Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Amendments to New York Stock Exchange Rules 35 (“Floor Employees to be Registered”) and 301 (“Proposed Transfer or Lease of Membership”), 77230-77232 [E5-8067]

Download as PDF 77230 Federal Register / Vol. 70, No. 249 / Thursday, December 29, 2005 / Notices inconvenience and interruption to the public. The Commission believes that waiver of the 30 day operative delay is consistent with the protection of investors and the public interest,23 because it will allow the Exchange to continue, without interruption, the existing operation of the Pilot for an additional year, while the Commission considers the Hybrid Market. Accordingly, the Commission designates that the proposal shall become operative as of the date of this notice. 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. Comments may be submitted by any of the following methods: wwhite on PROD1PC65 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2005–89 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–9303. All submissions should refer to File Number SR–NYSE–2005–89. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). 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. Copies of such filing also will be 23 For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Aug<31>2005 18:56 Dec 28, 2005 Jkt 208001 available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE–2005–89 and should be submitted on or before January 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.24 Jonathan G. Katz, Secretary. [FR Doc. E5–8066 Filed 12–28–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53018; File No. SR–NYSE– 2005–78] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Amendments to New York Stock Exchange Rules 35 (‘‘Floor Employees to be Registered’’) and 301 (‘‘Proposed Transfer or Lease of Membership’’) December 23, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 2 thereunder, notice is hereby given that on December 13, 2005, the New York Stock Exchange, Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed change consists of amendments to NYSE Rules 35 (‘‘Floor Employees to be Registered’’) and 301 (‘‘Proposed Transfer or Lease of Membership’’) which would limit access to the Exchange Floor until fingerprint reports have been properly processed and approved and would require an alternative background check for persons whose fingerprints are 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 deemed illegible. The text of the proposed rule change is available on NYSE’s Web site (http://www.nyse.com), at NYSE’s Office of the Secretary, and at the Commission’s public reference room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NYSE 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. NYSE 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 NYSE Rule 35 governs the issuance of Floor tickets (e.g., Regular Tickets and Special Tickets) to Floor employees, which enables them to enter upon the trading Floor. NYSE Rule 35.70 requires the fingerprinting of prospective employees of members and member organizations. Similarly, NYSE Rule 301.23 requires that prospective members be fingerprinted. Security concerns have suggested a tightening of these rules in two respects: (1) That access to the Floor be denied for persons fingerprinted for the first time until the fingerprinting results have properly been processed and accepted; and (2) that those persons whose fingerprints cannot be read (i.e., are illegible) be subject to an alternative background check acceptable to the Exchange to cover the same criminal convictions included by fingerprint type. In order for a background check to be acceptable to the Exchange, it would, at a minimum, have to disclose the same arrest records which the fingerprint check would for all fifty states and, where the applicant is foreign, through the records of Interpol. Amendments are also proposed to reflect the fact that the Exchange no longer accepts fingerprint cards, but rather processes them through agents.3 3 See NYSE Information Memo 04–53, dated October 8, 2004 (announcing that as of October 29, 2004, the Exchange would stop accepting new fingerprints from its members and member organizations and other persons and entities subject to a fingerprinting requirement under Section 17 of the Exchange Act, but noting that certain members unable to submit fingerprints through another SRO E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 70, No. 249 / Thursday, December 29, 2005 / Notices wwhite on PROD1PC65 with NOTICES Background Rule 17f–2 4 under the Exchange Act sets out the requirements for the fingerprinting of persons employed in the securities industry. The Exchange has adopted procedures to comply with the regulations in order to assure that appropriate persons are fingerprinted and the results of the fingerprinting are reviewed.5 Prior to providing member firm employees with Floor ticket access to the Trading Floor and Exchange facilities, and pursuant to NYSE Rules 35 and 345.11 (‘‘Employees— Registration, Approval, Records’’),6 a member firm must electronically submit a Form U4 7 via the Central Registration Depository system (‘‘CRD’’).8 The hiring member firm and the employee are responsible for confirming the accuracy of the information included on the Form U4.9 Members and member organizations currently have up to 30 days from the date of the electronic filing of the Form U4 application in Web CRD for the fingerprints to be submitted. Applicants and member organizations sometimes wait until the end of the 30-day period to submit fingerprints, whereas results from the FBI can be reported within 24– 48 hours. It is proposed that prospective new Floor employees not be admitted to the Floor until the results of the fingerprinting have been posted to the CRD, reviewed and approved. While the physical security of the Floor is the primary factor in the proposed changes, it is hoped that with this proposed would still be able to receive Exchange fingerprint services). Upon the completion of the reorganization of the Exchange proposed for January of 2006, NYSE believes that there should no longer be members unable to utilize another SRO. 4 17 CFR 240.17f–2. 5 See NYSE Information Memos 76–30 dated June 25, 1976 and 76–53, dated December 31, 1976, announcing, respectively, the adoption of Exchange Act Rule 17f–2 and SEC approval of the Exchange’s plan for the processing of fingerprints. See also Securities Exchange Act Release No. 13105 (December 23, 1976), 42 FR 753 (January 4, 1977). 6 NYSE Rule 345.11 requires, among other things, member firms to thoroughly investigate the previous record of persons whom they contemplate employing. 7 Form U4 includes information such as an individual’s ten-year employment history, five-year residential history, education, disciplinary actions, disclosure information, and the self-regulatory organization of registration. 8 The CRD is a registration and licensing system for the U.S. securities industry, state and Federal regulators, and SROs. The NASD operates the CRD pursuant to policies developed jointly with the North American Securities Administrators Association, Inc. 9 Through CRD the accuracy of the disclosure portion (e.g., criminal disclosures, regulatory action disclosures) of Form U4 pursuant to prior submitted filings and fingerprinting is confirmed. VerDate Aug<31>2005 18:56 Dec 28, 2005 Jkt 208001 requirement, member organizations will be encouraged to act more promptly. An applicant who has been fingerprinted previously with a member or registered broker-dealer would be granted a conditional approval, pending review of the fingerprint results submitted by the current employer, assuming the prior employment was within ninety days of the application. Any such applicant would have been under a duty to disclose any reportable events during such employment to a supervising broker-dealer who was charged with a duty to report statutory disqualifications. In addition, the applicant would, of course, have a duty to disclose any reportable events during the intervening period in his or her application. A separate issue is raised where applicants submit fingerprints, which cannot be read (i.e., illegible fingerprints). Under Exchange Act Rule 17f–2(a)(l)(iv),10 when fingerprints are rejected three times as ‘‘illegible’’ by the FBI, the