3032 Federal Register / Vol. 63, No. 13 / Wednesday, January 21, 1998 / Rules and Regulations

1Pub. L. 104–290, 110 Stat. 3416 (1996).

2 15 U.S.C. 77r.

3See Letter from David P. Semak, Vice President,

Regulation, Pacific Stock Exchange, Incorporated

(n/k/a Pacific Exchange, Inc.), to Arthur Levitt, Jr.,

Chairman, Commission, dated November 15, 1996

(‘‘PCX Petition’’); letter from Alger B. Chapman,

Chairman, CBOE, to Jonathan G. Katz, Secretary,

Commission, dated November 18, 1996 (’’CBOE

Petition’’); letter from J. Craig Long, Esq., Foley and

Lardner, to Jonathan G. Katz, Secretary,

Commission, dated February 4, 1997(’’CHX

Petition’’); and letter from Michele R. Weisbaum,

Vice President and Associate General Counsel,

Phlx, to Jonathan G. Katz, Secretary, Commission,

dated March 31, 1997 (‘‘Phlx Petition’’) (collectively

the ‘‘Petitions’’).

4Securities Act Release No. 7422, Securities

Exchange Act Release No. 38728 (June 10, 1997)

(‘‘proposing release’’), 62 FR 32705 (June 17, 1997).

5See Letter from J. Craig Long, Esq., Foley &

Lardner, to Jonathan G. Katz, Secretary,

Commission, dated June 26, 1997 (received June 30,

1997) (‘‘Foley letter’’); letter from Ira L. Kotel, Esq.,

Roberts, Sheridan & Kotel, to Jonathan G. Katz,

Secretary, Commission, dated July 16, 1997

(received July 21, 1997) (‘‘Kotel letter’’); and letter

from James C. Yong, First Vice President and

General Counsel, The Options Clearing Corporation

(‘‘OCC’’), to Jonathan G. Katz, Secretary,

Commission, dated July 8, 1997 (received July 22,

1997) (‘‘OCC letter’’).

6Specifically, the Commission noted that unlike

the NYSE, Amex, or Nasdaq/NMS, the CHX did not

have a minimum share price requirement for

continued listing of common stock on Tier I. With

regard to the Phlx, the Commission identified the

Exchange’s lack of a maintenance standard for

bonds and debentures listed on Tier I of the

Exchange as a deficiency in their listing standards.

Moreover, with respect to stock index, currency and

currency index warrants, the Phlx had no public

distribution, aggregate market value, nor term to

maturity requirements. Finally, the Commission

noted that issuers of ‘‘other securities’’ listed on

Tier I of the Phlx were required to have pre-tax

income of only $100,000 in three of the four last

fiscal years, versus the Amex requirement that

issuers have $750,000 in pre-tax income in their last

fiscal year, or in two of their last three fiscal years.

See proposing release, supra note 4.

7See Phlx Listing Standards Order, infra note 18.

Note 2: Information concerning the

existence of approved alternative methods of

compliance with this airworthiness directive,

if any, may be obtained from the Engine

Certification Office.

(f) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the aircraft to

a location where the requirements of this AD

can be accomplished.

(g) This amendment becomes effective on

March 23, 1998.

Issued in Burlington, Massachusetts, on

January 7, 1998.

Jay J. Pardee,

Manager, Engine and Propeller Directorate,

Aircraft Certification Service.

[FR Doc. 98–1326 Filed 1–20–98; 8:45 am]

BILLING CODE 4910–13–U

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 230

[Release No. 33–7494, 34–39542, File No.

S7–17–97]

RIN 3235–AH18

Covered Securities Pursuant to

Section 18 of the Securities Act of 1933

AGENCY: Securities and Exchange

Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange

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

is adopting Rule 146(b) under Section

18 the Securities Act of 1933, as

amended (‘‘Securities Act’’). The

purpose of the Rule is to designate

securities listed on the Chicago Board

Options Exchange, Tier I of the Pacific

Exchange, and Tier I of the Philadelphia

Stock Exchange as covered securities for

the purposes of Section 18 of the

Securities Act. Covered Securities under

Section 18 are exempt from state law

registration requirements.

EFFECTIVE DATE: This final rule is

effective January 21, 1998.

