[Federal Register Volume 69, Number 3 (Tuesday, January 6, 2004)]
[Notices]
[Pages 708-709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-222]



[[Page 708]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48998; File No. SR-Amex-2003-101]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Relating to Amex Membership's 
Duty to Report Fraudulent or Manipulative Conduct

December 29, 2003.
    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 21, 2003, the American Stock Exchange LLC (``Amex'' 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 Amex. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend Rule 3 of the Amex's General and Floor 
Rules to require Amex members or member organizations to report to the 
Exchange fraudulent or manipulative conduct in connection with the 
trading of securities on the Floor.
    The text of the proposed rule change appears below. Proposed new 
language is italicized; proposed deletions are [bracketed].
* * * * *

[Excessive Dealing] General Prohibitions and Duty to Report

Rule 3. (a)-(g) no change

    (h) It shall be deemed an act detrimental to the interest or 
welfare of the Exchange for any member, member organization or employee 
thereof to fail to report immediately to the Exchange any fraudulent or 
manipulative conduct in connection with the trading of securities on 
the Floor (i) of which the member, member organization or employee 
thereof has knowledge, or (ii) that the member, member organization or 
employee thereof has been asked to perform. Reports to the Exchange of 
fraudulent or manipulative conduct shall be made in such form and to 
such person(s) as the Exchange shall prescribe from time to time in a 
notice to the membership.
* * * * *

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 Amex 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 Amex 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Paragraphs (b) and (c) of Article V, Section 4 of the Amex 
Constitution grant the Exchange the authority to discipline any member 
or member organization that engages in fraud and fictitious 
transactions.\3\ Furthermore, Paragraph (j) of Article V, Section 4 of 
the Amex Constitution grants the Exchange broad authority to discipline 
members and member organizations for conduct that is detrimental to the 
interest or welfare of the Exchange. The Exchange deems any fraudulent 
or manipulative conduct in connection with the trading of securities on 
the Exchange's Floor to be a violation of the Amex Constitution and 
detrimental to the interest and welfare of investors and the Exchange.
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    \3\ In addition to the prohibitions of Article V, Section 4 of 
the Amex Constitution, Rule 4 of the Amex's General and Floor Rules 
prohibits transactions executed ``for the purpose of creating or 
inducing a false, misleading or artificial appearance of activity in 
[a] security or for the purpose of unduly and improperly influencing 
the market price of [a] security or for the purpose of making a 
price which does not reflect the true state of the market in [a] 
security.''
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    The Exchange states that, at present, no Amex rule exists requiring 
members or member organizations to report to the Exchange fraudulent or 
manipulative acts that occur in connection with transactions on the 
Floor. Accordingly, the Exchange believes that there is an opportunity 
to enhance its ability to police such behavior. The Exchange therefore 
proposes to add paragraph (h) to Amex Rule 3 to require any member and 
member organization to report immediately to the Exchange fraudulent or 
manipulative conduct in connection with the trading of securities on 
the Floor of which the member or member organization has knowledge or 
has been asked to perform.
    In addition to adding paragraph (h), the Exchange proposes to use 
this opportunity to amend the title of Amex Rule 3. By way of 
background, Amex Rule 3 (``Excessive Dealings'') contains various 
prohibitions impacting members and member organizations. For example, 
among other prohibitions, Amex Rule 3 forbids a member or member 
organization from: (i) Effecting trades for an account in which the 
member or member organization has a direct or indirect interest where 
such trades are excessive in view of that member or member 
organization's financial resources or in view of the market for the 
security; (ii) circulating rumors of a sensational character that might 
affect market conditions; (iii) improperly using or disclosing 
confidential information entrusted to the member or member organization 
by customers; and (iv) in the case of a regular or options principal 
member, effecting a transaction with an associate member or non-member 
on the Floor of the Exchange unless permitted by rule. In light of the 
unrelated prohibitions of the rule and the proposed addition of 
paragraph (h), the Exchange proposes to change the title of Amex Rule 3 
from ``Excessive Dealings'' to ``General Prohibitions and Duty to 
Report.''
2. Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
section 6(b) of the Act \4\ in general and furthers the objectives of 
section 6(b)(5) of the Act \5\ in particular in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and to protect 
investors and the public interest, and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will impose no burden on competition.

[[Page 709]]

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

    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 Exchange 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Comments may also be submitted electronically at the following e-mail 
address: <a href="/cdn-cgi/l/email-protection#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="750700191058161a1818101b0106350610165b121a03">[email protected]</span></a>. All comment letters should refer to 
File No. SR-Amex-2003-101. 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, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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 will also be available for 
inspection and copying at the principal office of the Amex. All 
submissions should refer to File No. Amex-2003-101 and should be 
submitted by January 27, 2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-222 Filed 1-5-04; 8:45 am]
BILLING CODE 8010-01-P


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