[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]


-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).

---------------------------------------------------------------------------

[[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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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].''
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(2).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-11599 Filed 5-07-99; 8:45 am]
BILLING CODE 8010-01-M