[Federal Register Volume 66, Number 44 (Tuesday, March 6, 2001)]
[Notices]
[Pages 13618-13619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5331]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44010; File No. SR-PCX-00-37]


Self-Regulatory Organizations; the Pacific Exchange, Inc.; Order 
Granting Approval to Proposed Rule Change to Increase Fines for 
Violations of Exchange Rules Under the Exchange's Minor Rule Plan

February 27, 2001.

I. Introduction

    On December 11, 2000, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), 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 increase fines for members, 
floor brokers and market makers for violating Exchange rules under the 
Minor Rule Plan. The Exchange amended the proposal on January 8, 
2001.\3\ The proposed rule change was published for comment in the 
Federal Register on January 23, 2001.\4\ The Commission received no 
comments on the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See January 5, 2001 letter from Cindy L. Sink, Senior 
Attorney, Regulatory Policy, PCX to Nancy Sanow, Assistant Director, 
Division of Market Regulation (``Division''), SEC and attachments 
(``Amendment No. 1''). In response to a request from the Division, 
the PCX converted the proposal from effective upon filing pursuant 
to section 19(b)(3)(A) of the Act, to being considered pursuant to 
Section 19(b)(2) in Amendment No. 1. 15 U.S.C. 78s(b)(3)(A). 15 
U.S.C. 78s(b)(2).
    \4\ Securities Exchange Act Release No. 43846 (January 16, 
2001), 66 FR 7526.
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II. Description of the Proposal

    The Exchange proposes to amend PCX Rule 10.13(k) governing Minor 
Rule Plan violations to increase most of the fines. The PCX believes 
the current average Minor Rule Plan fine of $250 is too low to deter 
violations of PCX rules. The Exchange believes that an increase in 
fines will more adequately sanction violations of the PCX's order 
handling and investigating rules, many of which are processed under the 
Minor Rule Plan.
    Most PCX Minor Rule Plan violations currently specify a fine of 
$250 for a first violation, $500 for a second, and $750 for a third. 
Multiple violations are calculated on a two-year basis. Under the 
proposed increases, most fines will be $1,000 for a first violation, 
$2,500 for a second and $3,500 for a third,\5\ calculated on the same 
two-year basis. Some violations, such as disruptive conduct or abusive 
language on the options floor, will be $500 for a first violation, 
$2,000 for a second, and $3,500 for a third.
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    \5\ The Commission notes that when the PCX imposes a sanction in 
excess of $2,500, it must comply with Rule 19d-1 under the Act. 17 
CFR 240.19d-1.
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    Other violations, such as a member's failure to cooperate with a 
PCX examination of its financial responsibility or operational 
condition, will be fined $2,000 for a first violation, $4,000 for a 
second, and $5,000 for a third. A member that impedes or fails to 
cooperate in an Exchange investigation will be fined $3,500 for a first 
violation, $4,000 for a second, and $5,000 for a third. Less serious 
violations, such as fines for improper dress under the PCX dress code, 
remain unchanged at $100 for the first violation, $200 for the second, 
and $500 for the third.
    Under the proposal, the Enforcement Department would continue to 
exercise its discretion under PCX Rule 10.13(f) and take cases out of 
the Minor Rule Plan to pursue them as formal disciplinary matters if 
the facts or circumstances warrant such action.

III. Discussion

    The Commission has reviewed carefully the PCX's proposed rule 
change and finds, for the reasons set forth below, that the proposal is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange,\6\ 
and with the requirements of section 6(b).\7\ In particular, the 
Commission finds the proposal is consistent with section 6(b)(5) \8\ of 
the Act in that it is designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the

[[Page 13619]]

public interest. The Commission finds the proposal is also consistent 
with section 6(b)(6) \9\ of the Act, which requires that the rules of 
an exchange provide that its members and associated persons be 
appropriately disciplined for violations of the Act and the rules of 
the Exchange. The Commission believes that the proposed rule change 
should assist the Exchange in exercising its responsibilities as self-
regulatory organization to properly conduct surveillance and to 
diligently monitor its members for compliance with the securities laws. 
The Commission also believes that increasing the fines for Minor Rule 
Plan violations will serve as a deterrent, and hopefully will result in 
fewer violations. The Commission notes, however, that the Exchange must 
continue to exercise its discretion under PCX Rule 10.13(f) and pursue 
violations of the rules included in the Minor Rule Plan as formal 
disciplinary matters if the facts and circumstances of the violation 
warrant such action.
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    \6\ In approving this rule, the Commission has considered its 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(6).
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IV. Conclusion

    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-PCX-00-37), as amended, is 
approved.
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    \10\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-5331 Filed 3-5-01; 8:45 am]
BILLING CODE 8010-1-M