual
harassment, or any discrimination claim in violation of a statute, to
be eligible for submission to arbitration only where all parties have
agreed to arbitration after the claim has arisen. Notice of the
proposed rule change, together with the substance of the proposal, was
provided in a Commission release and in the Federal Register.\3\ The
Commission received no comment letters. This Order approves the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Exchange Act Release No. 41206 (March 23, 1999) 64 FR 15388
(March 31, 1999).
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[[Page 25097]]
II. Description of the Proposal
The proposed rule change will modify the current requirement in PCX
Rule 12.1 that any employment-related disputes between a registered
representative and a member or member organization be addressed by
arbitration. The proposal provides that claims related to employment,
including sexual harassment, or any discrimination claim in violation
of a statute, are eligible for arbitration at the Exchange only if the
parties agree to arbitrate the claims after they arise.
The proposed rule change is the most recent in a series of rule
changes implemented by self regulatory organizations (``SROs'') which
modify or clarify exchange rules with regard to arbitration of
employment related claims, including claims of sexual harassment.\4\
The proposed rule change is substantially similar to the rule changes
the Commission approved for the other SROs; however, PCX has broadened
the scope of the previously approved rule changes, to mandate that all
claims related to employment, including sexual harassment, or any
discrimination claim in violation of a statute, are eligible for
arbitration at the Exchange only if the parties agree to arbitrate the
claims after they arise.
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\4\ See Exchange Act Release No. 40109 (June 22, 1998) 63 FR
35299 (June 29, 1998) (National Association of Securities Dealers
(``NASD'') no longer requires associated persons, solely by virtue
of their association or registration with the NASD, to arbitrate
claims of statutory employment discrimination); Exchange Act Release
No. 40858 (December 29, 1998) 64 FR 1051 (January 7, 1999) (New York
Stock Exchange removes mandatory arbitration of statutory employment
discrimination claims from its rules, allowing arbitration only
pursuant to a post-dispute agreement to arbitrate); Exchange Act
Release No. 40861 (December 29, 1998) 64 FR 1039 (January 7, 1999)
(Boston Stock Exchange excludes from mandatory arbitration any
employee dispute between a registered representative or associated
persons and a member organization alleging employment discrimination
in violation of a statute, including sexual harassment, unless the
parties agree to arbitrate the claim after it has arisen); Exchange
Act Release No. 41080 (February 22, 1999) 64 FR 10033 (March 1,
1999) (Chicago Board Options Exchange adopts new Interpretation .03
under Exchange Rule 18.1 to clarify that a claim involving
employment discrimination, including sexual harassment, is not
appropriate for mandatory arbitration at the Exchange).
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III. Discussion
Under the Act, SROs are assigned rulemaking and enforcement
responsibilities to perform their role in regulating the securities
industry for the protection of investors and other related purposes.
Pursuant to section 19(b)(2) of the Act,\5\ the Commission is required
to approve an SRO's proposed rule change if the Commission determines
that the proposal is consistent with applicable statutory standards.
These standards include section 6(b)(5) of the Act,\6\ which provides
that the Exchange's rules must be designed to, among other things,
``promote just and equitable principles of trade,'' and ``protect
investors and the public interest.'' Section 6(b)(5) also provides that
the Exchange's rules may not be designed to ``regulate * * * matters
not related to the purposes of the [Exchange Act] or the administration
of the [Exchange].''
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\5\ 15 U.S.C. 78s(b)(2).
\6\ 15 U.S.C. 78f(b)(5).
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The Exchange's proposed rule change is consistent with section 6(b)
of the Act in general, and furthers the objectives of section 6(b)(5)
of the Act in particular, in that it is designed to promote just and
equitable principles of trade and the protection of investors and the
public interest by improving the administration of an impartial
arbitration forum for the resolution of disputes between members and
persons associated with members. Furthermore, the proposed rule change
is intended to provide uniformity throughout the securities industry as
other SROs have modified or clarified their rules with regard to the
arbitration of employment related claims. It is reasonable for the
Exchange to make a policy determination that in this unique area it
will not, as an SRO, permit the use of arbitration unless there is a
post-dispute agreement. It is also not improper under the Act for one
SRO's policy determination to differ from that of another.
V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\7\ that the proposal, SR-PCX-99-02, be and hereby is approved.\8\
\7\ 15 U.S.C. 78s(b)(2).
\8\ In approving the proposal, the Commission has considered the
rule's impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-11599 Filed 5-07-99; 8:45 am]
BILLING CODE 8010-01-M