Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Accelerated Approval of Proposed Rule Change as Amended by Amendment No. 1 Relating to the Exchange's Business Conduct Committee and Disciplinary Rules, 36157-36159 [E6-9934]

Download as PDF Federal Register / Vol. 71, No. 121 / Friday, June 23, 2006 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(i) of the Act 7 and Rule 19b– 4(f)(1) 8 thereunder because it constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule. At any time within sixty days of the filing of such rule change, the Commission may summarily abrogate such 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. Comments may be submitted by any of the following methods: jlentini 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–OCC–2006–04 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–OCC–2006–04. 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 7 15 8 17 U.S.C. 78s(b)(3)(A)(i). CFR 240.19b–4(f)(1). VerDate Aug<31>2005 17:22 Jun 22, 2006 Jkt 208001 the Commission’s Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of OCC and on OCC’s Web site at http:// www.optionsclearing.com. 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–OCC–2006–04 and should be submitted on or before July 14, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 Nancy M. Morris, Secretary. [FR Doc. E6–9694 Filed 6–22–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54011; File No. SR–Phlx– 2005–65] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Accelerated Approval of Proposed Rule Change as Amended by Amendment No. 1 Relating to the Exchange’s Business Conduct Committee and Disciplinary Rules June 16, 2006. I. Introduction On November 2, 2005, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’)1 and Rule 19b–4 thereunder,2 to amend the Exchange By-Law Article X, Section 10–11 (‘‘Business Conduct Committee’’) and Exchange Rules 960 and 970, the disciplinary rules. The Phlx filed Amendment No. 1 to the proposed rule change on May 16, 2006. The proposed rule change, as amended, was published for comment in the Federal Register on May 26, 2006 for a 15-day comment period, which ended on June 12, 2006.3 The Commission received no comments on the proposal. This order approves the proposed rule 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 53846 (May 19, 2006), 71 FR 30462. 1 15 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 36157 change, as amended, on an accelerated basis. II. Description of the Proposed Rule Change The Phlx proposes to create the new staff position of a ‘‘Hearing Officer,’’ who, along with two other Hearing Panelists, would hear contested disciplinary matters that are currently heard by a Panel appointed by the Chairman of the Business Conduct Committee (‘‘BCC’’ or ‘‘Committee’’). In connection with creating the Hearing Officer position, the Phlx proposes to amend Exchange By-law Article X, Section 10–11, which governs the BCC, and Exchange Rules 960 and 970, the disciplinary rules. Background Pursuant to Exchange Rule 960.5(a), a hearing on a Statement of Charges is currently held before a Hearing Panel composed of three persons appointed by the Chairman of the BCC or the Chairman’s designee. The presiding person of each Hearing Panel is a member of the Committee. The other two persons on the Hearing Panel are members of the Exchange, or general partners or officers of member organizations, or such other persons whom the Chairman of the BCC or the Chairman’s designee considers to be qualified. Pursuant to Exchange Rule 960.5(a)(4), Hearing Panelists currently may be compensated in extraordinary cases, as determined by the Chairman of the BCC, in consultation with the Chairman of the Board of Governors. Exchange Rule 960.5(a)(4) provides factors to be considered when determining whether a case is extraordinary, which include but are not limited to the anticipated length of time of the hearing, the complexity and seriousness of the matter, and the magnitude of the potential penalty. Currently, pursuant to Exchange Rule 960.5(d), after the conclusion of the hearing, the Hearing Panel reviews the entire record of the proceeding and submits a written hearing report to the Committee containing proposed findings of fact concerning the allegations in the Statement of Charges, conclusions as to whether a violation within the disciplinary jurisdiction of the Exchange has occurred and an enumeration of such violations, and recommendations as to appropriate sanctions, to be considered by the Committee