Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Notices 60741

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

2 17 CFR 240.19b-4.

3 In Amendment No. 1, the PCX requested

accelerated approval of its filing on the ground that

the Commission has already approved similar

filings of other Self-Regulatory Organizations. See

Letter from Michael Pierson, Senior Attorney,

Regulatory Policy, PCX, to Jerome Roche, Law

Clerk, Division of Market Regulation, SEC, dated

October 9, 1997.

4 In Amendment No. 2, the PCX narrowed the

scope and applicability of PCX Rule 9.20(b).

Additionally, the PCX amended Rule 9.23 to

include ‘‘telemarketing scripts’’ within the

definition of ‘‘sales literature.’’ See Letter from

Michael Pierson, Senior Attorney, Regulatory

Policy, PCX, to Jerome Roche, Law Clerk, Division

of Market Regulation, SEC, dated October 22, 1997.

5 15 U.S.C. 6101–08.

6 47 U.S.C. 227.

7Pursuant to the TCPA, the FCC adopted rules in

December 1992 that, among other things, (1)

prohibit cold-calls to residential telephone

customers before 8 a.m. or after 9 p.m. (location

time at the called party’s location) and (2) require

persons or entities engaging in cold-calling to

institute procedures for maintaining a ‘‘do-not-call’’

list that includes, at a minimum, (a) a written policy

for maintaining the do-not-call list, (b) training

personnel in the existence and use thereof, (c)

recording a consumer’s name and telephone

number on the do-not-call list at the time the

request not to receive calls is made, and retaining

such information on the do-not call list for a period

of at least ten years, and (d) requiring telephone

solicitors to provide the called party with the name

of the individual caller, the name of the person or

entity on whose behalf the call is being made and

a telephone number or address at which such

person or entity may be contacted. 57 FR 48333

(codified at 47 CFR 64.1200). With certain limited

exceptions, the FCC Rule applies to all residential

telephone solicitations, including those relating to

securities transactions. Id. The term ‘‘telephone

solicitation’’ refers to the initiation of a telephone

call or message for the purpose of encouraging the

purchase or rental of, or investment in, property,

goods, or services, which is transmitted to any

person, other than with the called person’s express

invitation or permission, or to a person with whom

the caller has an established business relationship,

or by tax-exempt non-profit organization. Id.

8Securities Exchange Act Release No. 37897

(October 30, 1996) 61 FR 57937 (November 8, 1996)

(order approving File No. SR–PSE–96–32).

9 16 CFR 310.

10 §§ 310.3–4 of FTC Rules.

11 Id. Pursuant to the Telemarketing Act, the FTC

Rules do not apply to brokers, dealers, and other

securities industry professionals. Section 3(d)(2)(A)

of the Telemarketing Act.

A ‘‘demand draft’’ is used to obtain funds from

a customer’s bank account without that person’s

signature on a negotiable instrument. The customer

provides a potential payee with bank account

information that permits the payee to create a piece

of paper that will be processed like a check,

including the words ‘‘signature on file’’ or

‘‘signature preapproved’’ in the location where the

customer’s signature normally appears.

12 In response, the National Association of

Securities Dealers (‘‘NASD’’), the Municipal

Securities Rulemaking Board (‘‘MSRB’’), the New

York Stock Exchange (‘‘NYSE’’), the American

Stock Exchange (‘‘Amex’’), the Philadelphia Stock

Exchange (‘‘Phlx’’), and the Chicago Board Options

Exchange (‘‘CBOE’’) have adopted rules to curb

abusive telemarketing practices. See Securities

Exchange Act Release Nos. 38009 (Dec. 2, 1996) 61

FR 65625 (Dec. 13, 1996) (order approving File No.

SR–NASD–96–28); 38053 (Dec. 16, 1996) 61 FR

68078 (Dec. 26, 1996) (order approving File No. SR–

MSRB–96–06); 38638 (May 14, 1997) 62 FR 27823

(May 21, 1997) (order approving File No. SR–

NYSE–97–07); 38724 (June 6, 1997) 62 FR 32390

(June 13, 1997) (order approving File No. SR–

Amex–97–17); 38875 (Jul. 25, 1997) 62 FR 41983

(Aug. 4, 1997) (order approving File No. SR–Phlx–

97–18); and 39010 (Sep. 3, 1997) 62 FR 47712 (Sep.

10, 1997) (order approving File No. SR–CBOE–97–

39).

