[Federal Register Volume 70, Number 97 (Friday, May 20, 2005)]
[Notices]
[Pages 29371-29373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2525]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51696; File No. SR-PCX-2005-50]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing and Order Granting Accelerated Approval of Proposed Rule Change
Relating to a Pilot Rule Extension of a Waiver of California Arbitrator
Disclosure Standards
May 13, 2005.
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 12, 2005 and on May 13, 2005 (Amendment No. 1), the Pacific
Exchange, Inc. (``PCX'' 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 Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons and is
approving the proposal on an accelerated basis.
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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 and its wholly owned subsidiary PCX Equities, Inc.
(``PCXE'') are proposing to extend the pilot rule in PCX Rule 12.1(i)
and PCXE Rule 12.2(h), which requires industry parties in arbitration
to waive application of contested California arbitrator disclosure
standards, upon the request of customers (and, in industry cases, upon
the request of associated persons with claims of statutory employment
discrimination), for an additional six-month pilot period, until
November 26, 2005.
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On November 21, 2002, the Commission approved, for a six-month
pilot period, the Exchange's proposal to amend PCX and PCXE arbitration
rules to require industry parties in arbitration to waive application
of contested California arbitrator disclosure standards, upon the
request of customers or, in employment discrimination cases, upon the
request of associated persons.\3\ The Commission approved an extension
of the pilot period on May 15, 2003,\4\ November 19, 2003,\5\ May 24,
2004,\6\ and November 23, 2004.\7\ The pilot period is currently set to
expire on May 25, 2005.
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\3\ See Exchange Act Release No. 46881 (November 21, 2002), 67
FR 71224 (November 29, 2002) (Order approving SR-PCX-2002-71).
\4\ See Exchange Act Release No. 47872 (May 15, 2003), 68 FR
28869 (May 27, 2003) (Order approving SR-PCX-2003-22).
\5\ See Exchange Act Release No. 48806 (November 19, 2003), 68
FR 66521 (November 26, 2003) (Order approving SR-PCX-2003-61).
\6\ See Exchange Act Release No. 49758 (May 24, 2004), 69 FR
30734 (May 28, 2004) (Order approving SR-PCX-2004-25).
\7\ See Exchange Act Release No. 50731 (November 23, 2004), 69
FR 69660 (November 30, 2004) (Order approving SR-PCX-2004-104).
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On July 1, 2002, the Judicial Council of the State of California
adopted new rules that mandated extensive disclosure requirements for
arbitrators in California (the ``California Standards''). The
California Standards are intended to address perceived conflicts of
interest in certain commercial arbitration proceedings. As a result of
the imposition of the California Standards on arbitrations conducted
under the auspices of self-regulatory organizations (``SROs''), the
National Association of Securities Dealers, Inc. (``NASD'') and the New
York Stock Exchange (``NYSE'') suspended the appointment of arbitrators
for cases pending in California, and filed a joint complaint in federal
court for declaratory relief in which they contend that the California
Standards cannot lawfully be applied to NASD and NYSE because the
California Standards are preempted by federal law and are inapplicable
to SROs under
[[Page 29372]]
state law.\8\ Subsequently, in the interest of continuing to provide
investors with an arbitral forum in California pending the resolution
of the applicability of the California Standards, the NASD and NYSE
filed separate rule proposals with the Commission that would
temporarily require their members to waive the California Standards if
all non-member parties to arbitration have done so. The Commission
approved the NASD's rule proposal on September 26, 2002 \9\ and the
NYSE's rule proposal on November 12, 2002.\10\ Both the NASD and the
NYSE filed rule proposals to further extend the pilot period for
additional six-month periods.\11\
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\8\ See Motion for Declaratory Judgment, NASD Dispute
Resolution, Inc. and New York Stock Exchange, Inc., v. Judicial
Council of California, filed in the United States District Court for
the Northern District of California, No. C 02 3486 SBA (July 22,
2002). For a more complete discussion of the various pending cases
related to the California Standards, see Exchange Act Release No.
50971 (January 6, 2005), 70 FR 2685 (January 14, 2005) (Notice
regarding SR-NASD-2004-180), Exchange Act Release No. 51213
(February 16, 2005), 70 FR 8862 (February 23, 2005) (Order approving
SR-NASD-2004-180) and Exchange Act Release No. 51395 (March 18,
2005), 70 FR 15137 (March 24, 2005) (Order approving SR-NYSE-2005-
14).
\9\ See Exchange Act Release No. 46562 (September 26, 2002), 67
FR 62085 (October 3, 2002) (Order approving SR-NASD-2002-126).
Thereafter, the pilot period was extended to September 30, 2003. See
Exchange Act Release No. 48187 (July 16, 2003), 68 FR 43553 (July
23, 2003) (Order approving SR-NASD-2003-106).
