12582 Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices

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 Nineteenth pursuant

to Delaware corporate law, Pennsylvania contract

law, and the Exchange’s Certificate of

Incorporation, by-laws, and rules. 4 In connection with this proposed rule change,

the Commission approved a proposed 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 Twentieth (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).

9See, e.g., Certificate of Incorporation, Article

Thirteenth (lessor entitled to vote on compromise

or arrangement); Certificate of Incorporation, Article

Seventeenth (lessor entitled to receive any

distribution of assets upon liquidation); By-Law

Article I, Section 1–1 (defining lessor and lessee);

By-Law Article XII, Section 12–8 (authorizing lessor

application fee as fixed from time to time by the

Board, lessor initiation fee and fee upon transfer of

equitable title to a membership); and Rule 930

(setting forth required terms of lease agreements).

10See Exchange By-Law Article XII, Section 12–

9. As a condition of the right to lease their seats,

lessors agree ‘‘to abide by the [Exchange’s] By-Laws

as they have or shall be from time to time amended,

and by all rules and regulations adopted pursuant

to the By-Laws.’’ Lessees, as members, likewise

make the same commitment.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43987; File No. SR–Phlx–

99–50]

Self-Regulatory Organizations;

Philadelphia Stock Exchange, Inc.;

Order Approving Proposed Rule

Change and Amendment No. 1

Amending the Exchange’s Certificate

of Incorporation

February 20, 2001.

I. Introduction

On November 23, 1999, the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or ‘‘Exchange’’) submitted to the

Securities and Exchange Commission

(‘‘Commission’’) pursuant to section

19(b)(1) of the Securities and Exchange

Act of 1934 (‘‘Act’’),1 and Rule 19b–4

thereunder,2 a proposed rule change.

The Phlx filed an amendment to the

proposal on December 28, 2000.3 The

proposed rule change was published for

comment in the Federal Register on

January 16, 2001. The Commission did

not receive any comment letters with

respect to the proposal. This order

approves the Exchange’s proposal.

II. Description of the Proposal

A. The Original Filing

The Phlx proposed 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

represented in Amendment No. 1 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)(3).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.

Pursuant to Article Nineteenth, the

Board would have the authority to make

rules that impact lease arrangements,

including adopting rules relating to the

termination of lease agreements. As

discussed, the Exchange’s Certificate of

Incorporation, by-laws and rules already

include several provisions addressing

such authority.9 Moreover, the

Exchange’s by-laws require lessors and

lessees (as members) to pledge to abide

by the rules as they may be amended

from time to time.10

The Exchange further represents that

proposed Article Nineteenth is also

permissible as a matter of Pennsylvania

contract law. The provisions of Article

Nineteenth authorizing the adoption of

rules affecting lease agreements between

Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices 12583

11Other examples include By-Law Art. I, § 1–1

(defining lessor and lessee); By-Law Art. XII, § 12–

1 (a member conducts business on the Exchange);

By-Law Art. XII, § 12–8 (authorizing lessor

application fee, lessor initiation fee, and fees upon

transfer of equitable title); By-Law Art. XIV, §§ 14–

1, 14–2, 14–5 (the Exchange can impose charges on

members, including penalties for non-payment of

fees); By-Law Art. XV, § 15–1 (the Exchange

approves lessees); Rule 931 (the Exchange approves

lessors); Rule 960.1 et seq. (the Exchange may

discipline members).

12 15 U.S.C. 78f.

13 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

14 15 U.S.C. 78f(b)(5).

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

16 15 U.S.C. 78s(b)(2).

17 17 CFR 200.30–3(a)(12).

lessors and lessees are lawful because,

under the terms of its relationships with

both lessors and lessees, the Exchange

has the right to adopt by-laws, rules, or

regulations that affect those lessors and

lessees. Pennsylvania law holds that a

contracting party may lawfully exercise

its own contractual rights against

another party to the contract, even if

doing so interferes with the terms of a

separate agreement of the other party.

Here, the potential suspension or

termination of a lease agreement in

accordance with the rules of the

Exchange is permissible under the terms

of the Exchange’s separate agreements

with each of the parties to the lease

agreement.

Both lessors and lessees (as members)

agree respectively as a condition of

approval of the right to lease seats and

as a condition of approval for

membership that the Exchange may

effectuate changes to their lease

agreements, including termination. As a

condition of the right to lease their

seats, lessors agree ‘‘to abide by the

[Exchange’s] By-Laws as they have or

shall be from time to time amended, and

by all rules and regulations adopted

pursuant to the By-Laws.’’ See By-Law

Art. XII, § 12–9(b). Lessees (as members)

likewise make the same commitment.