FOR FURTHER INFORMATION CONTACT:

Sharon M. Lawson, Senior Special

Counsel, James T. McHale, Special

Counsel, or David S. Sieradzki, Esq., at

202/942–0181, 202/942–0190, or 202/

942–0135; Office of Market Supervision,

Division of Market Regulation,

Securities and Exchange Commission

(Mail Stop 2–2), 450 Fifth Street, N.W.,

Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION:

I. Introduction

On October 11, 1996, The National

Securities Markets Improvement Act of

1996 (‘‘NSMIA’’) 1 was signed into law.

Among other changes made to the

federal securities laws, NSMIA amends

Section 18 of the Securities Act 2 to

provide for exclusive federal registration

of securities listed, or authorized for

listing, on the New York Stock

Exchange (‘‘NYSE’’), the American

Stock Exchange (‘‘Amex’’), or listed on

the National Market System of the

Nasdaq Stock Market (‘‘Nasdaq/NMS’’),

or any other national securities

exchange designated by the Commission

to have substantially similar listing

standards to those markets. More

specifically, Section 18(a) provides that

‘‘no law, rule, regulation, or order, or

other administrative action of any State

* * * requiring, or with respect to,

registration or qualification of securities

* * * shall directly or indirectly apply

to a security that—(A) is a covered

security.’’ Covered securities are defined

in Section 18(b)(1) to include those

securities listed, or authorized for

listing, on the NYSE, Amex, or listed on

Nasdaq/NMS (collectively the ‘‘Named

Markets’’), or those securities listed, or

authorized for listing, on a national

securities exchange (or tier or segment

thereof) that has listing standards that

the Commission determines by rule are

‘‘substantially similar’’ to one of the

Named Markets.

The Pacific Exchange, Incorporated

(‘‘PCX’’), the Chicago Board Options

Exchange, Incorporated (‘‘CBOE’’), the

Chicago Stock Exchange, Incorporated

(‘‘CHX’’), and the Philadelphia Stock

Exchange, Incorporated (‘‘Phlx’’)

(collectively the ‘‘Petitioners’’) have

petitioned the Commission to adopt a

rule which finds their listing standards

to be substantially similar to those of the

NYSE, Amex, or Nasdaq/NMS and,

therefore, entitling securities listed

pursuant thereto to be deemed covered

securities under Section 18 of the

Securities Act.3

On June 10, 1997, the Commission

issued a release proposing to adopt Rule

146(b) that would designate securities

listed on the CBOE and Tier I of the PCX

as designated securities for the purposes

of Section 18(a) of the Securities Act,

and soliciting comment on whether Tier

I securities of the CHX and Phlx should

be included in Rule 146(b).4 The

Commission received three comment

letters in response to the proposal.5

As to the inclusion of securities listed

on Tier I of the CHX and Tier I of the

Phlx in Rule 146(b), the Commission

stated that while most of their Tier I

listing standards are substantially

similar to one of the Named Markets,

they differed in several important

respects.6 The Commission also

indicated, however, that if the CHX and

Phlx were to revise their Tier I listing

standards in these areas to conform

them to those of the NYSE, Amex, or

Nasdaq/NMS prior to the adoption of

the proposed Rule, the Commission

likely would include securities listed on

these markets in final Rule 146(b).

Accordingly, in order to obtain the

benefits of the exemption under the

proposed Rule, the CHX and Phlx 7 both

revised their Tier I listing standards to

address the noted deficiencies.

Although CHX has modified its listing

and maintenance standards as

suggested, the Commission has concerns

regarding the CHX’s listing and

maintenance procedures and thus does

not include CHX in the final Rule. The

Commission will continue to review the

CHX’s listing program, including listing

standards and operations, and may

determine to include securities listed on

CHX Tier I in the future.

After careful comparison, the

Commission concludes that currently
Federal Register / Vol. 63, No. 13 / Wednesday, January 21, 1998 / Rules and Regulations 3033

8See, e.g., Del. Code Ann. tit. 6 sec. 7309(a)(8)

(1996).

9H.R. Rep. No. 622, 104th Cong., 2d Sess., pt. 1,

at 30 (1996) (‘‘Legislative History’’). As a result of

this federal preemption of the state registration

process, SRO listing standards have become all the

more important to preserving the integrity of U.S

financial markets and protecting investors.

10See Legislative History, supra note 9.

11See Petitions, supra note 3.

12The Commission notes that presently the CBOE

only has one tier, or segment, for listing purposes.

13See supra note 5.

14The changes to the SmallCap listing standards

referred to in the Kotel letter were recently

approved by the Commission. See Securities

Exchange Act Release No. 38961 (August 22, 1997)

(‘‘Nasdaq Listing Standards Order’’).