individual is exempt from further fingerprinting.11 Exchange Act Rule 17f–2 does not require an alternate means of conducting a background check. To address this background check lapse, the NYSE’s proposed amendment goes beyond the requirements of the foregoing rule and requires that members and member organizations conduct an alternative background check acceptable to the Exchange. Any such background check, in order to be acceptable to the Exchange, would have to cover the same criminal convictions included by fingerprint type on a fifty state basis and, if the applicant is foreign, an Interpol or other multi-national database check. These checks are generally conducted by non-governmental agencies. Member organizations would be expected to use appropriate due diligence in the selection of investigative agencies for such background checks, assuring their ability to satisfactorily research all pertinent databases. As above, conditional approval would be available to persons previously the subject of a background check, provided employment with a member or registered broker-dealer terminated within ninety days of the applications. The proposed revisions to NYSE Rules 35.70 and 301.23 will also reflect the fact that the Exchange no longer receives fingerprint cards directly, but does so through agents of the 10 17 CFR 240.17f–2(a)(1)(iv). this instance, CRD also conducts a ‘‘name check.’’ 11 In PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 77231 Exchange.12 However, the Exchange’s Membership Services Department will process the fingerprints of member applicants not associated with brokerdealers (not required to be registered on CRD). 2. Statutory Basis NYSE believes that the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with the requirements of Sections 6(b)(5) 13 which requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and national market system, and in general, to protect investors and the public interest. NYSE believes that the proposed rule change, by strengthening the security of the Exchange Floor, will help assure the uninterrupted trading and maintenance of the market. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that the proposal does not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others Comments were neither solicited nor received. 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 self-regulatory organization 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. 12 NYSE Rule 345.18 provides that any filing or submission to be made with the Exchange under this rule, where appropriate, may be made with a properly authorized agent acting on behalf of the Exchange and shall be deemed to be a filing with the Exchange. 13 15 U.S.C. 78f(b)(5). E:\FR\FM\29DEN1.SGM 29DEN1 77232 Federal Register / Vol. 70, No. 249 / Thursday, December 29, 2005 / Notices 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 Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2005–78 on the subject line. Paper Comments wwhite on PROD1PC65 with NOTICES • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–9303. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 Jonathan G. Katz, Secretary. [FR Doc. E5–8067 Filed 12–28–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52995; File No. SR–PCX– 2005–140] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. Relating to the NASD PCX Agreement December 21, 2005. 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 December All submissions should refer to File 21, 2005, the Pacific Exchange, Inc. Number SR–NYSE–2005–78. This file (‘‘PCX’’ or ‘‘Exchange’’) filed with the number should be included on the Securities and Exchange Commission subject line if e-mail is used. To help the (‘‘Commission’’ or ‘‘SEC’’) the proposed Commission process and review your rule change as described in Items I and comments more efficiently, please use II below, which Items have been only one method. The Commission will prepared by PCX. On December 21, post all comments on the Commission’s 2005, PCX filed Amendment No. 1 to Internet Web site (http://www.sec.gov/ the proposed rule change. PCX filed the rules/sro.shtml). Copies of the proposed rule change pursuant to submission, all subsequent Section 19(b)(3)(A) of the Act 3 and Rule amendments, all written statements 19b–4(f)(6) thereunder,4 which renders with respect to the proposed rule it effective upon filing with the change that are filed with the Commission. The Commission is Commission, and all written publishing this notice to solicit comments on the proposed rule change, communications relating to the as amended, from interested persons. proposed rule change between the Commission and any person, other than I. Self-Regulatory Organization’s those that may be withheld from the Statement of the Terms of Substance of public in accordance with the the Proposed Rule Change provisions of 5 U.S.C. 552, will be PCX is proposing to amend its available for inspection and copying in undertaking to extend for 90 days from the Commission’s Public Reference the date of this filing the time period by Room. Copies of the filing also will be which PCX will amend the agreement available for inspection and copying at between the National Association of the principal office of NYSE. All Securities Dealers (‘‘NASD’’) and PCX comments received will be posted currently in place pursuant to Rule 17d– without change; the Commission does 2 under the Act 5 (the ‘‘NASD PCX not edit personal identifying Agreement’’). As described in more information from submissions. You detail below, the amendment to the should submit only information that you wish to make available publicly. All NASD PCX Agreement will expand the scope of the NASD’s regulatory submissions should refer to File responsibility. Number SR–NYSE–2005–78 and should be submitted on or before January 19, 14 14 17 CFR 200.30–3(a)(12). 2006. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 5 17 CFR 240.17d–2. 3 15 VerDate Aug<31>2005 18:56 Dec 28, 2005 Jkt 208001 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, PCX 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. PCX 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 Commission recently approved a proposed rule change in relation to the acquisition of PCX Holdings, Inc. by Archipelago Holdings, Inc. (‘‘Archipelago Holdings’’).6 In its filing with the Commission, PCX committed to amend the NASD PCX Agreement within 90 days of the Commission’s approval of SR–PCX–2005–90 to expand the scope of the NASD’s regulatory functions under the NASD PCX Agreement so as to encompass all of the regulatory oversight and enforcement responsibilities with respect to the broker-dealer affiliate of Archipelago Holdings, Archipelago Securities, L.L.C. (‘‘Archipelago Securities’’).7 The 90-day period expires on December 21, 2005, and while the PCX and NASD have executed an amended NASD PCX Agreement, the PCX and NASD have not yet filed the amended NASD PCX Agreement with the Commission. The PCX believes that an extension of time for an additional 90 days from the date of this filing to amend the PCX NASD Agreement will give the Commission staff sufficient time to publish and take action on the proposal. There is currently a plan in place (i.e., the NASD PCX Agreement) allocating to the NASD the responsibility to receive regulatory reports from Archipelago Securities, to examine Archipelago Securities for compliance and to enforce compliance by Archipelago Securities with the Act, the rules and regulations thereunder and the rules of the NASD, and to carry out other specified regulatory functions with respect to 6 Securities Exchange Act Release No. 52497 (September 22, 2005); 70 FR 56949 (September 29, 2005) (approving SR–PCX–2005–90 as amended). 7 Archipelago Securities acts as the outbound order router for the Archipelago Exchange and, as such, is regulated as an exchange ‘‘facility’’ of the PCX and PCXE. E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 70, Number 249 (Thursday, December 29, 2005)]
[Notices]
[Pages 77230-77232]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-8067]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53018; File No. SR-NYSE-2005-78]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Amendments to New 
York Stock Exchange Rules 35 (``Floor Employees to be Registered'') and 
301 (``Proposed Transfer or Lease of Membership'')

