Document ID: SEC-2005-0324-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2005-12-05T05:00Z

[Federal Register: December 5, 2005 (Volume 70, Number 232)]
[Notices]               
[Page 72477-72480]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05de05-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52844; File No. SR-Amex-2005-064]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 
Thereto Relating to Telemarketing

November 28, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ (``Exchange Act'') and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on June 14, 2005, the American Stock Exchange LLC 
(``Amex'' 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 September 23, 2005, the Amex filed Amendment No. 1 
to the proposed rule change.\3\ On November 15, 2005, the Amex filed 
Amendment No. 2 to the proposed rule change.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Amex partially amended the text of 
proposed amended Amex Rule 429 and made conforming and technical 
changes to the original filing.
    \4\ In Amendment No. 2, the Amex made additional changes to the 
text of proposed amended Amex Rule 429 and to the original filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Amex Rule 429 
(``Telemarketing'') to require Amex members and member organizations to 
participate in the National Do-Not-Call Registry maintained by the 
Federal Trade Commission (``FTC'') and to follow applicable regulations 
of the Federal Communications Commission (``FCC'').
    The current text of Amex Rule 429 would be deleted. The text of the 
proposed rule change is set forth below. Italics indicate new text.

Telemarketing

Rule 429.

(a) General Telemarketing Requirements

    No member or member organization, or person associated with a 
member or member organization shall initiate any telephone 
solicitation, as defined in paragraph (g)(2) of this rule, to:

(1) Time of Day Restriction

    Any residence of a person before the hour of 8 a.m. or after 9 p.m. 
(local time at the called party's location), unless
    (A) the member has an established business relationship with the 
person pursuant to paragraph (g)(1)(A),
    (B) the member has received that person's prior express invitation 
or permission, or
    (C) the person called is a broker or dealer;

(2) Firm Specific Do-Not-Call List

    Any person that previously has stated that he or she does not wish 
to receive an outbound telephone call made by or on behalf of the 
member; or

(3) National Do-Not-Call List

    Any person who has registered his or her telephone number on the 
Federal Trade Commission's national do-not-call registry.

(b) National Do-Not-Call List Exceptions

    A member making telephone solicitations will not be liable for 
violating paragraph (a)(3) if:

(1) Established Business Relationship Exception

    The member has an established business relationship with the 
recipient of the call. A person's request to be placed on the firm-
specific do-not-call list terminates the established business 
relationship exception to that national do-not-call list provision for 
that member even if the person continues to do business with that 
member;

(2) Prior Express Written Consent Exception

    The member has obtained the person's prior express invitation or 
permission. Such permission must be evidenced by a signed, written 
agreement between the person and the member which states that the 
person agrees to be contacted by the member and includes the telephone 
number to which the calls may be placed; or

(3) Personal Relationship Exception

    The associated person making the call has a personal relationship 
with the recipient of the call.

(c) Safe Harbor Provision

    A member or person associated with a member making telephone 
solicitations will not be liable for violating paragraph (a)(3) if the 
member or person associated with the member demonstrates that the 
violation is the result of an error and that as part of the member's 
routine business practice, it meets the following standards:
    (1) Written procedures. The member has established and implemented 
written procedures to comply with the national do-not-call rules;
    (2) Training of personnel. The member has trained its personnel and 
any entity assisting in its compliance, in procedures established 
pursuant to the national do-not-call rules;
    (3) Recording. The member has maintained and recorded a list of 
telephone numbers that it may not contact; and
    (4) Accessing the national do-not-call database. The member uses a 
process to prevent telephone solicitations to any telephone number on 
any list established pursuant to the do-not-call rules, employing a 
version of the national do-not-call registry obtained from the 
administrator of the registry no more than thirty-one (31) days prior 
to the date any call is made, and maintains records documenting this 
process.

(d) Procedures

    Prior to engaging in telemarketing, a member must institute 
procedures to comply with paragraph (a). Such procedures must meet the 
following minimum standards:
    (1) Written policy. Members must have a written policy for 
maintaining a do-not-call list.
    (2) Training of personnel engaged in telemarketing. Personnel 
engaged in any aspect of telemarketing must be informed and trained in 
the existence and use of the do-not-call list.
    (3) Recording, honoring of do-not-call requests. If a member 
receives a request from a person not to receive calls from that member, 
the member must record the request and place the person's name, if 
provided, and telephone number on the firm's do-not-call list at the 
time the request is made. Members must honor a person's do-not-call 
request within a reasonable time from the date such request is made. 
This period may not exceed thirty days from the date of such request. 
If such requests

