3634 Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices

8See Securities Exchange Act Release No. 42035

(October 19, 1999), 64 FR 57681 (October 26, 1999)

(File No. SR–PCX–99–13); Release No. 43293

(September 14, 2000) 65 FR 57416 (September 22,

2000) (File No. SR–PCX–99–36); Release No. 43025

(July 12, 2000), 65 FR 44559 (July 18, 2000) (File

No. SR–PCX–99–40); Release No. 43149 (August 11,

2000), 65 FR 51392 (August 23, 2000) (File No. SR–

PCX 99–44); and Release No. 42861 (May 30, 2000),

65 FR 36489 (June 8, 2000) (File No. SR–PCX–99–

45).

9 15 U.S.C. 78f(b)(5). 10 15 U.S.C. 78f(b)(6).

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division of Market Regulation

(‘‘Division’’), Commission (December 28, 2000)

(‘‘Amendment No. 1’’). Amendment No. 1 corrected

typographical errors that appeared in the proposed

rule text.

4See Letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division, Commission (January

5, 2001) (‘‘Amendment No. 2’’). Amendment No. 2

further corrected typographical errors that appeared

in the proposed rule text.

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(6).

be subject to disciplinary action

pursuant to rule 10.13. The proposed

recommended fines, pursuant to

proposed rule 10.13(k)(i)(35) of this rule

are $500, $1000 and $1,500 for first,

second and third time violations,

respectively.

Seventh, the Exchange proposes to

amend the text specifying the

recommended fines for violations of the

position limit rules pursuant to rule

10.13(k)(i)(21) of the Minor Rule Plan

Recommended Fine Schedule. The

Exchange proposes that position and

exercise limit violations be the greater of

$250.00 or $1 per contract over 5% of

the applicable limit. The Exchange

proposes this change so that it is

obvious that the imposition of a

monetary fine is recommended

regardless of whether the applicable

number of contracts is less than 5% over

the designated position or exercise

limit.

Eighth, the Exchange proposes to

amend the text specifying the

recommended fines for violations of the

exercise limit rules pursuant to rule

10.13(k)(i)(22) of the Minor Rule Plan

Recommended Fine Schedule. The

Exchange proposes that position and

exercise limit violations be the greater of

$250.00 or $1 per contract over 5% of

the applicable limit. The Exchange

proposes this change so that it is

obvious that the imposition of a

monetary fine is recommended

regardless of whether the applicable

number of contracts is less than 5% over

the designated position or exercise

limit.

Ninth, the Exchange proposes to

delete all references to OFPAs in rule

10.13(h) and (k), pertaining to the PCX

Minor Rule Plan and to replace those

references with the current rules. The

Exchange proposes this change because

it intends to renumber and incorporate

all OFPAs pertaining to Options trading

into the text of Rule 6.8

2. Statutory Basis

The Exchange believes that the

proposal is consistent with Section

6(b)(5) of the Act 9 because it is designed

to promote just and equitable principles

of trade, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities,

and in general, to protest investors and

the public interest. The proposal is also

consistent with Section 6(b)(6),10 which

requires that members and persons

associated with members be

appropriately disciplined for violations

of Exchange Rules.

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 were not 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 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 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,

including whether the proposed rule

change, as amended, is consistent with

the Act. Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549–

0609. 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–PCX–99–48 and should be

submitted by February 6, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1192 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43816; File No. SR–PCX–

00–42]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Supervisory Procedures

January 8, 2001.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and rule 19b–4 thereunder,2

notice is hereby given that on December

1, 2000, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the Exchange. On December

28, 2000, the Exchange filed

Amendment No. 1 to the proposed rule

change.3 On January 5, 2001, the

Exchange filed Amendment No. 2 to the

proposed rule change.4 The proposed

rule change, as amended, has become

effective on filing pursuant to section

19(b)(3)(A) of the Act 5 and rule 19b–

4(f)(6) thereunder.6 The Commission is

publishing this notice to solicit

Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices 3635

7PCX Rule 9.1.

8PCX Rule 9.2(b).

9PCX Rule 6.2(b).

10PCXE Rule 2.14(d).

11PCXE Rule 9.1(c).

12PCXE Rule 9.1(d).

13See National association of Securities Dealers,

Rule 3010.

