Document ID: SEC-2009-0839-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change Regarding Statutory Disqualification Procedures
Posted Date: 2009-06-22T04:00Z

[Federal Register: June 22, 2009 (Volume 74, Number 118)]
[Notices]               
[Page 29525-29526]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22jn09-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60106; File No. SR-CBOE-2009-033]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Regarding 
Statutory Disqualification Procedures

June 12, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Exchange Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is 
hereby given that on May 26, 2009, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or the ``Exchange'') filed with the Securities 
and Exchange Commission (the ``SEC'' or ``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been substantially prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 its rule regarding members and 
associated persons who are or become subject to a statutory 
disqualification. The text of the proposed rule change is available on 
the Exchange's Web site (http://www.cboe.org/legal), at the Exchange's 
Office of the Secretary, and at the Commission's Public Reference Room.

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 Exchange 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 those 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Exchange Rule 3.18(a) provides that the Exchange may determine not 
to permit a member or an associated person of a member who is or 
becomes subject to a statutory disqualification under the Exchange 
Act,\4\ to continue in membership or in association with a member. 
Under Rule 3.18(b), a member or an associated person who is or becomes 
subject to a statutory disqualification and wishes to continue in 
membership or in association with a member must submit an application 
to the Exchange to do so. When the Exchange receives such an 
application, or otherwise becomes aware that a member or an associated 
person is subject to a statutory disqualification, the Exchange is 
required to appoint a panel to conduct a hearing under the procedures 
set forth in Rule 3.18 to determine whether to allow the member or 
associated person to continue in membership or in association with a 
member. The purpose of this rule filing is to expand the ability of the 
Exchange to waive the requirement to conduct a hearing under Rule 3.18 
if the Exchange intends to grant a member's application for continued 
membership or an associated person's application for continued 
association with a member.
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    \4\ 15 U.S.C. 78a et seq.
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    Exchange Act Rule 19h-1 \5\ prescribes the form and content of, and 
establishes the mechanism by which the Commission reviews, proposals 
submitted by self-regulatory organizations (``SROs''), such as the 
Exchange, to allow a member or associated person subject to a statutory 
disqualification to become or remain a member or associated with a 
member. Among other things, Exchange Act Rule 19h-1 provides for 
Commission review of notices filed by SROs proposing to admit any 
person to, or continue any person in, membership or association with a 
member, notwithstanding a statutory disqualification. However, Exchange 
Act Rule 19h-1(a)(2) \6\ and Exchange Act Rule 19h-1(a)(3) \7\ provide 
that for certain persons, and in limited circumstances, a notice does 
not need to be filed.
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    \5\ 17 CFR 240.19h-1.
    \6\ Exchange Act Rule 19h-1(a)(2), 17 CFR 240.19h-1(a)(2), 
provides that a notice need not be filed with the Commission, 
pursuant to Exchange Act Rule 19h-1, regarding an associated person 
subject to a statutory disqualification if the person's activities 
with respect to the member are solely clerical or ministerial in 
nature and such person does not have access to funds, securities, or 
books and records.
    \7\ Exchange Act Rule 19h-1(a)(3), 17 CFR 240.19h-1(a)(3), 
provides that a notice need not be filed with the Commission, 
pursuant to Exchange Act Rule 19h-1, regarding a person or member 
subject to a statutory disqualification if the person or member 
proposed for continued association or membership, respectively, 
satisfies the requirements of Exchange Act Rule 19h-1(a)(3)(i)-(vi).
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    Interpretation and Policy .03 to Rule 3.18 currently permits the 
Exchange to waive the hearing provisions of Rule 3.18 when the Exchange 
intends to grant an associated person's application for continued 
association and the Exchange is not required to make a notice filing 
with the Commission under Exchange Act Rule 19h-1(a)(2).\8\ The 
Exchange is proposing to expand its ability to waive the hearing 
provisions of Rule 3.18 to when the Exchange intends to grant a 
member's or associated person's application for continued membership or 
association and the Exchange is not required to make a notice filing 
with the Commission under Exchange Act Rule 19h-1(a)(3).
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    \8\ See Securities Exchange Act Release No. 56614 (October 4, 
2007), 72 FR 58132 (October 12, 2007) (SR-CBOE-2007-14).
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    The Exchange is also proposing to waive the hearing provisions of 
Rule 3.18 when the Exchange determines to allow a member to continue in 
membership, or an associated person to continue in association with a 
member, and the Exchange determines that it is otherwise appropriate to 
waive the hearing provisions of Rule 3.18 under the circumstances. For 
example, a settlement agreement for a disciplinary matter involving 
CBOE and multiple regulators or SROs could fully address statutory 
disqualification issues, obviating the need for a CBOE hearing on those 
same issues. The Exchange might also choose to exercise this waiver 
authority when no regulatory purpose would be served by conducting a 
hearing under Rule 3.18, such as when the Commission initiated the 
proceeding regarding the underlying conduct that resulted in the 
statutory disqualification and the sanction imposed in the matter does 
not inhibit the applicable party's ability to continue as an Exchange 
member or associated person.
    Interpretation and Policy .01 to Rule 3.18 (``Rule 3.18.01'') 
provides that the Exchange may waive the provisions of Rule 3.18 when a 
proceeding is pending before another SRO to determine whether to permit 
a member or an associated person to continue in membership or 
association with the

[[Page 29526]]

member notwithstanding a statutory disqualification. When the Exchange 
exercises this waiver authority, Rule 3.18.01 currently provides that 
the Exchange Department of Financial and Sales Practice Compliance 
shall determine whether the Exchange will concur in any the Exchange 
Act Rule 19h-1 filing made by another SRO. The Exchange is proposing to 
make two clarifying changes to this provision. First, the Exchange 
proposes to replace the reference to the ``Department of Financial and 
Sales Practice Compliance'' with the ``Exchange'' because the Exchange 
no longer has a department by that name. The Exchange is also proposing 
to include the words ``member or'' in the last sentence of Rule 3.18.01 
to clarify that the Exchange may concur in any Exchange Act Rule 19h-1 
filing made by another SRO with respect to a member or an associated 
person. This change is consistent with the rest of Rule 3.18.01.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Exchange Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Exchange Act,\10\ which requires, 
among other things, that the Exchange's rules be designed to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and protect investors and the public 
interest. The Exchange believes that the proposed rule change would 
better enable the Exchange to streamline the administration of its 
statutory disqualification program and better protect investors and the 
public interest by focusing Exchange resources on circumstances 
sufficient to warrant a statutory disqualification hearing.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is 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 with respect to the 
proposed rule change.

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 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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2009-033 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2009-033. 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the principal office of CBOE. 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-CBOE-2009-033 and should be 
submitted on or before July 13, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-14530 Filed 6-19-09; 8:45 am]

BILLING CODE 8010-01-P