[[Page 72478]]

are being recorded or maintained by a party other than the member on 
whose behalf the telemarketing call is made, the member on whose behalf 
the telemarketing call is made will be liable for any failure to honor 
the do not call request.
    (4) Identification of sellers and telemarketers. A member or person 
associated with a member making a call for telemarketing purposes must 
provide the called party with the name of the individual caller, the 
name of the member, an address or telephone number at which the member 
may be contacted, and that the purpose of the call is to solicit the 
purchase of securities or related service. The telephone number 
provided may not be a 900 number or any other number for which charges 
exceed local or long distance transmission charges.
    (5) Affiliated persons or entities. In the absence of a specific 
request by the person to the contrary, a person's do-not-call request 
shall apply to the member making the call, and will not apply to 
affiliated entities unless the consumer reasonably would expect them to 
be included given the identification of the caller and the product 
being advertised.
    (6) Maintenance of do-not-call lists. A member making calls for 
telemarketing purposes must maintain a record of the caller's request 
not to receive further telemarketing calls. A firm specific do-not-call 
request must be honored for five (5) years from the time the request is 
made.

(e) Wireless Communications

    The provisions set forth in this rule are applicable to members 
telemarketing or making telephone solicitations calls to wireless 
telephone numbers.

(f) Outsourcing Telemarketing

    If a member uses another entity to perform telemarketing services 
on its behalf, the member remains responsible for ensuring compliance 
with all provisions contained in this rule.

(g) Definitions

    (1) Established business relationship
    (A) An ``established business relationship'' exists between a 
member and a person if:
    (i) The person has made a financial transaction or has a security 
position, a money balance, or account activity with the member within 
the previous eighteen months immediately preceding the date of the 
telemarketing call;
    (ii) The member is the broker/dealer of record for an account of 
the person within the previous 18 months immediately preceding the date 
of the telemarketing call; or
    (iii) The person has contacted the member to inquire about a 
product or service offered by the member within the previous three 
months immediately preceding the date of the telemarketing call.
    (B) A person's established business relationship with a member does 
not extend to the member's affiliated entities unless the person would 
reasonably expect them to be included. Similarly, a person's 
established business relationship with a member's affiliate does not 
extend to the member unless the person would reasonably expect the 
member to be included.
    (2) The terms ``telemarketing'' and ``telephone solicitation'' mean 
the initiation of a telephone call or message for the purpose of 
encouraging the purchase or rental of, or investment in, property, 
goods, or services, which is transmitted to any person.
    (3) The term ``personal relationship'' means any family member, 
friend, or acquaintance of the telemarketer making the call.
    (4) The term ``account activity'' shall include, but not be limited 
to, purchases, sales, interest credits or debits, charges or credits, 
dividend payments, transfer activity, securities receipts or 
deliveries, and/or journal entries relating to securities or funds in 
the possession or control of the member.
    (5) The term ``broker/dealer of record'' refers to the broker/
dealer identified on a customer's account application for accounts held 
directly at a mutual fund or variable insurance product issuer.

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 Amex 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Amex Rule 429 currently limits members, member organizations, and 
associated persons from making outbound calls to the residence of any 
person for the purposes of soliciting the purchase of securities or 
related services between the hours of 8 a.m. and 9 p.m. It also 
requires disclosure to the called person of the caller's identity, firm 
telephone number and address, and the purpose of the call. Rule 429 
currently creates exceptions from its time of day and disclosure 
requirements for telephone calls to certain categories of ``existing 
customers.''
    The Exchange is proposing to amend Amex Rule 429 to incorporate 
applicable telemarketing regulations issued by the FCC and to require 
members and member organizations to participate in the national do-not-
call registry maintained by the FTC.
Background
    In 1992 and 1995, the FCC and the FTC established regulations 
requiring firms to maintain do-not-call lists and to limit the hours of 
telephone solicitations. The Telemarketing and Consumer Fraud Abuse 
Prevention Act of 1994 (the ``Telemarketing Act'') amended the 
Telephone Consumer Protection Act of 1991 (``TCPA'') and required the 
SEC to promulgate telemarketing rules substantially similar to those of 
the FTC, or direct self-regulatory organizations to do so, unless the 
SEC determined that such rules were not in the interest of investor 
protection.\5\
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    \5\ See 15 U.S.C. 6102(d)(1).
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    In 1996 and 1997 the Amex adopted Rule 428(a) and Rule 429 to 
require members and member organizations to maintain a centralized do-
not-call list of persons who do not wish to receive telephone 
solicitations from members or their associated persons, and to follow 
time-of-day restrictions on telemarketing.\6\
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    \6\ See Securities Exchange Act Release No. 36748 (January 19, 
1996), 61 FR 2556 (January 26, 1996); Securities Exchange Act 
Release No. 38724 (June 6, 1997) 62 FR 32390 (June 13, 1997).
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    In 2003, the FCC and the FTC established rules requiring sellers 
and telemarketers to participate in a national do-not-call registry. 
These rules include a ``safe harbor'' for telemarketers that have made 
a good faith effort to comply with the national do-not-call rules. In 
March 2004, the FTC and FCC further amended their telemarketing rules 
to require the use of a national do-not-call registry that is no more 
than thirty-one (31) days old.
    In correspondence dated February 3, 2005, Commission staff 
recommended that the Amex amend its telemarketing rules to require its 
members and member organizations to participate in

