[Federal Register Volume 69, Number 205 (Monday, October 25, 2004)]
[Notices]
[Pages 62314-62315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2817]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50559; File No. SR-NYSE-2004-48]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To 
Create New NYSE Rule 416A (``Member and Member Organization Profile 
Information Updates and Quarterly Certifications Via the Electronic 
Filing Platform'') and To Amend NYSE Rule 476A (``Imposition of Fines 
for Minor Violations of Rules''), Adding New NYSE Rule 416A to the 
``List of Exchange Rule Violations and Fines Applicable Thereto 
Pursuant to Rule 476A''

October 19, 2004.
    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 August 19, 2004, 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. On 
October 12, 2004, NYSE amended the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See October 8, 2004 letter from Mary Yeager, Assistant 
Secretary, Exchange, to Nancy J. Sanow, Assistant Director, Division 
of Market Regulation, Commission, and attachments (``Amendment No. 
1''). Amendment No. 1 completely replaced and superseded the 
original proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Proposed new NYSE Rule 416A (``Member and Member Organization 
Profile Information Updates and Quarterly Certifications Via the 
Electronic Filing Platform'') would require members and member 
organizations to promptly update their organizational information via 
the Electronic Filing Platform (``EFP''), and to make quarterly 
certifications that their organizational information is complete and 
accurate. The proposed corresponding amendment to NYSE Rule 476A 
(``Imposition of Fines for Minor Violations of Rules'') would allow the 
Exchange to sanction members' and member organizations' less serious 
violations of new NYSE Rule 416A pursuant to the minor fine provisions 
of NYSE Rule 476A. The text of the proposed rule change is available at 
NYSE and at the Commission.

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

    In its filing with the Commission, NYSE included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NYSE 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
    NYSE Rule 416 requires each Exchange member and member organization 
to submit to the Exchange information it deems essential for the 
protection of investors and the public interest. In 2001, the Exchange 
developed a new systems application for the EFP \4\ to facilitate the 
electronic entry and processing of such information.
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    \4\ The EFP is an extranet built by the NYSE to support 
authenticated, encrypted, two-way communications between the NYSE 
and its membership. It is currently being used for applications such 
as branch office approvals, short interest reporting, and 
fingerprints.
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    NYSE Information Memo No. 01-11, dated June 19, 2001, introduced 
the membership profile application of the EFP to members and member 
organizations, and provided a list of the data they were expected to 
promptly update. Exchange members and member organizations were 
informed that, in addition to ongoing updates, they would also be 
required to use the EFP semiannually (every December and June) to 
verify the accuracy of their membership profile information.
    During the following year, the EFP was modified to enable the 
submission of additional required contact information (e.g. an anti-
money laundering contact, and the heads of block/institutional trading, 
derivatives desks, and retail and program trading). NYSE Information 
Memo No. 02-41, dated August 30, 2002, increased from semiannual to 
quarterly the required frequency of members' and member organizations' 
review and verification of EFP profile information. It also expanded 
the list of required membership profile information to include EFP 
contact persons, member and member organization affiliates, and 
correspondent broker-dealers and clearing firms.

Need for Proposed Rule 416A

    Given the importance of maintaining an up-to-date repository of 
regulatory information, and of communicating critical information 
quickly, particularly during emergencies, it has become increasingly 
necessary for members' and member organizations' profile information to 
be current and accurate. Despite Information Memos Nos. 01-11 and 02-
41, some Exchange members and member organizations have failed to 
consistently update their profile information, or to conduct the 
required quarterly reviews and verifications.
    Proposed Rule 416A requires each member and member organization to 
furnish the Exchange with all of the profile information required by 
the EFP, to promptly (within 30 days) update its required membership 
profile information after any change in such information, to designate 
to the Exchange an appropriate senior officer (or his or her designee) 
as its membership profile contact person, and to make quarterly 
electronic certifications that it has reviewed its required membership 
profile information, and that such information is complete and 
accurate.
    Maintaining a current database of membership information allows the 
Exchange to better conduct its oversight of members and member 
organizations. Proposed Rule 416A is necessary to ensure that all 
members and member organizations promptly update their membership 
profile information via the EFP, and are vigilant in performing the 
required quarterly reviews and verifications of the completeness and 
accuracy of that information.
    The Exchange believes that the benefits of proposed Rule 416A 
outweigh its costs. In a recent order granting approval of a similar 
National Association of Securities Dealers (``NASD'') rule, the 
Commission addressed a comment regarding the cost of NASD's proposed 
rule, and found that the rule was reasonable based upon

[[Page 62315]]

the NASD's need for accurate information.\5\
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    \5\ See Securities Exchange Act Release No. 49497 (March 29, 
2004), 69 FR 17723 (April 5, 2004) (SR-NASD-2003-184).
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Need for Amendment to NYSE Rule 476A

    NYSE Rule 476A provides that the Exchange may impose a fine, not to 
exceed $5,000, on any member, member organization, allied member, 
approved person, or registered or non-registered employee of a member 
or member organization for a minor violation of certain specified 
Exchange rules.
    The purpose of the Rule 476A procedure is to provide a meaningful 
sanction for a rule violation when the initiation of a disciplinary 
proceeding under Rule 476 would be more costly and time-consuming than 
would be warranted given the minor nature of the violation, or when the 
violation calls for a stronger regulatory response than an admonition 
letter would convey. Rule 476A preserves due process rights, identifies 
those rule violations that may be the subject of summary fines, and 
includes a schedule of fines.
    In SR-NYSE-84-27,\6\ which initially set forth the provisions and 
procedures of Rule 476A, the Exchange indicated it would amend the list 
of rules from time to time, as it considered appropriate, in order to 
phase-in the implementation of Rule 476A as experience with it was 
gained.
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    \6\ Securities Exchange Act Release No. 21688 (January 25, 
1985), 50 FR 5025 (February 5, 1985).
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    Because of the possible range of severity of members' and member 
organizations' failure to satisfy the update, review, and certification 
requirements of the EFP system, an amendment to Rule 476A is necessary 
to allow the Exchange to sanction members' and member organizations' 
less serious violations of proposed new Rule 416A pursuant to the minor 
fine provisions of Rule 476A. The addition of proposed Rule 416A to 
Rule 476A's list of rule violations will not compromise the Exchange's 
ability to bring appropriate formal disciplinary actions for more 
serious violations of Rule 416A.
2. Statutory Basis
    NYSE believes that the proposed rule change is consistent with the 
requirements of Section 6(b)(5) \7\ of the Act, which requires that the 
rules of the Exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade and, in general, to protect investors and the 
public interest in that it helps the Exchange to maintain a current 
database of membership information, and to better conduct its oversight 
of members and member organizations. NYSE also believes the proposed 
rule change is consistent with Section 6(b)(6) of the Act,\8\ which 
requires the rules of the Exchange to provide for its members and 
persons associated with its members to be appropriately disciplined for 
violations of those rules through fitting sanctions, including the 
imposition of fines.
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal does not impose any burden 
on competition 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

    Written comments were neither solicited nor received.

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 self-regulatory organization 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File No. SR-NYSE-2004-48 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NYSE-2004-48. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of NYSE. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File No. SR-NYSE-2004-48 and 
should be submitted on or before November 15, 2004.

    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. E4-2817 Filed 10-22-04; 8:45 am]
BILLING CODE 8010-01-P