15The Commission also has reviewed each

exchange’s listing and maintenance standards for

warrants, currency and index warrants, other

securities, contingent value rights, equity linked

notes, and unit investment trusts. See proposing

release, supra note 4.

16For purposes of comparing the listing standards

of the CBOE and Tier I of the PCX, Phlx and CHX,

the Commission used the listing standards

applicable to securities listed on the Amex.

17The proposing release contains a more detailed

description of the comparison of these exchanges to

the Named Markets. See proposing release, supra

note 4.

the listing standards of Tier I of the

PCX, and Phlx, and the listing standards

of the CBOE are substantially similar to

the listing standards of the NYSE, Amex

or Nasdaq/NMS. Accordingly, the

Commission today is adopting Rule

146(b) which designates securities listed

on such markets as covered securities

under Section 18(b)(1) of the Securities

Act. As adopted, Rule 146(b) will

provide those covered securities with an

exemption from state blue sky

provisions as set forth under Section

18(a) of the Securities Act.

II. Background

The development and enforcement of

adequate standards governing the initial

and continued listing of securities on an

exchange is of critical importance to

financial markets and the investing

public. Listing standards serve as a

means for a self-regulatory organization

(‘‘SRO’’) to screen issuers and to provide

listed status only to bona fide

companies with sufficient float, investor

base and trading interest to maintain fair

and orderly markets. Once a security

has been approved for initial listing,

maintenance criteria allow an exchange

to monitor the status and trading

characteristics of that issue to ensure

that it continues to meet the exchange’s

standards for market depth and

liquidity.

Many States have recognized the

importance of listing standards by

excepting from state registration

requirements securities traded on the

Named Markets.8 In enacting Section 18,

Congress intended to codify in the

Securities Act an exemption from state

registration requirements similar to

these state law provisions.9 In order to

avoid competitive disparities, Congress

provided the Commission with the

discretionary authority to extend similar

preemption treatment to other national

securities exchanges (or tiers or

segments thereof) that have

substantially similar listing standards.10

As noted above, the PCX, CBOE, CHX,

and Phlx all have petitioned the

Commission to adopt a rule as

contemplated by Section 18.11 The

Petitioners assert that their Tier I listing

standards 12 are substantially similar to

those of the Named Markets, and that

until the Commission acts to provide

them with the benefits of the Section 18

exemption, they will be at a competitive

disadvantage to these markets. The

Commission recognizes the competitive

concerns raised by the Petitioners, but

notes that the statute requires the

Commission to make an independent

finding that the Petitioners’ listing

standards are substantially similar to

those of the NYSE, the Amex or Nasdaq/

NMS.

III. Comment Letters

As noted above, the Commission

received three comment letters in

response to the proposal.13 The Foley

letter, filed on behalf of the CHX, noted

that the CHX had submitted a proposed

rule change with the Commission to

amend its maintenance standards for

common stock listed on Tier I of the

Exchange to add a minimum share

price. The Foley letter urged that once

approved, the amendment should

resolve the Commission’s concerns

relating to the CHX’s Tier I standards

and that the Commission should

include securities listed on CHX’s Tier

I in Rule 146(b).

The Kotel letter did not address the

desirability of adopting proposed Rule

146(b) generally, but urged the

Commission to include securities listed

on the Nasdaq SmallCap Market

(‘‘SmallCap’’) in the Rule. In support of

this view, the Kotel letter noted that the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) recently

proposed to amend the requirements for

initial listing on SmallCap and that once

the new SmallCap listing standards

were approved, they would be

substantially similar to those of the

Amex.14 Accordingly, the Kotel letter

urged that securities listed on SmallCap

should be deemed covered securities for

purposes of Rule 146(b). In addition, the

Kotel letter stated that extending the

benefits of the Rule to securities listed

on SmallCap would further the

Commission’s policy of simplifying

securities regulation for small

businesses and would lower the costs

for small businesses in complying with

federal and state regulations.

The third comment letter received by

the Commission, the OCC letter,

generally supported the proposed Rule.

In addition, the OCC letter urged the

Commission to designate standardized

options traded on Tier I of the Phlx as

covered securities under the Rule, in the

event the Phlx did not file to amend its

listing standards to address the concerns

raised by the Commission in the

proposing release.

