[Federal Register Volume 61, Number 178 (Thursday, September 12, 1996)]
[Notices]
[Pages 48179-48180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23311]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37642; File No. SR-CBOE-96-46]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by Chicago Board Options Exchange, Incorporated Related to
Tolling of the Time Period for Settlement of Disciplinary Cases
Pursuant to Interpretation and Policy .01(d) Under Exchange Rule 17.8
September 5, 1996.
On July 23, 1996,\1\ the Chicago Board Options Exchange,
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') a proposed rule change
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\2\ and Rule 19b-4 thereunder.\3\ The proposed rule change
would amend Interpretation and Policy .01(d) under CBOE Rule 17.8
(``Interpretation .01(d)'') to allow the Exchange staff thirty days to
respond to a Respondent's document request before tolling the
Respondent's settlement period. The proposed rule change also would
amend Interpretation .01(d) to provide that in no event will a
Respondent have less than seven days after the receipt of requested
documents within which to submit an offer of settlement.
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\1\ The proposed rule change was originally filed with the
Commission on July 10, 1996. The CBOE subsequently submitted
Amendment No. 1 to the filing. Amendment No. 1 was a minor technical
amendment. See Letter from Arthur B. Reinstein, Senior Attorney,
CBOE, to Karl Varner, Staff Attorney, Division of Market Regulation,
SEC, dated July 23, 1996.
\2\ 15 U.S.C. 78s(b)(1) (1988).
\3\ 17 CFR 240.19b-4 (1993).
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Notice of the proposed rule change, together with the substance of
the proposal, was issued by Commission release (Securities Exchange Act
Release
[[Page 48180]]
No. 37496, July 30, 1996) and by publication in the Federal Register
(61 FR 40689, August 5, 1996). No comment letters were received. This
order approves the proposed rule change.
One purpose of the change to Interpretation .01(d) is to allow the
Exchange staff thirty days to respond to a Respondent's document
request before tolling the Respondent's settlement period. Pursuant to
CBOE Rule 17.8, after a Respondent is served with a statement of
charges for an alleged rule violation, that Respondent has 120 days to
attempt to resolve the charges by submitting a written offer of
settlement. Pursuant to CBOE Rule 17.4(c), within 60 days after a
statement of charges has been served, a Respondent may make a written
request for access to all documents concerning the case that are in the
investigative file of the Exchange except for staff investigation and
examination reports and materials prepared by the staff in connection
with such reports or in anticipation of a disciplinary hearing or other
privileged materials. If a Respondent requests access to the
investigative file, Interpretation .01(d) currently provides that the
120-day time period for submitting a written offer of settlement shall
be tolled during the number of days in excess of seven calendar days
that it takes staff to provide access to documents in response to the
Respondent's request.
The Exchange staff has found that, in most cases, it needs longer
than seven days to respond to a request. Before providing access to
documents, Exchange staff must review and organize the investigative
file to remove privileged documents or information that is not
discoverable and to remove information that may identify the
complainant. There have been occasions where Exchange staff has spent
more than 7 days preparing the investigative file for access, but after
gaining the benefit of tolling, the Respondent submits an offer of
settlement without ever reviewing the file. The rule change approved
today reduces this potential for delay in concluding a disciplinary
case by limiting a Respondent's ability to toll the 120-day settlement
period.
The rule change also amends Interpretation .01(d) to deal with the
situation where a Respondent has elected to proceed in an expedited
manner pursuant to Rule 17.3 in an effort to resolve a matter by
entering into a letter of consent prior to the issuance of charges, but
is unsuccessful in negotiating a letter of consent.
Interpretation and Policy .01(b) under Rule 17.8 provides that if a
Respondent is unsuccessful in an effort to reach agreement with
Exchange staff upon a letter of consent and charges are issued, any
time in excess of 30 days spent in attempting to negotiate a letter of
consent is deducted from the 120-day settlement period, but that in any
event a Respondent will always have at least 14 days after service of
charges within which to submit an offer of settlement. The existing
provision of Interpretation .01(d) tolls the settlement period after
seven days when a document request has been made. Therefore, if a
Respondent makes a document request on the first day of the 14-day
settlement period, that Respondent currently has at least seven days
remaining of the 14-day settlement period after the documents are
provided within which to submit an offer of settlement.
However, Interpretation .01(d) as amended would not toll the
settlement period until 30 days elapsed from the time that the
respondent makes a document request. Thus, the settlement period could
expire even though the Exchange has not yet responded to the document
request. To assure that the settlement period does not expire before
the Exchange has responded to the document request, and to further
assure that a Respondent has a meaningful opportunity to review the
requested documents, the rule change approved today also amends
Interpretation .01(d) to provide that in no event will a Respondent
have less than seven days after the receipt of requested documents
within which to submit an offer of settlement.
The Commission believes that the proposed rule change is consistent
with and furthers the objectives of Section 6(b)(7) of the Act in that
it improves the Exchange's procedures for the discipline of members and
persons associated with members. The Commission believes the proposed
change will make the review process more fair and efficient by reducing
the potential for delay in concluding a disciplinary case resulting
from Respondents, or their attorneys, requesting access to documents
solely to gain an extension of the 120-day settlement period through
tolling.
As noted above, the 120 day settlement period is frequently tolled
under Interpretation .01(d) while Exchange staff responds to the
Respondent's request for documents. The Commission believes that, by
tolling the 120 day settlement period only if exchange staff takes more
than 30 days to respond to a Respondent's request, the proposed change
provides a Respondent with access to a documents in accordance with
Rule 17.4(c) while discouraging access requests made for the purpose of
extending the 120 days settlement period.\4\
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\4\ The CBOE believes that, under the proposed rule change,
access requests by Respondents typically should not extend the 120-
day settlement period because the Exchange staff generally will be
able to respond within 30 days to an access request.
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The Commission also believes that it is consistent with the
objectives of Section 6(b)(7) of the Act to amend Interpretation .01(d)
to provide that in no event will a Respondent have less than seven days
after the receipt of requested documents within which to submit an
offer of settlement. The Commission believes that the proposed
amendment to Interpretation .01(d) will make the review process more
fair and efficient by continuing to provide a Respondent with a minimum
of seven days after Respondent's receipt of requested documents within
which to submit an offer of settlement.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change, SR-CBOE-96-46 be, and hereby is,
approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-23311 Filed 9-11-96; 8:45 am]
BILLING CODE 8010-01-M