[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)]
[Notices]
[Pages 19618-19619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9669]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35600; File No. SR-PSE-95-06]


Self-Regulatory Organizations; Pacific Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to New 
Organizational Structures

April 13, 1995.
    On February 21, 1995, the Pacific Stock Exchange, Inc. (``PSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Articles V and VIII of 
its Constitution to allow for the admission of entities with new 
organizational structures as member organizations.

    \1\15 U.S.C. 78s(b)(1).
    \2\17 CFR 240.19b-4.
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 35443 (March 6, 1995), 60 FR 13196 (March 10, 
1995). No comments were received on the proposal. This order approves 
the proposed rule change.

I. Proposal

    The PSE Constitution currently allows members of the Exchange to 
confer the privileges of their memberships on a firm which may be 
either a partnership or a corporation. The Exchange is proposing to 
amend Article VIII, Section 1(a) of its Constitution to provide that 
the Exchange may, in its discretion, and on such terms as the Exchange 
may prescribe, approve as a member firm, entities that have 
characteristics essentially similar to corporations, partnerships, or 
both.\3\ In addition, the Exchange is proposing to amend Article V, 
Sections 4, 5, and 7 of the PSE Constitution (definitions of ``member 
firm,'' ``member organization,'' and ``associated person'') to be 
consistent with the proposed change to Article VIII, Section 1(a). The 
Exchange is proposing to add the phrase ``or other organization'' to 
the definitions of ``member firm'' and ``member organization'' and to 
add the phrases ``member of a Limited Liability Company'' and ``trustee 
of a business trust'' to the definition of ``associated person.'' These 
amendments would permit the Exchange to approve business trusts, 
limited liability companies and other organizational structures as 
member organizations so long as the characteristics of the entity in 
question are essentially similar to those of corporations or 
partnerships.

    \3\The Exchange stated that non-corporate or partnership 
entities would have to be structured in such a format that would 
qualify as a broker or dealer registered with the SEC pursuant to 
the Act, since this is a prerequisite to becoming an Exchange member 
organization. Telephone conversation between Michael D. Pierson, 
Senior Attorney, PSE, and Elisa Metzger, Senior Counsel, SEC, on 
March 3, 1995.
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    The Exchange believes that the rule change is consistent with 
Section 6(b) of the Exchange Act, in general, and Section 6(b)(5) in 
particular, in that it is designed to promote just and equitable 
principles of trade and to protect investors and the public interest.

II. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Sections 6(b).\4\ Specifically, 
the Commission believes the amendment is consistent with the Section 
6(b)(2)\5\ of the Act, which requires the rules of an exchange, subject 
to the provisions of Section 6(c) of the Act,\6\ to ensure that any 
registered broker or dealer or natural person associated with a 
registered broker or dealer may become a member of the exchange and any 
person may become associated with a member thereof.

    \4\15 U.S.C. 78f(b).
    \5\15 U.S.C. 78f(b)(2).
    \6\15 U.S.C. 78f(c).
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    The PSE Constitution currently allows members of the Exchange to 
confer the privileges of their membership on a firm which may be either 
a partnership or a corporation. The amendments would enable entities 
with new organizational structures similar to corporations and 
partnerships to become Exchange members and be included in the 
Exchange's definition of a member organization. As in the case of a 
partnership or corporation applying for [[Page 19619]] membership, the 
new entity will be subject to all other requirements for membership 
approval.
    The Commission believes that the amendments to Articles V and VIII 
of the PSE Constitution reasonably balance the Exchange's interest in 
having the flexibility to approve entities with new organizational 
structures for Exchange membership, with the regulatory interests in 
protecting the financial and structural integrity of a member 
organization. For example, although the amendments permit the Exchange 
to approve business trusts, limited liability companies, or other 
organizational structures with characteristics of corporations or 
partnerships as member organizations, the PSE will review each Exchange 
member organization application on a case-by-case basis, and prior to 
approving any such organization for membership, the Exchange must be 
satisfied that: (1) the Exchange would legally have appropriate 
jurisdiction over such an entity; and (2) the permanency of the 
entity's capital is consistent with that required of other member 
organizations.

III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-PSE-95-06) is approved.

    \7\15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\17 CFR 200.30-3(1)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9669 Filed 4-18-95; 8:45 am]
BILLING CODE 8010-01-M