[Federal Register Volume 65, Number 155 (Thursday, August 10, 2000)]
[Notices]
[Pages 49043-49044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-20257]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43105; File No. SR-NYSE-00-24]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Approving Proposed Rule Change Relating to Revising the 
Exchange's FORM AP-1 Application

August 2, 2000.

I. Introduction

    On May 25, 2000, the New York Stock Exchange, Inc., (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to revise the Exchange's FORM AP-
1 (the ``Form'') Application. The proposed rule change was published 
for comment in the Federal Register on June 27, 2000.\3\ No comments 
were received on the proposal. This order approves the NYSE's proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4
    \3\ Securities Exchange Act Release No. 42971 (June 21, 2000), 
65 FR 39644.
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II. Description of the Proposal

    NYSE Rule 304(h) requires that ``[a]ny person who controls a member 
or member organization, or who engages in a securities or kindred 
business and is controlled by or under common control with a member or 
member organization but is not a member or allied member

[[Page 49044]]

or an employee of a member organization shall apply for approval by the 
Exchange as an approved person. . . .'' The approval process requires 
that certain pertinent information about the approved person Applicant 
be provided to the Exchange for review. FORM AP-1 is used by Applicants 
who are entities and FORM U-4 is completed by natural person 
Applicants.
    The Exchange is proposing several revisions to FORM AP-1, which 
will require additional information and otherwise enhance its 
effectiveness for reviewing, approving, and monitoring Approved 
Persons.
    The proposed substantive revisions to FORM AP-1:
     require greater detail regarding both the nature of an 
Applicant's business and the Applicant's relationship with the member 
organization (items 7A and 9A-C of the Form);
     require the Applicant, promptly upon request, to provide 
the Exchange with updated financial and other information (Instruction 
Sheet, No. 8);
     require the Applicant, if a registered broker-dealer, to 
submit a copy of its most recent FOCUS Report (Instruction Sheet, No. 
10);
     continue the effectiveness of the Applicant's FORM AP-1 
agreements with the Exchange notwithstanding that the named member or 
member organization has changed its name or legal form (p. 4 of the 
Form, 5th paragraph); and
     require that a copy of a complete organization chart of 
Applicant and its affiliates be provided (Instruction Sheet, No. 9).
    The proposed revisions (Form items 7A and 9A-C) will provide 
Exchange staff with more detailed information regarding the 
relationship between the member organization and approved person, 
enabling a more thorough evaluation of the Applicant (e.g., the Form 
asks for a general description of the Applicant's business and requires 
Applicant to indicate specifically how it controls, is controlled by or 
under common control with the member or member organization).
    The proposed revisions clarify circumstances under which an 
Applicant must file financial statements (Instruction Sheet, No. 8). 
Item 12 of the Form asks the Applicant to submit to the Exchange its 
most recent balance sheet and income or profit and loss statement if 
the Applicant (a) Controls the member organization; (b) is a subsidiary 
of the member organization for purposes of NYSE Rule 321 or its 
obligations or liabilities are guaranteed, endorsed or assumed by the 
member organization (under NYSE Rule 322); or (c) is a ``Material 
Associated Person'' as the term is used in Rule 17h-1T under the Act. 
The Exchange believes that in most cases there is no regulatory purpose 
served by requiring submission of financial statements of persons under 
common control unless, as previously indicated, the person is a 
``Material Associated Person.'' The Exchange, however, reserves the 
right to request current financial statements from applicants under 
common control. The Form also provides clarification that when 
financial statements are required to be submitted, they must be 
current, and clarification of the Exchange's right to request updated 
financial and other information. Approved person Applicants that are 
registered broker-dealers must submit copies of their most recent FOCUS 
report (Instruction Sheet, No. 10).
    The revised Form contains a new provision which states that the 
Applicant agrees that the statements, warranties, representations and 
undertakings in the Form will continue to apply notwithstanding a 
change to the member organization's name, form of organization, or 
legal status (but retains same SEC B/D number). This will eliminate the 
need for more frequent re-filings of FORM AP-1 (see page 4 of the Form, 
5th paragraph).
    To clarify the relationship between the Applicant and the member 
organization, a complete organization chart of the Applicant and its 
affiliates must be submitted with the Form (Instruction Sheet, No. 9). 
An organization chart may also identify other entities which should be 
approved persons.
    Certain additional changes are proposed in response to suggestions 
made by Commission staff. They include the addition of a question (item 
7B of the Form) to elicit the identity of any ``foreign financial 
regulatory authority'' to which the Applicant may be subject. They also 
include highlighting (on the Instruction Sheet) the responsibility of 
the Applicant to disclose whether it, or any person associated 
therewith, is subject to a statutory disqualification, and noting on 
the instruction Sheet (No. 8) that any required financial statements 
must be submitted in English.
    Several formatting revisions have also been made, such as 
italicizing defined terms and providing space for evidencing Exchange 
staff processing, which make the Form clearer and easier to use.

III. Discussion

    The Commission finds that the proposal is consistent with the 
requirements of the Act of the rules and regulations thereunder 
applicable to a national securities exchange.\4\ Specifically, the 
Commission believes that the proposal is consistent with the 
requirements of Section 6(b)(5) of the Act \5\ because it is designed 
to prevent fraudulent and manipulative acts and practices, promotes 
just and equitable principles of trade, and, in general, protects 
investors and the public interest, in that it will enhance the process 
by which the Exchange reviews, approves, and monitors Approved Persons. 
The Commission believes that by providing more meaningful and detailed 
information for the Exchange's review, the proposed revisions to the 
NYSE's FORM AP-1, Application will enable the Exchange to make a 
better-informed decision concerning approval of applicants. The 
Commission also believes that such additional information on the 
application should improve the utility of the form in connection with 
the Exchange's regulatory oversight responsibilities.
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    \4\ In approving this rule, the Commission has considered the 
proposed rule change's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-NYSE-00-24) is approved.
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    \6\ 15 U.S.C. 78s(b)(2).

    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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Margeret H. McFarland,
Deputy Secretary.
[FR Doc. 00-20257 Filed 8-9-00; 8:45 am]
BILLING CODE 8010-01-M