[Federal Register Volume 69, Number 16 (Monday, January 26, 2004)]
[Notices]
[Pages 3623-3625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1564]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49097; File No. SR-CHX-2004-05]


Self-Regulatory Organizations; Notice Of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 by the Chicago Stock Exchange, Inc. To Adopt an Anti-Money Laundering 
Compliance Program

January 16, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 12, 2004, the Chicago Stock Exchange, 
Inc. (``CHX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Exchange amended the proposal on January 15, 2004. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as amended, from interested persons and to grant accelerated 
approval to the proposed rule change.
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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 adopt CHX Rule 10 to Article VI of the CHX 
Rules to require Exchange members to develop and implement anti-money 
laundering compliance programs. The text of the proposed rule change 
follows. Additions are in italics.
* * * * *
Chicago Stock Exchange Rules
ARTICLE XXVIII
Article VI
Restrictions and Requirements
* * * * *

Anti-Money Laundering Compliance Program

    RULE 10. Each member organization and each member not associated 
with a member organization shall develop and implement a written anti-
money laundering program reasonably designed to achieve and monitor 
compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 
5311, et seq.) and the implementing regulations promulgated under that 
Act by the Department of the Treasury. Each member organization's anti-
money laundering program must be approved, in writing, by a member of 
senior management.
    The anti-money laundering program required by this Rule shall, at a 
minimum:
    (a) Establish and implement policies and procedures that can be 
reasonably expected to detect and cause the reporting of transactions 
as required under 31 U.S.C. 5318(g) (and the regulations promulgated 
under that provision);
    (b) Establish and implement policies, procedures and internal 
controls reasonably designed to achieve compliance with the Bank 
Secrecy Act (and the implementing regulations promulgated under that 
Act);
    (c) Provide for independent testing for compliance to be conducted 
by member staff or by a qualified outside party;
    (d) Designate, and identify to the Exchange (by name, title, 
mailing address, e-mail address, telephone number and facsimile 
number), an individual or individuals responsible for implementing and 
monitoring the day-to-day operations and internal controls of the 
program and provide prompt notification to the Exchange regarding any 
change in such designation; and
    (e) Provide ongoing training for appropriate staff.
* * * * *

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 III below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 3624]]

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

1. Purpose
    The proposed rule changes would amend the Exchange's rules to 
require Exchange members to develop and implement anti-money laundering 
compliance programs.
    Section 352 of the Uniting and Strengthening America by Providing 
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 
2001 (``Patriot Act'') requires broker-dealers to establish and 
implement anti-money laundering compliance programs that include, at a 
minimum: (a) internal policies, procedures and controls; (b) the 
specific designation of an anti-money laundering compliance officer; 
(c) ongoing employee training programs; and (d) an independent audit 
function to test the anti-money laundering program.\3\ These 
requirements, which were incorporated into the Bank Secrecy Act, took 
effect in April 2002.\4\
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    \3\ Uniting and Strengthening America by Providing Appropriate 
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. 
L. 107-56, 115 Stat. 272 (2001).
    \4\ 31 U.S.C. 5311, et seq.
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    Several exchanges have put rules in place that require their 
members to establish anti-money laundering compliance programs that are 
designed to comply with their Patriot Act obligations.\5\ Through this 
filing, the Exchange proposes to put similar requirements in place. 
Specifically, the Exchange proposes to add new CHX Rule 10 to Article 
VI of CHX Rules to require each of its members to develop and implement 
a written anti-money laundering program reasonably designed to achieve 
and monitor compliance with the requirements of the Bank Secrecy Act 
and the implementing regulations under that Act. Each compliance 
program must be approved, in writing, by a member of senior management 
and must consist of five specific components.\6\ The Exchange believes 
that its proposed rule is substantially similar to those proposed and 
implemented by the New York Stock Exchange, Inc., the National 
Association of Securities Dealers, Inc., as well as other markets.
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    \5\ See Securities Exchange Act Release Nos. 45798 (April 22, 
2002), 67 FR 20854 (April 26, 2002) (Order approving SR-NASD-2002-24 
and SR-NYSE-2002-10); and 48622 (October 10, 2003), 68 FR 59828 
(October 17, 2003) (Order approving SR-BSE-2003-18).
    \6\ A member firm's anti-money laundering compliance program 
must: (a) Incorporate policies and procedures that can be reasonably 
expected to detect and cause the reporting of transactions as 
required under the Bank Secrecy Act and related regulations; (b) 
incorporate policies, procedures and internal controls reasonably 
designed to achieve compliance with the Bank Secrecy Act and related 
regulations; (c) provide for independent testing to be conducted by 
the member's staff or by a qualified outside party; (d) designate 
(and identify to the Exchange by name, title, mailing address, e-
mail address, telephone number and facsimile number) an individual 
or individuals responsible for implementing and monitoring the day-
to-day operations and internal controls of the program and promptly 
notify the Exchange of any change in that designation; and (e) 
provide ongoing training for appropriate staff. The Exchange will 
give its members 90 days, after approval of this rule change by the 
Commission, to identify the individual(s) responsible for their 
compliance programs.
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2. Statutory Basis
    The Exchange believes that the statutory basis for the proposed 
rule change is Section 6(b)(5) of the Act,\7\ in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
and to perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that no burden will be placed on competition 
as a result of the proposed rule change.

