[Federal Register Volume 62, Number 196 (Thursday, October 9, 1997)]
[Notices]
[Pages 52804-52805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26722]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39178; File No. SR-PHLX-97-39]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Regarding ITSFEA 
Supervisory Procedures

October 1, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 18, 1997, the 
Philadelphia Stock Exchange, Inc. (``PHLX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. 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).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    PHLX, pursuant to Rule 19b-4 \2\ of the Act, proposes to amend 
Exchange Rule 761, Supervisory Procedures Relating to the Insider 
Trading and Securities Fraud Enforcement Act of 1988 (``ITSFEA''), and 
Floor Procedure Advice F-13, in order to broaden the scope of their 
applicability. The text of the proposed rule change may be examined at 
the places specified in Item IV below.
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    \2\ 17 CFR 240.19b-4.
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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 self-regulatory organization 
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 self-regulatory organization 
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
    On April 16, 1992, the Exchange received approval to implement 
Exchange Rule 761 \3\ which imposed supervisory procedures on its floor 
units respecting ITSFEA. In 1993, the Exchange revised the rule in 
order to make minor changes for the sake of clarity.\4\ The rule 
currently requires PHLX floor units to have every employee sign an 
attestation that he or she has read the most current version of the 
Exchange's ``Notice of Insider Trading'' and will ensure that the 
employer firm directly receives a duplicate account statement for all 
accounts in which the employee maintains a beneficial interest. 
Further, the rule requires all floor units to make and keep current an 
``ITSFEA Account List'' and review all accounts listed with a view 
towards identifying possible misuse of material non-public information.
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    \3\ Securities Exchange Act Release No. 30597 (April 16, 1992), 
57 FR 14855.
    \4\ Securities Exchange Act Release No. 33008 (October 4, 1993), 
58 FR 52518.
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    Currently, the rule only applies to PHLX floor units. Now, however, 
the PHLX has become the designated examining authority (``DEA'') for 
approximately eighteen firms over the past few years which do not have 
a floor presence. These firms are not now subject to the rule, and 
because no other self regulatory organization (``SRO'') is their DEA, 
they are exempt from these requirements entirely. In order to rectify 
this situation, the Exchange is proposing to change the phrase ``PHLX 
floor unit'' to ``PHLX member organization'' in the rule. That way, the 
rule will apply to all PHLX member organizations, with the caveat that 
any member organization which is required to have ITSFEA supervisory 
procedures pursuant to rules of another SRO which is its DEA, will not 
also be subject to PHLX Rule 761. Thus, all PHLX member firms for which 
the Exchange is the DEA will be subject to this rule, regardless of 
whether they conduct business on the floor of the Exchange or not.
    The second purpose of this rule change is to add commentary .01, 
which will provide that for the purpose of the rule, an employee will 
include ``every person who is compensated directly or indirectly by the 
member organization for the solicitation or handling of business in 
securities, including trading securities for the account of the member 
organization, whether such securities are those dealt in on the 
Exchange or those dealt over-the-counter.'' Thus, independent 
contractors as well as actual ``employees'' will be subject to the 
requirements of the rule. This language is similar to the language in 
Exchange Rule 604(d).
    Finally, Floor Procedure Advice F-13, which mirrors the language of 
Rule 761, with the addition of a fine schedule under the Exchange's 
minor rule plan, also will be revised in the same manner as Rule 761.
2. Statutory Basis
    The proposed rule change is consistent with Section 6 of the Act in 
general,\5\ and particular, with Section 6(b)(5),\6\ in that it is 
designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, as 
well as to protect investors and the public interest by assuring that 
the requirements of the ITSFEA rule are equally applied to all broker 
dealers and all persons who conduct a securities business for such 
broker dealers whether they are considered employees or independent 
contractors.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The PHLX does not believe that the proposed rule change will impose 
any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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

[[Page 52805]]

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 PHLX 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. 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 Section, 450 Fifth Street, NW, 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the PHLX. All 
submissions should refer to File No. SR-PHLX-97-39 and should be 
submitted by October 30, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-26722 Filed 10-8-97; 8:45 am]
BILLING CODE 8010-01-M