The Commission has determined that the NASD

Rule, MSRB Rule, the NYSE Rule, the Amex Rule,

and the Phlx Rule, together with the Act and the

Investment Advisers Act of 1940, the rules

thereunder, and the other rules of the SROs, satisfy

the requirements of the Telemarketing Act because

the applicable provisions of such laws and rules are

substantially similar to the FTC Rules except for

those FTC Rules that involve areas already

extensively regulated by existing securities laws or

regulations or activities inapplicable to securities

transactions. Securities Exchange Act Release No.

38480 (Apr. 7, 1996) 62 FR 18666 (Apr. 16, 1996).

Continued

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39303; File No. SR–PCX–

97–36]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change and Amendment Nos. 1

and 2 Thereto by the Pacific Exchange,

Inc., Relating to Codifying Certain

Requirements of the Telemarketing

and Consumer Fraud and Abuse

Prevention Act

November 5, 1997.

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

September 9, 1997, the Pacific

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

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

the proposed rule change as described

in Items I and II below, which Items

have been prepared by the selfregulatory organization. The PCX filed

Amendment No. 1 to its proposed rule

change on October 14, 1997,3 and

Amendment No. 2 on October 23, 1997.4

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons and to grant accelerated

approval of the proposed rule change, as

amended.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange is proposing to amend

its Rules in order to codify certain

requirements of the Telemarketing and

Consumer Fraud and Abuse Prevention

Act (‘‘Telemarketing Act’’), which

became law in August 1994.5 The text

of the proposed rule change and

Amendment Nos. 1 and 2 is available at

the Office of the Secretary, PCX, and at

the Commission.

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 III 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

Pursuant to the Telephone Consumer

Protection Act (‘‘TCPA’’),6 the Exchange

adopted in October 1996 a ‘‘cold call’’

rule to implement certain rules of the

Federal Communications Commission

(‘‘FCC Rule’’) 7 that require persons who

engage in telephone solicitations to sell

products and services (‘‘telemarketers’’)

to establish and maintain a list of

persons who have requested that they

not be contacted by the caller (a ‘‘donot-call’’ list).8 Under the Telemarketing

Act, the Federal Trade Commission

adopted detailed regulations (‘‘FTC

Rules’’) 9 to prohibit deceptive and

abusive telemarketing acts and

practices; the regulations became

effective on December 31, 1995.10 The

FTC Rules, among other things, (i)

require the maintenance of ‘‘do-notcall’’ lists and procedures, (ii) prohibit

abusive, annoying, or harassing

telemarketing calls, (iii) prohibit

telemarketing calls before 8 a.m. or after

9 p.m., (iv) require a telemarketer to

identify himself, the company he works

for, and the purpose of the call, and (v)

require express written authorization or

other verifiable authorization from the

customer before use of negotiable

instruments called ‘‘demand drafts.’’ 11

Under the Telemarketing Act, the SEC

is required either to promulgate or to

require the self-regulatory organizations

(‘‘SROs’’) to promulgate rules

substantially similar to the FTC Rules,

unless the SEC determines either that

the rules are not necessary or

appropriate for the protection of

investors or the maintenance of orderly

markets, or that existing federal

securities laws or SEC rules already

provide for such protection.12 The
60742 Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Notices

Accordingly, the Commission has determined that

no additional rulemaking is required by it under the

Telemarketing Act. Id. Notwithstanding this

determination, the Commission still expects the

Boston Stock Exchange, the Cincinnati Stock

Exchange, and the Chicago Exchange to file similar

proposals.

13 15 U.S.C. 78f(b)(5).

14The Commission, however, received two

comment letters on a NASD proposal (SR–NASD–

96–28), which is substantially similar. See Letter

from Brad N. Bernstein, Assistant Vice President

and Senior Attorney, Merrill Lynch, to Jonathan G.

Katz, Secretary, SEC, dated Aug. 19, 1996 (‘‘Merrill

Lynch Letter’’), and Letter from Frances M. Stadler,

Associate Counsel, Investment Company Institute

(‘‘ICI’’), to Jonathan G. Katz, Secretary, SEC, dated

Aug. 21, 1996 (‘‘ICI Letter’’). For a discussion of the

letters and responses thereto, see Securities

Exchange Act Release No. 38009 (Dec. 2, 1996)

(approving File No. SR–NASD–96–28).

1515 U.S.C. 78f(b)(5).

16 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).

purpose of the proposed rule change is

to amend PCX Rule 9.20 in response to

the Commission’s request that SROs

promulgate rules substantially similar to

applicable provisions of the FTC Rules

adopted pursuant to the Telemarketing

Act.

