[Federal Register Volume 67, Number 178 (Friday, September 13, 2002)]
[Notices]
[Pages 58088-58090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-23354]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46467]


Self-Regulatory Organizations; Approval of Chicago Board Options 
Exchange, Inc. Fingerprinting Plan

September 6, 2002.
    On July 12, 2002, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``Commission'' or ``SEC'') an amended fingerprinting plan 
(``Amended Plan'') pursuant to Rule 17f-2(c)\1\ under the Securities 
Exchange Act of 1934 (``Act'').\2\ The Amended Plan \3\ supersedes and 
replaces the Exchange's current fingerprinting plan.\4\ The Exchange 
believes that the Amended Plan will be a significant improvement over 
the current CBOE fingerprinting plan. It establishes procedures for the 
electronic capture and submission of fingerprints.
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    \1\ 17 CFR 240.17f-2(c).
    \2\ 15 U.S.C. 78a et seq.
    \3\ Attached hereto as Exhibit A.
    \4\ The Exchange's current fingerprinting plan was approved by 
the Commission on January 27, 1984. See Securities Exchange Act 
Release No. 20607 (January 27, 1984), 49 FR 4298 (February 3, 1984).

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[[Page 58089]]

    Under the Exchange's current fingerprinting plan, members submit 
manually rolled fingerprint cards to the CBOE, which then forwards the 
cards to the Federal Bureau of Investigation (``FBI'') (the fingerprint 
processing arm of the Office of the Attorney General of the United 
States). The FBI identifies submitted fingerprints, retrieves relevant 
criminal history information, and returns fingerprint reports 
(including the original fingerprint cards) to the CBOE. The Exchange 
has noted that two to three months generally elapses between the time 
when the CBOE submits fingerprint cards and when the CBOE receives 
fingerprint reports.
    Under the terms of the Amended Plan, the Exchange will continue to 
accept manually rolled fingerprint cards, but will also utilize a Live-
Scan electronic fingerprinting system.\5\ Any Live-Scan system utilized 
by the Exchange will have been certified by the FBI for compliance with 
the FBI's Integrated Automated Fingerprint Identification System 
(``IAFIS'') \6\ image quality specifications. The Live-Scan system will 
electronically capture and transmit fingerprints to the FBI for 
processing and transmit fingerprint reports back to the CBOE. The Live-
Scan system will be maintained at the CBOE and operated by a qualified 
CBOE representative. The Exchange estimates that under the Amended Plan 
approximately two days will elapse between when the CBOE submits 
electronic fingerprints and when the FBI returns fingerprint reports to 
the CBOE.
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    \5\ Live-Scan refers to the process of capturing fingerprints 
directly into a digitized format as opposed to traditional ink and 
paper methods. Using Live-Scan technology, images are captured and 
transmitted to a central location and/or interface for 
identification processing. Certified Live-Scan systems produce 
consistent high quality fingerprint images, thereby reducing 
rejection rates and lowering turnaround times. Live-Scan systems are 
used by law enforcement agencies for processing criminal fingerprint 
records and in government and commercial markets for applicant 
employment background checks.
    \6\ The IAFIS, part of which debuted in July 1999, was developed 
to offer rapid suspect identification to law enforcement agencies 
and organizations where criminal background histories are a critical 
factor in consideration for employment. Because fingerprint cards 
must be physically transported and processed, substantial delays can 
be experienced in the identification cycle. To improve the speed and 
accuracy of the fingerprint identification process and eliminate the 
need for contributing agencies to create and mail paper fingerprint 
cards to the FBI for processing, the FBI Criminal Justice 
Information Services Division developed the IAFIS to support the 
paperless submission of fingerprint records. IAFIS provides Federal, 
state and local criminal justice agencies the ability to 
electronically transmit fingerprint information, vastly improving 
response time.
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    The Commission has reviewed the procedures detailed in the Amended 
Plan and believes that the Amended Plan is in the public interest and 
consistent with the protection of investors. The Amended Plan should 
significantly improve upon the efficiency of the current CBOE 
fingerprinting plan by establishing procedures for the electronic 
capture and submission of fingerprints. Thus, the Commission declares 
the Amended Plan to be effective.
    The Commission notes that securities industry fingerprinting 
procedures are in a state of flux due to rapidly advancing technology. 
In the event that an industry-wide standard is adopted or becomes 
prevalent and in the event that this Amended Plan substantially differs 
therefrom, the Commission may declare this Amended Plan ineffective. 
The Commission imposes these terms and conditions on the Amended Plan 
and deems that they are necessary and appropriate in the public 
interest, for the protection of investors, and otherwise in furtherance 
of the purposes of the Act pursuant to Rule 17f-2(c).\7\
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    \7\ 17 CFR 240.17f-2(c).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(17)(iii).
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Margaret H. McFarland,
Deputy Secretary.

