[Federal Register Volume 66, Number 233 (Tuesday, December 4, 2001)]
[Notices]
[Pages 63084-63086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29930]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45097; File No. SR-NYSE-2001-44]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. To Amend NYSE Rule 407 
(``Transactions--Employees of Members, Member Organizations and the 
Exchange'')

November 21, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 22, 2001, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rule 407 (``Transactions--
Employees of Members, Member Organizations and the Exchange'') and 
incorporate and amend an existing written interpretation into the rule 
in

[[Page 63085]]

order to require that associated persons obtain their employers' 
written approval prior to entering into private securities 
transactions. In addition, the Exchange proposes to define the terms 
``securities or commodities account,'' ``private securities 
transactions'' and ``other financial institutions.''

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Rule 407(b) requires that members, allied members and 
employees to obtain the prior written consent of their employers in 
order to open and maintain a securities or commodities account at 
another broker-dealer, investment adviser, bank or other financial 
institution. Further, employers of such associated persons must receive 
duplicate confirmations and statements of such accounts. In this 
regard, the Exchange believes that NYSE Rule 407 helps members and 
member organizations maintain the integrity of their information 
barriers and employee trading policies and assists members and member 
organizations in monitoring employee trading for possible insider 
trading violations and manipulative and deceptive devices.
    An existing interpretation of NYSE Rule 407 in the NYSE 
Interpretation Handbook requires that members, allied members and 
employees associated with members or member organizations notify their 
employers of any private securities transactions, where such securities 
transactions are typically negotiated directly with an issuer and not 
through an account with a broker-dealer or bank.
    The Exchange proposes to amend NYSE Rule 407 and incorporate and 
amend the interpretation noted above into the rule to require that 
associated persons of members or member organizations obtain their 
employers' written approval (rather than notification) prior to 
entering into private securities transactions. The Exchange also 
proposes that associated persons effecting private securities 
transactions shall arrange for duplicate confirmations and statement 
(or their equivalents) to be sent to another person designated by their 
member or member organization under NYSE Rule 342(b)(1) (``Offices--
Approval, Supervision and Control'') to periodically review such 
transactions.
    In addition, the Exchange proposes to define the terms ``securities 
or commodities account,'' ``private securities transactions'' and 
``other financial institution.'' The Exchange proposes that the term 
``securities or commodities account'' shall include limited or general 
partnership interests in investment partnerships.
    The Exchange proposes that the term ``private securities 
transactions'' shall include all transactions in the securities of 
issuing entities that are not public, whether or not such transactions 
are negotiated directly with the issuer. It shall include, but not be 
limited to, interests in oil and gas ventures, real estate 
syndications, participations in tax shelters and in other investment 
vehicles, and shares issued prior to a public distribution by such 
issuing entities.
    The Exchange proposes that the term ``other financial institution'' 
shall include, but is not limited to, insurance companies, trust 
companies, credit unions and investment companies.
    In addition, the Exchange proposes to amend NYSE Rule 407 to 
provide the Exchange with the general authority to waive any of the 
requirements of the rule upon written request of a member or member 
organization that has the obligation to approve the account and where 
good cause is shown. For example, a member or member organization that 
is required to approve an account of an employee associated with such 
member or member organization may not wish to receive duplicate 
confirmations and statements because such employee does not have the 
direct or indirect power to make any investment decisions at another 
member or member organizations.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\3\ which provides, among other things, 
that the rules of the Exchange be designed to prevent fraudulent and 
manipulative acts and practices and promote just and equitable 
principles of trade.
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    \3\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the publication of this notice in the Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-NYSE-2001-44 and 
should be submitted by December 26, 2001.


[[Page 63086]]


    For the Commission, by the Division of Market Regulations, 
pursuant to the delegated authority.\4\

    \4\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-29930 Filed 12-3-01; 8:45 am]
BILLING CODE 8010-01-M