[Federal Register Volume 66, Number 35 (Wednesday, February 21, 2001)]
[Notices]
[Pages 11078-11079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4262]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43952; File No. SR-Phlx-00-13]


Self-Regulatory Organizations; Order Granting Approval of the 
Proposed Rule Change, as Amended, by the Philadelphia Stock Exchange, 
Inc. Relating to Timing Guidelines for Application in Disciplinary 
Hearings

February 12, 2001.

I. Introduction

    On July 13, 2000, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
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 amending Phlx Rule 960.5(a), (b), 
(c), and (d) to provide timing guidelines for certain procedures 
conducted pursuant to Phlx Rule 960.5. On August 23, 2000, the Phlx 
filed Amendment No. 1 to the proposed rule change.\3\ On November 9, 
2000, the Phlx filed Amendment No. 2 to the proposed rule change.\4\ On 
November 22, 2000, the Phlx filed Amendment No. 3 to the proposed rule 
change.\5\ On December 13, 2000, the Phlx filed Amendment No. 4 to the 
proposed rule change.\6\ Notice of the proposal, as amended, was 
published in the Federal Register on December 28, 2000.\7\ The 
Commission received no comments on the proposal. On January 11, 2001, 
the Phlx filed Amendment No. 5 to the proposed rule change.\8\ This 
order approves the proposal, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission (Aug. 22, 2000) 
(``Amendment No. 1''). In Amendment No. 1, the Phlx corrected its 
rule language and clarified which language of the rule text was to 
be added and deleted. The Phlx also added a paragraph describing 
that the proposal would allow the Chair of the Business Conduct 
Committee (``Committee'') to designate another person to oversee the 
Chairperson's duties pursuant to Phlx rules.
    The Phlx indicated that the designee would be a Business Conduct 
Committee member. Telephone conversation between Charles Falgie, 
Director of Enforcement/Counsel, Phlx, and Melinda Diller, Attorney, 
Division, Commission (Sept. 1, 2000).
    \4\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division, 
Commission (Nov. 8, 2000) (``Amendment No. 2''). In Amendment No. 2, 
the Phlx changed the text of the rule language and revised time 
limits and the manner in which a Respondent's request for a hearing 
is handled.
    \5\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division, 
Commission (Nov. 20, 2000) (``Amendment No. 3''). In Amendment No. 
3, the Phlx ``marked'' the filing and the text of the rule language 
to indicate the changes made in Amendment No. 2, which were not 
properly indicated.
    \6\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division, 
Commission (Dec. 13, 2000) (``Amendment No. 4''). In Amendment No. 
4, the Phlx made a few technical corrections to the text of the 
proposed rule.
    \7\ See Securities Exchange Act Release No. 43757 (December 20, 
2000), 65 FR 82432.
    \8\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division, 
Commission (Jan. 11, 2001) (``Amendment No. 5''). In Amendment No. 
5, the Phlx made a few more technical corrections to the text of the 
proposed rule. The Phlx also clarified that it inadvertently 
indicated the addition of the term ``its'' and the deletion of the 
term ``their'' between the terms ``Respondent'' and ``in'' in the 
first sentence under proposed Rule 960.5(a)(1). Telehpone 
conversation between Charles Falgie, Director of Enforcement/
Counsel, Phlx, and Sapna C. Patel, Attorney, Division, Commission 
(Jan. 12, 2001). Because Amendment No. 5 only makes minor technical 
corrections to the proposed rule text, the Commission is not 
required to solicit comments on it.
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II. Description of the Proposal

    The Phlx proposes to amend Phlx Rule 960.5 to provide timing 
guidelines for certain procedures relating to disciplinary hearings. 
Revised Rule 960.5 proposes to adopt a timing guideline of 120 days for 
the Chair of the Committee to schedule a hearing date after a hearing 
has been requested in the written Answer filed by a Respondent in 
response to a Statement of Charges.\9\ The Phlx also proposes a five 
business day timing guideline \10\ for the Chair of the Committee, or 
its designee, to schedule a hearing date and name a Hearing Panel after 
receiving a request from Counsel for the Exchange. If the request for a 
hearing comes from the Respondent, Counsel for the Exchange must 
request that a hearing date be set and a Hearing Panel be named within 
ten business days of receiving Respondent's request.\11\ Evidence and 
witness lists must be exchanged between the parties, as well as 
provided to the members of the

[[Page 11079]]