Exhibit A

Chicago Board Options Exchange, Incorporated; Fingerprint Plan

    Chicago Board Options Exchange, Incorporated (``Exchange'') submits 
this Fingerprint Plan (``Plan'') pursuant to Rule 17f-2(c) under the 
Securities Exchange Act of 1934, as amended (``Act''). This Plan 
supersedes and replaces the Exchange's Fingerprint Plan approved by the 
Securities and Exchange Commission (``Commission'') on January 27, 
1984.
    The purpose of this Plan is to enable Exchange members and Exchange 
member applicants to comply with Section 17(f)(2) of the Act and Rule 
17f-2 thereunder by providing a facility for the fingerprints of 
individual partners, directors, officers, and employees of Exchange 
members and Exchange member applicants to be processed and submitted to 
the Attorney General of the United States or its designee (``Attorney 
General'').
    The Exchange will utilize a Live-Scan electronic system for the 
taking of fingerprints. Any Live-Scan system utilized by the Exchange 
will have been certified by the Federal Bureau of Investigation 
(``FBI'') for compliance with the FBI's Integrated Automated 
Fingerprint Identification System Image Quality Specifications. The 
Exchange may also manually take fingerprints and receive manually taken 
fingerprint cards. The purpose of allowing this flexibility is to 
permit the Exchange to retain the ability to process and submit 
fingerprints to the Attorney General in the event the Exchange's Live-
Scan system is not able to be used due to, for example, a system 
problem. Additionally, this flexibility will permit the Exchange to 
continue to receive manually taken fingerprint cards from those who are 
located at a distance from the Exchange or who for other reasons find 
it more expedient to provide manually taken fingerprint cards to the 
Exchange rather than travel to the Exchange to have fingerprints taken.
    Accordingly, under the Plan, the Exchange may receive fingerprints 
through any of the following methods:
    1. The Exchange may utilize a Live-Scan system to take the 
fingerprints and create an electronic fingerprint record for the 
fingerprints;
    2. The Exchange may manually take the fingerprints on a paper 
fingerprint card; or
    3. The Exchange may receive manually taken paper fingerprint cards.
    The fingerprint cards and electronic fingerprint records will 
identify the individual providing the fingerprints and the Exchange 
member or Exchange member applicant with whom the individual is 
associated. The fingerprint cards and electronic fingerprint records 
will be in a form acceptable to the Attorney General and the Exchange.
    In the event that an individual who previously provided 
fingerprints to the Exchange in accordance with this Plan is required 
to re-submit fingerprints, the Exchange may permit the individual not 
to be re-fingerprinted if the following conditions are satisfied:
    1. The Exchange is in possession of an electronic record of that 
individual's fingerprints taken by a Live-Scan system;
    2. The existing electronic fingerprint record was previously 
submitted to, and deemed acceptable by, the Attorney General; and
    3. The Exchange is able to resubmit the existing electronic 
fingerprint record to the Attorney General.

    In such an event, the Exchange shall re-submit the existing 
electronic fingerprint record to the Attorney General and process the 
fingerprint record received back from the Attorney General with respect 
to the fingerprints in the same manner as is the case with respect to 
initially submitted fingerprints.