December 23, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on December 13, 2005, the New York Stock Exchange, Inc. (``NYSE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed change consists of amendments to NYSE Rules 35 
(``Floor Employees to be Registered'') and 301 (``Proposed Transfer or 
Lease of Membership'') which would limit access to the Exchange Floor 
until fingerprint reports have been properly processed and approved and 
would require an alternative background check for persons whose 
fingerprints are deemed illegible. The text of the proposed rule change 
is available on NYSE's Web site (http://www.nyse.com), at NYSE's Office 
of the Secretary, and at the Commission's public reference room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE 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. NYSE 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
    NYSE Rule 35 governs the issuance of Floor tickets (e.g., Regular 
Tickets and Special Tickets) to Floor employees, which enables them to 
enter upon the trading Floor. NYSE Rule 35.70 requires the 
fingerprinting of prospective employees of members and member 
organizations. Similarly, NYSE Rule 301.23 requires that prospective 
members be fingerprinted.
    Security concerns have suggested a tightening of these rules in two 
respects: (1) That access to the Floor be denied for persons 
fingerprinted for the first time until the fingerprinting results have 
properly been processed and accepted; and (2) that those persons whose 
fingerprints cannot be read (i.e., are illegible) be subject to an 
alternative background check acceptable to the Exchange to cover the 
same criminal convictions included by fingerprint type. In order for a 
background check to be acceptable to the Exchange, it would, at a 
minimum, have to disclose the same arrest records which the fingerprint 
check would for all fifty states and, where the applicant is foreign, 
through the records of Interpol. Amendments are also proposed to 
reflect the fact that the Exchange no longer accepts fingerprint cards, 
but rather processes them through agents.\3\
---------------------------------------------------------------------------