Time Limitations and Disclosure. The

proposed rule change adds new Rule

9.20(b)(1) to prohibit a member or

person associated with a member from

making outbound telephone calls to a

member of the public’s residence for the

purpose of soliciting the purchase of

securities or related services at any time

other than between 8 a.m. and 9 p.m.

local time at the called person’s location

and to require, under proposed

paragraph (b)(2) to Rule 9.20, such

member or associated person to

promptly disclose to the called person

in a clear and conspicuous manner the

caller’s identity and firm, the telephone

number or address at which the caller

may be contacted, and that the purpose

of the call is to solicit the purchase of

securities or related services.

Proposed paragraph (b)(3) to Rule 9.20

creates exemptions from the time-of-day

and disclosure requirements of

paragraphs (1) and (2) for telephone

calls by associated persons, or other

associated persons acting at the

direction of such persons for purposes

of maintaining and servicing existing

customers assigned to or under the

control of the associated persons, to

certain categories of ‘‘existing

customers.’’ Proposed paragraph (3)

defines ‘‘existing customer’’ as a

customer for whom the broker or dealer,

or a clearing broker or dealer on behalf

of the broker or dealer, carries an

account. Proposed subparagraph (3)(A)

exempts calls to an existing customer

who, within the preceding twelve

months, has effected a securities

transaction in, or made a deposit of

funds or securities into, an account

under the control of or assigned to the

associated person at the time of the

transaction or deposit. Proposed

subparagraph (3)(B) exempts calls to an

existing customer who, at any time, has

effected a securities transaction in, or

made a deposit of funds or securities

into, an account under the control of or

assigned to such associated person at

the time of the transaction or deposit, as

long as the customer’s account has

earned interest or dividend income

during the preceding twelve months.

Proposed subparagraph (3)(C) exempts

telephone calls to a broker or dealer. the

proposed rule change also expressly

clarifies that the scope of this rule is

limited to the telemarketing calls

described herein; the terms of the Rule

do not otherwise expressly or by

implication impose on members any

additional requirements with respect to

the relationship between a member and

a customer or between a person

associated with a member and a

customer.

Demand Draft Authorization and

Recordkeeping. The proposed rule

change adds Rule 9.20(d) to: (i) Prohibit

a member or person associated with a

member from obtaining from a customer

or submitting for payment a check,

draft, or other form of negotiable paper

drawn on a customer’s checking,

savings, share, or similar account

(‘‘demand draft’’) without that person’s

express written authorization, which

may include the customer’s signature on

the instrument; and (ii) require the

retention of such authorization for a

period of three years.

Telemarketing Scripts. The proposed

rule change also amends the definition

of ‘‘sales literature’’ contained in Rule

9.23 to include ‘‘telemarketing scripts’’

within that definition. This will require

telemarketing scripts to be retained for

a period of three years.

2. Statutory Basis

The Exchange believes that the basis

under the Act for the proposed rule

change is the requirement under Section

6(b)(5) 13 that an Exchange have rules

that are designed to promote just and

equitable principles of trade, to remove

impediments to, and perfect the

mechanism of, a free and open market

and, in general, to protect investors and

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change will impose no

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 solicited

or received with respect to the proposed

rule change.14

III. 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, N.W.,

Washington, D.C. 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

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the PCX. All submissions

should refer to File No. SR–PCX–97–36

and should be submitted by December

3, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of the

Proposed Rule Change

The Commission finds that the

proposed rule change, as amended, is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with Section 6(b)(5) of the Act 15 which

requires, among other things, that the

rules of the exchange be designed to

prevent further fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest.16 The

proposed rule change, as amended, is

consistent with these objectives in that

it imposes time restriction and

disclosure requirements, with certain

exceptions, on members’ telemarketing

calls, requires verifiable authorization

from a customer for demand drafts, and

prevents members from engaging in

certain deceptive and abusive

telemarketing acts and practices while
Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Notices 60743

17 15 U.S.C. 78f.

18 15 U.S.C. 78s(b)(2).

19 17 CFR 200.30–3(a)(12).

allowing for legitimate telemarketing

activities.

The Commission believes that the

amendments to Rule 9.20, prohibiting a

member of person associated with a

member from making outbound

telephone calls to the residence of any

person for the purpose of soliciting the

purchase of securities or related services

at any time other than between 8 a.m

and 9 p.m. local time at the called

person’s location, without prior consent

of the person, is appropriate. The

Commission notes that, by restricting

the times during which a member of a

person associated with a member may

call a residence, the proposal furthers

the interest of the public and provides

for the protection of investors by

preventing members and member

organizations from engaging in

unacceptable practices, such as

persistently calling members of the

public at unreasonable hours of the day

and night.

