[Federal Register Volume 66, Number 150 (Friday, August 3, 2001)]
[Notices]
[Pages 40771-40772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19433]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44611; File No. SR-PCX-2001-19]


Self-Regulatory Organizations; Approval of Proposed Rule Change 
by the Pacific Exchange, Inc. Relating to Exchange Rules Under the 
Minor Rule Plan

July 27, 2001.

I. Introduction

    On April 4, 2001, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''),

[[Page 40772]]

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 imposed on ETP Holders, ETP Firms or associated persons 
of an ETP Firm of its wholly-owned subsidiary, PCX Equities, Inc. 
(``PCXE'' or ``Corporation'') for violating the Exchange rules under 
the Minor Rule Plan. The proposed rule change was published for comment 
in the Federal Register on June 18, 2001.\3\ The Commission received no 
comments on the proposal. 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\ See Securities Exchange Act Release No. 44402 (June 8, 
2001), 66 FR 32856.
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II. Description of the Proposal

    The Exchange proposes to amend PCXE's rules governing Minor Rule 
Plan violations to increase most fines because the Exchange believes 
that the current fines are too low to deter violations of PCXE rules. 
The Exchange further believes that an increase in the current fines 
will more adequately sanction violations of the PCXE's order-handling 
and investigating rules. Many of these violations are processed under 
the Minor Rule Plan.
    Under the proposed increases, the fines for disruptive conduct will 
be $500 for a first violation, $2,000 for a second and $3,500 \4\ for a 
third calculated on a two-year basis. More serious 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 violation, and $5,000 for a third 
violation. 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 PCXE dress code remain the same at $100 
for the first violation, $250 for the second and $500 for the third.
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    \4\ 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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    Under the proposed rule, the Exchange's Enforcement Department 
would continue to exercise its discretion under PCXE Rule 10.12(j) and 
take cases out of the Minor Rule Plan to pursue them as formal 
disciplinary matters if the facts or circumstances warrant such action. 
The Exchange's proposal also includes amendments to PCXE's Equity Floor 
Procedure Advices (``EFPA'') that correspond to the increased Minor 
Rule Plan fines.

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.\5\ 
and with the requirements of Section 6(b).\6\ In particular, the 
Commission finds the proposal is consistent with Section 6(b)(5) \7\ 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 public interest. The Commission finds the proposal is 
also consistent with Section 6(b)(6) \8\ 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.
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    \5\ In approving this rule, the Commission has considered its 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(6).
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    The Commission believes that the proposed rule change should assist 
the Exchange in exercising its responsibilities as a 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.

IV. Conclusion

     It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-PCX-2001-19) is approved.
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    \9\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-19433 Filed 8-2-01; 8:45 am]
BILLING CODE 8010-01-M