    \3\ See NYSE Information Memo 04-53, dated October 8, 2004 
(announcing that as of October 29, 2004, the Exchange would stop 
accepting new fingerprints from its members and member organizations 
and other persons and entities subject to a fingerprinting 
requirement under Section 17 of the Exchange Act, but noting that 
certain members unable to submit fingerprints through another SRO 
would still be able to receive Exchange fingerprint services). Upon 
the completion of the reorganization of the Exchange proposed for 
January of 2006, NYSE believes that there should no longer be 
members unable to utilize another SRO.

---------------------------------------------------------------------------

[[Page 77231]]

Background
    Rule 17f-2 \4\ under the Exchange Act sets out the requirements for 
the fingerprinting of persons employed in the securities industry. The 
Exchange has adopted procedures to comply with the regulations in order 
to assure that appropriate persons are fingerprinted and the results of 
the fingerprinting are reviewed.\5\
---------------------------------------------------------------------------

    \4\ 17 CFR 240.17f-2.
    \5\ See NYSE Information Memos 76-30 dated June 25, 1976 and 76-
53, dated December 31, 1976, announcing, respectively, the adoption 
of Exchange Act Rule 17f-2 and SEC approval of the Exchange's plan 
for the processing of fingerprints. See also Securities Exchange Act 
Release No. 13105 (December 23, 1976), 42 FR 753 (January 4, 1977).
---------------------------------------------------------------------------

    Prior to providing member firm employees with Floor ticket access 
to the Trading Floor and Exchange facilities, and pursuant to NYSE 
Rules 35 and 345.11 (``Employees--Registration, Approval, 
Records''),\6\ a member firm must electronically submit a Form U4 \7\ 
via the Central Registration Depository system (``CRD'').\8\ The hiring 
member firm and the employee are responsible for confirming the 
accuracy of the information included on the Form U4.\9\
---------------------------------------------------------------------------

    \6\ NYSE Rule 345.11 requires, among other things, member firms 
to thoroughly investigate the previous record of persons whom they 
contemplate employing.
    \7\ Form U4 includes information such as an individual's ten-
year employment history, five-year residential history, education, 
disciplinary actions, disclosure information, and the self-
regulatory organization of registration.
    \8\ The CRD is a registration and licensing system for the U.S. 
securities industry, state and Federal regulators, and SROs. The 
NASD operates the CRD pursuant to policies developed jointly with 
the North American Securities Administrators Association, Inc.
    \9\ Through CRD the accuracy of the disclosure portion (e.g., 
criminal disclosures, regulatory action disclosures) of Form U4 
pursuant to prior submitted filings and fingerprinting is confirmed.
---------------------------------------------------------------------------

