[Federal Register Volume 68, Number 112 (Wednesday, June 11, 2003)]
[Notices]
[Pages 35046-35047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14713]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47985; File No. SR-NYSE-2003-13]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. To Amend the Fine Schedule 
for Individuals and Member Organizations Who Commit Minor Rule 
Violations Under Rule 476A

June 4, 2003.
    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 April 28, 2003, 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 proposed rule change seeks to amend the fine schedule for 
individuals and member organizations who commit minor rule violations 
under NYSE Rule 476A.

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 NYSE 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. The Exchange 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 purpose of NYSE Rule 476A is to provide an efficient and 
effective way by which the Exchange may encourage full compliance with 
NYSE rules by its members, member organizations, allied members, 
approved persons and registered and non-registered employees of member 
organizations. The rule permits the Exchange to impose a fine (not to 
exceed $5,000), in lieu of commencing a disciplinary proceeding before 
a Hearing Panel, for a rule violation which the NYSE determines to be 
minor in nature, but which the NYSE nevertheless believes requires the 
imposition of a meaningful sanction. Fines imposed pursuant to NYSE 
Rule 476A are not required to be reflected on a member or member 
organization's Form BD.
    The person against whom the fine is sought to be imposed under NYSE 
Rule 476A is served with a written statement indicating the specific 
rule that has been violated, the act or omission constituting the 
violation, and the fine. The written statement also indicates the date 
by which the fine must be paid, or the person must submit a written 
response contesting the Exchange's determination to impose the fine. If 
the person against whom a fine is sought to be imposed under NYSE Rule 
476A chooses to contest the fine and submits a written answer within 
the time allowed, the matter becomes a ``disciplinary proceeding'' 
subject to NYSE Rule 476, including review by an Exchange Hearing 
Panel, with the usual right of appeal to the Board of Directors. The 
NYSE believes that the freedom of the person charged to contest the 
fine and seek a full hearing on the charges in accordance with 
established procedures provides that person with his full ``due 
process'' rights and prevents misuse of NYSE Rule 476A.
    Currently, the fine schedule is as follows:

------------------------------------------------------------------------
                                                               Member
                  Fine amount                   Individual  organization
------------------------------------------------------------------------
First Time Fined..............................        $500       $1,000
Second Time Fined **..........................       1,000        2,500
Subsequent Fines **...........................       2,500       5,000
------------------------------------------------------------------------
** Within a ``rolling'' 12-month period.

    The purpose of the fine procedure is to deter violations of 
Exchange rules through the imposition of a meaningful sanction. The 
current fine schedule was

[[Page 35047]]

originally adopted in 1985,\3\ and has not been revised since it was 
first introduced. The Exchange believes that it is appropriate at this 
time to increase the amounts of certain of the fines that may be 
imposed pursuant to NYSE Rule 476A to ensure that the fine program for 
minor rule violations continues to be a meaningful deterrent to 
violative behavior.
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    \3\ See Securities Exchange Act Release No. 22415 (Sept. 17, 
1985), 50 FR 38600 (Sept. 23, 1985) (SR-NYSE-84-27).
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    The NYSE is proposing to amend NYSE Rule 476A to establish only two 
levels of fines for member organizations by raising the first time fine 
for member organizations to $2,500, and all subsequent fines to $5,000. 
For individuals, the first fine would be $1,000, the second fine would 
be $2,500, and subsequent fines would be $5,000.
    The proposed schedule is as follows:

------------------------------------------------------------------------
                       Fine amount                          Individual
------------------------------------------------------------------------
First Time Fined........................................           $1000
Second Time Fined **....................................            2500
Subsequent Fines **.....................................            5000


------------------------------------------------------------------------
                                                              Member
                       Fine amount                         organization
------------------------------------------------------------------------
First Time Fined........................................           2,500
Subsequent Fines **.....................................          5,000
------------------------------------------------------------------------
** Within a ``rolling'' 12-month period

    The NYSE notes that the procedures authorized by NYSE Rule 476A are 
not mandatory. Under the rule, the Exchange may, in any case where it 
does not consider the rule violation to be minor, proceed to bring 
charges and commence a formal disciplinary proceeding under NYSE Rule 
476.
2. Statutory Basis
    The NYSE believes that the basis under the Act for this proposed 
rule change is the requirement under Section 6(b)(5)\4\ that an 
Exchange have rules that are designed 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 NYSE further believes 
that the proposed rule will also advance the objectives of Section 
6(b)(6)\5\ of the Act in that it will permit Exchange members and 
persons associated with members to be ``appropriately disciplined'' for 
violation of Exchange rules. In addition, the Exchange believes that it 
also supports Section 6(b)(7)\6\ of the Act in that it provides a fair 
procedure for the disciplining of members and persons associated with 
members. Finally, the Exchange believes that it also advances the 
objectives of Section 6(b)(1)\7\ of the Act in that it allows the 
Exchange to enforce compliance with its rules by its members and 
persons associated with members.
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    \4\ 15 U.S.C. 78f(b)(5).
    \5\ 15 U.S.C. 78f(b)(6).
    \6\ 15 U.S.C. 78f(b)(7).
    \7\ 15 U.S.C. 78f(b)(1).
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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 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
    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 
NYSE. All submissions should refer to file number SR-NYSE-2003-13 and 
should be submitted by July 2, 2003.

    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)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-14713 Filed 6-10-03; 8:45 am]
BILLING CODE 8010-01-P