Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Notices 49269

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 38795

(June 30, 1997), 62 FR 36594 (July 8, 1997).

4Pub. L. 104–290, 110 Stat. 3416 (1996).

5 15 U.S.C. 77s.

subadvisers best suited to the needs of

the Series. Applicants believe that

shareholders’ interests are adequately

protected by their voting rights with

respect to the Management Agreements

and the responsibilities assumed by the

Manager and the Funds’ boards.

6. Applicants contend that

shareholders will be provided with

adequate information about subadvisers.

Funds’ prospectuses and statements of

additional information will contain all

required information regarding each

subadviser. Within 90 days of the hiring

of a new subadviser, a Fund will furnish

shareholders with all the information

that would have been provided in a

proxy statement.

7. Section 6(c) of the Act provides that

the SEC may exempt any person,

security, or transaction from any

provision of the Act if and to the extent

that such exemption is necessary or

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act. For the reasons stated above,

applicants believe that the requested

exemptive relief satisfies this standard.

Applicants’ Conditions

Applicants agree that any order of the

SEC granting the requested relief will be

subject to the following conditions:

1. Before a Series may rely on the

order requested in the application, the

operation of the Series in the manner

described in the application will be

approved by a majority of the

outstanding voting securities, as defined

in the Act, of the Series or, in the case

of a new Series whose public

shareholders purchased shares on the

basis of a prospectus containing the

disclosure contemplate by condition 2

below, by the sole initial shareholder(s)

before offering shares of such Series to

the public.

2. Any Series relying on the requested

relief will disclose in its prospectus the

existence, substance, and effect of any

order granted pursuant to the

application. In addition, the Series will

hold itself out to the public as

employing the subadviser structure

described in the application. The

prospectus will prominently disclose

that the Manager has ultimate

responsibility to oversee the subadvisers

and recommend their hiring,

termination, and replacement.

3. The Manager will provide

management and administrative

services to the Funds and, subject to the

review and approval of their respective

boards of trustees, will set the overall

investment strategies of the Series;

recommend subadvisers; where

appropriate, allocate and reallocate the

assets of the Series among subadvisers;

and monitor and evaluate the

investment performance of the

subadvisers, including their compliance

with the investment objectives, policies,

and restrictions of the Series.

4. A majority of each board of trustees

of each Fund will be persons each of

whom is not an ‘‘interested person’’ of

the Fund (as defined in section 2(a)(19)

of the Act) (the ‘‘Independent

Trustees’’), and the nomination of new

or additional Independent Trustees will

be placed within the discretion of the

then existing Independent Trustees.

5. The Funds will not enter into

Subadvisory Agreements with any

subadviser that is an ‘‘affiliated person,’’

as defined in section 2(a)(3) of the Act,

of the Series, or the Manager other than

by reason of serving as a subadviser to

one or more of the Series (an ‘‘Affiliated

Subadviser’’) without such agreement,

including the compensation to be paid

thereunder, being approved by the

shareholders of the applicable Series.

6. When a change of subadviser is

proposed for a Series with an Affiliated

Subadviser, the board of trustees of the

applicable Fund including a majority of

the Independent Trustees, will make a

separate finding, reflected in the

minutes of the meeting of the board of

trustees of the Fund, that the change of

subadviser is in the best interest of the

Series and its shareholders and does not

involve a conflict of interest from which

the Manager, or an Affiliated Subadviser

derives an inappropriate advantage.

7. No director, trustee, or officer of a

Fund or the Manager will own directly

or indirectly (other than through a

pooled investment vehicle that is not

controlled by any such director, trustee,

or officer) any interest in a subadviser

except for ownership of interests in the

Manager or any entity that controls, is

controlled by, or under common control

with the Manager, or ownership of less

than 1% of the outstanding securities of

any class of equity or debt securities of

a publicly-traded company that is either

a subadviser or an entity that controls,

is controlled by, or is under common

control with a subadviser.

