[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24947-24948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11516]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35667; File No. SR-CHX-95-06]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by The Chicago Stock Exchange, Incorporated Relating to Article 
V, Rule 3, Which Pertains to the Registration and Fingerprinting of 
Floor Employees, and the Imposition of an Initial Registration Fee on 
Clerks

May 3, 1995.
    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 March 1, 
1995, the Chicago Stock Exchange, Incorporated (``CHX'' 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 (``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

    The Exchange proposes to add interpretation and policies .10, .02 
and.03 under Rule 3 of Article V of the Exchange's Rules and to add a 
new clerk's fee.

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
    Rule 3 of Article V of the Exchange's rules states that employees 
of members or member organizations may not be admitted to the Floor 
unless such employees are registered with and approved by the Exchange. 
The registration process currently requires completion of an 
application card and data sheet that call for disclosure of very 
limited information. Currently, only Floor employees that accept orders 
from the public and applicants for membership are required to submit a 
completed Uniform Application for Securities Industry Registration or 
Transfer (``Form U-4'') to the Exchange.\1\

    \1\Form U-4 is used by the various securities SROs as part of 
their registration and oversight of member organization personnel. 
Specifically, Form U-4 is the uniform form for licensing 
salespersons within the states and various SROs. An individual 
applying for registration must file Form U-4 with the Central 
Registration Depository (``CRD'') operated by the National 
Association of Securities Dealers (``NASD''). Thereafter, the 
registered person is obligated to update this information as changes 
occur. The CRD is a computer data base containing current 
registration information as well as the regulatory and enforcement 
actions taken against securities industry personnel for access by 
the Commission, state regulators and certain SROs.
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    Under the proposal, all Floor employees will be required to submit 
a Form U-4 in order to become registered. The Form U-4 requires 
detailed disclosure of background information, including information 
regarding employment and disciplinary history, and is the standard 
industry form submitted to SROs for individuals required to be 
registered (including securities salespersons and traders). The Form U-
4 also requires this information to be updated whenever the information 
submitted becomes inaccurate or incomplete. The Exchange also has 
imposed a requirement that a member (or member organization) shall 
promptly give written notice of termination of a Floor employee to the 
Exchange on the Uniform Termination Notice for Securities Industry 
Registration (Form U-5)\2\ and concurrently provide a copy 
[[Page 24948]] of such notice to the person who has been terminated.

    \2\Form U-5 contains information relating to the circumstances 
surrounding the termination of an applicant's prior employment, and 
must be completed and submitted to the NASD, and other SROs 
requiring such a submission under their respective rules, whenever a 
registered employee is terminated.
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    Requiring each Floor employee to submit the Form U-4 will enable 
the Exchange to fulfill its regulatory responsibilities better by 
identifying those individuals who are subject to a statutory 
disqualification under Section 3(a)(39) of the Act.\3\ The Exchange is 
required to make a determination in each case where an individual who 
is subject to a statutory disqualification (e.g., is suspended or 
barred by an SRO, or has been convicted of any felony or certain 
enumerated misdemeanors) seeks admission to or continuance in 
membership, participation in, or association with a member or member 
organization. In addition, Rule 19h-1\4\ under the Act requires that 
the Exchange provide detailed information to the Commission whenever it 
determines to admit or continue in membership or participation or 
association with a member or member organization, any person who is 
subject to a statutory disqualification.

    \3\15 U.S.C. 78c(a)(39) (1988).
    \4\17 CFR 240.19h-1 (1994).
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    Additional provisions of the proposal will require all Floor 
Employees of members and member organizations and all Exchange members 
to be fingerprinted and to submit such fingerprints to the Exchange for 
identification, background checking, and appropriate processing. The 
proposed amendments to require fingerprinting of all Exchange members 
and floor clerks also will help in identifying persons who are subject 
to a statutory disqualification as well as enhance overall security on 
the Exchange Floor.
    Fingerprinting currently is required for each partner, director, 
officer or employee of broker-dealers pursuant to Rule 17f-2\5\ under 
the Act, with certain exceptions. Floor clerks are not required by Rule 
17f-2 to submit fingerprints because they do not physically handle 
monies or securities.\6\ The Exchange, however, now has determined that 
all floor members and floor employees should be fingerprinted to help 
to ensure the security of the CHX staff, members, and the Exchange 
facility. The requirement to fingerprint members and floor employees is 
consistent with the requirements of other exchanges.\7\

    \5\17 CFR 240.17f-2 (1994)
    \6\See 17 CFR 240.17f-2(a)(1)(i).
    \7\See, e.g., NYSE Rule 35.60 (requiring fingerprinting of all 
floor employees of members and member organizations and all 
employees of members and member organizations who have submitted 
registration applications for admission to the floor).
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    The requirements of the amended rules to submit Form U-4 and 
fingerprints will apply to all current and prospective Floor employees 
and members.
    Finally, the proposed rule change imposes an initial registration 
fee on clerks of $50.
2. Statutory Basis
    The CHX believes that the proposed rule change is consistent with 
Section 17(f)(2) of the Act, which requires (with certain exceptions) 
fingerprinting of each partner, director, officer or employee of 
broker-dealers.
    The rule change also is consistent with Section 6(c)(2) of the Act 
because having more comprehensive background information submitted on 
Form U-4 will enable the Exchange to identify individuals who are 
subject to statutory disqualification under Section 3(a)(39) of the 
Act.
    The rule change advances the objectives of Rule 19h-1 under the 
Act, which requires detailed reporting to the Commission of the 
Exchange's determination to admit to, or continue in, membership or 
participation or association with a member, persons subject to 
statutory disqualification.
    Finally, the proposed rule change is consistent with Section 
6(b)(5) of the Act, which provides, in pertinent part, that the rules 
of the Exchange be designed to prevent fraudulent and manipulative 
acts, to promote just and equitable principles of trade and to protect 
the investing public.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose a burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 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 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 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 written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the CHX. All 
submissions should refer to File No. SR-CHX-95-06 and should be 
submitted by May 31, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11516 Filed 5-9-95; 8:45 am]
BILLING CODE 8010-01-M