The Commission also believes that the

amendments to Rule 9.20, requiring a

member of person associated with a

member to promptly disclose to the

called person in a clear and

conspicuous manner the caller’s

identify and firm, telephone number or

address at which the caller may be

contacted, and that the purpose of the

call is to solicit the purchase of

securities or related services, are

appropriate. By requiring the caller to

identify himself or herself and the

purpose of the call, the Rule assists in

the prevention of fraudulent and

manipulative acts and practices by

providing investors with information

necessary to make an informed decision

about purchasing securities. Moreover,

by requiring the associated person to

identify the firm for which the caller is

being contacted, the Rule encourages

responsible use of the telephone to

market securities.

The Commission also believes that

Rule 9.20, creating exemptions from the

time-of-day and disclosure requirements

for telephone calls by associated

persons, or other associated persons

acting at the direction of such persons,

to certain categories of ‘‘existing

customers’’ is appropriate. The

Commission believes it is appropriate to

create an exemption for calls to

customers with whom there are existing

relationships in order to accommodate

personal and timely contact with a

broker who can be presumed to know

when it is convenient for a customer to

respond to telephone calls. Moreover,

such an exemption also may be

necessary to accommodate trading with

customer in multiple time zones across

the United States. The Commission,

however, believes that the exemption

from the time-of-day and disclosure

requirements should be limited to calls

to persons with whom the broker has a

least a minimally active relationship. In

this regard, the Commission believes

that Rule 9.20 achieves an appropriate

balance between providing protection

for the public and the members’ interest

in competing for customers.

The Commission also believes that the

amendment to Rule 9.20, requiring that

a member or a person associated with a

member obtain from a customer, and

maintain for three years, express written

authorization when submitting for

payment a check, draft, or other form of

negotiable paper drawn on a customer’s

checking, savings, share or similar

account, is appropriate. The

Commission notes that requiring a

member or person associated with a

member to obtain express written

authorization from a customer in the

above-mentioned circumstances assists

in the prevention of fraudulent and

manipulative acts in that it reduces the

opportunity for a member or person

associated with a member to

misappropriate customers’ funds.

Moreover, the Commission believes that

by requiring a member or person

associated with a member to retain the

authorization for three years, Rule 9.20

protects investors and the public

interest in that it provides interested

parties with the ability to acquire

information necessary to ensure that

valid authorization was obtained for the

transfer of a customer’s funds for the

purchase of a security.

The Commission also believes that the

amendment to Rule 9.23 requiring the

retention of telemarketing scripts for

three years is appropriate. By requiring

the retention of telemarketing scripts for

three years, Rule 9.23 assists in the

prevention of fraudulent and

manipulative acts and practices and

provides for the protection of the public

in that interested parties will have the

ability to acquire copies of the scripts

used to solicit the purchase of securities

to ensure that members and associated

persons are not engaged in unacceptable

telemarketing practices.

Finally, the Commission believes that

the proposed rule achieves a reasonable

balance between the Commission’s

interest in preventing members from

engaging in deceptive and abusive

telemarketing acts and the members’

interest in conducting legitimate

telemarketing practices.

The Commission finds good cause for

approving the proposed rule change,

including Amendment Nos. 1 and 2,

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register. The proposal is

identical to the NASD and MSRB rules,

which were published for comment and,

subsequently, approved by the

Commission. The approval of the PCX’s

rules provides a consistent standard

across the industry. In that regard, the

Commission believes that granting

accelerated approval to the proposed

rule change is appropriate and

consistent with Section 6 of the Act.17

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,18 that the

proposed rule change (SR–PCX–97–36),

including Amendment Nos. 1 and 2, is

approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.19

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–29748 Filed 11–10–97; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

Data Collection Available for Public

Comments and Recommendations

ACTION: Notice and request for

comments.

SUMMARY: In accordance with the

Paperwork Reduction Act of 1995, this

notice announces the Small Business

Administration’s intentions to request

approval on a new, and/or currently

approved information collection.

DATES: Comments should be submitted

on or before January 12, 1998.

FOR FURTHER INFORMATION CONTACT:

Curtis B. Rich, Management Analyst,

Small Business Administration, 409 3rd

Street, S.W., Suite 5000, Washington,

D.C. 20416. Phone Number: 202–205–

6629.

SUPPLEMENTARY INFORMATION:

Title: ‘‘Small Disadvantaged Business

Certification Application’’.

Type of Request: New Collection.

Form No: N/A.

Description of Respondents: Small

Businesses seeking certification as a

Small Disadvantaged Business.

Annual Responses: 100,000.

Annual Burden: 5,000.

Comments: Send all comments

regarding this information collection to

Patricia A. Lefevre, Office of Minority

Enterprise Development, Small Business

Administration, 409 3rd Street, S.W.,

Suite 8000, Washington, D.C. 20416.

Phone No: 202–205–6416. Send