[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)] [Notices] [Pages 19618-19619] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 95-9669] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-35600; File No. SR-PSE-95-06] Self-Regulatory Organizations; Pacific Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change Relating to New Organizational Structures April 13, 1995. On February 21, 1995, the Pacific Stock Exchange, Inc. (``PSE'' 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 proposed rule change to amend Articles V and VIII of its Constitution to allow for the admission of entities with new organizational structures as member organizations. \1\15 U.S.C. 78s(b)(1). \2\17 CFR 240.19b-4. --------------------------------------------------------------------------- The proposed rule change was published for comment in Securities Exchange Act Release No. 35443 (March 6, 1995), 60 FR 13196 (March 10, 1995). No comments were received on the proposal. This order approves the proposed rule change. I. Proposal The PSE Constitution currently allows members of the Exchange to confer the privileges of their memberships on a firm which may be either a partnership or a corporation. The Exchange is proposing to amend Article VIII, Section 1(a) of its Constitution to provide that the Exchange may, in its discretion, and on such terms as the Exchange may prescribe, approve as a member firm, entities that have characteristics essentially similar to corporations, partnerships, or both.\3\ In addition, the Exchange is proposing to amend Article V, Sections 4, 5, and 7 of the PSE Constitution (definitions of ``member firm,'' ``member organization,'' and ``associated person'') to be consistent with the proposed change to Article VIII, Section 1(a). The Exchange is proposing to add the phrase ``or other organization'' to the definitions of ``member firm'' and ``member organization'' and to add the phrases ``member of a Limited Liability Company'' and ``trustee of a business trust'' to the definition of ``associated person.'' These amendments would permit the Exchange to approve business trusts, limited liability companies and other organizational structures as member organizations so long as the characteristics of the entity in question are essentially similar to those of corporations or partnerships. \3\The Exchange stated that non-corporate or partnership entities would have to be structured in such a format that would qualify as a broker or dealer registered with the SEC pursuant to the Act, since this is a prerequisite to becoming an Exchange member organization. Telephone conversation between Michael D. Pierson, Senior Attorney, PSE, and Elisa Metzger, Senior Counsel, SEC, on March 3, 1995. --------------------------------------------------------------------------- The Exchange believes that the rule change is consistent with Section 6(b) of the Exchange Act, in general, and Section 6(b)(5) in particular, in that it is designed to promote just and equitable principles of trade and to protect investors and the public interest. II. Discussion The Commission finds 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, with the requirements of Sections 6(b).\4\ Specifically, the Commission believes the amendment is consistent with the Section 6(b)(2)\5\ of the Act, which requires the rules of an exchange, subject to the provisions of Section 6(c) of the Act,\6\ to ensure that any registered broker or dealer or natural person associated with a registered broker or dealer may become a member of the exchange and any person may become associated with a member thereof. \4\15 U.S.C. 78f(b). \5\15 U.S.C. 78f(b)(2). \6\15 U.S.C. 78f(c). --------------------------------------------------------------------------- The PSE Constitution currently allows members of the Exchange to confer the privileges of their membership on a firm which may be either a partnership or a corporation. The amendments would enable entities with new organizational structures similar to corporations and partnerships to become Exchange members and be included in the Exchange's definition of a member organization. As in the case of a partnership or corporation applying for [[Page 19619]] membership, the new entity will be subject to all other requirements for membership approval. The Commission believes that the amendments to Articles V and VIII of the PSE Constitution reasonably balance the Exchange's interest in having the flexibility to approve entities with new organizational structures for Exchange membership, with the regulatory interests in protecting the financial and structural integrity of a member organization. For example, although the amendments permit the Exchange to approve business trusts, limited liability companies, or other organizational structures with characteristics of corporations or partnerships as member organizations, the PSE will review each Exchange member organization application on a case-by-case basis, and prior to approving any such organization for membership, the Exchange must be satisfied that: (1) the Exchange would legally have appropriate jurisdiction over such an entity; and (2) the permanency of the entity's capital is consistent with that required of other member organizations. III. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\7\ that the proposed rule change (SR-PSE-95-06) is approved. \7\15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\8\ \8\17 CFR 200.30-3(1)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 95-9669 Filed 4-18-95; 8:45 am] BILLING CODE 8010-01-M