\10\ See Exchange Act Release No. 46816 (November 12, 2002), 67
FR 69793 (November 19, 2002) (Order approving SR-NYSE-2002-56).
Thereafter, the pilot period was extended to September 30, 2003. See
Exchange Act Release No. 47836 (May 12, 2003), 68 FR 27608 (May 20,
2003) (Order approving SR-NYSE-2003-16).
\11\ See Exchange Act Release No. 48553 (September 26, 2003), 68
FR 57494 (October 3, 2003) (Order approving SR-NASD-2003-144);
Exchange Act Release No. 49452 (March 19, 2004) 69 FR 17010 (March
31, 2004) (Order approving SR-NASD-2004-40); Exchange Act Release
No. 48552 (September 26, 2003), 68 FR 57496 (October 3, 2003) (Order
approving SR-NYSE-2003-28); Exchange Act Release No. 49521 (April 2,
2004), 69 FR 18661 (April 8, 2004) (Order approving SR-NYSE-2004-
18); Exchange Act Release No. 50447 (September 24, 2004), 69 FR
58567 (September 30, 2004) (Order approving SR-NASD-2004-126);
Exchange Act Release No. 50449 (September 24, 2004), 69 FR 58985
(October 1, 2004) (Order approving SR-NYSE-2004-50; Exchange Act
Release No. 51213 (February 16, 2005), 70 FR 8862 (Order approving
SR-NASD-2004-180); and Exchange Act Release No. 51395 (March 18,
2005), 70 FR 15137 (March 24, 2005) (Order approving SR-NYSE-2005-
14).
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Since the NASD's and NYSE's lawsuit relating to the application of
the California Standards has not been resolved, PCX is now requesting
an extension of the pilot for an additional six months (or until the
pending litigation has resolved the question of whether or not the
California Standards apply to SROs). PCX requests that the pilot be
extended for six months beginning on May 26, 2005. The extension of
time permits the Exchange to continue the arbitration process using PCX
rules regarding arbitration disclosures and not the California
Standards. No substantive changes are being made to the pilot program,
other than extending the operation of pilot program.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\12\ in general, and Section 6(b)(5) of the Act,\13\ in
particular, in that it is designed to promote just and equitable
principles of trade by ensuring that OTP Holders, OTP Firms, ETP
Holders and the public have a fair and impartial forum for the
resolution of their disputes.
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\12\ 15 U.S.C. 78s(b).
\13\ 15 U.S.C. 78s(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. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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 Number SR-PCX-2005-50 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-PCX-2005-50. 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 Room, 450 Fifth
Street, NW., Washington, DC 20549-0609. Copies of such filing also will
be available for inspection and copying at the principal offices of the
Exchange. 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 Number SR-PCX-
2005-50 and should be submitted on or before June 10, 2005.
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.\14\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act \15\ in that it promotes
just and equitable principles of trade by ensuring that members and
member organizations and the public have a fair and impartial forum for
the resolution of their disputes.
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\14\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
\15\ 15 U.S.C. 78f(b)(5).
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The Commission also believes that the proposed rule change raises
no issues that have not been previously considered by the Commission.
Granting accelerated approval here will merely extend a pilot program
that is designed to inform aggrieved parties about their options
regarding mechanisms that are available for resolving disputes with
broker-dealers. The PCX and PCXE adopted the pilot program under PCX
Rule 12.1(i) and PCXE Rule 12.2(h), respectively, in
[[Page 29373]]
response to the purported imposition of the California Standards on
Exchange arbitrations and arbitrators. The pilot rules are currently
set to expire on May 25, 2005, and must be extended in order to
continue to provide the waiver option until a final judicial
determination is reached. During the period of this extension, the
Commission and Exchange will continue to monitor the status of the
pending litigation.
After careful consideration, the Commission finds good cause,
pursuant to Section 19(b)(2) of the Act,\16\ for approving the proposed
rule change prior to the thirtieth day after the date of publication of
notice in the Federal Register. The Commission notes that the current
extension of the pilot program, under PCX Rule 12.1(i) and PCXE Rule
12.2(h), expires on May 25, 2005. Accordingly, the Commission believes
that there is good cause, consistent with Section 6(b)(5) of the
Act,\17\ to approve the proposal on an accelerated basis.
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\16\ 15 U.S.C. 78s(b)(2).
\17\ 15 U.S.C. 78f(b)(5).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-PCX-2005-50) is hereby
approved on an accelerated basis, and that PCX Rule 12.1(i) and PCXE
Rule 12.2(h) are extended until November 26, 2005.
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\18\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2525 Filed 5-19-05; 8:45 am]
BILLING CODE 8010-01-P