[Federal Register Volume 69, Number 225 (Tuesday, November 23, 2004)]
[Notices]
[Pages 68205-68206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3297]



[[Page 68205]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50677; File No. SR-PCX-2004-108]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To 
Amend the Corporate Governance Requirements for PCX Listed Companies

November 16, 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 November 15, 2004, the Pacific Exchange, Inc. (``PCX'' 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. The 
proposed rule change has been filed by PCX as a ``non-controversial'' 
rule change under Rule 19b-4 under the Act,\3\ which renders the 
proposal effective upon filing with the Commission.\4\ 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.
    \3\ Id.
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Pacific Exchange, Inc. (``PCX'' or ``Exchange''), through its 
wholly owned subsidiary PCX Equities, Inc. (``PCXE'') is proposing to 
amend its Corporate Governance and Disclosure Policies. The proposed 
changes will amend certain director independence standards so that 
immediate family members of a director are only included in the 
standards if they are executive officers of the listed company. The 
Exchange also proposes to allow dually listed companies to apply the 
independence standards of other self-regulatory organizations 
(``SROs'') in limited situations. The text of the proposed rule change 
is set forth below. Proposed new language is in italics; proposed 
deletions are in brackets.
* * * * *

Rules of the PCX Equities, Inc.

Rule 5 Listings

] 7956R Corporate Governance and Disclosure Policies

    Rule 5.3-5.3(k)(1)--No Change.
    Rule 5.3(k)(1)(A)--A director who is an employee or former 
employee, or whose immediate family member is an executive officer, of 
the listed company whose employment ended within the past three years.
    Rule 5.3(k)(1)(B)-(D)--No Change.
    Rule 5.3(k)(1)(E)--A director who is an executive officer or an 
employee, or whose immediate family member is an executive officer, of 
a company that makes payments to, or receives payments from, the listed 
company for property or services in an amount which, in any single 
fiscal year, exceeds the greater of $200,000 or 5% of such other 
company's consolidated gross revenues, is not ``independent'' until 
three years after falling below such threshold. For purposes of this 
rule, charitable organizations shall not be considered ``companies'', 
provided however that a listed company shall disclose in its annual 
proxy statement, or if the listed company does not file an annual proxy 
statement, in the company's annual report on Form 10-K filed with the 
SEC, any charitable contributions made by the listed company to any 
charitable organization in which a director serves as an executive 
officer if, within the preceding three years, contributions in any 
single fiscal year exceeded the greater of $200,000 or 5% of such 
charitable organization's consolidated gross revenues. At any time, 
however, when an issuer has a class of securities that is listed on a 
national securities exchange or national securities association other 
than the Corporation and is subject to requirements substantially 
similar to those set forth in this Section 5.3(k)(1)(E) the issuer 
shall not be required to separately meet the requirements set forth 
above. Governance requirements of other markets will be considered to 
be substantially similar to the requirements above if they are adopted 
by the New York Stock Exchange or the National Association of 
Securities Dealers (for the Nasdaq National Market or Small Cap 
Market).
    Rule 5.3(k)(1)(F)--A director who receives, or whose immediate 
family member is an executive employee who receives, more than $100,000 
per year in direct compensation from the listed company, other than 
director and committee fees and pension or other forms of deferred 
compensation for prior service (provided such compensation is not 
contingent in any way on continued service). Such director shall not be 
independent until three years after he or she ceases to receive more 
than $100,000 per year in such compensation.
    Rule 5.3(k)(1)(G)-5.3(k)(6)--No Change.
* * * * *

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 PCX 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 self-regulatory organization 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 this rule change is to make certain modifications to 
the Exchange's Corporate Governance and Disclosure Policies. With 
regard to PCX Rule 5.3(k)(1)(A) and 5.3(k)(1)(F), the proposed changes 
will amend director independence standards so that immediate family 
members of a director are only included in the standards if they are 
executive officers of the listed company.\5\ The Exchange also proposes 
to allow, in the limited situation of Rule 5.3(k)(1)(E), dually listed 
companies to apply the independence standards of other SROs. The 
proposed changes to Rules 5.3(k)(1)(A) and 5.3(k)(1)(F) will eliminate 
certain inconsistencies between the Exchange's rules and those of other 
national securities exchanges or national securities associations. The 
proposed change to Rule 5.3(k)(1)(E) will allow dually listed issuers 
to apply one uniform test to determine independence of their directors 
regardless of how many SROs list their security.
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    \5\ As revised by the proposed rule change, these provisions 
will be similar to Sections 303A.02(b)(i) and (b)(ii) of the NYSE 
Listed Company Manual. Telephone conversation between Steven B. 
Matlin, Senior Attorney, Regulatory Policy, PCX, and Geoffrey 
Pemble, Special Counsel, Division, Commission, on November 16, 2004.

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[[Page 68206]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \6\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \7\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of change, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \6\ 6 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has been designated by PCX as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act 
\8\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    The foregoing proposed rule change: (1) Does not significantly 
affect the protection of investors or the public interest, (2) does not 
impose any significant burden on competition, and (3) by its terms does 
not become operative for 30 days after the date of this filing, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest. Furthermore, the PCX 
gave the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing of 
the proposed rule change. Consequently, the proposed rule change has 
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-PCX-2004-108 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 No. SR-PCX-2004-108. 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 the PCX. 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-PCX-2004-108 and should 
be submitted on or before December 14, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Margaret H. McFarland,
Deputy Secretary.
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    \12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E4-3297 Filed 11-22-04; 8:45 am]
BILLING CODE 8010-01-P