[Federal Register Volume 61, Number 19 (Monday, January 29, 1996)]
[Notices]
[Pages 2848-2850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1565]



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[[Page 2849]]


SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36755; File No. SR-Amex-95-46]


Self-Regulatory Organizations; American Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to the 
Exchange's Arbitration Rules

January 22, 1996.
    On November 28, 1995, the American Stock Exchange, Inc. (``Amex'' 
or ``Exchange'') submitted to the Securities and Exchange Commission 
(``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 modify its arbitration rules concerning class 
action claims, the initiation of a claim, document exchanges, filing 
fees, and the enforceability of arbitration awards.

    \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 the Federal 
Register on December 14, 1995.\3\ No comments were received on the 
proposal. This order approves the proposal.

    \3\ Securities Exchange Act Release No. 36566 (Dec. 8, 1995), 60 
FR 64191.
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    As described more fully below, the Exchange has proposed amendments 
to its arbitration procedures that were developed primarily by the 
Securities Industry Conference on Arbitration.\4\

    \4\ Amex Rule 600(d)(iii) corresponds to Securities Industry 
Conference on Arbitration Uniform Code of Arbitration (``SICA UCA'') 
Section 1(d) (iii) (as amended Jan. 20, 1994); Amex Rule 607(c) 
corresponds to SICA UCA Section 20(c) (as amended Jan. 7, 1993 and 
Oct. 21, 1994); Amex Rule 620(e) corresponds to SICA UCA Section 
30(e) (as amended Oct. 21, 1994).
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    The Commission has carefully reviewed the Exchange's proposal to 
amend Amex Rules 600 (Arbitration), 606 (Initiation of Proceedings), 
607 (General Provision Governing Prehearing Proceeding), 620 (Schedule 
of Fees), and add a new rule, 624 (Failure to Honor Award). The 
Commission concludes that this proposal 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 Section 6(b).\5\

    \5\ 15 U.S.C. 78f(b).
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    Amex Rule 600(d)(iii) currently bars members, allied members, 
member organizations, and associated persons from seeking to enforce an 
agreement to arbitrate against a customer where that customer has 
initiated in court a putative class action or is a member of a putative 
or certified class with respect to any claims encompassed by the class 
action. Amex Rule 600, however, currently omits specific reference to 
claims filed by members, allied members, member organizations, and 
associated persons against other members, allied members, member 
organizations, and associated persons. The proposed amendment clarifies 
that all class actions, including claims involving members, allied 
members, member organizations, and associated persons, are ineligible 
for submission to the Exchange's arbitration facility.
    The Commission finds that the proposed amendment to Amex Rule 
600(d)(iii) is consistent with Section 6(b)(5) \6\ because it is 
designed to promote just and equitable principles of trade, prevent 
unfair discrimination between customers, issuers, brokers, or dealers, 
and, in general, protect investors and the public interest. Over the 
years, the courts have developed procedures and expertise for managing 
class action litigation, and, therefore, duplicating the often complex 
procedural safeguards necessary for these lawsuits is unnecessary. In 
addition, access to the courts for class action litigation should be 
preserved for claims filed by members, allied members, member 
organizations, and associated persons against other members, allied 
members, member organizations, and associated persons as well as for 
claims involving investors. Hence, this rule change should provide a 
sound procedure for the management of class action disputes, should 
promote the efficient resolution of these types of class action 
disputes, and should prevent wasteful litigation over the possible 
applicability of agreements to arbitrate between members, allied 
members, member organizations, and associated persons, notwithstanding 
the exclusion of class action claims from Amex arbitration.