at the next Committee meeting after the report is completed. Pursuant to Exchange Rule 960.8, currently, after reviewing the entire record of the disciplinary proceeding, E:\FR\FM\23JNN1.SGM 23JNN1 36158 Federal Register / Vol. 71, No. 121 / Friday, June 23, 2006 / Notices the BCC, by a majority of the members voting, determines whether the Respondent has committed violations and the appropriate sanctions, if any. The BCC then issues a written decision, including in its decision a statement of findings and conclusions, with the reasons therefor, upon all material issues presented in the record, and whether each violation within the disciplinary jurisdiction of the Exchange alleged in the Statement of Charges has occurred. Hearing Officer jlentini on PROD1PC65 with NOTICES The Exchange proposes to establish a new permanent professional position of Hearing Officer. The responsibilities of the Hearing Officer would include, but not be limited to: presiding over hearings in contested disciplinary cases authorized by the Exchange’s BCC, conducting pre-hearing conferences, ruling on procedural or discovery matters, scheduling hearing sessions, making all necessary evidentiary or other rulings (in consultation with the Hearing Panelists), regulating the conduct of the hearing, imposing appropriate sanctions for improper conduct by a party or a party’s representative, drafting and issuing decisions on behalf of the Hearing Panel and rendering decisions in connection with Summary Disposition Proceedings. The Hearing Officer would not be permitted to be involved in any manner in the investigation of possible misconduct, to participate in the consideration by the BCC of whether to institute a disciplinary action, to render a decision following a hearing without the concurrence of a majority of the Hearing Panel, to rule upon requests to disqualify the Hearing Officer or any member of the Hearing Panel, or to issue citations for violations of Exchange rules or floor procedure advices.4 The Hearing Officer would report to the Audit Committee for all performance and compensation purposes to help ensure that the Hearing Officer is completely neutral and accountable to the Audit Committee alone. The Hearing Officer would merely report to the General Counsel or his or her designee to comply with policies and procedures applicable to all 4 In addition, in accordance with By-Law Article X, Section 10–11, the jurisdiction of the Hearing Officer and Hearing Panel shall not extend to the enforcement of rules and regulations of the Floor Procedure Committee or the Options Committee relating to order, decorum, health, safety and welfare on the trading floors, or to hearings held by and sanctions imposed by such committees relating to such matters, except as permitted by the rules of the Exchange or any interpretation thereof, and any regulations promulgated thereunder. VerDate Aug<31>2005 17:22 Jun 22, 2006 Jkt 208001 employees of the Exchange, such as reporting vacation time or sick leave. Hearing Panelists The BCC Chair, or the Chair’s designee, would select two Hearing Panelists for each matter from a pool of qualified individuals.5 Consistent with current practice, the Hearing Panelists would be selected based on their background, experience and training, which should qualify them to consider and make determinations regarding the subject matter to be presented to the Hearing Panel. The Chair would also consider other factors, including the availability of the individual Hearing Panelists, the extent of their prior service on Hearing Panels and any relationship between such persons and the Respondent, which might make it inappropriate for such persons to serve on the Hearing Panel. After being designated as a qualified Hearing Panelist, the Exchange intends to have each prospective Hearing Panelist complete a mandatory training session to be conducted by the Hearing Officer. Qualified Hearing Panelists would serve for three-year terms. After that time, if a Hearing Panelist wished to continue serving, the Hearing Panelist would be required to submit an updated application for review and approval by the BCC. The Exchange proposes that Hearing Panelists be compensated for all hearing sessions and for one deliberation session per disciplinary proceeding for which a Hearing Panel renders a decision. A hearing session would be defined as any meeting between the parties and Hearing Panel, including pre-hearing conferences, but no compensation would be paid for ‘‘study time’’ (i.e., reviewing materials in preparation for a pre-hearing conference or hearing). Hearing Panelists would be compensated at a fixed and nonnegotiable rate for each hearing session that lasts four hours or less and for one deliberation session.6 For example, if a 5 The Exchange intends to form a ‘‘pool’’ of prequalified Hearing Panelists for contested disciplinary cases. In order to form this pool, the staff intends to develop a questionnaire, using as a model the questionnaire currently used by the NASD for potential members of arbitration panels. Members of the BCC would not be eligible to serve as Hearing Panelists. However, as discussed in proposed Exchange Rule 960.5(a)(7), if the Hearing Officer is unable to preside over the hearing for any reason, the Chair of the BCC shall appoint a qualified replacement Hearing Officer for that hearing from a pre-screened pool of qualified candidates, which could possibly include a member of the BCC. 6 Compensation for Hearing Panelists would be subject to a cap amount per day, regardless of the number of hearing sessions (or Board or Committee meetings attended). PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 hearing on a given day lasted a total of six hours, Hearing Panelists would be compensated for two hearing sessions. If a case settled prior to a hearing, Hearing Panelists would not receive any compensation, unless a pre-hearing conference (which is included in the definition of a hearing session and for which compensation would be given) was held. If a hearing were cancelled, the Hearing Panelists would not be entitled to compensation, but would be reimbursed for any travel-related expenses incurred, if applicable. If a Hearing Panelist is also a member of the Board, any Board or Standing Committee meetings that are held on the same day as the hearing would be considered a single meeting for the purposes of compensation. Offers of Settlement and Issuance of Decisions If an Offer of Settlement (‘‘Offer’’) is submitted to the BCC before a hearing commences, even if the Hearing Panelists are selected, the Committee would still consider the Offer and, if accepted, issue a decision. The Exchange proposes that, if an Offer is submitted after a hearing commences, however, the Exchange staff would promptly submit its position with respect to such Offer. The Hearing Panel would then determine whether to consider the Offer and, if considered, whether to accept or reject the Offer. The Hearing Panel would review the entire record of the disciplinary proceeding (or the written submissions, if applicable) 7 and, by a majority vote, determine whether the Respondent has committed violations and the appropriate sanctions, if any. The Hearing Panel would then issue a written decision, including in its decision a statement of findings and conclusions, with the reasons therefor, upon all material issues presented in the record, and whether each violation within the disciplinary jurisdiction of the Exchange alleged in the Statement of Charges has occurred. The Hearing Panel would be required to prepare its decision, absent extraordinary circumstances, within 60 days after Exchange staff has served the Hearing Officer and/or members of the Hearing Panel with a copy of the transcript of the hearing. A decision issued by the Hearing Panel would be considered final. Any appeal of the decision would 7 In lieu of requesting a hearing, a Respondent may request that the matter be decided upon written submissions. The Hearing Officer shall decide whether to grant the request and determine a schedule for each party to make its respective submissions. See proposed Exchange Rule 960.4. E:\FR\FM\23JNN1.SGM 23JNN1 Federal Register / Vol. 71, No. 121 / Friday, June 23, 2006 / Notices be taken directly to the Exchange’s Board of Governors. jlentini on PROD1PC65 with NOTICES III. Discussion After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.8 In particular, the Commission finds that the proposed rule change, as amended, is consistent with section 6(b)(5) of the Act,9 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. In addition, the Commission finds that the proposed rule change, as amended, is consistent with section 6(b)(6) of the Act,10 which requires that the rules of the exchange provide that its members and persons associated with its members shall be appropriately disciplined for violation of the provisions of the Act, the rules and regulations thereunder, or the rules of the exchange, and with section 6(b)(7) of