[Federal Register Volume 60, Number 65 (Wednesday, April 5, 1995)]
[Rules and Regulations]
[Pages 17201-17202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8259]



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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 200

[Release No. 34-35548]


Establishment of Commission Quorum Requirement

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
amending its rules to specify the number of Commission members that 
constitute a quorum. The amendments are designed to promote 
flexibility, finality, and collegiality of agency decisionmaking.

EFFECTIVE DATE: May 5, 1995.

FOR FURTHER INFORMATION CONTACT: Walter B. Stahr, Assistant General 
Counsel, or C. Hunter Jones, Special Counsel, Office of the General 
Counsel, at (202) 942-0888.

SUPPLEMENTARY INFORMATION: The Commission is modifying 17 CFR 200.40-
200.42 to provide that three members constitute a quorum of the 
Commission, with two important exceptions. First, if the number of 
members in office is two or one, that number is sufficient for a 
quorum. Second, if the number of members in office minus the number 
disqualified with respect to a matter is two, two constitute a quorum 
for purposes of that matter.
    The Securities Exchange Act of 1934 (``Exchange Act''), unlike many 
statutes that establish federal agencies, does not establish a quorum 
requirement for the Commission. In the past, the practice of the 
Commission has generally been that three members constitute a quorum. 
See In re International Paper & Power Co., 2 SEC 792, 793 n.1 (1937), 
rev'd on other grounds sub nom. Lawless v. SEC, 105 F.2d 574 (1st Cir. 
1939). This practice, however, has never been formally adopted as a 
policy or rule.
    The Commission, which currently has only three members, has 
reconsidered its quorum practice. It has decided to adopt a general 
rule, with the exceptions discussed below, that three commissioners are 
required for a quorum. Although this rule may create difficulties when 
only three commissioners are in office, these difficulties are 
outweighed by the benefits of having all three commissioners deliberate 
and vote on matters.
    Situations arise, however, in which only two members are able to 
participate in a matter. When three members are in office, for example, 
one member may recuse himself or herself from considering a matter. See 
17 CFR 200.60. Similarly, it is possible that, at some point, there 
would be only two commissioners in office. In the past, the Commission 
has resorted to the duty officer procedure to deal with urgent matters 
as to which only two commissioners are available. See 17 CFR 200.42. 
The duty officer procedure, however, because it is a form of 
delegation, is not available for rulemaking. See Exchange Act Section 
4A(a). Moreover, although a duty officer's action is Commission action 
unless and until the Commission directs otherwise, see 17 CFR 
200.42(c)(3), the Commission cannot affirm the duty officer's action 
when only one other Commission member is available to consider the 
matter. Finally, and perhaps most importantly, it is more consistent 
with the collegial nature of the Commission to allow the two qualified 
members to address such matters as a Commission.
    The Commission also believes that it would be appropriate to 
preserve the flexibility necessary to take effective action in the 
event, however unlikely, that there would be a period with only one 
commissioner in office. To provide adequate flexibility in this 
unlikely situation, the Commission is providing that one commissioner 
would constitute a quorum if no other commissioners are in office. The 
Commission does not believe it is necessary, at this time, to provide 
that one commissioner may constitute a quorum when disqualifications 
result in only one commissioner being available to deal with a 
particular matter.
    Accordingly, the Commission is adopting a new rule, at 17 CFR 
200.41, providing that three members constitute a quorum unless only 
two members or one member are in office, or unless, because of 
disqualifications, only two members are available to deal with a 
particular matter. The Commission is also amending 17 CFR 200.40 to 
clarify that it applies only to meetings that are subject to the 
Government in the Sunshine Act.
    The Commission has determined that these amendments and additions 
to its procedural rules relate solely to the agency's organization, 
procedure or practice. Therefore, the provisions of the Administrative 
Procedure Act (``APA'') regarding notice and comment are not 
applicable. See 5 U.S.C. 553. Similarly, the provisions of the 
Regulatory Flexibility Act, which apply only when notice and comment 
are required by the APA or other laws, are not applicable. See 5 U.S.C. 
601-612.

Effects on Competition

    Section 23(a)(2) of the Exchange Act requires the Commission, in 
adopting rules under the Exchange Act, to consider the anti-competitive 
effects of such rules, if any, and to balance any impact against the 
regulatory benefits gained in furthering the purposes of the Exchange 
Act. See 15 U.S.C. 78w(a)(2). The Commission has considered the changes 
adopted in this release in light of the standards cited in section 
23(a)(2) and believes that their adoption would not impose any burden 
on competition not necessary or appropriate in furtherance of the 
Exchange Act.

Statutory Basis of Rule

    The amendments to the Commission's rules are adopted pursuant to 
the authorities set forth therein.

List of Subjects in 17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies).

Text of Amendments

    For the reasons set out in the preamble, title 17, chapter II, part 
200 of the Code of Federal Regulations is amended as follows: 
[[Page 17202]] 

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

    1. The authority citation for part 200, subpart B, is revised to 
read as follows:

    Authority: 5 U.S.C. 552b; 15 U.S.C. 78d-1 and 78w.

    2. Section 200.40 is revised to read as follows:


Sec. 200.40  Joint disposition of business by Commission meeting.

    Any meeting of the Commission that is subject to the provisions of 
the Government in the Sunshine Act, 5 U.S.C. 552b, shall be held in 
accordance with subpart I of this part. The Commission's Secretary 
shall prepare and maintain a Minute Record reflecting the official 
action taken at such meetings.


Secs. 200.41 and 200.42  [Redesignated as Secs. 200.42 and 200.43]

    3. Sections 200.41 and 200.42 are redesignated as Secs. 200.42 and 
200.43, and Sec. 200.41 is added to read as follows:


Sec. 200.41  Quorum of the Commission.

    A quorum of the Commission shall consist of three members; 
provided, however, that if the number of Commissioners in office is 
less than three, a quorum shall consist of the number of members in 
office; and provided further that on any matter of business as to which 
the number of members in office, minus the number of members who either 
have disqualified themselves from consideration of such matter pursuant 
to Sec. 200.60 or are otherwise disqualified from such consideration, 
is two, two members shall constitute a quorum for purposes of such 
matter.


Sec. 200.42  [Amended]

    4. In newly redesignated Sec. 200.42, in paragraph (a) the 
reference to ``Sec. 200.42'' is revised to read ``Sec. 200.43'' and in 
paragraph (b) the reference to ``Sec. 200.41(a)'' is revised to read 
``Sec. 200.42(a)''.


Sec. 200.43  [Amended]

    5. In newly redesignated Sec. 200.43(c)(1), the reference to 
``Sec. 200.42(a)'' is revised to read ``Sec. 200.43(a)'' and the 
reference to ``Sec. 200.41'' is revised to read ``Sec. 200.42''.


Sec. 200.401  [Amended]

    6. In Sec. 200.401(a), the reference to ``Sec. 200.41 or 
Sec. 200.42'' is revised to read ``Sec. 200.42 or Sec. 200.43''.

    Dated: March 30, 1995.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-8259 Filed 4-4-95; 8:45 am]
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