    \6\ 15 U.S.C. 78f(b)(5).
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    Currently, Amex Rule 606(c)(6) provides that decisions concerning 
the right to arbitrate are made by the Director of Arbitration, subject 
to appeal to the Exchange's Board of Governors. In order to conform the 
Exchange's rules to the Uniform Code of Arbitration, the Exchange 
proposes to delete Amex Rule 606(c)(6). The Exchange believes decisions 
concerning the right to arbitrate a claim should be made by the panel 
of arbitrators selected to hear the matter, instead of the Director of 
Arbitration.
    The Commission finds that the proposed deletion of Amex Rule 
606(c)(6) is consistent with Section 6(b)(5) because it is designed to 
prevent unfair discrimination between customers, issuers, brokers, or 
dealers and, in general, protect investors and the public interest. 
Impartiality is an important aspect of the arbitration process. By 
allowing a panel of arbitrators to make the determination of whether or 
not a claim may be submitted to the Exchange's arbitration facility, 
the proposed rule change should further improve the arbitration 
process's appearance of impartiality.
    Amex Rule 607(c) currently requires all parties to serve on each 
other copies of documents in their possession that they intend to 
present at the hearing and to identify witnesses they intend to present 
at the hearing not less than ten calendar days prior to the first 
scheduled hearing date. The Exchange proposes to amend this rule to 
allow parties to: (1) Provide a list of documents that have been 
produced previously to the other side, instead of providing the actual 
documents; (2) require the list identifying witnesses to include the 
address and business affiliation of the witnesses listed; and (3) 
require prehearing exchanges of documents and the list of documents 
previously produced to occur twenty days in advance of the hearing, 
instead of ten days as is presently required.
    The Commission finds that the proposed amendments to Amex Rule 
607(c) are consistent with Section 6(b)(5) because they are designed to 
promote just and equitable principles of trade, prevent unfair 
discrimination between customers, issuers, brokers, or dealers, and, in 
general, protect investors and the public interest.\7\ The proposed 
amendments should increase the efficiency of the arbitration process 
because they: (1) Eliminate duplicative prehearing document exchange; 
(2) should assist parties in the process of preparing and organizing 
their cases by providing them with advance notice regarding the 
background of witnesses and the location of nonparty witnesses; (3) 
should reduce the number of instances of surprise; and (4) should 
provide the parties with a more reasonable time frame in which to 
address last minute discovery requests.

    \7\ 15 U.S.C. 78f(b)(5).
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    Amex Rule 620(e) presently provides that the nonrefundable filing 
fee for a dispute that does not specify a money claim is $250, while 
Amex Rule 620(i) charges industry parties a $500 nonrefundable filing 
fee when the dispute does state a money claim. The proposed amendment 
to Amex Rule 

[[Page 2850]]
620(e) would unify the nonrefundable filing fee for all industry claims 
at $500.
    The Commission finds that this proposed amendment is consistent 
with Section 6(b)(4) \8\ because it provides for the equitable 
allocation of reasonable fees among its members and other persons using 
its facilities. Moreover, a uniform filing fee removes any temptation 
for industry parties to purposely omit the monetary amount of their 
claims in order to reduce the nonrefundable filing fee from $500 to 
$250.\9\

    \8\ 15 U.S.C. 78f(b)(4).
    \9\ See Securities Exchange Act Release No. 35167 (Dec. 28, 
1994), 60 FR 1816 (approving File No. SR-NASD-94-75 and publishing 
the NASD's determination that there have been situations in which 
industry parties have purposely not disclosed the monetary amount of 
their claim in order to reduce the nonrefundable filing fee from 
$500 to $250).
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    The Exchange is proposing to add a new rule, Amex Rule 624. This 
new rule would provide that the failure of a member firm or registered 
representative to honor an arbitration award, including those issued at 
another self-regulatory organization or by the American Arbitration 
Association, would subject the firm or registered representative to 
disciplinary proceedings at the Exchange.
    The Commission finds that the addition of proposed Amex Rule 624 to 
the Exchange's arbitration rules is consistent with Section 6(b)(6) 
\10\ because it provides for appropriate disciplinary action for 
violating the provisions of the Act, the rules and regulations 
thereunder, or the rules of the Exchange. By establishing the 
enforceability of arbitration awards, this proposal should increase the 
effectiveness of the arbitration process.

    \10\ 15 U.S.C. 78f(b)(6).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-Amex-95-46) is approved.

    \11\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\

    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-1565 Filed 1-26-96; 8:45 am]
BILLING CODE 8010-01-M