Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices 159

7 17 CFR 200.30–3(a)(12) (1994).

1The PSE originally proposed to list and trade

SCOR securities in 1992. That proposal was

published for public comment in Securities

Exchange Act Release No. 32514 (June 25, 1993), 58

FR 35496 (July 1, 1993) (File No. SR–PSE–92–42).

The Commission received several comment letters

regarding the proposal, and subsequently published

amendments to the proposal for public comment in

Securities Exchange Act Release No. 34328 (July 7,

1994), 59 FR 35776 (July 13, 1994). The Exchange

withdrew file no. SR–PSE–92–42 on November 22,

1994, and submitted the instant filing that includes

modifications to the proposal in response to

comments from the public and from Commission

staff.

2Once a single issuance of securities has been

accepted for listing on the Exchange, all securities

of that class will be considered to be ‘‘SCOR’’

securities for purposes of this rule, including

restricted securities (i.e., securities restricted

pursuant to federal or state securities laws, by any

other law, by any agreement, or in any other

manner), provided that such restricted securities

may not be eligible for trading on the Exchange.

3See Small Corporate Offering Registration

Program and Form U–7, 1 Blue Sky L. Rep. (CCH)

¶ 6461 (September 1994).

OCC’s systems for the clearance and

settlement of FX Index Options should

facilitate promptness and precision.

III. Conclusion

The Commission finds that the

proposal is consistent with the

requirements of the Act, particularly

with Section 17A(b)(3)(F) of the Act,

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

OCC–94–08) be, and hereby is,

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94–32253 Filed 12–30–94; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35140; File No. SR–PSE–

94–31]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

Pacific Stock Exchange, Inc. Relating

to the Listing and Trading of Small

Corporate Offering Registration

(‘‘SCOR’’) Securities on the Exchange

December 22, 1994.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on December 15, 1994,

the Pacific Stock Exchange, Inc. (‘‘PSE’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II and III

below, which Items have been prepared

by the self-regulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PSE is submitting this rule filing

in order to permit the Exchange listing

and trading of common stock and

preferred stock that qualifies under the

Small Corporate Offering Registration

(‘‘SCOR’’) designation.1

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV 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

Introduction

The Exchange is proposing to list and

trade common stock and preferred stock

that qualifies under the Small Corporate

Offering Registration (‘‘SCOR’’)

designation. Under the proposal, the

SCOR marketplace will be implemented

on a three-year pilot basis and the

program will be evaluated at least on an

annual basis to determine whether this

new marketplace has achieved its policy

objectives—to facilitate capital

formation for small businesses and to

provide public market liquidity. The

SCOR program will include any

securities of an issuer that has been

designated as common stock and/or

preferred issued pursuant to (i)

Regulation A under the Securities Act of

1933 (‘‘Securities Act’’) and using the

prescribed form as applicable; or (ii)

Rule 504 under the Securities Act and

using Form U–7 of the North American

Securities Administrators Association

(‘‘NASAA’’) or a state variation of such

form with substantially similar

requirements.2 Since such securities are

not currently listed or traded on any

national securities exchange, the PSE

believes that the implementation of the

Exchange’s proposal will facilitate the

capital formation process for small

companies and will supply muchneeded liquidity to public investors

within a regulated marketplace. In

addition, under the proposal, companies

will be afforded all of the benefits of an

Exchange listing, with the exception of

the Blue Sky exemption from state

securities registration requirements and

automatic marginability.

In August 1992, the Commission

adopted certain rules as part of its Small

Business Initiatives program. The

program includes, in part, substantive

changes to the ‘‘small issues’’ exemption

from registration requirements under

the Securities Act (Regulation A), as

well as changes to the ‘‘seed capital’’

registration exemption pursuant to Rule

504 under the Securities Act. These

revisions are designed to facilitate the

access of small companies to capital

markets and to reduce the costs of

compliance with the federal securities

laws.

Rule 504

The Commission’s modifications to

Rule 504 include the elimination of

several restrictions and other changes

that would allow small companies to

conduct public offerings of up to $1

million in unrestricted securities during

a twelve-month period. These changes

are designed to allow small companies

to market offerings directly to

prospective investors by bypassing both

the venture capital and small

underwriting houses. At the state level,

offerings may be registered using the

SCOR registration form, Form U–7;

however, such limited offerings must

also qualify under state Blue Sky laws

that require delivery of a prospectus,

offering circular, or disclosure

document to all purchasers prior to sale.

