[Federal Register Volume 70, Number 159 (Thursday, August 18, 2005)]
[Notices]
[Pages 48608-48610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4507]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52242; File No. SR-CHX-2005-16]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
and Amendment Nos. 1 and 2 Thereto To Amend Exchange Article VI, Rule 9 
Relating to Continuing Education for Registered Persons

August 11, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 20, 2005, 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, II 
and III below, which Items have been prepared by the Exchange. On July 
18, 2005, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ On August 5, 2005, the Exchange filed Amendment No. 2 to the 
proposed rule change.\4\ The CHX has filed the proposal as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\5\ and Rule 19b-4(f)(6) thereunder,\6\ which renders the proposal 
effective upon filing with the Commission. 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\ In Amendment No. 1, the Exchange amended the proposed rule 
change to incorporate the new ``base date'' term used by other self-
regulatory organizations and to make other minor changes to the rule 
text.
    \4\ In Amendment No. 2, the Exchange withdrew its request for 
accelerated effectiveness and made minor edits to the rule text.
    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 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 CHX proposes to eliminate the current exemptions from the 
Exchange's continuing education requirements that apply to persons who 
have been continuously registered for more than 10 years. Below is the 
text of the proposed rule change. Proposed new language is in italics. 
Deletions are in [brackets].

ARTICLE VI

Restrictions and Requirements
* * * * *
Continuing Education for Registered Persons
    RULE 9. (a) Regulatory Element--No member or member organization 
shall permit any registered person to continue to, and no registered 
person shall continue to, perform duties as a registered person, unless 
such person has complied with the continuing education requirements of 
Section (a) of this Rule.
    Each registered person shall complete the Regulatory Element of the 
continuing education program on the occurrence of their second 
registration anniversary date and every three years thereafter, or as 
otherwise prescribed by the Exchange. On each of the occasions, the 
Regulatory Element must be completed within one hundred twenty days 
after the person's registration anniversary date. A person's initial 
registration date, also known as the ``base date,'' shall establish the 
cycle of anniversary dates for purposes of this rule. The content of 
the Regulatory Element of the program shall be determined by the 
Exchange for each registration category of persons subject to the rule.

[(1) Registered persons who have been continuously registered for more 
than ten years as of March 1, 2000 shall be exempt from participation 
in the Regulatory Element of the continuing education program, provided 
such persons have not been subject to any disciplinary action within 
the last ten years as enumerated in subsection (a)(3)(i)-(ii) of this 
Rule. However, persons delegated supervisory responsibility or 
authority and are registered in such capacity are exempt from 
participation in the Regulatory Element under this provision only if 
they have been continuously registered in a supervisory capacity for 
more than ten years as of March 1, 2000 and provided that such 
supervisory person has not been subject to any disciplinary action 
under subsection (a)(3)(i)-(ii) of this Rule.]
[Persons who have been currently registered for ten years or less as of 
March 1, 2000 shall participate in the Regulatory Element of the 
continuing education program within one hundred twenty days after the 
occurrence of their next registration anniversary date and every three 
years thereafter.]

    ([2]1) Failure to complete--Unless otherwise determined by the 
Exchange, any registered persons who have not completed the Regulatory 
Element of the program within the prescribed time frames will have 
their registration deemed inactive until such time as the requirements 
of the program have been satisfied. Any person whose registration has 
been deemed inactive under this Rule shall cease all activities as a 
registered person and is prohibited from performing any duties and 
functioning in any capacity requiring registration.
    The Exchange may, upon application and a showing of good cause, 
allow for additional time for a registered person to satisfy the 
program requirements.
    ([3]2) [Re-entry into program] Disciplinary Actions--Unless 
otherwise determined by the Exchange, a registered person will be 
required to [re-enter] re-take the Regulatory Element and satisfy all 
of its requirements if such person:
    (i) Becomes subject to any statutory disqualification as defined in 
Section 3(a)(39) of the Securities Exchange Act of 1934;
    (ii) becomes subject to suspension or to the imposition of a fine 
of $5,000 or more for violation of any provision of any securities law 
or regulation, or any agreement with or rule or standard of conduct of 
any securities governmental agency, securities self-regulatory 
organization, or as imposed by any such regulatory or self-regulatory 
organization in connection with a disciplinary proceeding; or
    (iii) is ordered as a sanction in a disciplinary proceeding to [re-
enter] re-take the continuing education program by any securities 
governmental agency or any securities self-regulatory organization.
    The re-taking of the Regulatory Element [Re-entry] shall commence 
with [initial] participation within 120 days of the registered person 
becoming subject to the statutory disqualification, in the case of (i) 
above, or the disciplinary action becoming final, in the case of (ii) 
or (iii) above.
* * * * *

[[Page 48609]]