[[Page 58090]]

    Once fingerprints are taken, the Exchange will review the 
information on the fingerprint card or in the electronic fingerprint 
record for the fingerprints, as applicable, for completeness, but not 
for accuracy, and will then submit the completed fingerprint card or 
electronic fingerprint record, as applicable, to the Attorney General 
for identification and processing.
    The Exchange shall submit fingerprint cards and electronic 
fingerprint records to the Attorney General in accordance with any 
requirements of the Attorney General relating to the manner of 
submission of this information. The submission may occur through any of 
the following methods:
    1. The Exchange may electronically transmit to the Attorney General 
an electronic fingerprint record created by a Live-Scan system;
    2. The Exchange may print out an electronic fingerprint record 
created by a Live-Scan system onto a paper fingerprint card and submit 
the fingerprint card to the Attorney General through manual 
transmission, such as by United States mail; or
    3. The Exchange may submit manually taken fingerprint cards to the 
Attorney General through manual transmission, such as by United States 
mail.
    The purpose of allowing this flexibility is to permit the Exchange 
to retain the ability to submit fingerprints to the Attorney General in 
the event the Exchange is unable to electronically transmit electronic 
fingerprint records to the Attorney General due to a telecommunication 
problem or otherwise. Additionally, this flexibility will permit the 
Exchange to manually transmit to the Attorney General fingerprint cards 
manually taken by the Exchange and received from Exchange members and 
Exchange member applicants.
    The Exchange will keep a list of the fingerprint cards and 
electronic fingerprint records submitted to the Attorney General in 
order to check on fingerprint submissions to the Attorney General 
pursuant to this Plan for which no fingerprint report has yet been 
received from the Attorney General. When a fingerprint report is 
received by the Exchange from the Attorney General with respect to 
fingerprints submitted by the Exchange pursuant to this Plan, the 
Exchange promptly will manually (such as by United States mail) or 
electronically forward a copy of the fingerprint report to the 
appropriate Exchange member or Exchange member applicant.
    The Exchange promptly will review all fingerprint reports received 
from the Attorney General with respect to fingerprints submitted by the 
Exchange pursuant to this Plan in order to determine whether they 
contain information involving:
    1. A statutory disqualification, as that term is defined in the 
Act; or
    2. Material misstatements or omissions concerning information 
previously reported to the Exchange.

If so, the Exchange promptly will take appropriate action concerning 
eligibility or continued eligibility for Exchange membership or for 
employment or association with an Exchange member.
    Copies of fingerprint reports received from the Attorney General 
with respect to fingerprints submitted by the Exchange pursuant to this 
Plan will be maintained by the Exchange in accordance with the 
Exchange's Record Retention/Destruction/Conversion Plan filed with the 
Commission. Any maintenance of fingerprint records by the Exchange 
shall be for the Exchange's own administrative purposes, and the 
Exchange is not undertaking to maintain fingerprint records on behalf 
of Exchange members pursuant to Rule 17f-2(d)(2).
    The above procedures will be modified in the following manner with 
respect to individuals in registration capacities recognized by the 
Exchange who are associated persons of Exchange members that are not 
members of NASD. The Exchange has established an arrangement with NASD 
to permit these individuals to be electronically registered with the 
Exchange through the Web Central Registration Depository (``Web CRD''). 
In connection with this registration process, these registered persons 
will have their fingerprints processed and submitted to the Attorney 
General through the facilities of either NASD or the Exchange. The 
extent to which these registered persons may utilize either one or both 
of these facilities will be determined by the Exchange and NASD. 
Fingerprint reports for these registered persons that are generated by 
the Attorney General will be provided to Web CRD and will be provided 
to the members with which these registered persons are associated 
through Web CRD. Record-keeping with respect to fingerprint submissions 
to and fingerprint reports from the Attorney General for these 
registered persons will be maintained by NASD. NASD will notify the 
Exchange if a fingerprint report received by Web CRD for one of these 
registered persons contains information relating to an arrest or 
conviction. In such an instance, the Exchange will review the 
fingerprint report and take appropriate action, if necessary, 
concerning eligibility or continued eligibility of the individual for 
employment or association with an Exchange member.
    The Exchange will advise Exchange members and Exchange member 
applicants of the availability of its fingerprint services and any fees 
charged by the Exchange in connection with those services and the 
processing of fingerprints pursuant to this Plan. The Exchange shall 
file any such fees with the Commission pursuant to Section 19(b)(3)(A) 
of the Act.
    The Exchange shall not be liable for losses or damages of any kind 
in connection with its fingerprinting services, as a result of its 
failure to follow, or properly to follow, the procedures described 
above, or as a result of lost or delayed fingerprint cards, electronic 
fingerprint records, or fingerprint reports, or as a result of any 
action by the Exchange or the Exchange's failure to take action in 
connection with this Plan.

[FR Doc. 02-23354 9-12-02; Filed 8:45 am]
BILLING CODE 8010-01-P