Document ID: SEC-2007-0475-0001
Agency: sec
Document Type: Notice
Title: Joint industry plan: American Stock Exchange, LLC, et al.
Posted Date: 2007-04-02T04:00Z

[Federal Register: April 2, 2007 (Volume 72, Number 62)]
[Notices]               
[Page 15729-15731]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap07-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55532; File No. S7-966]

 
Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Order Granting Approval of Amendment to the Plan for the 
Allocation of Regulatory Responsibilities Among the American Stock 
Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board 
Options Exchange, Inc., the International Securities Exchange, LLC, the 
National Association of Securities Dealers, Inc., the New York Stock 
Exchange, LLC, the NYSE Arca, Inc., and the Philadelphia Stock 
Exchange, Inc.

March 26, 2007.
    On December 5, 2006, the American Stock Exchange, LLC (``Amex''), 
the Boston Stock Exchange, Inc. (``BSE''),

[[Page 15730]]

the Chicago Board Options Exchange, Inc. (``CBOE''), the International 
Securities Exchange, LLC (``ISE''), the National Association of 
Securities Dealers, Inc. (``NASD''), the New York Stock Exchange, LLC 
(``NYSE''), the NYSE Arca, Inc. (``NYSE Arca''), and the Philadelphia 
Stock Exchange, Inc. (``Phlx'') (collectively the ``SRO participants'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 17(d) \1\ of the Securities Exchange Act of 1934 
(``Act'') and Rule 17d-2 thereunder,\2\ an amendment to their January 
14, 2004 plan for the allocation of regulatory responsibility. The 
proposed amended plan was published for comment on January 26, 2007.\3\ 
The Commission received no comments on the amended plan. This order 
approves the amended plan.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
    \3\ Securities Exchange Act Release No. 55145 (January 22, 
2007), 72 FR 3882.
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I. Introduction

    Section 19(g)(1) of the Act,\4\ among other things, requires every 
national securities exchange and registered securities association 
(``SRO'') to examine for, and enforce, compliance by its members and 
persons associated with its members with the Act, the rules and 
regulations thereunder, and the SRO's own rules, unless the SRO is 
relieved of this responsibility pursuant to Section 17(d) or 19(g)(2) 
of the Act.\5\ Without this relief, the statutory obligation of each 
individual SRO could result in a pattern of multiple examinations of 
broker-dealers that maintain memberships in more than one SRO (``common 
members''). This regulatory duplication would add unnecessary expenses 
for common members and their SROs.
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    \4\ 15 U.S.C. 78s(g)(1).
    \5\ 15 U.S.C. 78q(d) or 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\6\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules and regulations, or to perform other 
specified regulatory functions.
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    \6\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session. 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\7\ Rule 17d-1, adopted on 
April 20, 1976,\8\ authorizes the Commission to name a single SRO as 
the designated examining authority (``DEA'') to examine common members 
for compliance with the financial responsibility requirements imposed 
by the Act, or by Commission or SRO rules. When an SRO has been named 
as a common member's DEA, all other SROs to which the common member 
belongs are relieved of the responsibility to examine the firm for 
compliance with applicable financial responsibility rules.
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    \7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2.
    \8\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18809 (May 3, 1976).
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    Rule 17d-1 deals only with an SRO's obligations to enforce broker-
dealers' compliance with the financial responsibility requirements. 
Rule 17d-1 does not relieve an SRO from its obligation to examine a 
common member for compliance with its own rules and provisions of the 
federal securities laws governing matters other than financial 
responsibility, including sales practices, and trading activities and 
practices.
    To address regulatory duplication in these other areas, on October 
28, 1976, the Commission adopted Rule 17d-2 under the Act.\9\ This rule 
permits SROs to propose joint plans allocating regulatory 
responsibilities with respect to common members. Under paragraph (c) of 
Rule 17d-2, the Commission may declare such a plan effective if, after 
providing for notice and comment, it determines that the plan is 
necessary or appropriate in the public interest and for the protection 
of investors, to foster cooperation and coordination among the SROs, to 
remove impediments to and foster the development of a national market 
system and a national clearance and settlement system, and in 
conformity with the factors set forth in Section 17(d) of the Act. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \9\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49093 (November 8, 1976).
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II. The Plan