See id. at 12–9(a). By agreeing to abide

by future by-laws, rules, and

regulations, lessors and lessees

necessarily grant permission to the

Exchange to adopt rules pursuant to

which their lease agreements may be

suspended or terminated. Indeed, the

Exchange has already repeatedly

exercised its right to adopt rules and bylaws directly impacting lessors and

lessees in a variety of rules, including

Rule 930, which closely regulates the

terms and conditions of lease

agreements.11 Accordingly, Article

Nineteenth, which would provide in

express form the authorization for the

adoption of rules suspending or

terminating lease agreements, would

simply authorize that which is

countenanced by the terms of the

Exchange’s existing relationship with

lessors and lessees, and is thereby

permissible as a matter of Pennsylvania

contract law.

Thus, the Exchange believes that

proposed Article Nineteenth was

properly adopted by the Exchange

Board under Delaware law and is

permissible as a matter of Pennsylvania

contract law.

III. Discussion

After careful consideration, the

Commission finds that the proposed

rule change is consistent with the

requirements of section 6 of the Act 12

and the rules and regulations

thereunder applicable to a national

securities exchange.13 In particular, the

Commission finds the proposed rule

change is consistent with section 6(b)(5)

of the Act,14 in that it promotes just and

equitable principles of trade and

protects investors and the public

interest.

The Phlx represented that it needs

Article Nineteenth in order to give the

Board the express authorization to adopt

specific rules relating to the leasing of

memberships, including suspending or

terminating lease agreements. The

Commission finds that the proposed

rule change promotes just and equitable

principles of trade and protects

investors and the public interest

because it enables the Board to

determine whether, and under what

terms and conditions, memberships can

be leased. Furthermore, the Phlx

acknowledges that any such rules or

resolutions, which are adopted by the

Board under Article Nineteenth, shall be

filed with the Commission to the extent

required pursuant to section 19(b) of the

Act.15

The Commission is not required

under section 19(b)(2) of the Act to find

that a proposed rule change by a selfregulatory organization is lawful under

state law. In approving this proposal,

the Commission is relying on the Phlx’s

representation that it has the general

power under applicable provisions of

Delaware corporate law to adopt Article

Nineteeth without the approval of

members, or by owners, lessors, or

lessees of memberships. Furthermore,

the Commission is also relying on the

Phlx’s representation that, under the

applicable powers of Pennsylvania

contract law, the Phlx has the right to

adopt by-laws, rules, or regulation that

affect those lessors and lessees

contractual relationships. The

Commission has not independently

evaluated the accuracy of Phlx’s

representations about Delaware or

Pennsylvania law.

Thus, the Commission finds that the

proposed rule change is consistent with

the Act.

IV. Conclusion

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,16 that the

proposed rule change (SR–Phlx–99–50),

and Amendment No. 1 thereto, are

approved.

By the Commission, for the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4754 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

Environmental Impact Statement:

Klickitat and Skamania Counties,

Washington and Hood River County,

Oregon

AGENCY: Federal Highway

Administration (FHWA), DOT.

ACTION: Notice of Intent.

SUMMARY: The FHWA is issuing this

notice to advise the public that an

Environmental Impact Statement (EIS)

will be prepared for a proposed new

Columbia River crossing project in

Klickitat County or Skamania County,

Washington and Hood River County,

Oregon. Northern and southern termini

for the new crossing would be located

in or near the cities of White Salmon

and Bingen, Washington, and Hood

River, Oregon.

FOR FURTHER INFORMATION CONTACT:

Michael Kulbacki, Transportation and

Environmental Engineer, Federal

Highway Administration, 711 S. Capitol

Way, Suite 501, Olympia, WA 98501,

Telephone: 360–753–9556; or Dale

Robins, Project Manager, Southwest

Washington Regional Transportation

Council, 1351 Officers Row, Vancouver,

WA 98661, Telephone: 360–397–6067.

Additional information can also be

obtained at the project web site:

http:www.rtc.wa.gov/studies/sr35.

SUPPLEMENTARY INFORMATION: The

FHWA, in cooperation with the

Washington State Department of

Transportation, the Southwest

Washington Regional Transportation

Council, and the Oregon Department of

Transportation, will prepare an EIS on