* * * Interpretations and Policies
* * * * *
    .03 A registered person, [who has been continuously registered for 
more than ten years as of March 1, 2000 ]who becomes subject to a 
disciplinary action as enumerated in subsections (a)(3)(i)-(ii) of the 
Rule, will be required to satisfy the requirements of the Regulatory 
Element of the continuing education program with [as if ]the date the 
disciplinary action becomes final as [is] the person's [initial 
registration anniversary] new base date.
* * * * *
    .06 A registered person who is a member of the Exchange and of 
another self-regulatory organization (``SRO'') shall be subject to the 
other SRO's implementation date for the elimination of exceptions to 
the Regulatory Element section of the continuing education program, if 
that date is earlier than October 1, 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, as 
amended, 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 CHX has prepared summaries, set forth 
in Sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    The Exchange's continuing education rules generally require 
registered persons to complete the regulatory element of the continuing 
education program on their second registration anniversary dates and 
every three years thereafter, or as otherwise prescribed by the 
Exchange.\7\ The rules currently provide an exception for two groups of 
persons: (1) Registered persons who have been continuously registered 
for more than ten years as of March 1, 2000 and (2) persons who have 
been continuously registered in a supervisory capacity for more than 
ten years as of March 1, 2000.\8\ These exceptions are available so 
long as the registered persons have not been subject to specific types 
of disciplinary actions within the last ten years.\9\
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    \7\ See CHX Article VI, Rule 9(a).
    \8\ See CHX Article VI, Rule 9(a)(1).
    \9\ See CHX Article VI, Rule 9(a)(1). A registered person does 
not qualify for the exception if he or she (i) becomes subject to 
any statutory disqualification as defined in Section 3(a)(39) of the 
Securities Exchange Act of 1934; (ii) becomes subject to suspension 
or to the imposition of a fine of $5,000 or more for violation of 
any provision of any securities law or regulation, or any agreement 
with or rule or standard of conduct of any securities governmental 
agency, securities self-regulatory organization, or as imposed by 
any such regulatory or self-regulatory organization in connection 
with a disciplinary proceeding; or (ii) is ordered as a sanction in 
a disciplinary proceeding to re-enter (or as proposed, to re-take) 
the continuing education program by any securities governmental 
agency or any securities self-regulatory organization. See CHX 
Article VI, Rule 9(a)(3), which is being redesignated as CHX Article 
VI, Rule 9(a)(2) in this proposed rule change.
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    At its December 2003 meeting, the Securities Industry/Regulatory 
Council on Continuing Education (the ``Council'') agreed to recommend 
that self-regulatory organizations (``SROs'') eliminate, from their 
continuing education rules, the two exceptions described above. The 
Council made that recommendation to ensure that all registered market 
participants receive the full benefits of continuing education 
programs, including a new module that focuses on ethical issues.
    After considering the issue, the Exchange believes that it is 
appropriate to eliminate the two exceptions, so that all of its 
registered participants--regardless of the length of time of their 
registrations--will participate in the regulatory element of the 
required continuing education programs. The Exchange proposes that this 
rule change take effect on October 1, 2005.\10\
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    \10\ To eliminate any confusion, the Exchange has confirmed in 
the proposed rule that an Exchange participant who is also a member 
of another SRO must comply with the rules of the other SRO which 
eliminated these exceptions as of an earlier date. See Securities 
Exchange Act Release Nos. 50404 (September 16, 2004), 69 FR 57126 
(September 23, 2004); 50456 (September 27, 2004), 69 FR 59285 
(October 4, 2004); 50630 (November 3, 2004), 69 FR 65232 (November 
10, 2004); 50651 (November 10, 2004) 69 FR 67374 (November 17, 
2004).
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2. Statutory Basis
    The CHX believes the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder that are applicable to a national securities 
exchange, and, in particular, with the requirements of Section 
6(b).\11\ In particular, the CHX believes the proposal is consistent 
with Section 6(b)(5) of the Act \12\ in that it is designed to 
facilitate transactions in securities, 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 by requiring 
all registered Exchange participants to participate in the regulatory 
element of continuing education programs.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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, as 
amended, will 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because 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) does not become operative for 30 days after the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change, as amended, has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) also requires that 
the Exchange give the Commission written notice of its intent to 
file the proposed rule change along with a brief description and 
text of the propose rule change, at least five business days prior 
to the date of filing of the proposed rule change. The Commission 
notes that the Exchange satisfied the pre-filing five-day notice 
requirement.
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    At any time within 60 days of the filing of such 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.\15\
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    \15\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the proposal to have been filed on August 
5, 2005, the date the Exchange filed Amendment No. 2.
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IV. 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

[[Page 48610]]

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-CHX-2005-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CHX-2005-16. 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, as 
amended, 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.
    Copies of the 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-CHX-2005-16 and should be submitted on 
or before September 8, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4507 Filed 8-17-05; 8:45 am]
BILLING CODE 8010-01-P