[Federal Register Volume 67, Number 139 (Friday, July 19, 2002)]
[Notices]
[Pages 47590-47592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18225]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46190; File No. SR-PCX-2002-33]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc., To Revise the Process for 
Designating Arbitrators for Member-to-Member Disputes

July 11, 2002.
    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 May 30, 2002, the Pacific Exchange, Inc. (``PCX'' 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX proposes to amend PCX Rule 12.8(e) to revise the process 
for designating arbitrators for member-to-member disputes. Text in 
brackets indicates material to be deleted, and text in italics 
indicates material to be added.
* * * * *

Pacific Exchange, Inc., Rules of The Board of Governors

Rule 12

Arbitration

Designation of [Number of] Arbitrators

    Rule 12.8(a)-(d)--No change.
    (e) Member Controversies. [(1)] In all arbitration matters not 
involving public customers[,] and where the matter in controversy 
involves an amount that is $30,000 or less (exclusive of interest and 
costs), the Director of Arbitration [shall] will appoint an arbitration 
panel composed of one securities industry arbitrator unless the parties 
request and mutually agree to the appointment of a public arbitrator 
[assign the matter to a panel consisting of members of the Arbitration 
Committee]. If the amount involved in the controversy exceeds $30,000 
(exclusive of interest and costs), the Director of Arbitration will 
appoint an arbitration panel composed of three or five arbitrators from 
the securities industry unless the parties request and mutually agree 
to a different panel composition. [Such] [m]Members of the arbitration 
panel will [shall] not be affiliated with any of the parties to the 
controversy or have any interest in the matter to be heard. [For 
controversies involving an amount of $10,000 or less, the panel shall 
consist of one (1) member. For all other controversies, the panel shall 
consist of three (3) members.]
    Commentary:
    .01--No change.
    (f)--No change.
* * * * *

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 PCX included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed

[[Page 47591]]

rule change. The text of these statements may be examined at the places 
specified in Item IV below. The PCX has prepared summaries, set forth 
in Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The current PCX rules divide arbitration claims between matters 
involving public customers (``Public Controversies'') and matters not 
involving public customers (``Member Controversies''). Public 
Controversies are addressed in PCX Rules 12.8(a) and (b), which provide 
for one arbitrator where the matter in controversy does not exceed 
$30,000 and for three to five arbitrators where the matter exceeds 
$30,000. Arbitrators for Public Controversies are selected by the 
Director of Arbitration who appoints a panel from the existing pool of 
arbitrators of the Exchange.\3\ Member Controversies are covered by 
Rule 12.8(e), which provides for a panel consisting of one Arbitration 
Committee member for controversies involving an amount of $10,000 or 
less, and a panel of three Arbitration Committee members for all other 
controversies.
---------------------------------------------------------------------------

    \3\ The Exchange's Director of Arbitration maintains a list of 
arbitrators who are qualified approved applicants.
---------------------------------------------------------------------------

    The proposed rule would provide a new selection process for Member 
Controversies. Specifically, the proposed rule would eliminate the 
current reference to the Arbitration Committee in Rule 12.8(e) and 
provide for the Director of Arbitration to appoint a panel from the 
same existing pool of arbitrators that the Exchange currently uses for 
Public Controversies. Also, the proposed rule would state that if the 
matter in controversy involves an amount that is $30,000 or less 
(exclusive of interest and costs), the Director of Arbitration would 
appoint an arbitration panel composed of one securities industry 
arbitrator, unless the parties request and mutually agree to the 
appointment of a public arbitrator. However, if the amount involved in 
the controversy exceeds $30,000 (exclusive of interest and costs), the 
Director of Arbitration would appoint an arbitration panel composed of 
three or five arbitrators from the securities industry unless the 
parties request and mutually agree to a different panel composition.
    A ``securities industry arbitrator'' is currently defined as a 
person: associated with a member, or broker/dealer, government 
securities broker, government securities dealer, municipal securities 
dealer or registered investment advisor; or who has been associated 
with any of these entities within the past three years; or who is 
retired from any of these entities; or who is an attorney, accountant 
or other professional who devoted twenty percent or more professional 
work effort to securities industry clients within the last two 
years.\4\ An arbitrator who is not from the securities industry is 
deemed a public arbitrator.\5\ Public arbitrators may not have a spouse 
or other member of the household who is a person associated with a 
registered broker dealer, municipal securities dealer, government 
securities broker, government securities dealer or investment 
advisor.\6\ Members of an arbitration panel will not be affiliated with 
any of the parties to the controversy or have any interest in the 
matter to be heard.\7\
---------------------------------------------------------------------------

    \4\ See PCX Rule 12.8(c).
    \5\ See PCX Rule 12.8(d).
    \6\ See PCX Rule 12.8(d).
    \7\ See PCX Rule 12.8(e).
---------------------------------------------------------------------------

    PCX believes that the proposed rule change would simplify the PCX 
arbitrator selection process for Member Controversies by coordinating 
the rule with existing rules on Public Controversies. The proposed rule 
would provide this uniformity by raising the amount in controversy from 
$10,000 to $30,000 as the threshold in determining whether the 
controversy would be heard by at least three arbitrators. This proposed 
threshold would be consistent with PCX Rules for Public Controversies. 
The proposed rule would also provide for a consistent source of 
arbitrators by using the same arbitrator list for the selection of 
arbitrators for both Public and Member Controversies.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \9\ in particular, because it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, and to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 the 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 35 days of the date of 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
    (A) 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 
PCX. All

[[Page 47592]]

submissions should refer to File No. SR-PCX-2002-33 and should be 
submitted by August 9, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.10
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-18225 Filed 7-18-02; 8:45 am]
BILLING CODE 8010-01-P