Federal Register / Vol. 62, No. 58 / Wednesday, March 26, 1997 / Notices 99

3See Securities Exchange Act Release No. 29616

(August 27, 1991), 56 FR 43826 (September 4,

1991).

4 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 38203

(January 24, 1997), 62 FR 4564 (January 30, 1997).

4 In amendment No. 1 the Exchange revises the

definition of ‘‘foreign broker/dealer’’ to include

those persons or entities which are required to be

registered, authorized or licensed by a foreign

governmental agency or foreign regulatory

organization, even if they are not so registered,

authorized or licensed. See letter from Michael D.

Pierson, Senior Attorney, Regulation Policy, PSE, to

James T. McHale, Attorney, Office of Market

Supervision (‘‘OMS’’), Division of Market

Regulation (‘‘Division’’), Commission, dated March

11, 1997 (‘‘Amendment No. 1’’).

5Rule 6.52(a) provides in part that ‘‘[o]nly nonbroker/dealer customer orders may be placed with

an Order Book Official pursuant to this Rule.’’ Cf.

SEC Rule 11Ac1–4(a)(6) (equity ‘‘customer limit

orders’’ that must be displayed pursuant to Rule

11Ac1–4 include those that are ‘‘not for the account

of either a broker or dealer’’) (effective January 20,

1997).

6Rule 6.87(a) provides: ‘‘Only non-broker/dealer

customer orders are eligible for execution on the

Exchange’s Automatic Execution System (‘‘AutoEx’’).’’

7Rule 6.86(a) provides: ‘‘Each trading crowd is

required to provide a depth of twenty (20) option

contracts for all non-broker/dealer customer orders,

at the bid/offer that is displayed as the

disseminated market quote at the time such orders

are announced or displayed at the trading post

designated for trading the subject option class.’’

8Sections 3(a)(4) and 3(a)(5) of the Act provide:

(4) The term ‘‘broker’’ means any person engaged

in the business of effecting transactions in securities

for the account of others, but does not include a

bank.

(5) The term ‘‘dealer’’ means any person engaged

in the business of buying and selling securities for

his own account, through a broker or otherwise, but

does not include a bank, or any person insofar as

he buys or sells securities for his own account,

either individually or in some fiduciary capacity,

but not as a part of a regular business.

9The Commission notes that a non-broker/dealer

customer executing a trade through a foreign

broker/dealer would be treated as a public customer

for purposes of PSE Rules 6.52(a), 6.86 and 6.87, as

revised. Telephone conversation between Michael

D. Pierson, Senior Attorney, Regulation Policy, PSE,

and James T. McHale, Attorney, OMS, Division,

Commission, on March 3, 1997.

done in the dissemination of OTC

Bulletin Board information in 1991.3

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Nasdaq Stock Market 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 solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal 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 self-regulatory organization

consents, the Commission will:

(A) By order approve the 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, 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 at

the Commission’s Public Reference

Section, 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 NASD. All submissions

should refer to File No. SR–NASD–97–

17 and should be submitted by April 16,

1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7642 Filed 3–25–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38420; International Series

Release No. 1066; File No. SR–PSE–96–46]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval to Amendment

No. 1 Thereto by the Pacific Stock

Exchange, Inc. Relating to Foreign

Broker/Dealers

March 19, 1997.

On December 16, 1996, the Pacific

Stock Exchange, Inc. (‘‘PSE’’ 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

modify its rules to specify that the term

‘‘broker/dealer,’’ as used in PSE Rules

6.52(a), 6.86 and 6.87, includes foreign

broker/dealers. The PSE also proposed

to adopt a definition of the term

‘‘foreign broker/dealer.’’ Notice of the

proposed rule change was published for

comment and appeared in the Federal

Register on January 30, 1997.3 No

comment letters were received on the

proposal. On March 12, 1997, the

Exchange filed amendment No. 1 to the

proposed rule change.4 This order

approves the PSE proposal, as amended.

I. Description of the Proposal

PSE Rules 6.52(a), 6.86 and 6.87,

relating to option transactions only,

currently distinguish between orders for

broker/dealers and orders for nonbroker/dealers. Under these rules, only

non-broker/dealer customer orders are

eligible to be placed on the public limit

order book,5 to be entered for automatic

execution,6 or are eligible for a

guaranteed minimum execution of 20

contracts on the floor of the Exchange.7

The purpose of the proposed rule

change is to clarify the meaning of the

term ‘‘broker/dealer,’’ as used in Rules

6.52(a), 6.86 and 6.87, by specifying that

it includes foreign broker/dealers. The

Exchange is also proposing to adopt the

following definition of ‘‘foreign broker/

dealers,’’ which would be applicable to

PSE Rules 6.52(a), 6.86 and 6.87:

Foreign Broker/Dealer: The term

‘‘foreign broker/dealer’’

means any person or entity that is registered,

authorized or licensed by a foreign

governmental agency or foreign regulatory

organization (or should be so registered,

authorized or licensed) to perform the

function of a broker or dealer in securities,

or both. The terms ‘‘broker’’ and ‘‘dealer’’

mean the same as set out in Sections 3(a)(4)

and 3(a)(5) of the Securities Exchange Act of

1934, provided that a ‘‘broker’’ or ‘‘dealer’’

may be a bank.8

In light of the current globalization of

the securities markets, the Exchange

believes that the subject rules should be

applied consistently. In this regard, PSE

asserts that an exchange specialist (or

functional equivalent) in Canada or

Mexico, for example, should be subject

to the same rules applicable to trading

on the PSE as an exchange specialist in

the United States, and should not have

a competitive advantage over United

States broker/dealers.9
100 Federal Register / Vol. 62, No. 58 / Wednesday, March 26, 1997 / Notices

10See Securities Exchange Act Release No. 37695

(September 17, 1996), 61 FR 50366 (September 25,

1996) (order approving SR–PSE–96–19).

11 ISG was created in February 1981 to design,

develop and implement a coordinated intermarket

surveillance system among securities markets in the

United States. On July 14, 1983, the exchanges

participating in the ISG entered into an agreement

to coordinate more effectively surveillance and

investigative information sharing agreements in

stock and options markets. In 1989, with the active

participation of the SEC and Commodity Futures

Trading Commission, the ISG created an ‘‘affiliate’’

category for futures exchanges and non-U.S. selfregulatory organizations. Currently, the ISG is

comprised of nine members and 13 affiliates.

12See generally H. Bloomenthal & S. Wolff,

International Capital Markets and Securities

Regulation (1996).

13SEC Rule 15a–6(b)(3) provides: the term

‘foreign broker or dealer’ shall mean any non-U.S.

resident person (including any U.S. person engaged

in business as a broker or dealer entirely outside the

United States, except as otherwise permitted by this

rule) that is not an office or branch of, or a natural

person associated with, a registered broker or

dealer, whose securities activities, if conducted in

the United States, would be described by the

definition of ‘broker’ or ‘dealer’ in sections 3(a)(4)

or 3(a)(5) of the Act.

14 15 U.S.C. 78f(b)(5).

15 15 U.S.C. 78k–1(a)(1)(c)(ii).

16See Securities Exchange Act Release No. 37695

(September 17, 1996), 61 FR 50366 (September 25,

1996). (order approving SR–PSE–96–19).

17See Securities Exchange Act Release Nos.

34891 (October 25, 1994), 59 FR 54653 (November

1, 1994); and 34400 (July 19, 1994), 59 FR 38011

(July 26, 1994).

18See PSE Rule 6.75, ‘‘Priority of Bids and

Offers.’’

19The discussion and analysis in this approval

order is intended only to address the PSE’s

proposed definition of foreign broker/dealer. It is

not intended to address the meaning of foreign

broker/dealer under the statutes, rules and

regulations of the federal securities laws.

20Telephone conversation between Michael D.

Pierson, Senior Attorney, Regulation Policy, PSE,

and James T. McHale, Attorney, OMS, Division,

Commission, on March 5, 1997.

The Exchange believes that the

proposed definition is sufficiently

specific to ensure fair enforcement of

the affected rules.10 The PSE asserts that

it will be able to verify whether a person

or entity is registered, authorized or

licensed by a foreign governmental

agency or a foreign regulatory

organization to perform the specified

functions of a broker/dealer. The PSE

notes that, as a member of the

Intermarket Surveillance Group

(‘‘ISG’’),11 the Exchange may promptly

obtain from ISG members and affiliates

information on the accounts of persons

or entities entering orders for execution

on the PSE, including whether such

orders have been entered for the account

of a broker or dealer. The Exchange may

also obtain such information from

foreign exchanges or foreign regulatory

authorities with whom the Exchange

has an effective surveillance sharing

agreement or from a foreign exchange or

regulatory authority that is subject to a

memorandum of understanding with the

Commission that would require those

entities to provide such information to

the Exchange upon request.

Based upon its review of the

applicable regulatory structures of

various foreign jurisdictions, the

Exchange believes that the proposed

definition is sufficiently specific to

cover the foreign equivalents of U.S.

brokers and dealers. These foreign

jurisdictions include, but are not limited

to, the following: Australia, Canada, the

Czech Republic, France, Germany, Hong

Kong, Hungary, Japan, Luxembourg,

Mexico, the Netherlands, Poland, South

Africa, South Korea, the Slovak

Republic, Switzerland, and the United

Kingdom.12

The Exchange also believes that the

proposed definition of ‘‘foreign broker/

dealer’’ contains objective criteria for its

application and is narrower in scope

than the definition of ‘‘foreign broker or

dealer’’ specified in SEC Rule 15a–

6(b)(3).13 In addition, the Exchange

notes the proposed definition is

substantially similar in form and

substance to SEC Rule 17a–7(c)

(definition of nonresident brokers and

dealers) and Exchange Act Sections

3(a)(50) (definition of foreign securities

authority) and 3(a)(52) (definition of

foreign financial regulatory authority).

