Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13915

for action pursuant to 10 CFR 2.206 has

been granted.

On the basis of the NRC staff’s review

and the record of the Vogtle license

transfer amendment proceeding, I

conclude that no unauthorized transfer

of the Vogtle or Hatch operating licenses

occurred, and that the GPC nuclear

facilities are being operated in

accordance with NRC regulations and

do not endanger the health and safety of

the public. On balance, the evidence

does not support the conclusion that

GPC, SONOPCO Project, or Southern

Nuclear deliberately provided false or

misleading information to the NRC or

that Southern Nuclear or GPC

(including the GPC employees that

would be employed by Southern

Nuclear if the proposed license transfer

is authorized) lack the requisite

character and integrity to be an NRC

licensee as required by section 182 of

the Atomic Energy Act, 42 U.S.C 2232,

and 10 CFR 50.80. Thus, there is no

basis upon which to grant Petitioners’

request that the operation of the facility

be modified, suspended or revoked.

With respect to Petitioners’ request

that the NRC institute proceedings and

impose civil penalties based on the

matters addressed in the Petition, the

issues in the Petition that give rise to

substantial health and safety issues

have, in fact, been the subject of a

lengthy proceeding and escalated

enforcement actions by the NRC. Also,

based upon the findings of the DOL, the

NRC has addressed both Petitioners’

specific concerns that they were

discriminated against for engaging in

protected activities (and the associated

allegation that GPC retaliates against

managers who make their regulatory

concerns known) by taking escalated

enforcement actions against GPC. Based

on actions already taken by the NRC

staff and the licensee, there is

reasonable assurance that the GPC

facilities operate with adequate

protection of the public health and

safety. Therefore, I decline to take any

further action with respect to matters

raised in the Petition. To this extent, the

Petitioners’ request for action pursuant

to 10 CFR 2.206 is denied.

A complete copy of the Director’s

Decision will be filed with the Secretary

of the Commission for the Commission’s

review in accordance with 10 CFR

2.206(c) of the Commission’s

regulations. As provided by this

regulation, the Director’s Decision will

constitute the final action of the

Commission 25 days after the date of

issuance unless the Commission, on its

own motion, institutes a review of the

Director’s Decision in that time.

Dated at Rockville, Maryland, this 18th day

of March 1997.

[FR Doc. 97–7317 Filed 3–21–97; 8:45 am]

BILLING CODE 7590–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22569; 812–10524]

Nations Fund Trust et al.; Notice of

Application

March 17, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Nations Funds Trust

(‘‘NFT’’), Nations Fund, Inc. (‘‘NFI’’),

NationsBanc Advisors, Inc. (‘‘NBAI’’),

The Pilot Funds (‘‘Pilot’’), and

Boatmen’s Trust Company

(‘‘Boatmen’s’’).

RELEVANT ACT SECTIONS: Order requested

under section 17(b) for an exemption

from section 17(a).

SUMMARY OF APPLICATION: Applicants

request an order under section 17(b) for

an exemption from section 17(a) to

permit certain series of NFT and NFI to

acquire all of the assets and assume all

of the stated liabilities of certain series

of Pilot. Because of certain affiliations,

applicants may not rely on rule 17a–8

under the Act.

FILING DATE: The application was filed

on February 13, 1997. Applicants have

agreed to file an amendment during the

notice period, the substance of which is

included in this notice.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

April 11, 1997, and should be

accompanied by proof of service on the

applicants, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants: NFT, NFI, NBAI, and

Boatmen’s One NationsBank Plaza,

Charlotte, North Carolina 28255; Pilot,

3435 Stelzer Road, Columbus, Ohio,

43219.

FOR FURTHER INFORMATION CONTACT:

John K. Forst, Staff Attorney, at (202)

942–0569, or Mary Kay Frech, Branch

Chief, at (202) 942–0564, (Division of

Investment Management, Office of

Investment Company Regulation.)

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicants’ Representations

1. NFT, a Massachusetts business

trust, is registered under the Act as an

open-end management investment

company. NFT currently consists of

thirty-two series, seven of which are the

subject of this application: Nations

Strategic Fixed Income Fund, Nations

Disciplined Equity Fund, Nations Value

Fund, Nations Intermediate Municipal

Bond Fund, Nation Short-Intermediate

Government Fund, Nations Tax Exempt

Fund, and Nations Municipal Income

Fund. NFI, A Maryland corporation, is

registered under the Act as an open-end

management investment company.