IV. Discussion

The Commission has reviewed

extensively the listing and maintenance

standards for all securities listed and

traded on the Petitioners’ markets,

including common stock, preferred

stock, bonds and debentures, and

options.15 With regard to applying the

‘‘substantially similar’’ standard, the

Commission notes that under Section

18(b)(1)(B) of the Securities Act the

Commission has the authority to

compare the listing standards of a

petitioner with those of either the

NYSE, Amex, or Nasdaq/NMS. The

Commission attempted initially to

compare a petitioner’s listing standards

for all securities with only one of these

markets.16 If a petitioner’s listing

standards in a particular category did

not meet the standards of that market,

however, the Commission compared the

petitioner’s standards to the other two

markets. Additionally, the Commission

interpreted the substantially similar

standard to require listing standards at

least as comprehensive as those of the

markets named in Section 18(b)(1)(A). If

a petitioner’s standards were higher

than such markets, then the

Commission still determined that the

petitioner’s standards were substantially

similar to these markets. Finally, the

Commission reviewed the listing

standards for each type of security in

making the substantially similar

determination. Differences in language

or approach of the listing standards for

a particular security did not necessarily

lead to a determination that the listing

standards of a petitioner were not

substantially similar to those of the

named exchange.

After careful comparison, using the

approach outlined above, the

Commission concludes that currently

the listing standards of the CBOE and

Tier I of the PCX, and Phlx are

substantially similar to the listing

standards of the NYSE, Amex or

Nasdaq/NMS.17 Therefore, the
3034 Federal Register / Vol. 63, No. 13 / Wednesday, January 21, 1998 / Rules and Regulations

18See Securities Exchange Act Release No. 39053

(September 11, 1997), 62 FR 49286 (September 19,

1997) (‘‘Phlx Listing Standards Order’’).

19As noted above, the Commission stated in the

proposing release that if the Phlx were to revise its

Tier I listing standards in the areas where the

Commission identified deficiencies prior to the

adoption of the proposed Rule, the Commission

likely would include securities listed on the Phlx

in final Rule 146(b).

20Although the Commission did not identify the

lack of a cash-settlement requirement as a

deficiency in the Phlx’s Tier I listing standards, the

Phlx determined to codify its existing requirement

that non-equity warrants be cash-settled in U.S.

dollars. This requirement is identical to Section

106(d) of the Amex Company Guide.

21This provision is substantially similar to

Section 107 and, by reference, Section 101(b) of the

Amex Company Guide.

22These provisions are substantially similar to

Section 1003(b)(iii) and (e) of the Amex Company

Guide.

23Specifically, the minimum share price for

preferred stock to be listed on SmallCap is $4 per

share, while the minimum share price for initial

inclusion of preferred shares on the Amex is $10.

See Section 103(b) of the Amex Company Guide

and NASD Rule 4310(c)(4). In addition, SmallCap

does not have a minimum distribution requirement

for preferred stock, while the Amex requires a

minimum of 100,000 publicly held shares when the

issuer of the preferred shares has common stock

listed on the Amex or NYSE. See Amex Section

103(b). Lastly, warrants listed on SmallCap are

required to have a minimum distribution of 100,000

warrants for initial inclusion, while Amex requires

a minimum distribution of 1,000,000 warrants to

400 public holders or 500,000 warrants to 800

public holders. See Amex Section 105(b) and NASD

Rule 4310(c)(9).

24See Legislative History, supra note 9.

25 If, however, one of the Named Markets raised

its listing standards with respect to a particular

security, a conforming change by the exchanges

designated in Rule 146(b) may not necessarily be

required for two reasons. First, Section 18(b)(1)(B)

requires that the regional exchanges’ listing

standards be substantially similar to only one of the

Named Markets in order to qualify for the

exemption. Second, a listing standard change made

by one of the Named Markets should not force the

exchanges designated in Rule 146(b) to conform

their listing standards. Otherwise, a single Named

Market would be, in effect, setting the listing

standards for all the regional exchanges. If,

however, all three Named Markets were to raise

their listing standards, and the Commission

believed that the change was significant enough so

that failure to adopt the new standard rendered the

exchanges designated in Rule 146(b) to have

substantially inferior standards, then the

Commission may require the latter exchanges to

raise their standards in order to maintain their

exemption under the Rule.