    On September 8, 1983, the Commission approved the SRO participants' 
plan for allocating regulatory responsibilities pursuant to Rule 17d-
2.\10\ On May 23, 2000, the Commission approved an amendment to the 
plan that added the ISE as a participant.\11\ On November 8, 2002, the 
Commission approved another amendment that replaced the original plan 
in its entirety and, among other things, allocated regulatory 
responsibilities among all the participants in a more equitable 
manner.\12\ On February 5, 2004, the parties submitted an amendment to 
the plan, primarily to include the BSE, which was establishing a new 
options trading facility to be known as the Boston Options Exchange 
(``BOX''), as an SRO participant.\13\
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    \10\ See Securities Exchange Act Release No. 20158 (September 8, 
1983), 48 FR 41256 (September 14, 1983).
    \11\ See Securities Exchange Act Release No. 42816 (May 23, 
2000), 65 FR 24759 (May 31, 2000).
    \12\ See Securities Exchange Act Release No. 46800 (November 8, 
2002), 67 FR 69774 (November 19, 2002).
    \13\ See Securities Exchange Act Release No. 49197 (February 5, 
2004), 69 FR 7046. (February 12, 2004).
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    The plan reduces regulatory duplication for a large number of firms 
currently members of two or more of the SRO participants by allocating 
regulatory responsibility for certain options-related sales practice 
matters to one of the SRO participants. Generally, under the current 
plan, the SRO participant responsible for conducting options-related 
sales practice examinations of a firm, and investigating options-
related customer complaints and terminations for cause of associated 
persons of that firm, is known as the firm's ``Designated Options 
Examining Authority'' (``DOEA''). Pursuant to the current plan, any 
other SRO of which the firm is a member is relieved of these 
responsibilities during the period the firm is assigned to a DOEA.

III. Proposed Amendment to the Plan

    The purpose of the amended plan is to: (i) Provide that NASD and 
NYSE will be DOEAs under the plan, (ii) provide that the Designated 
Examination Authority pursuant to Commission Rule 17d-1 under the Act 
for a broker-dealer that is a member of more than one SRO participant 
(but not a member of the NASD or the NYSE) shall perform the regulatory 
responsibility under the agreement as if such DEA were the DOEA, (iii) 
to incorporate a more formal procedure for updating the list of common 
rules, and (iv) make certain other changes to the plan. The amended 
plan replaces the previous plan in its entirety.

IV. Discussion

    The Commission finds that the amended plan is consistent with the 
factors set forth in Section 17(d) of the Act \14\ and Rule 17d-2(c) 
thereunder \15\

[[Page 15731]]

in that the amended plan is necessary or appropriate in the public 
interest and for the protection of investors, to foster cooperation and 
coordination among self-regulatory organizations, and to remove 
impediments to and foster the development of a national market system. 
In particular, the Commission continues to believe that the plan is an 
achievement in cooperation among the SRO participants, and that the 
plan will reduce unnecessary regulatory duplication by allocating to 
the designated SRO the responsibility for certain options-related sales 
practice matters that would otherwise be performed by multiple SROs. 
The plan promotes efficiency by reducing costs to firms that are 
members of more than one of the SRO participants. In addition, because 
the SRO participants coordinate their regulatory functions in 
accordance with the plan, the plan promotes, and will continue to 
promote, investor protection.
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    \14\ 15 U.S.C. 78q(d).
    \15\ 17 CFR 240.17d-2(c).
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V. Conclusion

    This order gives effect to the amended plan submitted to the 
Commission that is contained in File No. S7-966. The SRO participants 
shall notify all members affected by the amended plan of their rights 
and obligations under the amended plan.
    It is therefore ordered, pursuant to Sections 17(d) \16\ of the 
Act, that the amended plan of the Amex, BSE, CBOE, ISE, NASD, NYSE, 
NYSE Arca, and Phlx filed pursuant to Rule 17d-2 \17\ is approved.
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    \16\ 15 U.S.C. 78q(d).
    \17\ 17 CFR 240.17d-2.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(34).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5981 Filed 3-30-07; 8:45 am]

BILLING CODE 8010-01-P