[[Page 72479]]

the national do-not-call registry.\7\ Commission staff noted that NASD 
also had recently filed an amendment to their rules regarding the 
frequency of updates from the national do-not-call registry.\8\ In this 
regard, proposed Rule 429 is substantially similar to the NASD rule 
that was approved by the Commission in January 2004 and amended in 
January 2005.\9\
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    \7\ See Correspondence dated February 3, 2005 from Martha Mahan 
Haines, Assistant Director, Division of Market Regulation, SEC.
    \8\ See Securities Exchange Act Release No. 34-49055 (January 
12, 2004); 69 FR 2801 (January 20, 2004). See also Securities 
Exchange Act Release No. 34-51023 (January 11, 2005); 70 FR 2083 
(January 19, 2005).
    \9\ Id.
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Proposed Amex Rule 429
    Paragraph (a)(1) of proposed Amex Rule 429 provides that members, 
member organizations, or persons associated with a member or member 
organization may engage in telephone solicitations only between the 
hours of 8 a.m. and 9 p.m. unless (1) they have an established business 
relationship with the called person; (2) the member has received that 
person's prior express invitation or permission; or (3) the person 
called is a broker-dealer. These provisions are essentially identical 
to those already in place, except the ``existing customer'' exception 
is being replaced with an ``established business relationship'' 
exception, mirroring the FCC's Rules. As defined in paragraph 
(g)(1)(A), an established business relationship exists if the person 
called has made a financial transaction, or has a security position, a 
money balance, or account activity with the member within the previous 
eighteen (18) months immediately preceding the date of the 
telemarketing call, if the member is the broker-dealer of record for an 
account of the person within the previous 18 months immediately 
preceding the date of the telemarketing call, or when the person has 
contacted the member to inquire about a product or service offered by 
the member within the previous three (3) months immediately preceding 
the date of the telemarketing call.
    Paragraph (a)(2) of proposed Amex Rule 429 prohibits members and 
member organizations, and persons associated with a member or member 
organization from initiating a telephone solicitation to any person 
listed on a firm specific do-not-call list. The firm specific do-not-
call list is maintained pursuant to existing Amex Rule 428.
    Paragraph (a)(3) of proposed Amex Rule 429 requires firms to 
participate in a national do-not-call list. Paragraph (b) of proposed 
Amex Rule 429 lists several exceptions to the national do-not-call list 
compliance requirement, where a member making telephone solicitations 
will not be liable for violating paragraph (a)(3). First, a member will 
not be found liable if they are able to demonstrate that there is an 
established business relationship with the recipient of the call. A 
person's request to be placed on the firm-specific do-not-call list 
terminates the established business relationship exception set forth in 
proposed Amex Rule 429(b), even if the person continues to do business 
with that member. The second exception applies if the member has 
obtained the person's prior express invitation or permission. Such 
permission must be confirmed by a signed written agreement between the 
person and the member, which states that the person agrees to be 
contacted by the member and includes the telephone number to which the 
calls may be placed. Finally, the member or associated person making 
the call will not be found liable if the associated person making the 
call has a personal relationship with the recipient of the call.
    Paragraph 429(c) creates a safe harbor from the national do-not-
call list requirements of paragraph (a)(3). To be eligible for this 
safe harbor, a member or person associated with a member making 
telephone solicitations must demonstrate that the member's routine 
business practice meets the following standards:
     The member must demonstrate that it has established and 
implemented written procedures to comply with the national do-not-call 
rules;
     The member must demonstrate that it has trained its 
personnel and any entity assisting in its compliance, in procedures 
established pursuant to the national do-not-call rules;
     The member must demonstrate that it has maintained and 
recorded a list of telephone numbers that it may not contact; and
     The member must demonstrate that it uses a process to 
prevent telephone solicitations to any telephone number on any list 
established pursuant to the do-not-call rules, and is employing a 
version of the national do-not-call registry obtained from the 
administrator of the registry no more than thirty-one (31) days prior 
to the date any call is made, and maintains records documenting this 
process.\10\
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    \10\ As noted above, the thirty-one (31) day requirement is 
consistent with recent amendments to the FCC and FTC rules that 
became effective January 1, 2005.
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    Paragraph 429(d) sets forth the procedures necessary for members to 
comply with Proposed Amex Rule 429(a). Under paragraphs 429(d)(1)-
(d)(4), a firm's procedures must meet the following minimum standards:
     The member must have a written policy for maintaining a 
do-not-call list;
     The member must demonstrate that its personnel engaged in 
telemarketing are informed and trained in the existence and use of the 
do-not-call list;
     The member must record do-not-call requests when they are 
made and honor them within a reasonable time not to exceed 31 days;
     Members must provide the called party with the name of the 
individual caller, the name of the member, an address or telephone 
number at which the member may be contacted, and that the purpose of 
the call is to solicit the purchase of securities or a related service. 
Such telephone number may not be a 900 number or any other number for 
which charges exceed local or long-distance transmission charges.
    Paragraph 429(d)(3) provides that a member will be liable for any 
failure to honor a do-not-call request by an entity recording or 
maintaining such requests on its behalf.
    Paragraph 429(d)(5) provides that a person's do-not-call request 
applies to the member making the call, and not to affiliated entities, 
unless the consumer reasonably would expect them to be included given 
the identification of the caller and the product being advertised, or 
unless the consumer specifically requests that it apply to affiliated 
entities. Finally, paragraph (d)(6) of proposed amended Amex Rule 429 
requires that a member maintain a record of the caller's request not to 
receive further telemarketing calls. A firm specific do-not-call 
request must be honored for five (5) years from the time the request is 
made.
    Paragraph 429(e) provides that the provisions of the proposed rule 
also apply to members telemarketing or making telephone solicitation 
calls to wireless telephone numbers. Paragraph 429(f) states that a 
member is responsible for complying with the foregoing provisions even 
if it uses another entity to perform telemarketing services on its 
behalf.
    Paragraph 429(g) defines terms used in proposed amended Rule 429. 
As noted above, paragraph 429(g)(1)(A) codifies the definition of an 
established business relationship. Paragraph 429(g)(1)(B) further 
states that a person's established business relationship with a member 
does not extend to the member's affiliated entities unless the person 
would reasonably expect them to be included. Similarly, an established 
business relationship with an affiliate