Three of NFI’s existing five series and

three shell funds are the subject of this

application: Nations Equity Income

Fund, Nations Prime Fund, Nations

Treasury Fund, Nations Small Company

Growth Fund (shell), Nations U.S.

Government Bond Fund (shell), and

Nations International Growth Fund

(shell) (collectively, these thirteen funds

are referred to as the ‘‘Acquiring

Funds’’).

2. Pilot, a Massachusetts business

trust, is registered under the Act as an

open-end management investment

company. Pilot currently offers fourteen

series: Pilot Diversified Bond Income

Fund, Pilot Equity Income Fund, Pilot

Growth Fund, Pilot Growth and Income

Fund, Pilot Intermediate Municipal

Bond Fund, Pilot Intermediate U.S.

Government Securities Fund, Pilot

International Equity Fund, Pilot

Missouri Short-Term Tax-Exempt Fund,

Pilot Municipal Bond Fund, Pilot

Municipal Bond Fund, Pilot Short-Term

U.S. Treasury Fund, Pilot Small

Capitalization Equity Fund, Pilot U.S.

Government Securities Fund, Pilot

Short-Term Diversified Assets Fund,

and Pilot Short-Term Tax-Exempt

Diversified Fund (collectively, the

‘‘Acquired Funds’’).

3. The investment objectives of each

Acquired Fund are substantially similar

to those of the corresponding Acquiring

Fund.

4. NBAI is the investment adviser to

the operating Acquiring Funds. NBAI is
13916 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

1Not more than 0.25% of such assets will be used

to compensate service organizations for personal

services provided to Class B shareholders and/or

the maintenance of shareholder accounts. Not more

than 0.75% of such assets will be paid to PFD as

reimbursement for distribution activities.

a wholly-owned subsidiary of

NationsBank, N.A., which is a whollyowned subsidiary of NationsBank

Corporation (‘‘NationsBank’’).

Boatmen’s is the investment adviser to

the Acquired Funds.

5. On August 29, 1996, Boatmen’s

Bancshares, Inc. (‘‘Bancshares’’), the

former parent of Boatmen’s, entered into

an Agreement and Plan of Merger (the

‘‘Merger Agreement’’) with

NationsBank. The Merger Agreement

provided that Bancshares will merge

with and into a wholly-owned

subsidiary of NationsBank (the

‘‘Holding Company Merger’’). The

Holding Company Merger was

consummated on January 7, 1997.

6. Currently, Boatmen’s and its

affiliates, which are under common

control with NBAI, hold of record in

their name and in the names of their

nominees more than 25% of the

outstanding voting Securities of the

Pilot class of shares of a minority of the

Acquired Funds. Except as noted below,

all such securities are held for the

benefit of others in a trust, agency,

custodial, or other fiduciary or

representative capacity. Except for

Boatmen’s ownership for its own

account as of December 31, 1996, of

more than 5%, but less than 10% of the

Pilot class of the Pilot Municipal Bond

Fund, neither Boatmen’s, NBAI, or any

affiliate of NBAI owns an economic

interest in these securities.

7. Shares of Nations Prime Fund,

Nations Tax Exempt Fund, and Nations

Treasury Fund (the ‘‘Nations Money

Market Funds’’) are divided into six

classes of shares: Primary A Shares,

Primary B Shares, Investor A Shares,

Investor B Shares, Investor C Shares,

and Daily Shares. Shares of all other

Acquiring Funds (the ‘‘Nations NonMoney Market Funds’’) are divided into

five classes of shares: Primary A Shares,

Primary B Shares. Investor A Shares,

Investor C Shares, and Investor N

Shares. Primary A Shares, Daily Shares,

and Investor B Shares are the only share

classes of Nations Money Market Funds

involved in the proposed

reorganization. Primary A Shares,

Investor A Shares, and Investor N

Shares are the only share classes of

Nations Non-Money Market Funds

involved in the proposed

reorganization.