    Members and member organizations currently have up to 30 days from 
the date of the electronic filing of the Form U4 application in Web CRD 
for the fingerprints to be submitted. Applicants and member 
organizations sometimes wait until the end of the 30-day period to 
submit fingerprints, whereas results from the FBI can be reported 
within 24-48 hours. It is proposed that prospective new Floor employees 
not be admitted to the Floor until the results of the fingerprinting 
have been posted to the CRD, reviewed and approved. While the physical 
security of the Floor is the primary factor in the proposed changes, it 
is hoped that with this proposed requirement, member organizations will 
be encouraged to act more promptly.
    An applicant who has been fingerprinted previously with a member or 
registered broker-dealer would be granted a conditional approval, 
pending review of the fingerprint results submitted by the current 
employer, assuming the prior employment was within ninety days of the 
application. Any such applicant would have been under a duty to 
disclose any reportable events during such employment to a supervising 
broker-dealer who was charged with a duty to report statutory 
disqualifications. In addition, the applicant would, of course, have a 
duty to disclose any reportable events during the intervening period in 
his or her application.
    A separate issue is raised where applicants submit fingerprints, 
which cannot be read (i.e., illegible fingerprints). Under Exchange Act 
Rule 17f-2(a)(l)(iv),\10\ when fingerprints are rejected three times as 
``illegible'' by the FBI, the individual is exempt from further 
fingerprinting.\11\ Exchange Act Rule 17f-2 does not require an 
alternate means of conducting a background check. To address this 
background check lapse, the NYSE's proposed amendment goes beyond the 
requirements of the foregoing rule and requires that members and member 
organizations conduct an alternative background check acceptable to the 
Exchange. Any such background check, in order to be acceptable to the 
Exchange, would have to cover the same criminal convictions included by 
fingerprint type on a fifty state basis and, if the applicant is 
foreign, an Interpol or other multi-national database check. These 
checks are generally conducted by non-governmental agencies. Member 
organizations would be expected to use appropriate due diligence in the 
selection of investigative agencies for such background checks, 
assuring their ability to satisfactorily research all pertinent 
databases. As above, conditional approval would be available to persons 
previously the subject of a background check, provided employment with 
a member or registered broker-dealer terminated within ninety days of 
the applications.
---------------------------------------------------------------------------

    \10\ 17 CFR 240.17f-2(a)(1)(iv).
    \11\ In this instance, CRD also conducts a ``name check.''
---------------------------------------------------------------------------

    The proposed revisions to NYSE Rules 35.70 and 301.23 will also 
reflect the fact that the Exchange no longer receives fingerprint cards 
directly, but does so through agents of the Exchange.\12\ However, the 
Exchange's Membership Services Department will process the fingerprints 
of member applicants not associated with broker-dealers (not required 
to be registered on CRD).
---------------------------------------------------------------------------

    \12\ NYSE Rule 345.18 provides that any filing or submission to 
be made with the Exchange under this rule, where appropriate, may be 
made with a properly authorized agent acting on behalf of the 
Exchange and shall be deemed to be a filing with the Exchange.
---------------------------------------------------------------------------

2. Statutory Basis
    NYSE believes that the proposed rule change is consistent with the 
requirements of the Exchange Act and the rules and regulations 
thereunder applicable to a national securities exchange, and in 
particular, with the requirements of Sections 6(b)(5) \13\ which 
requires, among other things, that the rules of an exchange be designed 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
national market system, and in general, to protect investors and the 
public interest. NYSE believes that the proposed rule change, by 
strengthening the security of the Exchange Floor, will help assure the 
uninterrupted trading and maintenance of the market.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal does not impose any burden 
on competition not necessary or appropriate in furtherance of the 
purposes of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    Comments were neither solicited nor received.

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 self-regulatory organization 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.

[[Page 77232]]

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 Exchange Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2005-78 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-NYSE-2005-78. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). 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. Copies of the filing 
also will be available for inspection and copying at the principal 
office of NYSE. All comments received will be posted without change; 
the Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2005-78 and should be submitted on or before January 19, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 14 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
 [FR Doc. E5-8067 Filed 12-28-05; 8:45 am]
BILLING CODE 8010-01-P