Act,11 which requires that the rules of the exchange provide a fair procedure for the disciplining of members and persons associated with members. The Commission believes that the proposed rule change should streamline and expedite the hearing process by having a permanent Hearing Officer and pre-screened, qualified Hearing Panelists, and by having the Hearing Panel issue a final decision itself, without having to go to the BCC for review and approval. In addition, the Commission notes that the Exchange proposes to place restrictions on the activities of the Hearing Officer, and to require a Hearing Officer or Hearing Panelist to remove himself from consideration of a matter if he cannot render a fair and impartial decision. The Commission believes that these measures should help to ensure to that the Hearing Officer and Hearing Panelists are completely neutral and that their decisions are fair and impartial. Furthermore, the Commission believes that having a single Hearing Officer preside over all hearings will 8 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78f(b)(5). 10 15 U.S.C. 78f(b)(6). 11 15 U.S.C. 78f(b)(7). VerDate Aug<31>2005 17:22 Jun 22, 2006 Jkt 208001 increase the likelihood that more uniform sanctions will be imposed for similar misconduct by members, making the Exchange’s disciplinary process more fair. The Commission finds good cause for accelerating approval of the proposed rule change, as amended by Amendment No. 1, prior to the 30th day after the date of publication of notice of the filing in the Federal Register. The Commission published the proposed rule change for public comment on May 26, 2006 for a 15-day comment period and received no comments on the proposal. The Commission believes that accelerated approval should expedite the appointment of a hearing officer and allow the Exchange to implement a more efficient disciplinary process.12 IV. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,13 that the proposed rule change (SR–Phlx–2005– 65), as amended, is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 Nancy M. Morris, Secretary. [FR Doc. E6–9934 Filed 6–22–06; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 10497 and # 10498] Kentucky Disaster # KY–00007 U.S. Small Business Administration. ACTION: Notice. AGENCY: SUMMARY: This is a notice of an Administrative declaration of a disaster for the Commonwealth of Kentucky dated 6/15/2006. Incident: Severe Storms and Tornadoes. Incident Period: 4/2/2006. Effective Date: 6/15/2006. Physical Loan Application Deadline Date: 8/14/2006. Economic Injury (EIDL) Loan Application Deadline Date: 3/15/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, National Processing 12 The Commission notes that the Exchange has represented that the BCC will hear any current matters through their completion if a hearing commenced prior to the date of this approval order. Thus, any ongoing hearing will be heard by the BCC through its completion and the BCC will issue a decision accordingly. 13 15 U.S.C. 78s(b)(2). 14 17 CFR 200.30–3(a)(12). PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 36159 And Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s disaster declaration applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Christian Contiguous Counties: Kentucky: Caldwell, Hopkins, Muhlenberg, Todd, Trigg Tennessee: Montgomery, Stewart The Interest Rates are: Percent Homeowners With Credit Available Elsewhere ......................... Homeowners Without Credit Available Elsewhere .................. Businesses With Credit Available Elsewhere ................................. Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere .................. Other (Including Non-Profit Organizations) With Credit Available Elsewhere ................................. Businesses And Non-Profit Organizations Without Credit Available Elsewhere ......................... 5.750 2.875 7.408 4.000 5.000 4.000 The number assigned to this disaster for physical damage is 10497 C and for economic injury is 10498 0. The States which received an EIDL Declaration # are Kentucky, Tennessee. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Dated: June 15, 2006. Hector V. Barreto, Administrator. [FR Doc. E6–9957 Filed 6–22–06; 8:45 am] BILLING CODE 8025–01–P DEPARTMENT OF STATE [Public Notice 5449] Culturally Significant Objects Imported for Exhibition Determinations: ‘‘Crossroads: Modernism in Ukraine, 1910–1930’’ SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and E:\FR\FM\23JNN1.SGM 23JNN1