8. Shares of the Acquiring Funds are

distributed by Stephens Inc.

(‘‘Stephens’’), a registered broker-dealer.

Stephens receives no compensation in

connection with the distribution of

Primary A Shares of the Acquiring

Funds. Each Acquiring Fund’s Investor

A Share class has adopted a distribution

plan pursuant to rule 12b–1 under the

Act. This distribution plan provides for

a payment of up to 0.25% (on an

annualized basis) of the average daily

net asset value of the Investor A Shares

of the Non-Money Market Funds. The

Acquiring Funds have approved

shareholder servicing plans and

distribution plans with respect to

Investor B and Daily Shares of the

Nations Money Market Funds and

Investor N Shares of the Nations NonMoney Market Funds. Payments under

the shareholder servicing plans may not

exceed 0.25% (on an annualized basis)

of the average daily net asset value of

these shares. Payments under the

distribution plans may not exceed

0.75% of the average daily net asset

value of each Nations Non-Money

Market Fund’s Investor N Shares, or

0.10% of the Investor B Shares and

0.45% of the Daily Shares of the Nations

Money Market Funds.

9. Shares of Pilot Missouri Short-Term

Tax-Exempt Fund, Pilot Short-Term

Diversified Assets Fund, Pilot ShortTerm Tax-Exempt Fund, and Pilot

Short-Term U.S. Treasury Fund (the

‘‘Pilot Money Market Funds’’) are

divided into three classes of shares:

Pilot Shares, Investor Shares, and

Administration Shares. The other

Acquired Funds (the ‘‘Pilot Non-Money

Market Funds’’) are divided into three

classes of shares: Pilot Shares, Class A

Shares, and Class B Shares.

10. Shares of the Acquired Funds are

distributed by Pilot Fund Distributors,

Inc. (‘‘PFD’’), a registered broker-dealer.

Certain classes of the Acquired Funds

have adopted distribution plans

pursuant to rule 12b–1 under the Act.

Under these plans, PFD receives

payments for distribution and support

services. Payments under the

distribution plan for Class A Shares may

not exceed 0.25% (on an annual basis)

of the average daily net assets. Payments

under the distribution plan for Class B

Shares may not exceed 1.00% (on an

annual basis) of the average daily net

assets.1 Pilot Administration Shares

have an account administration fee of

0.25% and Pilot Investor Shares have a

rule 12b–1 fee of 0.50% to be paid to

PFD in connection with distribution and

administration of such shares. Pilot

Shares are not subject to any rule 12b–

1 fees.

11. Pilot Shares, Administrative

Shares, and Investor Shares of the

Acquired Funds are offered at net assets

value. Class A Shares of the Acquired

Funds are offered at a public offering

price that includes a maximum frontend sales load between 4.00% and

4.50%. Class B Shares of the Acquired

Funds are offered at net asset value with

a sliding-scale deferred sales load. The

Acquired Funds’ shareholders will pay

no front-end or contingent deferred

sales charges after the reorganization.

Shares of all classes of the Acquiring

Funds are offered at net asset value.

12. Pilot has entered into a separate

agreement and plan of reorganization

(each a ‘‘Plan’’ and, collectively, the

‘‘Plans’’) with each of NFT and NFI,

providing for the transfer of all of the

assets (and subject to the assumption of

the stated liabilities) of each of Pilot

Diversified Bond Income Fund, Pilot

Equity Income Fund, Pilot Growth

Fund, Pilot Growth and Income Fund,

Pilot Intermediate Municipal Bond

Fund, Pilot Intermediate U.S.

Government Securities Fund, Pilot

International Equity Fund, Pilot

Municipal Bond Fund, Pilot Short-Term

U.S. Treasury Fund, Pilot Small

Capitalization Equity Fund, Pilot U.S.