Commission is adopting Rule 146(b),

designating securities listed on these

markets as ‘‘covered securities’’ for

purposes of Section 18 of the Securities

Act. With regard to the CHX, the

Commission has determined not to

include securities listed on Tier I of the

Exchange at this time. Although the

Exchange has modified its listing and

maintenance standards as suggested, the

Commission has concerns regarding the

CHX’s listing and maintenance

procedures. The Commission will

continue to review the CHX’s listing

program, including listing standards

and operations, and may determine to

include securities listed on CHX Tier I

in the future.

With regard to the Phlx, the

Commission concludes that the changes

recently made by the Exchange to its

Tier I listing standards 18 enable the

Commission to make the substantially

similar finding.19 First, the Phlx

amended Rule 803(e) to adopt

additional listing standards for stock

index warrants, currency warrants and

currency index warrants (collectively

‘‘non-equity warrants’’). New subsection

(2) to Rule 803(e) requires that nonequity warrants have a term of between

one and five years from the date of

issuance. Rule 803(e)(3) imposes a

minimum public distribution and

market value requirement of 1,000,000

non-equity warrants with at least 400

public warrant holders and a minimum

aggregate market value of $4,000,000.

Finally, new subsection (9) to Rule

803(e) requires that non-equity warrants

be cash-settled in U.S. dollars.20

Second, the Phlx increased the pre-tax

income requirement for issuers of ‘‘other

securities’’ in Rule 803(f)(2) from

$100,000 in three of the four prior fiscal

years to $750,000 in the issuer’s last

fiscal year or in two of its last three

fiscal years.21 Other securities are

hybrid securities that have features

common to both equity and debt

securities, yet do not fit within the

traditional definitions of either.

Third, the Phlx amended Rule 810(a),

which contains the maintenance

standards for Tier I securities, to add

maintenance standards for bonds, notes

and debentures. New subsection (5) to

Rule 810(a) requires that debt securities

maintain an aggregate market value or

principal amount of bonds that are

publicly held of $400,000 and that the

issuer is able to meet its obligations in

the listed debt securities. Also, for any

debt security convertible into a listed

equity security, the debt security will be

reviewed when the underlying equity

security is delisted and will be delisted

when the underlying equity security is

no longer subject to real-time trade

reporting in the United States. In

addition, if common stock is delisted for

violation of any of the corporate

governance criteria in Phlx Rules 812

through 899, the Exchange also will

delist any listed debt security

convertible into that common stock.22

In light of the above changes made by

the Phlx to its Tier I listing standards,

the Commission concludes that the

Phlx’s Tier I listing standards, when

taken as a whole, are substantially

similar to those of the Amex, and that

securities listed on Tier I of the Phlx

should be included in Rule 146(b) as

covered securities. In addition, because

Phlx Tier I securities include options,

the Commission need not consider

whether standardized options traded on

the Phlx could be deemed covered

securities separately from other Phlx

Tier I securities, as suggested in the

OCC letter.

With regard to the Kotel letter, while

it does appear that the SmallCap initial

listing standards for common stock are

similar to those of the Amex, the

Commission has determined not to

include securities listed on SmallCap in

Rule 146(b) at this time. First, the

proposing release did not solicit

comment on whether SmallCap listing

standards are substantially similar to

one of the Named Markets. Second, the

Commission has identified several

aspects of the SmallCap listing

standards which appear to differ

significantly from those of the Amex

and the other primary markets. 23 Third,

pursuant to the Nasdaq Listing

Standards Order, the new maintenance

standards do not become effective until

six months after the Order was issued

(February 22, 1998), and the existing

maintenance standards for securities

listed on SmallCap are considerably less

stringent than those of any one of the

Named Markets. Finally, the

Commission notes that it has the

authority to undertake a more extensive

review of the SmallCap listing standards

in the future and, if appropriate,

propose an amendment to Rule 146(b) to

include securities listed on SmallCap in

the Rule.

With respect to a designated exchange

maintaining its status under Rule

146(b), the Commission notes that

Congress intended for the Commission

to monitor the listing requirements of

the regional exchanges, consistent with

its supervisory authority under the

Securities Exchange Act of 1934

(‘‘Exchange Act’’), to ensure the

continued integrity of these markets and

the protection of investors. 24 For

example, if a regional exchange

proposed to lower its listing standards

for common stock, the Commission

likely would consider this to be a

substantive revision which may change

the finding that the regional exchange’s

listing standards are substantially

similar to those of the Named

Markets. 25 Accordingly, in reviewing

future proposed changes to SRO listing

standards, the Commission will

consider whether the proposed

change(s) will require an amendment to

Rule 146(b). In the event that the
Federal Register / Vol. 63, No. 13 / Wednesday, January 21, 1998 / Rules and Regulations 3035

26Although the Administrative Procedure Act

states that an agency must provide general notice

of the proposed rulemaking and an opportunity for

comment, these requirements do not apply if the

agency for good cause, finds that those procedures

are ‘‘impracticable, unnecessary, or contrary to the

public interest.’’ 5 U.S.C. 553(b)(B). 27 15 U.S.C. 77b(b).