The Form U–7 has been supported by

the American Bar Association as well as

NASAA.3

Regulation A

The Commission revised Regulation A

to exempt from registration public

offerings of up to $5 million in a twelvemonth period. The disclosure

requirements are embodied in the

offering statement (SEC Form 1–A),

which consists of three parts. The

offering circular is contained in Part II

and may be prepared in three alternative

formats, one of which permits the use of

the same simplified disclosure

statement (Form U–7) that is prescribed

by most states for SCOR offerings.

The Exchange believes these changes

to Regulations A and D, in conjunction
160 Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices

4The Exchange discussed its proposal with the

Small Business Capital Formation and the Small

Business Sales Practices committees of NASAA.

5The term ‘‘public beneficial holder’’ means a

beneficial holder who, with respect to the issuer, is

not a director or officer or member of the immediate

family thereof or an affiliate or associate thereof,

and whose ownership of an equity security is less

than 5% of the total number of shares issued and

outstanding.

6PSE Rule 3.3 contains corporate governance

requirements regarding conflicts of interest,

independent directors/audit committee, quorum,

shareholder approval, annual meetings, solicitation

of proxies and consents, and common and preferred

stock voting rights. SCOR issues are subject to all

of these corporate governance requirements except

for the independent directors/audit committee

requirement in Rule 3.3(b).

7For a discussion of the comments received on

the previous PSE SCOR listing proposal see

Securities Exchange Release No. 34328, supra note

1.

with the efforts of several states that are

in the forefront of the small business

movement, will clearly benefit both the

investing public as well as small

companies seeking access to capital

markets. The Exchange also believes the

expanded use of the Form U–7 in

Regulation A offerings will encourage a

more effective and simplified system of

raising capital. The collective efforts of

federal and state agencies to streamline

the registration process for small

corporate offerings is especially

important because the institutional

venture capital industry has

substantially abandoned the financing

of small start-up companies, leaving

them the private offering market as the

only remaining source of capital.

Therefore, the development of the SCOR

program has made corporate offerings

more flexible and less costly to small

companies, without compromising

investor protection.

Initial and Continued Listing

Requirements

The Exchange has in place a

regulatory program that will ensure

close scrutiny of any company applying

to list its common stock and/or

preferred stock under the SCOR

program. The listing qualification

process for SCOR applicants will be the

same as the process in place for other

PSE-listed equity issuers. The merit

review process is coordinated by the

Exchange’s Listings Department, which

works directly with the Equity Listing

Committee. This Committee, which is

comprised of floor members, ‘‘upstairs’’

members and member firm

representatives, has substantial

collective experience in the evaluation

of companies for possible listing on the

Exchange.

The Exchange’s proposed SCOR

marketplace is limited to the listing of

one class of common stock and

preferred stock. To ensure a minimum

level of financial performance by issuers

under the SCOR program, the Exchange

has developed a single set of initial and

maintenance listing requirements that

will apply to both common stock and

preferred stock. In formulating the

listing requirements set forth below, the

Exchange consulted extensively with

committees of NASAA,4 the California

Department of Corporations, and leaders

from the small business community.

The Exchange believes that the proposal

satisfactorily addresses the mutual

concerns of these individuals and

organizations.

Under the proposal, at the time of

application and formal request for

listing, the issuer must meet all of the

following listing requirements. First, the

SCOR offering in the class of security for

which the issuer is applying for listing

must be at least $5 per share, and

constitute at least 150,000 publicly held

shares with a minimum public

distribution of 250 beneficial holders.5

Second, the company must have total

net tangible assets of at least $500,000

and total net worth of at least $750,000.

Third, the issuer must have specific

corporate governance policies that

comply with PSE Rule 3.3.6 Fourth, the

issuer must provide the Exchange with

audited financial statements that are

required to be included in the issuer’s

Exchange Act registration statement.

Fifth, the company must demonstrate

that the product, service, or technology

is sufficiently developed and that there

is a reasonable expectation of future

earnings from its business. Finally, the

issuer must have registered the

securities of the class at the state level

using either the state Form U–7 (or the

equivalent registration form to which a

regulatory review is applied) or a

coordinated state filing with the federal

Form 1–A offering statement.

In addition, under the proposal, once

an issuer’s class of security has been

approved for listing under the SCOR

program, the following requirements

must also be met. First, the issuer’s class

of common stock and/or preferred stock

must be registered under section 12(b)

of the Exchange Act (before it may be

treaded on the Exchange). Second, the

issuer must comply with the Exchange’s

listing policies and agreements, as well

as the reporting and disclosure

requirements of the Exchange Act.