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.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, and amended, 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. Comments may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-CHX-2004-05. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review your comments more efficiently, comments should be 
sent in hardcopy or by e-mail but not by both methods. 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 at 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-CHX-2004-05 and should be 
submitted by February 17, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange. In particular, 
the Commission believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\8\ which, among other things, requires 
that the Exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, and, in general, protect investors and 
the public interest.
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    \8\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    The Commission believes that the Exchange's proposal to adopt an 
Anti-Money Laundering Compliance Program accurately, reasonably, and 
efficiently implements the requirements of the Patriot Act as it 
applies to its members. The Commission also recognizes that anti-money 
laundering compliance programs will evolve over time, and that 
improvements to these programs are inevitable as members find new ways 
to combat money laundering and to detect suspicious activities.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. The 
Commission notes that the Rule is substantially similar to anti-money 
laundering compliance program rules that the Commission has previously 
approved for other self-regulatory organizations.\9\ Accordingly, the

[[Page 3625]]

Commission believes that there is good cause, consistent with Section 
19(b) of the Act,\10\ to approve the proposed rule change, as amended, 
on an accelerated basis.
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    \9\ See Securities Exchange Act Release Nos. 45798 (April 22, 
2002), 67 FR 20854 (April 26, 2002) (Order approving SR-NASD-2002-24 
and SR-NYSE-2002-10); 46041 (June 6, 2002), 67 FR 40366 (June 12, 
2002) (Order approving SR-Phlx-2002-29); 46258 (July 25, 2002), 67 
FR 49715 (July 31, 2002) (Order approving SR-Amex-2002-52); 446462 
(September 5, 2002), 67 FR 58665 (September 17, 2002) (Notice of 
Filing and Order Granting Accelerated Approval of SR-CBOE-2002-45); 
46468 (September 6, 2002), 67 FR 58095 (September 13, 2002) (Notice 
of Filing and Immediate Effectiveness of SR-PCX-2002-44); 46739 
(October 29, 2002), 67 FR 67432 (November 5, 2002) (Notice of Filing 
and Immediate Effectiveness of SR-NASD-2002-146); and 48622 (October 
10, 2003), 68 FR 59828 (October 17, 2003) (Order approving SR-BSE-
2003-18).
    \10\ 15 U.S.C. 78f(b)(5) and 78s(b).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-CHX-2004-05) is hereby 
approved on an accelerated basis.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-1564 Filed 1-23-04; 8:45 am]
BILLING CODE 8010-01-P