Commission determines that a proposed

change in listing standards would

require an amendment to Rule 146(b),

and where the proposed rule change is

subject to full notice and comment

under Section 19(b) of the Exchange

Act, the Commission may conclude that

it is unnecessary to provide notice and

comment for the corresponding

amendment to this Rule. 26 Finally, the

Commission notes that enforcement of

an SRO’s listing standards is subject to

periodic inspections by Commission

staff, as is enforcement of all SRO rules,

and should the Commission find that an

exchange designated in Rule 146(b) is

not adequately enforcing its

requirements for initial and continued

listing, the Commission will take

appropriate action to revoke that

exchange’s exemption.

V. Conclusion

For the reasons discussed above, as

supplemented by the Commission’s

detailed discussion in the proposing

release, the Commission concludes that

the listing standards of the CBOE, and

Tier I of the PCX, and Phlx are

substantially similar to those of the

NYSE, Amex or Nasdaq/NMS.

Accordingly, securities listed on these

Exchanges should be deemed covered

securities and entitled to an exemption

from state blue sky provisions as set

forth in Section 18(a) of the Securities

Act.

The Commission concludes that the

Rule offers potential benefits for

investors. The Rule should facilitate

listings on qualifying exchanges, or tiers

or segments thereof, which should

increase competition and enhance the

overall liquidity of the U.S. securities

markets. The Commission does not

anticipate that the Rule would result in

any costs for U.S. investors or others. As

noted above, through the review of SRO

listing standards pursuant to Section

19(b) of the Exchange Act, the

Commission will be able to continue to

ensure such listing standards are

sufficient to protect investors. The

Commission also concludes that Rule

146(b) should serve to reduce the cost

of raising capital because it will

streamline the registration process for

issuers listing on the Exchanges

designated in the Rule. Thus, the

Commission has considered the Rule’s

impact on efficiency, competition and

capital formation and concludes that it

would promote these three objectives. 27

At the same time, Rule 146(b) does not

undercut the state securities review of

offerings because the listing standards of

the CBOE and Tier I of the PCX, and

Phlx are substantially similar to the

Named Markets, which are already

exempt from state registration. Finally,

Rule 146(b) imposes no recordkeeping

or compliance burdens, and merely

provides a limited purpose exemption

under the federal securities laws.

VI. Administrative Requirements

Pursuant to Section 605(b) of the

Regulatory Flexibility Act, 5 U.S.C.

605(b), the Chairman of the Commission

has certified that Rule 146(b) should not

have a significant economic impact on

a substantial number of small entities.

This certification, including the reasons

therefor, is attached to this release as

Appendix A. The Paperwork Reduction

Act does not apply because the

proposed amendments do not impose

recordkeeping or information collection

requirements, or other collections of

information which require the approval

of the Office of Management and Budget

under 44 U.S.C. 3501, et. seq.

VII. Statutory Basis

Rule 146(b) is being adopted pursuant

to 15 U.S.C. 77r et seq., particularly

Section 18 of the Securities Act unless

otherwise noted.

List of Subjects in 17 CFR Part 230

Securities.

Text of the Rule

For the reasons set forth in the

preamble, Title 17, Chapter II of the

Code of Federal Regulations is amended

as follows:

PART 230—GENERAL RULES AND

REGULATIONS, SECURITIES ACT OF

1933

1. The authority citation for Part 230

continues to read, in part, as follows:

Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j,

77s, 77sss, 78c, 78d, 78l, 78m, 78n, 78o, 78w,

78ll(d), 78t, 80a–8, 80a–29, 80a–30, and 80a–

37, unless otherwise noted.

* * * * *

2. Section 230.146 is amended by

revising the section heading,

redesignating the introductory text and

paragraphs (a) and (b) as paragraph (a)

introductory text and paragraphs (a)(1)

and (a)(2), respectively, and adding

paragraph (b) to read as follows:

§ 230.146 Rules under Section 18 of the

Act.