Agencies

[Federal Register Volume 71, Number 121 (Friday, June 23, 2006)]
[Notices]
[Pages 36157-36159]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-9934]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54011; File No. SR-Phlx-2005-65]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Accelerated Approval of Proposed Rule Change as Amended 
by Amendment No. 1 Relating to the Exchange's Business Conduct 
Committee and Disciplinary Rules

June 16, 2006.

I. Introduction

    On November 2, 2005, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change pursuant to section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'')\1\ and Rule 
19b-4 thereunder,\2\ to amend the Exchange By-Law Article X, Section 
10-11 (``Business Conduct Committee'') and Exchange Rules 960 and 970, 
the disciplinary rules. The Phlx filed Amendment No. 1 to the proposed 
rule change on May 16, 2006. The proposed rule change, as amended, was 
published for comment in the Federal Register on May 26, 2006 for a 15-
day comment period, which ended on June 12, 2006.\3\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change, as amended, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 53846 (May 19, 
2006), 71 FR 30462.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Phlx proposes to create the new staff position of a ``Hearing 
Officer,'' who, along with two other Hearing Panelists, would hear 
contested disciplinary matters that are currently heard by a Panel 
appointed by the Chairman of the Business Conduct Committee (``BCC'' or 
``Committee''). In connection with creating the Hearing Officer 
position, the Phlx proposes to amend Exchange By-law Article X, Section 
10-11, which governs the BCC, and Exchange Rules 960 and 970, the 
disciplinary rules.

Background

    Pursuant to Exchange Rule 960.5(a), a hearing on a Statement of 
Charges is currently held before a Hearing Panel composed of three 
persons appointed by the Chairman of the BCC or the Chairman's 
designee. The presiding person of each Hearing Panel is a member of the 
Committee. The other two persons on the Hearing Panel are members of 
the Exchange, or general partners or officers of member organizations, 
or such other persons whom the Chairman of the BCC or the Chairman's 
designee considers to be qualified.
    Pursuant to Exchange Rule 960.5(a)(4), Hearing Panelists currently 
may be compensated in extraordinary cases, as determined by the 
Chairman of the BCC, in consultation with the Chairman of the Board of 
Governors. Exchange Rule 960.5(a)(4) provides factors to be considered 
when determining whether a case is extraordinary, which include but are 
not limited to the anticipated length of time of the hearing, the 
complexity and seriousness of the matter, and the magnitude of the 
potential penalty.
    Currently, pursuant to Exchange Rule 960.5(d), after the conclusion 
of the hearing, the Hearing Panel reviews the entire record of the 
proceeding and submits a written hearing report to the Committee 
containing proposed findings of fact concerning the allegations in the 
Statement of Charges, conclusions as to whether a violation within the 
disciplinary jurisdiction of the Exchange has occurred and an 
enumeration of such violations, and recommendations as to appropriate 
sanctions, to be considered by the Committee at the next Committee 
meeting after the report is completed.
    Pursuant to Exchange Rule 960.8, currently, after reviewing the 
entire record of the disciplinary proceeding,

[[Page 36158]]

the BCC, by a majority of the members voting, determines whether the 
Respondent has committed violations and the appropriate sanctions, if 
any. The BCC then issues a written decision, including in its decision 
a statement of findings and conclusions, with the reasons therefor, 
upon all material issues presented in the record, and whether each 
violation within the disciplinary jurisdiction of the Exchange alleged 
in the Statement of Charges has occurred.

Hearing Officer

    The Exchange proposes to establish a new permanent professional 
position of Hearing Officer. The responsibilities of the Hearing 
Officer would include, but not be limited to: presiding over hearings 
in contested disciplinary cases authorized by the Exchange's BCC, 
conducting pre-hearing conferences, ruling on procedural or discovery 
matters, scheduling hearing sessions, making all necessary evidentiary 
or other rulings (in consultation with the Hearing Panelists), 
regulating the conduct of the hearing, imposing appropriate sanctions 
for improper conduct by a party or a party's representative, drafting 
and issuing decisions on behalf of the Hearing Panel and rendering 
decisions in connection with Summary Disposition Proceedings. The 
Hearing Officer would not be permitted to be involved in any manner in 
the investigation of possible misconduct, to participate in the 
consideration by the BCC of whether to institute a disciplinary action, 
to render a decision following a hearing without the concurrence of a 
majority of the Hearing Panel, to rule upon requests to disqualify the 
Hearing Officer or any member of the Hearing Panel, or to issue 
citations for violations of Exchange rules or floor procedure 
advices.\4\
---------------------------------------------------------------------------