Government Securities Fund, and Pilot

Short-Term Diversified Assets Fund to

Nations Strategic Fixed Income Fund,

Nations Equity Income Fund, Nations

Disciplined Equity Fund, Nations Value

Fund, Nations Intermediate Municipal

Bond Fund, Nations Short-Intermediate

Government Fund, Nations

International Growth Fund (shell),

Nations Municipal Income Fund,

Nations Treasury Fund, Nations Small

Company Growth Fund (shell), Nations

U.S. Government Bond Fund (shell),

and Nations Prime Fund, respectively,

in exchange for shares of designated

classes of each corresponding Acquiring

Fund. Pursuant to these Plans, both

Pilot Missouri Short-Term Tax-Exempt

Fund and Pilot Short-Term Tax-Exempt

Diversified Fund will be reorganized

into the Nations Tax Exempt Fund. Pilot

Money Market Fund shareholders of

Pilot Shares, Investor Shares, and

Administration Shares will receive

Primary A, Daily, and Investor B Shares,

respectively, of Nations Money Market

Funds. Shareholders of Pilot NonMoney Market Fund Pilot Shares, Class

A Shares, and Class B Shares will

receive Primary A, Investor A, and

Investor N Shares, respectively, of

Nations Non-Money Market Funds. The

aggregate net asset value of Acquiring

Fund shares to be issued to shareholders

of an Acquired Fund will equal the

value of the aggregate net assets of the

Acquired Fund as of the close of

business on the business day

immediately prior to the closing. Shares

of the Acquiring Funds will be
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13917

distributed pro rata to shareholders of

each Acquired Fund in liquidation of

the Acquired Fund. Thereafter, each of

the Acquired Funds and Pilot will be

dissolved.

13. The board of trustees of NFT and

the board of directors of NFI, including

the disinterested trustees/directors,

considered and unanimously approved

the respective Plan on February 6, 1997.

The board of trustees of Pilot, including

the disinterested trustees, considered

and unanimously approved the Plans at

meetings held on January 31, 1997 and

February 5, 1997. Each of the boards has

determined, with respect to their funds,

that participation in the reorganizations

is in the best interests of each of the

Acquired Funds and the Acquiring

Funds, and that the interests of

shareholders will not be diluted as a

result of the reorganizations.

14. Each board based its decision to

approve the Plans on a number of

factors, including: (a) The compatibility

of each Acquired Fund’s investment

objective, policies and restrictions with

those of its corresponding Acquiring

Fund; (b) the terms and conditions of

the reorganizations and whether they

would result in a dilution of the existing

shareholders’ interests; (c) the

conditioning of the reorganizations on

receipt of a legal opinion confirming the

absence of any adverse federal tax

consequences to the Acquired Funds or

their shareholders resulting from the

reorganizations; (d) the similarities

between the Acquired Funds’ and the

Acquiring Funds’ respective

distribution, administrative, transfer

agency, shareholder service and custody

arrangements, and the relative

performance of each of the Acquired

and Acquiring Funds; (e) the potential

expense savings, economies of scale,

reduced per-share expenses, and

benefits to the portfolio management

process that could result from

combining the assets and operations of

the Acquired Funds and the Acquiring

Funds; and (f) information regarding

expense ratios of the Acquired Funds

and the Acquiring Funds.

15. Combined prospectus/proxy

statements describing the relevant

reorganizations were filed with the SEC

on February 20, 1997, and will be

mailed to shareholders of each Acquired

Fund on or about March 20, 1997.

Applicants anticipate that special

meetings of shareholders of the

Acquired Funds will be held on or

about April 21, 1997 and, subject to

shareholder approval, the

reorganizations will be completed on or

about May 2, 1997.

16. Approximately $450,000 of the

expenses incurred in connection with

the reorganizations will be allocated to

the Acquiring Funds following

consummation of the reorganizations

(the ‘‘Allocated Amount’’). NBAI will

absorb all expenses of the

reorganizations other than the Allocated

Amount. In addition, NBAI has

committed to maintain current (after

waiver) expense ratios for all Acquiring

Fund classes for a period of at least two

years after the closing, absent

extraordinary circumstances or a

reduction in fund assets that impacts fee

levels (the Expense Commitment). This

Expense Commitment will cause NBAI,

in effect, to absorb approximately

$320,000 of the Allocated Amount

through additional fee waivers. NBAI

also will absorb the portion of the

remaining Allocated Amount that

otherwise would be borne by current

Pilot Fund shareholders by making a

capital contribution of $31,000 to the

Pilot Funds prior to the closing. After

NBAI absorbs this $351,000,

approximately $99,000 of expenses will

be borne by current Nations Fund

shareholders.

