[Federal Register Volume 70, Number 166 (Monday, August 29, 2005)]
[Notices]
[Pages 51104-51105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4715]



[[Page 51104]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 52314; File No. SR-NYSE-2005-43]


Self-Regulatory Organizations; New York Stock Exchange, Inc., 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to 
Rule 607 Relating to the Classification of Arbitrators as Public or 
Industry

August 22, 2005.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Exchange Act'' or ``Act''),\2\ and Rule 19b-4 thereunder,\3\ 
notice is hereby given that on June 17, 2005, the New York Stock 
Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed amendments to its 
arbitration rules as described in Items I, II and III below, which 
items have been prepared by the NYSE. On August 4, 2005, the NYSE filed 
Amendment No. 1 to the proposed rule change (``Amendment No. 1'').\4\ 
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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ In Amendment No. 1, which supplemented the original filing, 
the Exchange modified the implementation date for the proposed rule 
change and clarified certain aspects of the filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change consists of an amendment to New York Stock 
Exchange, Inc. Rule 607 relating to the classification of arbitrators 
as public or industry. The text of the proposed rule change, as 
amended, is available on the NYSE's Web site (http://www.NYSE.com), at 
the NYSE's principal office, and at the Commission's Public Reference 
Room.

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 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. The 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
    In arbitrations involving customers or non-members where the 
damages are alleged to exceed $25,000, arbitration panels are comprised 
of three arbitrators, two public arbitrators and one from the 
securities industry. The customer or non-member may request at least a 
majority of arbitrators from the securities industry.
    Under Exchange Rule 607(a)(2), an arbitrator is currently 
classified as being from the securities industry if he or she: (1) Is, 
or within the past five years was, associated with certain entities 
related to the securities industry (or is retired from, or spent a 
substantial part of his or her career with such an entity); (2) is an 
attorney or other professional who devoted 20 percent or more of his or 
her work effort to securities industry clients within the past 2 years; 
or (3) is registered under the Commodity Exchange Act, or is a member 
of a registered futures association or any commodity exchange or is 
associated with any such person.
    Under Exchange Rule 607(a)(3), an arbitrator who is not from the 
securities industry is classified as a public arbitrator. However, a 
person cannot be classified as a public arbitrator if he or she has a 
spouse or household member who is associated with certain entities 
related to the securities industry.
    The NYSE is concerned that some arbitrators currently classified as 
public have affiliations with entities that have securities industry 
ties such as banks, insurance companies, mutual funds, holding 
companies and asset management firms. In an effort to enhance investor 
confidence in the NYSE arbitration forum, and in order to further 
ensure that persons serving as public arbitrators do not have ties to 
the securities industry or related firms, the Exchange is proposing to 
amend Rule 607. The proposed amendments would: (1) Expand the list of 
entities engaged in the securities business by adding certain 
membership categories not previously specifically mentioned (but, 
nevertheless, contemplated by the current rule), and by adding a catch-
all for any ``other organization engaged in the securities business;'' 
(2) preclude any individual who is associated with any entity that 
controls, is controlled by, or is under common control with an entity 
on the expanded list from being classified as a public arbitrator; and 
(3) preclude any individual from being classified as a public 
arbitrator who has an immediate family member associated with an entity 
on the expanded list. The amendment also defines which persons are 
included within the term ``immediate family member.''
    In order to ensure the integrity of the classification of public 
arbitrators, the Exchange will update and reclassify arbitrators in 
compliance with the amended rule, once approved.
    The proposed amendments resemble a provision in the Uniform Code of 
Arbitration (``UCA'') developed by the Securities Industry Conference 
on Arbitration.\5\ Aside from word choice and punctuation, the 
principal differences between the proposed rule change and the UCA are 
as follows:
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    \5\ The NASD has a rule similar to the UCA provision. See NASD 
Rule 10308(a).
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     The UCA states that a person with a spouse or other member 
of the household who could be classified as being from the securities 
industry as set forth immediately above will not be classified as a 
public arbitrator. The NYSE proposed amendment expands the UCA 
provisions by excluding a person from being classified as a public 
arbitrator if the person has an ``immediate family member,'' which 
includes a spouse, parents, children, siblings, mothers and fathers-in-
law, sons and daughters-in-law, and anyone who shares such person's 
home (excluding domestic employees), associated with any of the 
entities in the NYSE proposed amendment as set forth immediately above.
     The NYSE proposed amendment states that a person will not 
be classified as a public arbitrator if the person is associated with 
an entity that, directly or indirectly, controls, is controlled by, or 
is under common control with, a member, allied member, member 
organization, broker/dealer, government securities broker, government 
securities dealer, municipal securities dealer, registered investment 
adviser, or other organization that is engaged in the securities 
business. The UCA does not have this provision.
2. Statutory Basis
    The NYSE believes that the proposed rule change is consistent with 
Section 6(b) \6\ of the Act in general and Section 6(b)(5) of the Act 
\7\ in particular 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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    \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 NYSE 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

    The NYSE has not solicited but has received written comments on the 
proposed rule change.

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 the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange has stated that the rule will become effective 90 days 
following the publication in the Federal Register of the Commission's 
approval of the rule change.

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 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 e-mail to [email protected]. Please include File 
Number SR-NYSE-2005-43 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-NYSE-2005-43. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the 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 Number SR-NYSE-2005-43 and should be submitted on or before 
September 19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4715 Filed 8-26-05; 8:45 am]
BILLING CODE 8010-01-P