    \4\ In addition, in accordance with By-Law Article X, Section 
10-11, the jurisdiction of the Hearing Officer and Hearing Panel 
shall not extend to the enforcement of rules and regulations of the 
Floor Procedure Committee or the Options Committee relating to 
order, decorum, health, safety and welfare on the trading floors, or 
to hearings held by and sanctions imposed by such committees 
relating to such matters, except as permitted by the rules of the 
Exchange or any interpretation thereof, and any regulations 
promulgated thereunder.
---------------------------------------------------------------------------

    The Hearing Officer would report to the Audit Committee for all 
performance and compensation purposes to help ensure that the Hearing 
Officer is completely neutral and accountable to the Audit Committee 
alone. The Hearing Officer would merely report to the General Counsel 
or his or her designee to comply with policies and procedures 
applicable to all employees of the Exchange, such as reporting vacation 
time or sick leave.

Hearing Panelists

    The BCC Chair, or the Chair's designee, would select two Hearing 
Panelists for each matter from a pool of qualified individuals.\5\ 
Consistent with current practice, the Hearing Panelists would be 
selected based on their background, experience and training, which 
should qualify them to consider and make determinations regarding the 
subject matter to be presented to the Hearing Panel. The Chair would 
also consider other factors, including the availability of the 
individual Hearing Panelists, the extent of their prior service on 
Hearing Panels and any relationship between such persons and the 
Respondent, which might make it inappropriate for such persons to serve 
on the Hearing Panel.
---------------------------------------------------------------------------

    \5\ The Exchange intends to form a ``pool'' of pre-qualified 
Hearing Panelists for contested disciplinary cases. In order to form 
this pool, the staff intends to develop a questionnaire, using as a 
model the questionnaire currently used by the NASD for potential 
members of arbitration panels. Members of the BCC would not be 
eligible to serve as Hearing Panelists. However, as discussed in 
proposed Exchange Rule 960.5(a)(7), if the Hearing Officer is unable 
to preside over the hearing for any reason, the Chair of the BCC 
shall appoint a qualified replacement Hearing Officer for that 
hearing from a pre-screened pool of qualified candidates, which 
could possibly include a member of the BCC.
---------------------------------------------------------------------------

    After being designated as a qualified Hearing Panelist, the 
Exchange intends to have each prospective Hearing Panelist complete a 
mandatory training session to be conducted by the Hearing Officer. 
Qualified Hearing Panelists would serve for three-year terms. After 
that time, if a Hearing Panelist wished to continue serving, the 
Hearing Panelist would be required to submit an updated application for 
review and approval by the BCC.
    The Exchange proposes that Hearing Panelists be compensated for all 
hearing sessions and for one deliberation session per disciplinary 
proceeding for which a Hearing Panel renders a decision. A hearing 
session would be defined as any meeting between the parties and Hearing 
Panel, including pre-hearing conferences, but no compensation would be 
paid for ``study time'' (i.e., reviewing materials in preparation for a 
pre-hearing conference or hearing). Hearing Panelists would be 
compensated at a fixed and non-negotiable rate for each hearing session 
that lasts four hours or less and for one deliberation session.\6\ For 
example, if a hearing on a given day lasted a total of six hours, 
Hearing Panelists would be compensated for two hearing sessions. If a 
case settled prior to a hearing, Hearing Panelists would not receive 
any compensation, unless a pre-hearing conference (which is included in 
the definition of a hearing session and for which compensation would be 
given) was held. If a hearing were cancelled, the Hearing Panelists 
would not be entitled to compensation, but would be reimbursed for any 
travel-related expenses incurred, if applicable. If a Hearing Panelist 
is also a member of the Board, any Board or Standing Committee meetings 
that are held on the same day as the hearing would be considered a 
single meeting for the purposes of compensation.
---------------------------------------------------------------------------

    \6\ Compensation for Hearing Panelists would be subject to a cap 
amount per day, regardless of the number of hearing sessions (or 
Board or Committee meetings attended).
---------------------------------------------------------------------------

