[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Notices]
[Pages 36209-36210]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 00-14261]
[[Page 36209]]
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SECURITIES AND EXCHANGE COMMISSION
[(Release No. 34-42860; File No. SR-Phlx-00-07)]
Self Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to Disclosure
of Securities Accounts
May 30, 2000.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), \1\ and Rule 19b-4 thereunder, \2\ notice is hereby given
that on January 31, 2000, the Philadelphia Stock Exchange, Inc.
``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been 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\ 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 proposes to adopt new Rule 757 (``Disclosure of
Securities Accounts''), which would require Exchange members, member
organizations, foreign currency options participants, and foreign
currency options participant organizations (``Exchange members and
organizations'') to report to the Exchange all securities accounts in
which they have any financial interest or power to make investment
decisions. In addition, the rule would require that Exchange members
and organizations notify the institution that services the accounts, or
at which the accounts are located, that the Exchange members and
organizations are members of the Exchange. Below is the text of the
proposed rule change, which is entirely new.
* * * * *
Rule 757--Disclosure of Securities Accounts
(a) Every member, member organization, participant, and participant
organization shall promptly report to the Exchange any securities
account, including any error account, in the name of the member, member
organization, participant, or participant organization or in which the
member, member organization, participant, or participant organization
has, directly or indirectly, any financial interest or power to make
investment decisions.
(b) Every report shall, at a minimum, include the name of the
account, the account number, the type of account, the current
securities position(s) in the account, and the name, address, and
telephone number of the institution that services the account or at
which the account is maintained. A report shall contain such additional
information as the Exchange may from time to time require.
(c) Every member, member organization, participant, or participant
organization having a reportable account for purposes of this rule
shall notify each institution that services an account or at which an
account is maintained that the member, member organization,
participant, or participant organization is a member of the Exchange.
Commentary:
.01 Purchases of a security of a publicly traded registered
investment company directly from the issuer or the principal
underwriter shall not be deemed a reportable security for the purposes
of this section. Interest in a non-publicly traded investment vehicle,
including a hedge fund, is a reportable security for purposes of this
section.
* * * * *
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 Phlx 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
Proposed new Rule 757 would require Exchange members and
organizations to report to the Exchange information about all
securities accounts in which they have any financial interest or power
to make investment decisions.\3\ The Phlx states that this proposed
rule change would aid the investigative efforts of the other exchanges,
as well as its own efforts, by assisting the Intermarket Surveillance
Group (``ISG'') in creating a floor member securities account
database.\4\ The Phlx would transmit information it receives about
accounts of Exchange members and organizations to the Securities
Industry Automation Corporation, which would maintain the information
on behalf of the ISG.\5\
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\3\ Proposed new Rule 757 does not impose an obligation on
Exchange members and organizations to report the securities
positions in their accounts on an ongoing basis. Telephone
conversation between Jurij Trypupenko, Counsel, Phlx, and Ira
Brandriss, Attorney, Division of Market Regulation (``Division''),
Commission, February 22, 2000.
\4\ The ISG is an organization formed by representatives of
exchanges in the United States (and certain international exchanges)
to address surveillance issues.
\5\ Telephone conversation between Jurij Trypupenko, Counsel,
Phlx, and Ira Brandriss, Attorney, Division, Commission, and Joshua
Kans, Special Counsel, Division, Commission, March 9, 2000.
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Under the proposed rule, each report would include, at a minimum,
the name of the account, the account number, the type of account, the
current securities position(s) in the account, and the name, address,
and telephone number of the institution that services the account or at
which the account is maintained.\6\ In addition, the rule requires
every Exchange member and organization that has a reportable account to
inform each institution that services the account, or at which the
account is maintained, that the Exchange member or organization is a
member of the Exchange. Also, a report shall contain such additional
information as the Exchange may from time to time require. The proposed
commentary to new Rule 757 states that purchases of a security of a
publicly traded registered investment company directly from the issuer
or the principal underwriter shall not be deemed a reportable security
for the purposes of the rule. Interest in a non-publicly traded
investment vehicle, including a hedge fund, would be a reportable
security.
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\6\ The term ``institution'' includes a non-member brokerage
firm, investment adviser firm, bank, or other financial institution.
Telephone conversation between Jurij Trypupenko, Counsel, Phlx, and
Ira Brandriss, Attorney, Division, Commission, February 22, 2000.
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The Exchange represents that proposed new Rule 757 would also
enhance Exchange surveillance and regulatory efforts by expanding
current account reporting requirements. Phlx Rule 751 presently
requires employees of Exchange members and organizations to report
certain account information to the Exchange members and organizations
that employ them, but there is no corresponding obligation on Exchange
member and organization employers to report their account information
to the Exchange. The
[[Page 36210]]
Exchange believes that proposed new Rule 757's requirement that
Exchange members and organizations report securities accounts to the
Exchange should provide the Exchange with the capability to monitor and
investigate quickly the trading of securities by personnel that trade
on the equity, options, and foreign currency floors of the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6 of the Act \7\ in general, and furthers the objectives
of section 6(b)(5) \8\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, and to protect
investors and the public interest by requiring disclosure of securities
accounts in which Exchange members have a financial interest or power
to make investment decisions.
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\7\ 15 U.S.C. 78f(b).
\8\ 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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange did not solicit or receive written comments on 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 Exchange 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 Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
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 at the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-Phlx-00-07 and
should be submitted by June 28, 2000.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14261 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M