* * * * *

(b) Covered securities for purposes of

Section 18. (1) For purposes of Section

18(b) of the Act (15 U.S.C. 77r), the

Commission finds that the following

national securities exchanges, or

segments or tiers thereof, have listing

standards that are substantially similar

to those of the New York Stock

Exchange (‘‘NYSE’’), the American

Stock Exchange (‘‘Amex’’), or the

National Market System of the Nasdaq

Stock Market (‘‘Nasdaq/NMS’’), and that

securities listed on such exchanges shall

be deemed covered securities:

(i) Tier I of the Pacific Exchange,

Incorporated;

(ii) Tier I of the Philadelphia Stock

Exchange, Incorporated; and

(iii) The Chicago Board Options

Exchange, Incorporated.

(2) The designation of securities in

paragraphs (b)(1)(i) through (iii) of this

section as covered securities is

conditioned on such exchanges’ listing

standards (or segments or tiers thereof)

continuing to be substantially similar to

those of the NYSE, Amex, or Nasdaq/

NMS.

By the Commission.

Dated: January 13, 1998.

Margaret H. McFarland,

Deputy Secretary.

Note: Appendix A to the Preamble will not

appear in the Code of Federal Regulations.

Appendix A—Regulatory Flexibility Act

Certification

I, Arthur Levitt, Jr., Chairman of the

Securities and Exchange Commission, hereby

certify, pursuant to 5 U.S.C. 605(b), that Rule

146(b) (‘‘Rule’’) under the Securities Act of

1933 (‘‘Securities Act’’), which will designate

securities listed on certain national securities

exchanges, or tiers or segments thereof, as

covered securities under Section 18 of the

Securities Act, and therefore provide them

with an exemption from state registration

requirements, will not have a significant

economic impact on a substantial number of

small entities for the following reasons.

Under the Securities Act, a small entity is

defined as ‘‘an issuer whose total assets on

the last day of its most recent fiscal year were

$5,000,000 or less.’’ Issuers of this size

generally will not qualify for listing on the

national securities exchanges, or tiers or

segments thereof, designated in Rule 146(b).

More specifically, both the Chicago Board

Options Exchange, Incorporated and Tier I of

the Pacific Exchange, Incorporated require

issuers of common stock to have net worth

of at least $4,000,000. To be listed on Tier I

of the Philadelphia Stock Exchange,

Incorporated issuers of common stock must

have net tangible assets of at least $4,000,000.

I do not believe that there are a substantial

number of small entities which have total

assets less than $5,000,000, yet a net worth

or net tangible assets of at least $4,000,000.

For example, none of the issuers of common

stock listed exclusively on Tier I of the
3036 Federal Register / Vol. 63, No. 13 / Wednesday, January 21, 1998 / Rules and Regulations

Pacific Exchange have total assets of

$5,000,000 or less. In addition, the proposed

rule imposes no record-keeping or

compliance burden, but merely exempts

certain qualifying securities from state law

registration requirements.

Dated: January 2, 1998.

Arthur Levitt, Jr.,

Chairman.

[FR Doc. 98–1295 Filed 1–20–98; 8:45 am]

BILLING CODE 8010–01–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 100

[CGD11–97–004]

RIN 2115–AE46

Special Local Regulation; Laughlin,

Nevada

AGENCY: Coast Guard, DOT.

ACTION: Final Rule.

SUMMARY: The Coast Guard amends the

table of events in 33 CFR 100.1102 by

adding the Laughlin Aquamoto Sports

Challenge and Expo being conducted in

the waters of the Colorado River from

Davis Dam south to Harrah’s Hotel and

Casino on the following dates: annually,

commencing on the last Thursday of

May every year, and lasting a total of 4

days, ending on Sunday. These

regulations are necessary to provide for

the safety of life, property, and

navigation on the navigable waters of

the United States during scheduled

events.

EFFECTIVE DATE: May 28, 1998.

FOR FURTHER INFORMATION CONTACT:

Lieutenant Mike A. Arguelles, Coast

Guard Marine Safety Office San Diego;

telephone number (619) 683–6484.

SUPPLEMENTARY INFORMATION:

Regulatory History

On March 27, 1997, the Coast Guard

published a notice of proposed

rulemaking (NPRM) for this regulation

in the Federal Register (62 FR 14379).

The comment period ended May 10,

1997. The Coast Guard received one

letter commenting on the proposal. A

public hearing was not requested and no

hearing was held. The only change the

Coast Guard has made to the language

of this regulation since the publication

of the NPRM is to specify a more certain

date and time schedule for the annual

Laughlin Aquamoto Sports Challenge

and Expo.