Offers of Settlement and Issuance of Decisions

    If an Offer of Settlement (``Offer'') is submitted to the BCC 
before a hearing commences, even if the Hearing Panelists are selected, 
the Committee would still consider the Offer and, if accepted, issue a 
decision. The Exchange proposes that, if an Offer is submitted after a 
hearing commences, however, the Exchange staff would promptly submit 
its position with respect to such Offer. The Hearing Panel would then 
determine whether to consider the Offer and, if considered, whether to 
accept or reject the Offer.
    The Hearing Panel would review the entire record of the 
disciplinary proceeding (or the written submissions, if applicable) \7\ 
and, by a majority vote, determine whether the Respondent has committed 
violations and the appropriate sanctions, if any. The Hearing Panel 
would then issue a written decision, including in its decision a 
statement of findings and conclusions, with the reasons therefor, upon 
all material issues presented in the record, and whether each violation 
within the disciplinary jurisdiction of the Exchange alleged in the 
Statement of Charges has occurred. The Hearing Panel would be required 
to prepare its decision, absent extraordinary circumstances, within 60 
days after Exchange staff has served the Hearing Officer and/or members 
of the Hearing Panel with a copy of the transcript of the hearing. A 
decision issued by the Hearing Panel would be considered final. Any 
appeal of the decision would

[[Page 36159]]

be taken directly to the Exchange's Board of Governors.
---------------------------------------------------------------------------

    \7\ In lieu of requesting a hearing, a Respondent may request 
that the matter be decided upon written submissions. The Hearing 
Officer shall decide whether to grant the request and determine a 
schedule for each party to make its respective submissions. See 
proposed Exchange Rule 960.4.
---------------------------------------------------------------------------

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\8\ In particular, the Commission finds that the 
proposed rule change, as amended, is consistent with section 6(b)(5) of 
the Act,\9\ which requires, among other things, that the rules of a 
national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest. In addition, the 
Commission finds that the proposed rule change, as amended, is 
consistent with section 6(b)(6) of the Act,\10\ which requires that the 
rules of the exchange provide that its members and persons associated 
with its members shall be appropriately disciplined for violation of 
the provisions of the Act, the rules and regulations thereunder, or the 
rules of the exchange, and with section 6(b)(7) of Act,\11\ which 
requires that the rules of the exchange provide a fair procedure for 
the disciplining of members and persons associated with members.
---------------------------------------------------------------------------

    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(6).
    \11\ 15 U.S.C. 78f(b)(7).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change should 
streamline and expedite the hearing process by having a permanent 
Hearing Officer and pre-screened, qualified Hearing Panelists, and by 
having the Hearing Panel issue a final decision itself, without having 
to go to the BCC for review and approval. In addition, the Commission 
notes that the Exchange proposes to place restrictions on the 
activities of the Hearing Officer, and to require a Hearing Officer or 
Hearing Panelist to remove himself from consideration of a matter if he 
cannot render a fair and impartial decision. The Commission believes 
that these measures should help to ensure to that the Hearing Officer 
and Hearing Panelists are completely neutral and that their decisions 
are fair and impartial. Furthermore, the Commission believes that 
having a single Hearing Officer preside over all hearings will increase 
the likelihood that more uniform sanctions will be imposed for similar 
misconduct by members, making the Exchange's disciplinary process more 
fair.
    The Commission finds good cause for accelerating approval of the 
proposed rule change, as amended by Amendment No. 1, prior to the 30th 
day after the date of publication of notice of the filing in the 
Federal Register. The Commission published the proposed rule change for 
public comment on May 26, 2006 for a 15-day comment period and received 
no comments on the proposal. The Commission believes that accelerated 
approval should expedite the appointment of a hearing officer and allow 
the Exchange to implement a more efficient disciplinary process.\12\
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    \12\ The Commission notes that the Exchange has represented that 
the BCC will hear any current matters through their completion if a 
hearing commenced prior to the date of this approval order. Thus, 
any ongoing hearing will be heard by the BCC through its completion 
and the BCC will issue a decision accordingly.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-Phlx-2005-65), as amended, 
is approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-9934 Filed 6-22-06; 8:45 am]
BILLING CODE 8010-01-P