Third, in listing additional shares of the

same class of common stock or preferred

stock, the issuer must meet the

applicable federal securities laws and

state registration requirements. Finally,

an issuer listed under the SCOR

program must comply with the

Exchange’s listing maintenance

requirements set forth in Rule 3.5(r).

Trading Environment and Transaction

Reporting

The Exchange intends to allocate

common stock and preferred stock listed

under the SCOR program to a Specialist

for auction market trading. Any

transactions in such securities would be

reported on a real-time basis.

Transactions in SCOR securities would

be identified by a special suffix to the

ticker symbol so that members, public

investors and others can distinguish

these securities from other securities

traded on the Exchange. Finally, all of

the Exchange’s rules and equity

surveillance procedures would be

applicable to transactions in SCOR

securities.

2. Statutory Basis

The proposed rule change is

consistent with section 6(b)(5) of the Act

in that it is designed to prevent

fraudulent and manipulative acts and

practices and to perfect the mechanism

of a free and open market.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.7

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 other period (i) as the

Commission may designate up to 90

days of such date if its 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 whether the

proposed rule change should be

disapproved.
Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Notices 161

1 15 U.S.C. § 78s(b)(1) (1988). 2 15 U.S.C. § 78q–1 (1988).

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 PSE. All submissions

should refer to File No. SR–PSE–94–31

and should be submitted by January 24,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94–32254 Filed 12–30–94; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35153; File No. SRPhiladep–94–05]

Self-Regulatory Organization;

Philadelphia Depository Trust

Company; Notice of Proposed Rule

Change Concerning Disposal of

Expired Securities Certificates of

Warrants and Rights

December 27, 1994.

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

Securities Exchange Act of 1934

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

October 6, 1994, the Philadelphia

Depository Trust Company (‘‘Philadep’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change (File No. SRPhiladep–94–05) as described in Items I,

II, and III below, which Items have been

prepared primarily by Philadep, a selfregulatory organization (‘‘SRO’’). The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Philadep proposes to implement a

rule change that would allow the

disposal of expired securities

certificates of warrants and rights. The

proposed rule change would enable

Philadep to reduce its administrative

expenses associated with keeping

expired warrants and rights related

certificates in its vault.

II. Self-Regulatory Organization’s

Statement Regarding the Proposed Rule

Change

In its filing with the Commission,

Philadep included statements

concerning the purpose of and the 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 IV below.

Philadep has prepared summaries, as set

forth in sections (A), (B) and (C) below,

of the most significant aspects of these

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of and the

Statutory Basis for the Proposed Rule

Change

In order to reduce costs and increase

operational efficiency, Philadep

proposes to implement a program which

would allow it to destroy certain

expired securities certificates,

specifically expired warrants and rights.

This destruction policy would enable

Philadep to reduce the administrative

and safekeeping expenses associated

with keeping expired warrants and

rights related certificates in its vault. In

implementing this program, Philadep

will adhere to serveral procedures to

assure that Philadep does not assume

any undue risk. First, Philadep will

contact the transfer agent or the issuer

of the securities after the securities has

reached their expiration dates to verify

that the respective warrants or rights

have expired. Second, Philadep will

obtain written confirmation from the

transfer agent or the issuer that the

certificates representing such warrants

or rights have expired. If there is no

transfer agent, Philadep personnel will

exercise all reasonable due diligence to

confirm the expired nature of the

respective certificates, including (1)

consulting with Philadep’s legal

department, its internal audit

department, and its senior management

and (2) receiving a confirmation from

the issuer. Third, Philadep (1) will

notify its participants that the

certificates have expired in the

judgment of the transfer agent or, where

there is no transfer agent exist, other

appropriate parties; (2) will delete such

securities positions from its

participants’ account on or after the

thirtieth day following the date of the

notice; and (3) will mark the securities

certificates and send them to the

internal audit department for

destruction. Additionally, at Philadep’s

discretion, it may retain copies of the

certificates on microfilm or on other

mediums.

Philadep believes that the proposed

program complies with Section 17A of

the Act 2 in that it is contemplated to

foster cooperation and coordination

with persons engaged in the clearance

and settlement of securities transactions

by providing an efficient administrative

mechanism to destroy expired

securities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Philadep believe that the proposed

rule change will not pose any burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

Philadep has neither solicited nor

received any comments with respect to

the proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Changes and Timing for

Commission Action

Within thirty-five days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

ninety 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 Philadep consents, the

Commission will:

(A) by order approve such 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 such 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

respecting the proposed rule change that