Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Notices 69975

4 17 CFR 200.30–3(a)(1).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Release No. 43065 (July

21, 2000), 65 FR 47528.

4See Letter from George Reichhelm, General

Partner, and Andrew Schwarz, General Partner,

AGS Specialist Partners, to Secretary, Commission,

dated August 9, 2000.

5Additionally, any member of the AAC has the

authority to request a review of an Exchange

Disciplinary Panel decision, sua sponte.

6Pursuant to New York Stock Exchange

(‘‘NYSE’’) Rule 476(f), NYSE enforcement personnel

have the authority to appeal adverse determinations

by disciplinary panels and the review boards have

the authority to increase penalties imposed by

disciplinary panels. Further, National Association

of Securities Dealers, Inc. (‘‘NASD’’) Rule 9311

provides for similar authority.

7See note 4, supra.

8See Jones v. SEC, 115 F.3d 1173, 1183 (4th Cir.

1997); see also, Hudson v. United States, 522 U.S.

93 (1997).

9 15 U.S.C. 78f(b)(7).

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549–

0609, facts bearing upon whether the

application has been made in

accordance with the rules of the Amex

and what terms, if any, should be

imposed by the Commission for the

protection of investors. The

Commission, based on the information

submitted to it, will issue an order

granting the application after the date

mentioned above, unless the

Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Jonathan G. Katz,

Secretary.

[FR Doc. 00–29746 Filed 11–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43554; File No. SR–Amex–

00–22]

Self-Regulatory Organizations; Order

Granting Approval to Proposed Rule

Change by the American Stock

Exchange LLC Amending Article V,

Section 1 of the Exchange Constitution

and Exchange Rule 345

November 14, 2000.

I. Introduction

On April 13, 2000, the American

Stock Exchange LLC (‘‘Amex’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) 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 grant the Exchange’s

Enforcement Department the right to

appeal a decision of a Disciplinary

Panel and to grant the Amex

Adjudicatory Council (‘‘AAC’’) and the

Amex Board of Governors the authority

to increase a penalty imposed by a

Disciplinary Panel.

The proposed rule change was

published for comment in the Federal

Register on August 2, 2000. 3 The

Commission received one comment on

the proposal. 4 This order approves the

proposal.

II. Description of Proposal

The Amex is proposing to amend its

Constitution and Rules to allow

Exchange staff to appeal decisions of the

AAC, and to allow the AAC to increase

penalties imposed by a Disciplinary

Panel. Further, the Exchange seeking to

expand the scope of the Board of

Governor’s authority to review proposed

decisions of the AAC so that the Board

may also sustain, increase, or eliminate

any penalty imposed, or impose a lesser

penalty.

a. Article V, Section 1(c) and Rule 345

Currently, under Article V, Section

1(c) of the Exchange Constitution and

Rule 345, only Exchange members may

appeal a determination and/or penalty

imposed by a Disciplinary Panel to the

AAC. 5 The Exchange’s Enforcement

Department does not have the right to

appeal a Disciplinary Panel’s

determination under the Constitution or

Rule 345. Because only members have

the right to appeal a decision to the

AAC, currently the AAC may only

affirm the determination and penalty

imposed, modify or reverse the

determination, decrease or eleminate

the penalty imposed, impose any lesser

penalty permitted, or remand the matter

to the Disciplinary Panel for further

consideration. The AAC may not

impose a greater penalty on appeal.

The Exchange proposes to grant the

Enforcement Department the right of

appeal, and to give the AAC the

authority to increase a penalty imposed

by the Disciplinary Panel if it deems it

appropriate. The Exchange contends

that this authority would give the

reviewing body the full range of

alternatives that it needs to deal

effectively with appeals.

b. Constitution Article V, Section 1(d)

and Rule 345(g)

Pursuant to Exchange Constitution

Article V, Section 1(d) and Rule 345(g),

as the next level of review, any four

members of the Board of Governors may

call a proposed decision of the AAC in

a contested disciplinary matter for

review by the entire Board. In reviewing

a decision by the AAC, the Board may

affirm, modify or reverse the decision of

the AAC or remand the matter for

further consideration. The Exchange has

proposed to expand the scope of the

Board’s authority to review proposed

decisions of the AAC so that the Board

may also sustain, increase or eliminate

any penalty imposed, or imposed a

lesser penalty. 6

III. Summary of Comments

The Commission received one

comment letter on the proposed rule

change. 7 In their letter, the commenters

expressed their opinion that the

proposed rule change violates the

general principles of peer review and

double jeopardy. The commenters

argued that the peer review provided by

the current Amex review process

‘‘prevents the imposition penalties by

higher authorities that may act in

certain circumstances for the political

needs of the institution rather than for

the justified position of an individual.’’

The commenters believed that the

purpose of the AAC is to ‘‘ensure that

sterile rules that exist in the virtual

world of the Enforcement Department

are applied in a real world environment

with the benefit of the experience of real

world participants,’’ and that the

proposed rule change hampers this

purpose.

The comments also stated that the

proposed rule change would violate

citizens’ rights against double jeopardy.

The commenters asserted that it is

contrary to democratic principles to

allow a separate entity to increase a

penalty determined to be fair by a peer

group embodied to determine the final

outcome of a proceeding.

The Amex responded to the

commenters by noting that guarantees

regarding peer review and double

jeopardy apply to governmental

proceedings, not proceedings brought by

a self-regulatory organization (‘‘SRO’’).8

The Amex noted that Section 6(b)(7) of

the Act requires the rules of an

exchange to ‘‘provide a fair procedure

for the disciplining of members and

persons associated with members.’’ 9

In response to the commenters’

opinion that the proposed rule change

would undermine the peer review

provided for under the current

disciplinary structure, the Exchange

noted that the AAC (which the

commenters regarded as their ‘‘peer

group’’) is composed of six Board

members (three Floor Governors, all of

whom are members, and three Public

69976 Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Notices

10 15 U.S.C. 78f(b)(7).