II. 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, the

requirements of Section 6(b)(5)14 in that

it is designed to facilitate transactions in

securities, promote just and equitable

principles of trade, protect investors and

the public interest, and is not designed

to permit unfair discrimination between

customers, issuers, brokers, and dealers.

Additionally, the PSE’s proposal is

consistent with Section 11A(a)(1)(c)(ii)

of the Act 15 because it will promote fair

competition among brokers and dealers.

Specifically, with regard to PSE Rule

6.87, the Commission notes that it has

previously determined that limiting

execution of options orders through

Auto-Ex to non-broker/dealer customer

orders is appropriate and consistent

with the Act, because automatic

execution systems were developed, in

part, to aid public customers by

providing nearly instantaneous

execution of small orders at a

guaranteed price.16 Although the

originally adopted rule and related

Commission order did not specifically

address or define the term ‘‘non-broker/

dealer,’’ it is consistent with the

purpose of the rule to treat foreign

broker/dealers in a manner similar to

U.S. broker/dealers. Therefore, the

amendment to Rule 6.87 properly

clarifies that all broker/dealers, whether

U.S. registered or foreign, are prohibited

from utilizing Auto-Ex for execution of

their own trades.

With regard to Rule 6.86, PSE’s ‘‘firm

quote’’ or ‘‘20-up’’ rule, the Commission

finds that the amendment similarly

serves to clarify which market

participants are entitled to a guaranteed

execution of 20 option contracts. The

Commission believes that it is

reasonable and consistent with the

purpose of Rule 6.86 to not require PSE

market makers to provide a guaranteed

minimum level of liquidity to broker/

dealer option orders, regardless of

whether the broker/dealer is registered

in the United States or is a foreign

broker/dealer. Limiting the 20 contract

minimum to non-broker/dealers also

furthers the purposes of the Act by

helping to ensure that market makers’

volume guarantees will not be

exhausted by competitors to the

detriment of public customers.17

Similarly, the Commission also believes

that interpreting ‘‘broker/dealer’’ to

include foreign broker/dealers in

determining which orders may be

placed with an Order Book Official

pursuant to Rule 6.52, is reasonable and

consistent with the Act. Prohibiting the

entry of limit orders by broker/dealers,

whether U.S. registered or foreign, is

consistent with the purpose of Rule 6.52

to provide bona fide public customers

only with the benefits of the Exchange’s

customer limit order book, including

certain enhanced order priority.18

Finally, the Commission believes that

the PSE’s proposed definition of foreign

broker/dealer provides an objective and

verifiable standard that is capable of fair

enforcement.19 Specifically, the

Exchange’s Options Surveillance staff

should be able to confirm relatively

quickly whether a person or entity is

registered, authorized or licensed by a

foreign governmental agency or foreign

regulatory organization to perform the

functions of a broker or dealer as

defined in the Act. Moreover, the

Exchange has represented that an

attorney in their Compliance

Department will review the

determination made by the Options

Surveillance staff.20

The Commission finds good cause for

approving Amendment No. 1 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice thereof in the

Federal Register. Amendment No. 1
Federal Register / Vol. 62, No. 58 / Wednesday, March 26, 1997 / Notices 101

21See note 4, supra.

22 15 U.S.C. 78s(b)(2).

23 17 CFR 200.30–3(a)(12).

revises the PSE’s definition of ‘‘foreign

broker/dealer’’ to include those persons

or entities which are required to be

registered, authorized or licensed by a

foreign governmental agency or foreign

regulatory organization even if they are

not so registered, authorized or

licensed.21 The Commission finds that

Amendment No. 1 strengthens the

proposal by including within the

Exchange’s definition those individuals

or entities performing the function of a

broker or dealer, but not complying with

foreign regulatory requirements to

become registered, authorized, or

licensed. Essentially, the amendment

attempts to avoid a potential loophole

under the original proposal whereby a

party could assert that it was technically

a public customer because it was not

formally registered as a foreign broker/

dealer, even though it performs broker/

dealer functions and is required to be

approved for such activity. The

Commission believes that the

amendment properly provides that an

individual or entity attempting to avoid

the registration, authorization, or

licensing process of a foreign regulator

is not deemed a public customer on the

Exchange. The Commission also notes

that no comments were received on the

original PSE proposal, which was

subject to the full 21-day comment

period. Accordingly, the Commission

believes that it is consistent with

Section 6(b)(5) of the Act to approve

Amendment No. 1 to the proposed rule

change on an accelerated basis.