17. Applicants agree not to make any

material changes to the Plans that affect

representations in the application

without the prior approval of the SEC

staff.

Applicants’ Legal Analysis

1. Section 17(a) of the Act provides,

in pertinent part, that it is unlawful for

any affiliated person of a registered

investment company, or any affiliated

person of such person, acting as

principal, knowingly (a) to sell any

security or other property to such

registered company, or (b) to purchase

from such registered company any

security or other property. Section 17(b)

provides that the SEC may exempt a

transaction from section 17(a) if

evidence establishes that the terms of

the proposed transaction, including the

consideration to be paid, are reasonable

and fair and do not involve

overreaching on the part of any person

concerned, and that the proposed

transaction is consistent with the policy

of the registered investment company

concerned and with the general

purposes of the Act.

2. Section 2(a)(3) of the Act, in

pertinent part, defines the term

‘‘affiliated person’’ of another person to

include (a) any person owning,

controlling, or holding with power to

vote, 5% or more of the outstanding

voting securities of such other person;

(b) any person 5% or more of whose

outstanding voting securities are owned,

controlled, or held with the power to

vote by such other person; (c) any

person controlling, controlled by, or

under common control with, such other

person; and (d) if such other person is

an investment company, any investment

adviser thereof.

3. Rule 17a–8 under the Act exempts

from section 17(a) mergers,

consolidations, or purchases or sales of

substantially all of the assets of

registered investment companies that

may be affiliated persons solely by

reason of having a common investment

adviser, common directors/trustees,

and/or common officers provided that

certain conditions are satisfied.

4. The reorganizations may not be

exempt from the prohibitions of section

17(a) pursuant to rule 17a–8 because the

Acquiring Funds and the Acquired

Funds may be affiliated for reasons

other than those set forth in the rule. As

a result of the Holding Company

Merger, Boatmen’s and NBAI are both

under common control of NationsBank.

Currently, Boatmen’s and its affiliates

hold of record in their name and in the

names of their nominees more than 25%

of the outstanding voting securities of

the Pilot class of a minority of the

Acquired Funds. Because of this record

ownership and the beneficial ownership

of more than 5% of the Pilot Class of the

Pilot Municipal Bond Fund, each

Acquiring Fund may be deemed an

affiliated person of an affiliated person

of the corresponding Acquired Fund,

and vice versa, for reasons not based

solely on their common adviser,

common directors/trustees, and/or

common officers.

5. Applicants believe that the terms of

the proposed reorganizations satisfy the

standards of section 17(b). The boards of

trustees and directors of NFT, NFI, and

Pilot have determined that participation

in the reorganizations is in the best

interests of the Acquiring Funds, the

Acquired Funds and their shareholders,

and that the interests of the

shareholders will not be diluted as a

result of the reorganizations. Applicants

further submit that the terms of the

transaction, including the consideration

to be paid or received, are reasonable

and fair and do not involve

overreaching on the part of any party;

the investment objectives, policies, and

restrictions of each Acquired Fund are

compatible with and substantially

similar to each respective Acquiring

Fund’s investment objectives, policies,

and restrictions; and, the reorganization

and the granting of the requested order

is appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policies and provisions

of the Act.
13918 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

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

2Letter from Claudia Crowley, Special Counsel,

Amex, to Anthony Pecora, Attorney, Division of

Market Regulation, SEC, dated March 4, 1997

(‘‘Amendment No. 1’’). Amendment No 1 added a

paragraph explaining the Exchange’s enforcement

policy concerning ‘‘substantive’’ violations of Amex

Rule 170 and included an interpretation of that rule

in the form of an information circular that the

Exchange has represented to be binding on it.

3A zero minus tick is a price equal to the last sale

where the last preceding transaction at a different

price was at a higher price.

4A zero plus tick is a price equal to the last sale

where the last preceding transaction at a different

price was at a lower price.

5Securities Exchange Act Release No. 38299 (Feb.

18, 1997), 62 FR 8464 (‘‘February 1997 Approval

Order’’) (approving File No. SR–Amex–97–01).

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

7 15 U.S.C. 78f(b)(5).