8. Within 90 days of the hiring of any

subadviser, the affected Series will

furnish its shareholders with all

information about the new subadviser

that would be included in a proxy

statement. Such information will

include any change in such disclosure

caused by the addition of a new

subadviser. The Fund will meet this

condition by providing shareholders,

within 90 days of the hiring of a

subadviser with an information

statement meeting the requirements of

Regulation 14C and Schedule 14C under

the Securities Exchange Act of 1934

(‘‘1934 Act’’). The information statement

also will meet the requirements of Item

22 of Schedule 14A under the 1934 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24970 Filed 9–18–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39055; File No. SR–CHX–

97–17]

Self-Regulatory Organizations;

Chicago Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change Relating to Tier I Listing

Standards to Adopt a Share Price

Maintenance Standard for Common

Stock Listed on the Exchange

September 11, 1997.

I. Introduction

On June 25, 1997, the Chicago Stock

Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’)

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

add a share price maintenance standard

for common stock listed on Tier I of the

Exchange.

The proposed rule change was

published for comment in the Federal

Register on July 8, 1997.3 No comments

were received on the proposal. This

order approves the proposal.

II. Description of the Proposal

The National Securities Markets

Improvement Act of 1996 4 amended

section 18 of the Securities Act of 1933 5

to provide for exclusive federal

registration of securities listed, or

authorized for listing, on the New York

Stock Exchange (‘‘NYSE’’), the

American Stock Exchange (‘‘Amex’’) or

listed on the National Market System of

the Nasdaq Stock Market (‘‘Nasdaq/

NMS’’), or any other national securities

exchange designated by the Commission

by rule to have substantially similar

listing standards to those markets. The
49270 Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Notices

6Securities Exchange Act Release No. 38728,

Securities Act Release No. 7422 (June 10, 1997).

7 15 U.S.C. 78f(b).

8 15 U.S.C. 78f(b)(5).

9 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

10 15 U.S.C. 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

1On June 4, 1997, the Exchange filed Amendment

No. 1 to this rule filing. Amendment No. 1

supersedes entirely the Exchange’s rule filing and

was incorporated into the notice in its entirety. On

June 17, 1997 and June 24, 1997, the Exchange filed

Amendment Nos. 2 and 3 respectively; Amendment

No. 3 replaces Amendment No. 2 in its entirety and

the substance of Amendment No. 3 was

incorporated into the notice. See letter from J. Craig

Long, Attorney, Foley & Lardner, to Ivette Lopez,

Assistant Director, Market Regulation, Commission,

dated May 27, 1997 (‘‘Amendment No. 1’’) and

letters from David T. Rusoff, Attorney, Foley &

Lardner, to Sharon Lawson, Senior Special Counsel,

Market Regulation, Commission, dated June 13,

1997 (‘‘Amendment No. 2’’) and June 18, 1997

(‘‘Amendment No. 3’’) respectively.

2 15 U.S.C. 78s(b)(1).

3 17 CFR 240.19b–4.

4See Letter from James F. Duffy, Executive Vice

President and General Counsel, Legal and

Regulatory Policy, American Stock Exchange, to

Jonathan G. Katz, Secretary, Commission, dated July

31, 1997 (‘‘Amex Comment Letter’’).

CHX petitioned the SEC in February of

this year to adopt a rule finding the

CHX’s Tier I listing standards to be

substantially similar to those of the

NYSE, Amex or Nasdaq/NMS. If the

SEC adopts such a rule, any security

listed on the CHX under its Tier I

standards would be exempt from

registration in all fifty states.

The Commission has recently

published for comment proposed Rule

146(b) which would designate various

exchanges’ listing standards as being

substantially similar to those of the

NYSE, Amex or Nasdaq/NMS.6 The

Commission has indicated that it

preliminary believes that the only

deficiency in the CHX Tier I standards,

which precludes it from designating the

CHX Tier I securities as qualifying, is

that there is no minimum share price

requirement for continued listing on

Tier I. If such deficiency was corrected,

the SEC indicated that it would consider

including CHX’s Tier I securities in the

final Rule 146(b).

