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.

Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices 3637

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).

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

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

17 17 CFR 240.19b–4(f)(6).

(c). Written Procedures

Each ETP Holder, Equity ASAP

Holder or ETP Firm 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 achieve

compliance with applicable federal

securities laws and regulations, and

with the PCXE 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 PCXE rules

that relate to supervision of firm activity

for those PCX member firms and PCXE

ETP Holders, Equity ASAP Holders and

ETP 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 firm and ETP Holder, Equity

ASAP Holder and ETP Firm, whether

conducting a public business or a

proprietary business, to properly

supervise its business and employees.

The proposed rule clarifies (1) the

responsibility of the ETP Holders,

Equity ASAP Holders and ETP Firms for

the acts of its employees; and (2) the

requirement that each ETP Holder,

Equity ASAP Holder and ETP Firm

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 and the PCXE.

This section also informs ETP Holders,

Equity ASAP Holders and ETP Firms

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

ETP Holders, Equity ASAP Holders and

ETP Firms to establish and maintain a

system to supervise the activities of

their employees. The proposed rule

states that this system must be

reasonably designed to achieve

compliance with the federal securities

laws and PCXE rules. The final

responsibility for proper supervision

rests with the ETP Holder, Equity ASAP

Holder and ETP Firm. 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

ETP Holder, Equity ASAP Holder and

ETP Firm 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 ETP Holder, Equity ASAP

Holder and ETP Firm must identify to

the PCXE the person(s) who will be

responsible for such supervision.

Section three of the proposed rule

change states that each ETP Holder,

Equity ASAP Holder and ETP Firm

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 PCXE

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 aid

the Exchange in carrying out its

examination, compliance, and

surveillance functions. Finally, the

proposed rule change clarifies ETP

Holder’s, Equity ASAP Holder’s and

ETP Firm’s 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.

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 Act 16 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

3638 Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices

18CFR 200.30–2(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Cynthia Hoekstra, Counsel,

Phlx, to Nancy Sanow, Assistant Director, Division

of Market Regulation, Commission, dated December

27, 2000 (‘‘Amendment No. 1’’). In Amendment No.

1, the Phlx represented that the Phlx’s Board has

the authority to adopt Article Nineteen pursuant to

Delaware corporate law, Pennsylvania contract law,

and the Exchange’s Certificate of Incorporation, bylaws, and rules.

4 In connection with this proposed rule change,

the Commission approved a propose rule change

that adopted Article Twentieth. See Securities

Exchange Act Release No. 42317 (January 5, 2000),

65 FR 2215 (January 13, 2000) (SR–Phlx–99–48).

Article Twentieth provides, in part, that the

Exchange’s Board of Governors (‘‘Board’’) shall have

the power to assess such fees, dues, and other

charges upon members, lessors and lessees of

memberships and holders of permits (or any of

them) as the Board may from time to time adopt by

resolution or set forth in the Rules of the Board. On

May 11, 2000 the Commission approved a proposed

rule change, which amended Article Twentieth to

include the words ‘‘owner’’ and ‘‘member

organization’’ and to define the word ‘‘owner’’ to

clarify the original intent of Article Twentieth. See

Securities Exchange Act Release No. 42773 (May

11, 2000), 65 FR 31622 (May 18, 2000) (SR–Phlx–

00–30).

5Section 242 of the DGCL permits the board of

a non-stock corporation to adopt amendments to the

corporation’s Certificate of Incorporation.

6See also 8 Del. C. § 121(a) (providing that in

addition to powers expressly granted by law or the

Certificate of Incorporation, the corporation and its

directors may exercise ‘‘any powers incidental

thereto, so far as such powers and privileges are

necessary or convenient to the conduct, promotion

or attainment of the business or purposes set forth

in its certificate of incorporation’’).

7Article Third states, in part, that the Exchange

may operate as and perform all functions of a

national securities exchange and engage in any

lawful act or activity for which corporations may

be organized under the DGCL.

8See, e.g., By-Law Art. XV, § 15–1(a) (providing

that a membership may be leased in accordance

with such rules as the Board may adopt); Rule 930

(setting forth required terms of lease agreement and

providing, among other things, that the Exchange

may dispose of a membership subject to a lease

agreement); Rule 960.1 (providing that all members,

member organizations and any persons associated

with any member are subject to expulsion,

suspension, termination as to activities at the

Exchange or any other fitting sanction for violation

of the Rules of the Exchange); see also Certificate

of Incorporation, Article 20th (giving Board plenary

authority to assess fees, dues and other charges and

to impose penalties, including cancellation of a

membership and forfeiture of all rights as a lessor

or lessee, for nonpayment).

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–00–43 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. 01–1194 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43812; File No. SR–Phlx–

99–50]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Amending the Exchange’s Certificate

of Incorporation

January 5, 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 November

23, 1999, the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III, below, which Items

have been prepared by the Exchange.

The Phlx filed an amendment to the

proposal on December 28, 2000.3 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

a. The Original Filing

The Phlx proposes to amend its

Certificate of Incorporation to add

Article Nineteenth, relating to the

leasing of memberships.4 A complete

copy of the text of Article Nineteenth is

available at the Office of the Secretary,

the Phlx, and at the Commission.

Proposed Article Nineteenth provides

that, in addition to all other powers

granted to the Board by law, the

Certificate of Incorporation or

otherwise, the Board shall have the

power to determine whether, and under

what terms and conditions,

memberships may be leased, and to

adopt by resolution or to set forth in the

Rules of the Board such rules with

respect to lease agreements, lessors and

lessees as the Board may from time to

time determine to be advisable. Such

rules may include rules regulating and

setting forth the rights and obligations of

lessors and lessees, the required terms

of lease agreements, and the fees, dues,

and other charges required to be paid by

lessors and lessees (or either of them) to

the Exchange in connection with, and

for the privilege of, leasing

memberships. In addition, proposed

Article Nineteenth provides that the

Board shall have the power to adopt

rules relating to the suspension or

termination of any or all lease

agreements with respect to

memberships, to issue provisional

trading privileges on such terms as the

Board shall determine to members

whose lease agreements are suspended

or terminated, and to amend, alter, or

repeal any or all of the Rules of the

Board with respect to any of the

foregoing matters.

b. Amendment No. 1

As a non-stock corporation organized

under the Delaware General Corporation

Law (‘‘DGCL’’), the Exchange represents

that it has ample authority to adopt

proposed Article Nineteenth. Because

the Exchange’s Certificate of

Incorporation does not require member

approval to adopt a charter amendment,

proposed Article Nineteenth may be

adopted by the Board of Governors

without approval by the members of the

Exchange (including lessees of

memberships) or the owners of

memberships (including lessors of

memberships). 8 Del. C. § 242(b)93).5

Therefore, the Exchange’s Board

adopted Article Nineteenth in

accordance with Section 242.

Furthermore, Section 141(j) of the

DGCL empowers the Board to direct the

business and affairs of the Exchange,

and the Exchange’s by-laws give the

Board broad power to adopt rules of the

Exchange. 8 Del. C. § 141(j); 6 By-Law

Art. IV, § 4–4. In addition, existing

Article Third of the Phlx Certificate of

Incorporation gives the Exchange

authority to do all things necessary to

run a national securities exchange.7

Numerous provisions of the Exchange’s

by-laws and rules already address

matters similar to those addressed by

proposed Article Nineteenth.8

Therefore, the adoption of Article

Nineteenth falls within the broad

authority expressly conferred by

Delaware law and existing provisions

under the Phlx Certificate of

Incorporation.