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

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

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 is proposing to adopt a

rule requiring all members to adopt and

implement a supervisory system and

written supervisory procedures. Below

is the text of the proposed rule change.

Additions are italicized and deletions

are in brackets.

Supervision

* * * * *

Rule 4.25(a). Adherence to Law

No member or member organization may

engage in conduct in violation of the federal

securities laws, the Constitution or the Rules

of the Exchange. Every member or member

organization must supervise persons

associated with the member or member

organization so as to assure compliance

therewith.

(b) Supervisory System

Each member or member organization for

which the Exchange is the Designated

Examining Authority (‘‘DEA’’) must establish

and maintain a system to supervise the

activities of its associated persons and the

operations of its business. Such system must

be reasonably designed to ensure compliance

with applicable federal securities laws and

regulations and PCX Rules. Final

responsibility for proper supervision will rest

with the member or member organization.

The member’s or member organization’s

supervisory system must provide, at a

minimum, for the following:

(1) The establishment and maintenance of

written procedures as required by paragraph

(c) of this Rule.

(2) The designation of a person with

authority to reasonably discharge his/her

duties and obligations in connection with

supervision and control of the activities of

the associated persons of the member or

member organization.

(3) The member or member organization

must undertake reasonable efforts to

determine that all supervisory personnel are

qualified by virtue of experience or training

to carry out their assigned responsibilities.

(4) Each member or member organization

must designate and specifically identify to

the Exchange one or more persons who will

be responsible for such supervision.

(c) Written Procedures

Each member or member organization

must establish, maintain, and enforce written

procedures to supervise the business in

which it engages and to supervise the

activities of its associated persons that are

reasonably designed to ensure compliance

with applicable federal securities laws and

regulations, and with the PCX Rules.

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

Exchange 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

Exchange 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

There are some PCX and Pacific

Exchange Equities, Inc., (‘‘PCXE’’) rules

that relate to supervision of firm activity

for those PCX member firms that

conduct a public business. these include

options rules such as, ‘‘Office

Supervision’’7 ‘‘Account Supervision,’’8

‘‘Conduct on the Floor,’’9 and equities

rules such as, ‘‘Allied Persons &

Approved Persons,’’10 ‘‘Office

Supervision,’’11 and ‘‘Account

Supervision.’’12 The Exchange,

however, does not currently have a

comprehensive rule that directly

addresses the obligation of every

member or member organization,

whether conducting a public business or

a proprietary business, to properly

supervise its business and employees.

The Exchange believes that the

proposed rule clarifies (1) the

responsibility of the member or member

firm for the acts of its employees; and

(2) the requirement that each member

must supervise those persons for which

it is responsible.

The proposed rule has three distinct

parts. The first section of the proposed

rule change is a prohibition on engaging

in conduct that violates the federal

securities laws, the Constitution or the

Rules of the Exchange. This section also

informs members that they must

supervise all associated persons in order

to assure compliance.

Section two of the proposed rule

change sets forth the responsibility of all

members or member organizations to

establish and maintain a system to

supervise the activities of its employees.

The proposed rule states that this

system must be reasonably designed to

achieve compliance with the federal

securities laws and PCX rules. The final

responsibility for proper supervision

rests with the member or member

organization. The supervisory system

must, at a minimum, provide (1) the

designation of a person responsible for

carrying out the firm’s supervisory

obligations; (2) a requirement that the

member or member organization must

undertake reasonable efforts to

determine that all supervisory personnel

are qualified, by virtue of experience

and training, to carry out their

obligations; and (3) a requirement that

the member or member organization

must identify to the Exchange the

person(s) who will be responsible for

such supervision.

Section three of the proposed rule

change states that each member or

member organization must establish,

maintain, and enforce written

procedures to supervise the business in

which it engages and to supervise the

activities of its employees. These

procedures must be reasonably designed

to achieve compliance with the federal

securities laws and the PCX rules.

The Commission approved a similar

rule filing by the National Association

of Securities Dealers, Inc.13 The

Exchange believes that the proposed

rule change will serve to significantly

strengthen the ability of the Exchange to

carry out its oversight responsibilities as

a self-regulatory organization. The

proposed rule change should also help

the Exchange to carry out its

examination, compliance, and

surveillance functions. Finally, the

proposed rule change clarifies to

member or member organizations

supervisory obligations.

