Document ID: SEC-2006-0733-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange, Inc.
Posted Date: 2006-06-07T04:00Z

[Federal Register: June 7, 2006 (Volume 71, Number 109)]
[Notices]               
[Page 33008-33009]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jn06-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53917; File No. SR-Amex-2005-116]

 
Self-Regulatory Organizations; American Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change and Amendment No. 1 
Thereto Relating to Written Compliance and Supervisory Controls

June 1, 2006.

I. Introduction

    On November 7, 2005, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission

[[Page 33009]]

(``Commission'') pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ the 
proposed rule change relating to written compliance and supervisory 
controls. Amex filed Amendment No. 1 to the proposed rule change on 
April 6, 2006. The proposed rule change was published for comment in 
the Federal Register on April 28, 2006.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 53708 (April 24, 
2006), 71 FR 25254.
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II. Description of the Proposal

    The Exchange is proposing to amend Amex Rule 320 to require members 
and member organizations with employees to establish, maintain, 
enforce, and keep current a system of compliance and supervisory 
controls, including written compliance and supervisory policies and 
procedures, that are reasonably designed to achieve compliance with 
applicable securities laws and regulations and Exchange rules.\4\ In 
addition to requiring that the written compliance and supervisory 
policies and procedures be amended as necessary, the proposed rule 
would require that a member's or member organization's supervisory 
control employee provide reports, at least annually, to senior 
management summarizing certain aspects of the compliance and 
supervisory program.\5\
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    \4\ See proposed Amex Rule 320(e). An Amex member or member 
organization consisting of a sole individual (i.e., a sole 
proprietorship) would be required to maintain a written compliance 
manual specifying the obligations to which such member or member 
organization is subject along with the processes and controls in 
place that are reasonably designed to achieve compliance with such 
obligations. See Amex Rule 320, proposed Commentary .08.
    \5\ See proposed Amex Rule 320(e)(3).
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    In addition, the Exchange proposed clarifying edits to the text of 
Amex Rule 320, including: (1) Explicit references to a member's or 
member organization's obligation to comply with Exchange rules in 
addition to all applicable securities laws and regulations, and (2) 
replacing references to ``member firm'' with references to ``member 
organization.''

III. Discussion and Commission Findings

    The Commission has reviewed carefully the proposed rule change and 
finds that it is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange,\6\ particularly section 6(b)(5) of the Act,\7\ which, among 
other things, requires that the rules of a national securities exchange 
be designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Exchange's proposal to require its 
members and member organizations to establish, maintain, enforce, and 
keep current a system of compliance and supervisory controls, including 
written compliance and supervisory policies and procedures, that are 
reasonably designed to achieve compliance with applicable securities 
laws and regulations and Exchange rules should help strengthen the 
Exchange's regulatory program by increasing member awareness of the 
laws and rules with which they must comply. It should also provide 
members an additional incentive to be cognizant of changing regulatory 
requirements. The Exchange will review the adequacy of its members' and 
member organizations' compliance programs. Further, the requirement 
that Amex members and member organizations adopt comprehensive written 
compliance and supervisory policies and procedures, and report to 
senior management on certain aspects of the compliance and supervisory 
program, should result in the periodic assessment by members and member 
organizations of the effectiveness of their compliance programs. 
Accordingly, the proposed rule change should help Amex strengthen its 
regulatory program for detecting, sanctioning, and deterring violations 
of Exchange rules and securities laws and regulations and, therefore, 
should promote just and equitable principles of trade.\8\ Furthermore, 
the Commission believes that the Amex's proposal should enhance 
investor protection by facilitating the Exchange's review of its 
members' and member organizations' systems of compliance and 
supervisory controls and by enhancing the compliance programs at the 
member level.
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    \8\ The Commission notes that a national securities exchange 
must have the capacity to enforce compliance by its members with 
applicable securities laws, regulations and the exchange's own 
rules. See e.g., section 6(b)(1) of the Act, 15 U.S.C. 78f(b)(1).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-Amex-2005-116), as 
amended, be and hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-8802 Filed 6-6-06; 8:45 am]

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