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1 to the proposed rule change. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. Copies of such filing

with also be available for inspection and

copying at the principal office of the

PSE. All submissions should refer to

File No. SR–PSE–96–46 and should be

submitted by April 16, 1997.

For the foregoing reasons, the

Commission finds that the PSE’s

proposal, as amended, is consistent with

the requirements of the Act and the

rules and regulations thereunder.

It therefore is ordered, pursuant to

Section 19(b)(2) of the Act,22 that the

proposed rule change (SR–PSE–96–46)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.23

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7643 Filed 3–25–97; 8:45 am]

BILLING CODE 8010–01–M

UNITED STATES SENTENCING

COMMISSION

Sentencing Guidelines for United

States Courts

AGENCY: United States Sentencing

Commission.

ACTION: Notice of promulgation of

temporary, ‘‘emergency’’ guideline

amendments increasing penalties for

alien smuggling, fraudulent use of

government-issued documents, and

involuntary servitude, peonage, and

slave trade offenses and a proposal to repromulgate these amendments as

permanent amendments.

SUMMARY: The Sentencing Commission

hereby gives notice of the following

actions: (1) Pursuant to its authority

under sections 203, 211, and 218 of the

Illegal Immigration Reform and

Immigrant Responsibility Act of 1996,

the Commission is promulgating

temporary, emergency amendments to

§§ 2L1.1, 2L2.1, 2L2.2, and 2H4.1 and

accompanying commentary; and (2)

pursuant to section 217(a) of the

Comprehensive Crime Control Act of

1984 (28 U.S.C. 994(a) and (p)), the

Commission further proposes to repromulgate these amendments as

permanent, non-emergency

amendments.

DATES: The Commission has specified

an effective date of May 1, 1997, for the

emergency amendments increasing the

penalties for offenses involving alien

smuggling (§ 2L1.1), immigration

document fraud (§§ 2L2.1, 2L2.2), and

involuntary servitude, peonage, and

slave trade (§ 2H4.1).

FOR FURTHER INFORMATION CONTACT:

Michael Courlander, Public Information

Specialist, Telephone: (202) 273–4590.

Authority. 28 U.S.C. 994 (a), (o), (p), (x).

Richard P. Conaboy,

Chairman.

Amendments to the Sentencing

Guidelines, Policy Statements, and

Official Commentary

Emergency Amendment—Alien

Smuggling

1. Amendment: Section 2L1.1(a)(1) is

amended by deleting ‘‘20’’ and inserting

in lieu thereof ‘‘23’’.

Section 2L1.1(a)(2) is amended by

deleting ‘‘9’’ and inserting in lieu

thereof ‘‘12’’.

Section 2L1.1(b) is amended by

deleting subdivision (1) in its entirety

and inserting the following in lieu

thereof:

‘‘(1) If (A) the defendant committed

the offense other than for profit, or the

offense involved the smuggling,

transporting, or harboring only of the

defendant’s spouse or child (or both the

defendant’s spouse and child), and (B)

the base offense level is determined

under subsection (a)(2), decrease by 3

levels.’’.

Section 2L1.1(b)(2) is amended in the

column captioned ‘‘Increase in Level’’

by deleting ‘‘2’’ and inserting in lieu

thereof ‘‘3’’; by deleting ‘‘4’’ and

inserting in lieu thereof ‘‘6’’; and by

deleting ‘‘6’’ and inserting in lieu

thereof ‘‘9’’.

Section 2L1.1 is amended by deleting

(b)(3) in its entirety and by inserting the

following in lieu thereof:

‘‘(3) If the defendant committed any

part of the instant offense after

sustaining (A) a conviction for a felony

immigration and naturalization offense,

increase by 2 levels; or (B) two (or more)

convictions for felony immigration and

naturalization offenses, each such

conviction arising out of a separate

prosecution, increase by 4 levels.’’.

Section 2L1.1(b) is amended by

inserting the following additional

subdivisions:

‘‘(4) (Apply the greatest):

(A) If a firearm was discharged,

increase by 6 levels, but if the resulting

offense level is less than level 22,

increase to level 22.

(B) if a dangerous weapon (including

a firearm) was brandished or otherwise

used, increase by 4 levels, but if the

resulting offense level is less than level

20, increase to level 20.

(C) if a dangerous weapon (including

a firearm) was possessed, increase by 2

levels, but if the resulting offense level

is less than level 18, increase to level 18.

(5) If the offense involved

intentionally or recklessly creating a

substantial risk of death or serious

bodily injury to another person, increase