Hearing Panel, not less than eight business days prior to the scheduled 
hearing date.\12\ Counsel for the Exchange must provide a transcript of 
the hearing to the Hearing Panel members and the Respondent within five 
business days of receipt of the transcript. The Respondent, along with 
being provided a copy of the transcript, will be issued a bill for its 
portion of the costs of the transcript.\13\ The Exchange and the 
Respondent would bear equally the costs of the transcript, which would 
include, but will not be limited to, the costs for the court reporter, 
reproduction of the transcript, and producing copies.\14\ The Hearing 
Panel, on receipt of the transcript, would then have forty-five days to 
produce a hearing report.\15\ Finally, the proposed amendments 
establish formal procedures for requesting and granting adjournments of 
the hearing date. Requests would be presented in writing to the 
presiding person of the Hearing Panel and would be considered for just 
cause.\16\
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    \9\ See also Chicago Board Options Exchange, Rule 17.8. Offers 
of Settlement, Interpretations and Policies .02 (discussing a 
similar timing guideline for scheduling a hearing date).
    \10\ See Amendment No. 2, supra note 4; see also Amendment No. 
3, supra note 5. The Phlx confirmed that Amendment No. 3 incorrectly 
indicates that the time periods for scheduling the hearing date and 
for providing a transcript of the hearing to the Hearing Panel 
members and the Respondents were initially ten days and later 
amended to five days. However, these time periods have, and will 
remain, five days throughout the filing. Telephone conversation 
between Charles Falgie, Director of Enforcement/Counsel, Phlx, and 
Sapna C. Patel, Law Clerk, Division, Commission (Nov. 27, 2000).
    \11\ See Amendment No. 2, supra note 4; see also Amendment No. 
3, supra note 5.
    \12\ See also Cincinnati Stock Exchange, Rule 8.6. Hearings, 
Sub-Paragraph (b) Notice and List of Documents (discussing a similar 
time frame for parties to exchange evidence and witness lists).
    \13\ See Amendment No. 1, supra note 3.
    \14\ See Amendment No. 1, supra note 3.
    \15\ See also Pacific Exchange, Rule 10.7. Decision (discussing 
a similar time frame after receipt of the transcript in which to 
produce a report); see also Amendment No. 2, supra note 4; see also 
Amendment No. 3, supra note 5.
    \16\ See Amendment No. 1, supra note 3.
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    The proposed amendments also allow the Chair of the Committee to 
name a designee on behalf of the Committee.\17\ This is proposed for 
administrative purposes, such as the Chair's unavailability due to 
illness, the need for recusal, or other circumstances which may arise.
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    \17\ See Amendment No. 1, supra note 3.
    The Phlx later confirmed that the Chair of the Committee would 
name the designee on behalf of the Committee. Telephone conversation 
between Charles Falgie, Director of Enforcement/Counsel, Phlx, and 
Sapna C. Patel, Attorney, Division, Commission (Jan. 31, 2001).
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act \18\ and the 
rules and regulations thereunder applicable to a national securities 
exchange and, in particular, the requirements of section 6 of the 
Act.\19\ Section 6(b)(6) of the Act \20\ requires the rules of an 
exchange must provide that Exchange members, and persons associated 
with Exchange members, are appropriately disciplined for violations of 
the provisions of the Act, the rules and regulations thereunder, or the 
rules of the Exchange. Section 6(b)(7) of the Act \21\ provides that 
there be a fair procedure for disciplining Exchange members and persons 
associated with members.
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    \18\ The Commission has considered the proposed rule's impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(6).
    \21\ 15 U.S.C. 78f(b)(7).
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    The Commission believes that the Exchange's codification of certain 
timing guidelines relating to its disciplinary hearing process should 
foster a prompt, efficient disciplinary process and clarify the 
procedures for Exchange members and the general public. The Exchange 
has represented that, although these timing guidelines are not 
expressly a part of the Exchange's rules, the Exchange has been 
following these timing guidelines as a part of Exchange procedure. 
Furthermore, the time periods indicated throughout Phlx Rule 960.5 are 
similar to time periods employed by other exchanges.\22\ The Commission 
believes that, by expressly codifying these timing guidelines for 
disciplinary hearings, the Exchange will be able to impose and monitor 
compliance with the guidelines more effectively. The Commission also 
believes that the proposed rule change will improve the speed, 
fairness, and efficiency of disciplinary hearings, thereby promoting a 
fair procedure for the disciplining of Exchange members and persons 
associated with Exchange members.
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    \22\ See supra notes 9, 12, and 15.
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IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as amended, is consistent with the Act and the rules and 
regulations thereunder applicable to a national securities exchange, 
and, in particular, with sections 6(b)(6) and 6(b)(7).\23\
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    \23\ 15 U.S.C. 78f(b)(6) and 15 U.S.C. 78f(b)(7).
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    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\24\ that the proposed rule change, as amended (SR-Phlx-00-13) is 
approved.
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    \24\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-4262 Filed 2-20-01; 8:45 am]
BILLING CODE 8010-01-M