2. Statutory Basis

The Exchange believes that the

proposed rule change, as amended, is

consistent with section 6(b) of the Act,14

in general, and furthers the objectives of

section 6(b)(5) of the Act,15 in

particular, in that it is designed to

promote just and equitable principles of

trade, prevent fraudulent and

manipulative acts and practices, and

protect investors and the public interest

by setting forth member supervisory

obligations.

3636 Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices

16 15 U.S.C. 78s(b)(3)(A).

17 17 CFR 240.19b–4(f)(6).

18 17 CFR 200.30–2(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division of Market Regulation

(‘‘Division’’), Commission (December 28, 2000)

(‘‘Amendment No. 1’’). Amendment No. 1 corrected

typographical errors that appeared in the proposed

rule text.

4See Letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division, Commission (January

5, 2001) (‘‘Amendment No. 2’’). Amendment No. 2

further corrected typographical errors that appeared

in the proposed rule text.

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(6).

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.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing proposed rule

change does not (i) Significantly affect

the protection of investors or the public

interest; (ii) impose any significant

burden on competition; and (iii) become

operative for 30 days from the date on

which it was filed, or such shorter time

as the Commission may designate, and

the Exchange provided the Commission

with written notice of its intent to file

the proposed rule change at least five

business days prior to the filing date, it

has become effective pursuant to section

19(b)(3)(A) of the Act16 and rule 19b–

4(f)(6) thereunder.17

At any time within 60 days of the

filing of the proposed rule change, the

Commission may summarily abrogate

such rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC. 20549–0609. 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

room. Copies of such filing will also be

available for inspection and copying at

the principal office of the PCX.

All submissions should refer to File

No. SR–PCX–00–42 and should be

submitted by February 6, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1193 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43817; File No. SR–PCX–

00–43]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Supervisory Procedures for Pacific

Exchange Equities, Inc.

January 8, 2001.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on December

1, 2000, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the Exchange. On December

28, 2000, the Exchange filed an

amendment to the proposed rule

change.3 On January 5, 2001, the

Exchange filed Amendment No. 2 to the

proposed rule change.4 The proposed

rule change, as amended, has become

effective on filing pursuant to Section

19(b)(3)(A) of the Act 5 and Rule 19b–

4(f)(6) thereunder.6 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 is proposing to adopt a

Pacific Exchange Equities, Inc.

(‘‘PCXE’’) rule requiring all ETP

Holders, Equity ASAP Holders and ETP

Firms to adopt and implement a

supervisory system and written

supervisory procedures. Below is the

text of the proposed rule change.

Additions are italicized, and deletions

are in brackets.

Supervision

* * * * *

Rule 6.17(a). Adherence to Law

No ETP Holder, Equity ASAP Holder

or ETP Firms may engage in conduct in

violation of the federal securities laws,

the Constitution or the Rules of the

Corporation. Every ETP Holder, Equity

ASAP Holder or ETP Firm must

supervise persons associated with it so

as to assure compliance therewith.

(b). Supervisory System

Each ETP Holder, Equity ASAP

Holder or ETP Firm for which the

Corporation is the Designated

Examining Authority (‘‘DEA’’) must

establish and maintain a system to

supervise the activities of its associated

persons and the operation of its

business. Such system must be

reasonably designed to ensure

compliance with applicable federal

securities laws and regulations and

PCXE Rules. Final responsibility for

proper supervision will rest with the

ETP Holder, Equity ASAP Holder or ETP

Firm. The ETP Holder’s, Equity ASAP

Holder’s or ETP Firm’s supervisory

system must provide, at a minimum, for

the following:

(1) The establishment and

maintenance of written procedures as

required by paragraph (c) of this Rule.

(2) The designation of a person with

authority to reasonably discharge his/

her duties and obligations in connection

with supervision and control of the

activities of the associated persons of

the ETP Holder, Equity ASAP Holder or

ETP Firm.

(3) The ETP Holder, Equity ASAP

Holder or ETP Firm must undertake

reasonable efforts to determine that all

supervisory personnel are qualified by

virtue of experience or training to carry

out their assigned responsibilities.

(4) Each ETP Holder, Equity ASAP

Holder or ETP Firm must designate and

specifically identify to the Corporation

one or more persons who will be

responsible for such supervision.