[Federal Register Volume 64, Number 220 (Tuesday, November 16, 1999)]
[Notices]
[Pages 62239-62241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29876]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 42113; File No. SR-Phlx-99-40]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Relating to Communications With Customers or Members of
the Public
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 October 7, 1999, 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 below, which Items have been prepared by the Phlx. 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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[[Page 62240]]
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to amend Phlx Rule 1049 (``Communications to
Customers'') to allow members, member organizations, and associated
persons to distribute to customers or members of the public more than
one type of options worksheet to indicate possible outcomes under
various market conditions. Specifically, the proposed rule change: (i)
incorporates worksheets into the definition of ``sales literature'' and
establishes that worksheets must comply with the requirements
applicable to sales literature; (ii) adds references to members and
associated persons; (iii) deletes references to ``standard'' worksheets
and deletes prohibitions on ``nonstandard'' worksheets; and (iv)
deletes the requirement that worksheets must be uniform within a member
organization for each product type. Below is the text of the proposed
rule change. Proposed new language is in italic; proposed deletions are
in brackets.
Rule 1049. Communications to Customers
(a) to (d) No change.
(e) Definitions. For purposes of this Rule, the following
definitions shall apply:
(i) and (ii) No change.
(iii) The term ``sales literature'' shall include any written
communication (not defined as an ``advertisement'' or as ``educational
material'') distributed or made available to customers or the public
that contains any analysis, performance report, projection or
recommendation with respect to options, underlying securities or market
conditions, any [standard] forms of worksheets, or any seminar text
which pertains to options and which is communicated to customers or the
public at seminars, lectures or similar such events, or any Exchange-
produced materials pertaining to options.
(f) No change.
Commentary:
.01 to .03 No change.
.04 to D No change.
E. [Standard forms of o] Options worksheets utilized by members,
member organizations, or associated persons, [in addition to] must
comply[ing] with the requirements applicable to sales literature. [,
must be uniform within a member organization for each product type
(e.g. equity, foreign currency, index, etc.).]
[F. If a member organization has adopted a standard form of
worksheet for a particular options strategy, nonstandard worksheets for
that strategy may not be used.]
F. [G. Communications that portray performance of past
recommendations or actual transactions and completed worksheets shall
be kept at a place easily accessible to the sales office for the
accounts or customers involved.
0.5 No change.
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
The purpose of the proposed rule change is to allow members, member
organizations, and associated persons to distribute more than one type
of options worksheet to customers or members of the public. The
proposed rule change would allow members, member organizations, and
associated persons to use Exchange or industry-produced worksheets or
to tailor worksheets to specific clientele. Under the current rule,
once a member organization adopts a ``standard'' worksheet for a
particular options strategy or product type (e.g., equities, foreign
currently, index, etc.), it can only distribute that standard worksheet
to a client, and may not illustrate different market conditions through
other worksheets.
The proposed rule change also ensures that when members, member
organizations, and associated persons use options worksheets, all such
worksheets will comply with the requirements applicable to sales
literature. These requirements provide that (i) sales literature must
state that supporting documentation is available upon demand for any
claims, comparisons, recommendations, statistics or other technical
data, and (ii) sales literature may contain projected performance
figures only if it does not suggest the projection is certain,
parameters relating to the projected performance and all relevant costs
are clearly disclosed, the projections are plausible, and all material
assumptions are identified.\3\ Under current Rule 1049, only standard
options worksheets used by member organizations must comply with sales
literature requirements.
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\3\ Phlx Rule 1049, Commentary .04.
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The Exchange believes that the proposed rule change will improve
the quality of options worksheets that customers or members of the
public receive from members, member organizations, and associated
persons. The proposed rule change should enhance members' ability to
describe properly the risks and benefits of options trading, and should
enhance the ability of customers or members of the public to understand
these risks and benefits. In addition, by establishing that worksheets
used by members, member organizations, and associated persons must
comply with sales literature requirements, the proposed rule change
should promote uniform application of Rule 1049.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \4\ in general, and Section 6(b)(5) \5\ in
particular, in that it is designed to facilitate transactions in
securities and remove impediments to and perfect the mechanism of a
free and open market and national market system, and to protect
investors and the public interest by allowing the distribution of
worksheets that are tailored to the needs of specific clients.\6\
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx does not believe that the proposed rule change will impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received on the proposed rule
change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The proposed rule change will become effective upon filing pursuant
to Section 19(b)(3)(A) of the Act,\7\ and Rule
[[Page 62241]]
19b-4(f)(6) \8\ thereunder, in that it is designated by the Exchange as
effecting a change that: (i) does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for thirty days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-(f)(6).
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The Exchange represents that it provided written notice of its
intent to file the proposed rule change at least five business days
prior to the filing date. At any time within 60 days of the filing of
the proposed rule change, the Commission may summarily abrogate the
proposed rule change if it appears to the Commission that such action
is necessary or appropriate in the public interest, for the protection
of investors, or otherwise in furtherance of the purposes of the Act.
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 in the
Commission's Public Reference Room in Washington, DC. Copies of such
filing will also be available for inspection and copying at the
principal office of the Phlx. All submissions should refer to the File
No. SR-Phlx-99-40 and should be submitted by December 7, 1999.
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. 99-29876 Filed 11-15-99; 8:45 am]
BILLING CODE 8010-01-M