As a result of the above, the CHX is

proposing to amend Article XXVIII,

Rule 14 of the Exchange rules to add a

minimum share price requirement for

continued listing of common stock on

Tier I. The proposed amendment is

virtually identical to Amex’s

requirement. In essence, the proposed

amendment states that an issuer that has

a common stock listed under Tier I that

is selling for a substantial period of time

at a low price per share must effect a

reverse split within a reasonable period

of time after being notified that the

Exchange deems such action to be

appropriate. The proposed amendment

then sets forth examples of pertinent

factors which the Exchange will review

in determining whether a reverse split is

appropriate. If the issuer fails to effect

a reverse split, then the Exchange would

initiate a proceeding to delist the

issuer’s common stock from Tier I.

III. Discussion

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, and, in particular, with the

requirements of section 6(b).7

Specifically, the Commission believes

the proposal is consistent with the

section 6(b)(5) 8 requirement that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts, and, in general, to

protect investors and the public

interest.9 New Exchange Rule 14(a)(4)

provides the CHX with specific

authority to require an issuer with

common stock listed on Tier I to effect

a reverse stock split when the issue is

selling for a substantial period of time

at a low price per share. If such issuer

does not effect a reverse split of the

shares, which should have the effect of

increasing share price, within a

reasonable period of time after being

notified that the Exchange deems the

reverse split to be appropriate, the

Exchange will delist the issuer’s stock.

In establishing criteria to uphold the

quality of its market, the Commission

believes that it is appropriate for the

Exchange to have a maintenance

standard for securities selling at low

prices in conjunction with the other

standards for listing and maintenance.

The Commission finds that the share

price maintenance standard is a

reasonable measure for the Exchange to

use to maintain its quality control

standards for issuers listed on Tier I of

the Exchange and is a reasonable

standard to use to remove low-priced

securities from the Exchange. As noted

above, under the rule, the issuer will

have the opportunity to remedy

concerns about stock selling at a low

price by effecting a reverse stock split.

The Commission also believes that the

addition of the share price maintenance

standard to the Exchange’s maintenance

requirements for common stock should

help the Exchange monitor the

continued financial stability of

companies listed on Tier I because low

share prices can sometimes be the result

of financial difficulty with the issuer.

The maintenance standard will also

help ensure that stocks that are more

susceptible to manipulation will not be

traded on the Exchange. This should

protect investors and the public interest

consistent with section 6(b)(5) of the

Act.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,10 that the

proposed rule change (SR–CHX–97–17)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24865 Filed 9–18–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39076; File No. SR–CHX–

97–06]

Order Granting Approval to Proposed

Rule Change

September 15, 1997.

Self-Regulatory Organizations; Order

Granting Approval to Proposed Rule Change

by the Chicago Stock Exchange, Inc., Relating

to Listing and Trading Standards for Portfolio

Depositary Receipts.

I. Introduction

On March 17, 1997,1 the Chicago

Stock Exchange, Inc. (‘‘CHX’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘Commission’’), pursuant to section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 2 and Rule 19b–4

thereunder,3 a proposed rule change to

add Rule 25 to Article XXVIII of CHX’s

rules relating to the listing and trading

of Portfolio Depository Receipts

(‘‘PDRs’’).

The proposed rule change as amended

by Amendment Nos. 1, 2, and 3,

together with the substance of the

proposal, was published for comment in

Securities Exchange Act Release No.

38777 (June 26, 1997) 62 FR 35866 (July

2, 1997). One comment letter was

received in response to the proposal.4

II. Background and Description

The Exchange proposes to adopt new

Rule 25 under Article XXVIII to

accommodate the trading of PDRs,

securities which are interests in a unit

investment trust (‘‘Trust’’) holding a