[[Page 72480]]

does not extend to the member unless the person would reasonably expect 
the member to be included.
    Paragraph 429(g)(2) defines the terms ``telemarketing'' and 
``telephone solicitation'' to mean the initiation of a telephone call 
or message for the purpose of encouraging the purchase or rental of, or 
investment in, property, goods, or services, which is transmitted to 
any person.
    The term ``personal relationship'' is defined in paragraph 
429(g)(3) as any family member, friend, or acquaintance of the 
telemarketer making the call. The term ``account activity'' as defined 
in paragraph 429(g)(4) shall include, but not be limited to, purchases, 
sales interest credits or debits, charges or credits, dividend 
payments, transfer activity, securities receipts or deliveries, and/or 
journal entries relating to securities or funds in the possession or 
control of the member. Finally, the term ``broker/dealer of record'' as 
defined in paragraph 429(g)(5) refers to the broker/dealer identified 
on a customer's account application for accounts held directly at a 
mutual fund or variable insurance product issuer.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Exchange Act \11\ in general and furthers the 
objectives of Section 6(b)(5) \12\ in particular in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system. The Exchange 
believes the proposed rule change will enhance investor protection by 
enabling persons who do not want to receive telephone solicitations 
from members or member organizations to receive the protections of the 
national do-not-call registry.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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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 not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received by the Exchange on 
this proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (a) By order approve such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Exchange Act. Comments may 
be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rulecomments@sec.gov. Please include 

File Number SR-Amex-2005-064 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-064. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the Amex. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Amex-2005-064 and should be 
submitted on or before December 27, 2005.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6828 Filed 12-2-05; 8:45 am]

BILLING CODE 8010-01-P