Background and Purpose

The Laughlin Aquamoto Sports

Challenge and Expo will consist of five

various styles of watercraft racing. The

races will take place, annually, over a

four day period beginning on the last

Thursday of May, and ending on

Sunday. These regulations are necessary

to provide for the safety of life, property,

and navigation on the navigable waters

of the United States during scheduled

events. The race zone encompasses the

Colorado River from the Davis Dam

south to Harrah’s Hotel and Casino. The

race courses will be marked by vessels

with signs, and both north and south

boundaries of the race zone will have

major signs to alert non-participants

using the river. On the following days

and times, the race zone will be in use

by vessels competing in the event: (1)

the first day of the event, the last

Thursday of each May each year, from

3:00 PM PDT to 5:00 PM PDT, (2) the

second day of the event, Friday, from

8:00 AM PDT to 2:00 PM PDT, and from

3:30 PM PDT to 6:00 PM PDT, (3) the

third day of the event, Saturday, from

8:00 AM PDT to 1:30 PM PDT, and from

4:00 PM PDT to 5:00 PM PDT; and, (4)

the fourth and final day of the event,

Sunday, from 9:00 AM PDT to 1:30 PM

PDT, from 3:00 PM PDT to 4:00 PD PDT,

and from 6:00 PM PDT to 7:00 PM PDT.

During these times the Colorado River

from Davis Dam south to Harrah’s Hotel

and Casino will be closed with the

exception of emergency vessels. No

vessels other than participants or

official patrol vessels will be allowed to

enter this zone unless specifically

cleared by or through an official patrol

vessel. Once the zone is established,

authorization to remain within the zone

is subject to termination at any time.

The Patrol Commander may impose

other restrictions within the zone if

circumstances dictate. Restrictions will

be tailored to impose the least impact on

maritime interests yet provide the level

of security deemed necessary to safely

conduct the Aquamoto and Expo.

Discussion of Comments

The only comment received was from

a local business that sought notice of the

exact date of the event. The comment

also expressed concern that closure of

the area of the Colorado River specified

in the NPRM for an entire Saturday

afternoon in May or June might

prejudice business; suggested that the

river be open for unrestricted use on

Saturday afternoon from 1 p.m. PDT

until Sunday morning. The language of

this Final Rule provides the public with

more specific notice of the date and

time schedule for the annual Laughlin

Aquamoto Sports Challenge and Expo. It

also alleviates the concern that the river

not be closed for an entire Saturday

afternoon, because on Saturday, the

river will be open from 1:30 P.M. PDT

to 4 P.M. PDT, and from 5 P.M. PDT on.

Regulatory Evaluation

This regulation is not a significant

regulatory action under section 3(f) of

Executive Order 12866 and does not

require assessment of potential cost and

benefits under section 6(a)(3) of that

order. It has been exempted from review

by the Office of Management and

Budget under that Order.

It is not significant under the

regulatory policies and procedures of

the Department of Transportation (DOT)

(44 FR 11040, February 26, 1979). The

Coast Guard expects the economic

impact of this regulation to be so

minimal that a full Regulatory

Evaluation under paragraph 10(e) of the

regulatory policies and procedures of

the Department of Transportation is

unnecessary.

Small Entities

Under the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.), the Coast Guard

must consider whether this rule will

have a significant economic impact on

a substantial number of small entities.

‘‘Small entities’’ may include small

businesses and not-for-profit

organizations that are not dominant in

their fields and (2) governmental

jurisdictions with populations less than

50,000. Because it expects the impact of

this proposal to be so minimal, the

Coast Guard certifies under section

605(b) of the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.) that this proposal,

if adopted, will not have a substantial

impact on a significant number of small

entities.

Collection of Information

This rule contains no collection of

information requirements under the

Paperwork Reduction Act (44 U.S.C.

3501 et seq.).

Federalism

The Coast Guard has analyzed this

regulation under the principles and

criteria in Executive Order 12612 and

has determined that this rule does not

have sufficient federalism implications

to warrant the preparation of a

Federalism Assessment.

Environment

The Coast Guard considered the

environmental impact and concluded

that under paragraph 2.B.2 of

Commandant Instruction M16475.1B as

revised in 59 CFR 38654, July 29 1994

and 61 FR 13563, March 27, 1996, it

will have no significant environmental

impact and it is categorically excluded

from further environmental