11 15 U.S.C. 78f(b)(1).

12 15 U.S.C. 78f(b)(6).

13 15 U.S.C. 78f(b)(7).

14Currently, the AAC is only permitted to affirm

the determination and penalty imposed, modify or

reverse the determination, decrease or eliminate the

penalty imposed, impose any lesser penalty

permitted, or remand the matter to the Disciplinary

Panel for further consideration. See Exchange Rule

345.

15The Commission notes that both parties in a

civil proceeding have the right to appeal the

decision of the court.

16 In approving this rule change, the Commission

has considered the proposal’s impact on efficiency,

competition, and capital formation, consistent with

Section 3(f) of the Act. 15 U.S.C. 78c(f). 17 15 U.S.C. 78s(b)(2). 18 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Michael J. Ryan, Senior Vice

President, Chief of Staff, and Senior Legal Officer,

Amex, to Alton Harvey, Office Chief, Division of

Market Regulation, Commission, dated September

20, 2000.

Governors). Therefore, the Exchange

explained, when the Board exercises its

discretionary right to review a decision

of the AAC, all of the members of the

AAC who participated in the initial

decision will also participate in the

Board’s consideration of the matter, thus

providing member representation.

Further, the Exchange pointed out that

one-third of the Board’s governors are

Exchange members. Therefore, the

Exchange believes that at both the AAC

level of review and at the Board level of

review, member participation is more

than adequate to satisfy any peer review

requirement that might be implicit in

Section 6(b)(7) of the Act.10

With regard to the commenters’

opinion that the proposed rule change

would expose members to double

jeopardy because a separate entity could

increase a penalty determined to be fair

by a peer group, the Exchange noted

that the proposed rule does not provide

that a member or member organization

may be charged twice for the same

conduct.

IV. Discussion

For the reasons discussed below, the

Commission finds that the proposed

changes to the Amex Constitution and

Rules governing the procedures for

review of disciplinary decisions are

consistent with the Act in that they will

enhance the ability of the Exchange to

enforce compliance by its members and

persons associated with its members

with the provisions of the Act, the rules

and regulations thereunder, and the

rules of the Exchange consistent with

the requirement of Section 6(b)(1) of the

Act; 11 they will help ensure that

members and persons associated with

members are appropriately disciplined

for violations of the Act, the rules and

regulations thereunder, and the rules of

the Exchange consistent with Section

6(b)(6) of the Act; 12 and they will

provide a fair procedure for the

disciplining of members and persons

associated with members consistent

with Section 6(b)(7) of the Act.13

The Commission finds that it is fair

and appropriate to grant the division or

department of the Exchange which

brought the charges (‘‘Enforcement

Department’’) the same right to appeal

decisions of the Disciplinary Panel to

the AAC as is granted to members. The

Commission believes that allowing the

Enforcement Department to appeal these

decisions will provide an additional

check on the disciplinary process to

ensure that all parties are treated fairly.

While the Commission recognizes the

importance of Exchange rules designed

to protect members accused of violating

Exchange rules from unfair treatment, it

is also important to have procedures in

place that allow the Enforcement

Department to seek review of decisions

that it believes are improper or unfair.

The Commission does not believe that

the rights and protections granted to

members under the Rules will be

impinged upon by virtue of the fact the

Enforcement Department also has the

right of appeal. All final disciplinary

actions of SROs can be appealed to the

Commission. In addition, the

Commission has the ability to review on

its own motion any final disciplinary

action of an SRO.

Further, the Commission believes that

it is appropriate to grant the AAC the

authority to increase penalties imposed

by the Disciplinary Panel upon

appeal.14 The Enforcement

Department’s right to appeal is limited

under the current rule because the AAC

may not impose a penalty harsher than

that originally imposed by the

Disciplinary Panel. The Commission

believes that as part of the Enforcement

Division’s right to appeal, it should be

permitted to request an increased

penalty if it believes that the penalty

imposed by the Disciplinary Panel is

inadequate.15

Finally, the Commission believes that

it is also appropriate to allow the Board

of Governors additional discretion to

review penalties imposed as proposed

by the Exchange. Currently, the Board

may only affirm, modify or reverse the

decision of the AAC, or remand the

matter for further consideration. The

Commission believes that by granting

the Board the authority to sustain,

increase or eliminate any penalty

imposed, or impose a lesser penalty, the

disciplinary process will be more

streamlined. This change will permit

the Board to review not only decisions

of the AAC regarding whether it is

appropriate to sanction a member, but

also whether the sanction ultimately

imposed is appropriate. For example, if

the Board fees AAC’s decision to impose

a penalty is correct, but disagrees with

the penalty imposed, instead of

remanding the matter to the AAC for

additional consideration with

instructions, the Board may impose a

penalty that it believes is just. The

Commission finds that it is appropriate

for the Board to have the authority to

make these decisions.

V. Conclusion

For all of the aforementioned reasons,

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.16

It is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,17 that the

proposed rule change (SR–AMEX–00–

22) is approved.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29709 Filed 11–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43559; File No. SR–Amex–

00–43]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the American Stock Exchange LLC

Amending Its Rules To Require

Companies To Publicly Disclose

Receipt of a Delisting Notice

November 14, 2000.

I. Introduction

On August 16, 2000, the American

Stock Exchange LLC (‘‘Amex’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘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

amend its rules to require companies to

publicly disclose receipt of a written

delisting notice from the Exchange. On

September 26, 2000, the Amex

submitted Amendment No. 1 to the

proposal to make certain technical

modifications.3