[Federal Register Volume 69, Number 24 (Thursday, February 5, 2004)]
[Notices]
[Page 5641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2333]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49138; File No. SR-PCX-2003-36]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. 
Relating to the Composition of Its Audit Committee

January 28, 2004.
    On July 14, 2003, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change that would amend its rule regarding the PCX's 
Audit Committee. On August 21, 2003, PCX submitted by facsimile 
Amendment No. 1 to the proposed rule change.\3\ The proposed rule 
change, as modified by Amendment No. 1, was published for comment in 
the Federal Register on September 29, 2003.\4\ The Commission received 
no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Steven B. Maitlin, Senior Counsel, 
Regulatory Policy, PCX, to Leah Mesfin, Attorney, Division of Market 
Regulation, Commission, dated August 21, 2003 (``Amendment No. 1''). 
In Amendment No. 1, the Exchange replaced the term ``independent 
Governors'' in the proposed rule text with ``Public Governors.''
    \4\ Securities Exchange Act Release No. 48500 (September 17, 
2003), 68 FR 56030 (September 29, 2003).
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    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 \5\ and, in 
particular, the requirements of Section 6(b)(5) of the Act.\6\ Section 
6(b)(5) requires, among other things, that the rules of the exchange be 
designed to prevent fraudulent and manipulative acts, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest. The Commission notes that the 
proposed rule change specifies that all members of PCX's Audit 
Committee must be Public Governors. The PCX Constitution requires 
``Public Governors'' to be representatives of the public and not a 
broker or dealer or affiliated with a broker or dealer.\7\ Previously, 
Audit Committee members were not required to be Public Governors. 
Furthermore, the proposed rule change requires that at least one member 
of the Audit Committee have accounting or financial management 
expertise, as the Board of Governors interprets such qualification in 
its business judgment. The Commission believes that the proposed change 
should help improve the Exchange's governance structure by requiring 
that all members of the Audit Committee be Public Governors and that at 
least one of those members have accounting or financial management 
expertise. In this way, the independence and effectiveness of the Audit 
Committee should be enhanced. Therefore, the Commission finds that the 
proposed rule change is consistent with the Act.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See PCX Constitution, Article II, Section 1(a).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-PCX-2003-36), as amended by 
Amendment No. 1, be, and hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-2333 Filed 2-4-04; 8:45 am]
BILLING CODE 8010-01-P