[Federal Register Volume 65, Number 124 (Tuesday, June 27, 2000)]
[Notices]
[Pages 39644-39645]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16207]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42971; File No. SR-NYSE-00-24]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Revisions to 
the Exchange's FORM AP-1 Application

June 21, 2000.
    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 May 25, 2000, the New York Stock Exchange, Inc. (``NYSE'' 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. 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 Exchange proposed to revise its FORM AP-1 (Approved Person 
Application Form). The text of the proposed rule change is available 
upon request from the Office of the Secretary, the Commission or the 
NYSE.

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 IV 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
    NYSE Rule 304(h) requires that ``[a]ny person who controls a member 
or member organization, or who engages in a securities or kindred 
business and is controlled by or under common control with a member or 
member organization but is not a member or allied member or an employee 
of a member organization shall apply for approval by the Exchange as an 
approved person. * * *'' The approval process requires that certain 
pertinent information about the approved person Applicant be provided 
to the Exchange for review. FORM AP-1 is used by Applicants who are 
entities and FORM U-4 is completed by natural person Applicants.
    The Exchange is proposing several revisions to FORM AP-1, which 
will require additional information and otherwise enhance its 
effectiveness for reviewing, approving, and monitoring Approved 
Persons.
    The proposed substantive revisions to FORM AP-1:
    <bullet> Require greater detail regarding both the nature of an 
Applicant's business and the Applicant's relationship with the member 
organization (items 7A and 9A-C of the Form);
    <bullet> Require the Applicant, promptly upon request, to provide 
the Exchange with updated financial and other information (Instruction 
Sheet, No. 12);
    <bullet> Require the Applicant, if a registered broker/dealer, to 
submit a copy of its most recent FOCUS Report (Instruction Sheet, No. 
10);
    <bullet> Continue the effectiveness of the Applicant's FORM AP-1 
agreements with the Exchange notwithstanding that the named member or 
member organization has changed its name or legal form (p. 4 of the 
Form, 5th paragraph); and
    <bullet> Require that a copy of a complete organization chart of 
Applicant and its affiliates be provided Instruction Sheet, No. 9).
    The proposed revisions (Form items 7A and 9A-C) will provide 
Exchange staff with more detailed information regarding the 
relationship between the member organization and approved person, 
enabling a more thorough evaluation of the Applicant (e.g., the Form 
asks for a general description of the Applicant's business and requires 
Applicant to indicate specifically how it controls, is controlled by or 
under common control with the member or member organization).
    The proposed revisions clarify circumstances under which an 
Applicant must file financial statements Instruction Sheet, No. 8). 
Item 12 of the Form asks the Applicant to submit to the Exchange its 
most recent balance sheet and income or profit and loss statement if 
the Applicant: (a) Controls the member organization; (b) is a 
subsidiary of the member organization for purposes of NYSE Rule 321 or 
its obligations or liabilities are guaranteed, endorsed or assumed by 
the member organization (under NYSE Rule 322); or (c) is a ``Material 
Associated Person'' as the term is used in Rule 17h-1T under the Act. 
The Exchange believes that in most cases there is no regulatory purpose 
served by requiring submission of financial statements of persons under 
common control unless, as previously indicated, the person is a 
``Material Associated Person.'' The Exchange, however, reserves the 
right to request current financial statements from applicants under 
common control. The Form also provides clarification that when 
financial statements are required to be submitted, they must be 
current, and clarification of the Exchange's right to request updated 
financial and other information. Approved person Applicants that are 
registered broker-dealers must submit copies of their most recent FOCUS 
report (Instruction Sheet, No. 10).
    The revised Form contains a new provision which states that the 
Applicant agrees that the statements, warranties, representations and 
undertakings [in the Form] will continue to apply notwithstanding a 
change to the member organization's name, form of organization, or 
legal status (but retains same SEC B/D number). This will eliminate the 
need for more frequent refilings of FORM AP-1 (see page 4 of the Form, 
5th paragraph).
    To clarify the relationship between the Applicant and the member 
organization, a complete organization chart of the Applicant and its 
affiliates must be submitted with the Form (Instruction Sheet, No. 9). 
An organization chart may also identify other entities which should be 
approved persons.

[[Page 39645]]

    Certain additional changes are proposed in response to suggestions 
made by Securities and Exchange Commission staff. They include the 
addition of a question (item 7B of the Form) to elicit the identify of 
any ``foreign financial regulatory authority'' to which the Applicant 
may be subject. They also include highlighting (on the Instruction 
Sheet) the responsibility of the Applicant to disclose whether it, or 
any person associated therewith, is subject to a statutory 
disqualification, and noting on the Instruction Sheet (No. 8) that any 
required financial statements must be submitted in English.
    Several formatting revisions have also been made, such as 
italicizing defined terms and providing space for evidencing Exchange 
staff processing, which make the Form clearer and easier to use.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b)(5) \3\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest, in that it will 
enhance the process by which the Exchange reviews, approves, and 
monitors Approved Persons.
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    \3\ 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

    The Exchange has neither solicited nor received any written 
comments 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 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.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-NYSE-00-24 and 
should be submitted by July 18, 2000.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority. \4\
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    \4\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-16207 Filed 6-26-00; 8:45 am]
BILLING CODE 8010-01-M