[Federal Register Volume 59, Number 129 (Thursday, July 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16421]
[[Page Unknown]]
[Federal Register: July 7, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34289; File No. SR-CBOE-93-56]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Chicago Board Options Exchange, Inc., Relating to
Termination of Registered Representatives
June 30, 1994.
On December 14, 1993, the Chicago Board Options Exchange, Inc.
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4
thereunder,\2\ a proposal to amend CBOE Rule 9.3, ``Registration and
Termination of Registered Representatives,'' to require members to file
with the CBOE's Department of Compliance a termination notice for any
discharge or termination of employment of a registered person, and the
reason therefor, within 30 days of the termination. In addition, the
CBOE proposes to allow members to fulfill CBOE Rule 9.3's filing
requirements by submitting their filings or submissions to the North
American Securities Administrators Association (``NASAA'')/National
Association of Securities Dealers, Inc. (``NASD'') Central Registration
Depository (``CRD'') within the time period allowed under CBOE Rule
9.3.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1993).
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The proposed rule change was published in Securities Exchange Act
Release No. 33826 (March 28, 1994), 59 FR 15467 (April 1, 1994). No
comments were received on the proposed rule change.\3\
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\3\On March 30, 1994, the CBOE submitted a letter explaining
that the CBOE's Department of Compliance currently has an electronic
mail box in the CRD that captures all filings submitted by CBOE
member organizations in reference to terminations for cause. The
staff of the CBOE's Department of Compliance reviews this electronic
mail box on a daily basis and will continue to do so after the
Commission approves the proposal. See Letter from Michael L. Meyer,
Schiff Hardin & Waite, to Yvonne Fraticelli, Staff Attorney, Options
Branch, Division of Market Regulation, Commission, Dated March 30,
1994 (``March 30 Letter'').
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The CBOE states that the purpose of the proposal is to modify the
manner in which CBOE members report ``Termination for Cause'' of
employment or affiliation of any registered representative to the CBOE.
Currently, under CBOE Rule 9.3, members must file with the CBOE's
Department of Investigation a Uniform Termination Notice for Securities
Industry Registration (Form U-5) immediately after the termination of
employment ``for cause'' of a registered representative.\4\ The
proposal makes CBOE Rule 9.3 more encompassing by requiring members to
file termination notices with the Exchange's Department of Compliance
for any discharge or termination of employment of a registered person,
not just ``terminations for cause.'' In addition, the proposal
clarifies when termination notices must be filed, i.e., ``immediately,
but in no event later than thirty (30) days following termination,''
and requires members to file an amended Form U-5 if the member learns
of facts or circumstances which cause any information provided in the
notice to become inaccurate or incomplete. Members must file the
amended Form U-5 within 30 days after learning of the facts or
circumstances giving rise to the amendment. Finally, the proposal
relieves CBOE member organizations of the obligation to file Form U-5
information in hard copy form and, instead, deems all CBOE Rule 9.3
filings and submissions as made for purposes of the rule if they are
filed with the NASAA/NASD CRD within the time period set forth in CBOE
Rule 9.3.
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\4\The Department of Investigation no longer exists at the CBOE,
and a portion of the duties previously performed by the Department
of Investigation, including the receipt of Form U-5 information, is
now performed by the CBOE's Department of Compliance. The proposal
reflects this change by requiring that Form U-5 filings be made with
the Exchange's Department of Compliance.
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The CBOE believes that the proposal will reduce the costs to
members of copying, handling and mailing termination materials.
Further, the CBOE states that the proposal will bring the CBOE's
``Termination for Cause'' reporting requirements in line with similar
rules of the NASD (NASD By-Law Article IV, Section 3) and the New York
Stock Exchange, Inc. (``NYSE'') (NYSE Rule 345).\5\
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\5\NASD By-Law Article IV, Section 3, ``Notification by Member
to Corporation and Associated Person of Termination; Amendments to
Notification,'' requires NASD members to provide the NASD with
written notice of the termination of a registered person within 30
calendar days of the termination. If a member learns of facts or
circumstances which cause the information in the notice to become
inaccurate or incomplete, the member must file a written amendment
with the NASD no later than 30 calendar days after the member learns
of the facts or circumstances giving rise to the amendment. NYSE
Rule 345, ``Employees--Registration, Approval, Record,''
Supplementary Material .17, ``General Information Regarding
Employees,'' requires NYSE members to report to the NYSE on a Form
U-5 the discharge or termination of employment of any registered
person and the reason thereof within 30 days following the
termination. In addition, NYSE Supplementary Material .17 requires
members to provide a written amendment to Form U-5 if the member
learns of facts or circumstances causing any information in the
notice to become inaccurate or incomplete. The amendment must be
filed with the NYSE no later than 30 days after the member learns of
the facts or circumstances giving rise to the amendment.
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The CBOE believes that the proposed rule change is consistent with
Section 6(b) of the Act, in general, and with Section 6(b)(5), in
particular, in that it is designed to improve the CBOE's capacity to
enforce compliance with the provisions of the Act and the CBOE's rules
by enabling the Exchange to monitor more efficiently all discharges or
terminations of employment of registered persons, and, in general, to
protect investors and the public interest.
The Commission believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange and, in
particular, the requirements of Section 6(b)(5)\6\ in that it is
designed to promote just and equitable principles of trade and to
protect investors and the public interest. Specifically, the Commission
believes that the proposal to require CBOE members to file Form U-5
notices for any discharge or termination with the Exchange, rather than
only for ``terminations for cause,'' should facilitate the CBOE's
oversight of members' personnel by providing a more complete and
accurate record of the employment history of registered
representatives.\7\ The Commission also believes that the proposal
should help the Exchange to fulfill its responsibility under Section
6(c) of the Act to deny membership to those who have engaged in acts or
practices inconsistent with just and equitable principles of trade. In
addition, the proposal should simplify the Exchange's procedures by
eliminating the need for members to determine whether there has been a
``termination for cause'' and requiring, instead, that members file a
Form U-5 notice for all discharges and terminations.
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\6\15 U.S.C. 78f(b)(5) (1988).
\7\After the proposal is approved, the CBOE is expected to
continue to review members' Form U-5 filings with the CRD on a daily
basis. See May 30 Letter, supra note 3.
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The Commission believes that the proposal is designed to help to
ensure prompt compliance with CBOE Rule 9.3 by requiring members to
file a Form U-5 immediately, but no later than 30 days after a
termination. Moreover, by requiring members to file amendments to Form
U-5 within 30 days after learning of facts or circumstances giving rise
to the amendment, the proposal advises members of their continuing
obligation to amend to Form U-5 to report relevant changes and should
help to ensure the accuracy and reliability of the Exchange's records.
Finally, the Commission believes that allowing members to submit the
filings required under CBOE Rule 9.3 through the NASAA/NASD CRD will
facilitate timely compliance with the requirements of CBOE Rule 9.3 and
reduce the cost to members of complying with the rule. As noted above,
the CBOE is under a continuing obligation to review the CRD submissions
on a daily basis. This will ensure that the CBOE is aware of the U-5
filings from CBOE members in a timely manner.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-CBOE-93-56) is approved.
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\8\15 U.S.C. 78s(b)(2) (1988).
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) (1993).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-16421 Filed 7-6-94; 8:45 am]
BILLING CODE 8010-01-M