8 15 U.S.C. 78k(b).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7282 Filed 3–21–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38379; File No. SR–Amex–

97–12]

Self-Regulatory Organizations; Notice

of Filing of, and Order Granting

Accelerated Approval to, Proposed

Rule Change by the American Stock

Exchange, Inc. Relating to Execution

of Specialists’ Liquidating

Transactions

March 10, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

February 28, 1997, the American Stock

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

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which Items have

been prepared by the self-regulatory

organization. Subsequently, the

Exchange submitted Amendment No. 1

to the proposed rule change.2 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons and to

grant accelerated approval to the

proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex is proposing permanent

approval of a pilot program that

amended Exchange Rule 170 to permit

a specialist to effect a liquidating

transaction on a zero minus tick,3 in the

case of a ‘‘long’’ position, or a zero plus

tick,4 when covering a ‘‘short’’ position,

without Floor Official approval. The

pilot program also amended Exchange

Rule 170 to set forth the affirmative

action that specialists are required to

take subsequent to effecting various

types of liquidating transactions.

The text of the proposed rule change

is available at the Office of the

Secretary, the Amex, 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

land 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

On February 18, 1997, the

Commission approved an extension

until March 7, 1997 of a pilot program

that amended exchange Rule 170 to

permit a specialist to effect a liquidating

transaction on a zero minus tick, in the

case of a ‘‘long’’ position, or a zero plus

tick, when covering a ‘‘short’’ position,

without Floor Official approval.5 The

Rule continues to require that Floor

Official approval be obtained prior to

effecting a liquidating transaction on a

straight destabilizing tick (i.e., a minus

tick in the case of a ‘‘long’’ position or

a plus tick when covering a ‘‘short’’

position). The amendments also set

forth the affirmative action that

specialists are required to take

subsequent to effecting various types of

liquidating transactions.

During the course of the pilot

program, the Exchange has carefully

monitored compliance with the

requirements of the Rule. The Amex

believes that the amendments have

provided specialists with flexibility in

liquidating specialty stock positions in

order to facilitate their ability to

maintain fair and orderly markets,

particularly during unusual market

conditions. In addition, the specialist’s

concomitant obligation to participate as

dealer on the opposite side of the

market after a liquidating transaction

has been strengthened. The Exchange is

therefore proposing permanent approval

of the amendments to Amex Rule 170.

In addition, the Exchange is

proposing to adopt a formal policy to

address its enforcement with respect to

‘‘non-substantive’’ (i.e., if the approval

would have been granted if it had been

sought) violations of the requirement

that specialists obtain Floor Official

approval for reliquidating transactions

on straight destabilizing ticks. Absent

unusual circumstances, the Exchange

will, at a minimum, take the following

action:

—The Exchange staff will issue a cautionary

letter to the specialist for an initial

violation, during a ‘‘rolling’’ twelve-month

period.

—Any subsequent violation(s) by the same

specialist during the ‘‘rolling’’ twelvemonth period will be referred to the Minor

Floor Violation Disciplinary Committee for

appropriate action. Pursuant to Rule 590

and its commentary, the Committee has the

authority to issue a cautionary letter to the

specialist or impose fines ranging from

$500 to $2,500 ($1,000 to $5,000 for

member organizations).

Of course, the Exchange, even for an

initial violation, has the authority to

take more stringent action either

pursuant to Rule 590 or in accordance

with the Exchange’s formal disciplinary

procedures. In addition, the Exchange’s

policy with respect to ‘‘substantive’’

violations of this rule (e.g., failure to

properly re-enter the market or failure to

obtain the required Floor Official

approval when such approval, if sought,

would not have been granted) remains

unchanged. Such instances of

noncompliance will be dealt with

according to the Exchange’s formal

disciplinary procedures.

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) of the Act 6 in general and furthers

the objectives of Section 6(b)(5) 7 in

particular in that it is designed to

promote just and equitable principles of

trade, remove impediments to and

perfect the mechanism of a free and

open market, and, in general, protect

investors and the pubic interest. The

Exchange also believes the proposed

rule change is consistent with Section

11(b) of the Act 8 which allows

exchanges to promulgate rules relating

to specialists in order to maintain fair

and orderly markets.