Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Amendment to the Plan for the Allocation of Regulatory Responsibilities Among the American Stock Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, the National Association of Securities Dealers, Inc., the New York Stock Exchange, LLC, the NYSE Arca, Inc., and the Philadelphia Stock Exchange, Inc., 3882-3887 [E7-1220]
Download as PDF
<![CDATA[
3882
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Notices
sroberts on PROD1PC70 with NOTICES
under which 225,000 shares of
applicant’s common stock remain for
issuance, representing 0.2% of shares of
applicant’s common stock outstanding
as of December 31, 2006. The 320,000
shares of applicant’s common stock that
may be issued to Non-employee
Directors under the Plan represent 0.2%
of shares of applicant’s common stock
outstanding as of December 31, 2006.
Therefore, the maximum number of
applicant’s voting securities that would
result from the exercise of all
outstanding options issued and all
options issuable to directors, officers,
and employees under the Other Plans
and the Plan would be 17,535, 212
shares of applicant’s common stock, or
approximately 11.9% of shares of
applicant’s common stock outstanding
as of December 31, 2006. Applicant has
no outstanding warrants, options, or
rights to purchase its voting securities,
other than the options granted or to be
granted to its directors, officers, and
employees under the Other Plans and
the Plan.
Applicant’s Legal Analysis
1. Section 63(3) of the Act permits a
BDC to sell its common stock at a price
below current net asset value upon the
exercise of any option issued in
accordance with section 61(a)(3).
Section 61(a)(3)(B) provides, in
pertinent part, that a BDC may issue to
its non-employee directors options to
purchase its voting securities pursuant
to an executive compensation plan,
provided that: (a) The options expire by
their terms within ten years; (b) the
exercise price of the options is not less
than the current market value of the
underlying securities at the date of the
issuance of the options, or if no market
exists, the current net asset value of the
voting securities; (c) the proposal to
issue the options is authorized by the
BDC’s shareholders, and is approved by
order of the Commission upon
application; (d) the options are not
transferable except for disposition by
gift, will or intestacy; (e) no investment
adviser of the BDC receives any
compensation described in section
205(a)(1) of the Investment Advisers Act
of 1940, except to the extent permitted
by clause (b)(1) or (b)(2) of that section;
and (f) the BDC does not have a profitsharing plan as described in section
57(n) of the Act.
2. In addition, section 61(a)(3)
provides that the amount of the BDC’s
voting securities that would result from
the exercise of all outstanding warrants,
options, and rights at the time of
issuance may not exceed 25% of the
BDC’s outstanding voting securities,
except that if the amount of voting
VerDate Aug<31>2005
17:19 Jan 25, 2007
Jkt 211001
securities that would result from the
exercise of all outstanding warrants,
options, and rights issued to the BDC’s
directors, officers, and employees
pursuant to an executive compensation
plan would exceed 15% of the BDC’s
outstanding voting securities, then the
total amount of voting securities that
would result from the exercise of all
outstanding warrants, options, and
rights at the time of issuance will not
exceed 20% of the outstanding voting
securities of the BDC.
3. Applicant represents that its
proposal to grant certain stock options
to Non-employee Directors under the
Plan meets all the requirements of
section 61(a)(3)(B). Applicant states that
the Board is actively involved in the
oversight of applicant’s affairs and that
it relies extensively on the judgment
and experience of its Board. In addition
to their duties as Board members
generally, applicant states that the Nonemployee Directors provide guidance
and advice on operational issues,
underwriting policies, credit policies,
asset valuation and strategic direction,
as well as serving on committees.
Applicant believes that the availability
of options under the Plan will provide
significant at-risk incentives to Nonemployee Directors to remain on the
Board and devote their best efforts to
ensure applicant’s success. Applicant
states that the options will provide a
means for the Non-employee Directors
to increase their ownership interests in
applicant, thereby ensuring close
identification of their interests with
those of applicant and its stockholders.
Applicant asserts that by providing
incentives such as options, applicant
will be better able to maintain
continuity in the Board’s membership
and to attract and retain the highly
experienced, successful and dedicated
business and professional people who
are critical to applicant’s success as a
BDC.
4. Applicant states that the maximum
amount of voting securities that would
result from the exercise of all
outstanding options issued to the
directors, officers, and employees under
the Other Plans and the Plan would be
14,258,728 shares of applicant’s
common stock, or approximately 9.7%
of applicant’s shares of common stock
outstanding as of December 31, 2006,
which is below the percentage
limitations in the Act. Applicant asserts
that, given the relatively small amount
of common stock issuable to Nonemployee Directors upon their exercise
of options under the Plan, the exercise
of such options would not, absent
extraordinary circumstances, have a
substantial dilutive effect on the net
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
asset value of applicant’s common
stock.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–1228 Filed 1–25–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55145; File No. S7–966]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing of Amendment to the
Plan for the Allocation of Regulatory
Responsibilities Among the American
Stock Exchange, LLC, the Boston
Stock Exchange, Inc., the Chicago
Board Options Exchange, Inc., the
International Securities Exchange,
LLC, the National Association of
Securities Dealers, Inc., the New York
Stock Exchange, LLC, the NYSE Arca,
Inc., and the Philadelphia Stock
Exchange, Inc.
January 22, 2007.
Pursuant to Sections 17(d) 1 of the
Securities Exchange Act of 1934 (‘‘Act’’)
and Rule 17d–2 thereunder,2 notice is
hereby given that on December 5, 2006,
the American Stock Exchange, LLC
(‘‘Amex’’), the Boston Stock Exchange,
Inc. (‘‘BSE’’), the Chicago Board Options
Exchange, Inc. (‘‘CBOE’’), the
International Securities Exchange, LLC
(‘‘ISE’’), the National Association of
Securities Dealers, Inc. (‘‘NASD’’), the
New York Stock Exchange, LLC
(‘‘NYSE’’), the NYSE Arca, Inc. (‘‘PCX’’),
and the Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’) (collectively the ‘‘SRO
participants’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) an amendment to their
January 14, 2004 plan for the allocation
of regulatory responsibility.
I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every national
securities exchange and registered
securities association (‘‘SRO’’) to
examine for, and enforce, compliance by
its members and persons associated
with its members with the Act, the rules
and regulations thereunder, and the
SRO’s own rules, unless the SRO is
relieved of this responsibility pursuant
to Section 17(d) or 19(g)(2) 4 of the Act.
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
4 15 U.S.C. 78s(g)(2).
2 17
E:\FR\FM\26JAN1.SGM
26JAN1
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Notices
sroberts on PROD1PC70 with NOTICES
Without this relief, the statutory
obligation of each individual SRO could
result in a pattern of multiple
examinations of broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’). This
regulatory duplication would add
unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.5 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.6
Rule 17d–1, adopted on April 20, 1976,7
authorizes the Commission to name a
single SRO as the designated examining
authority (‘‘DEA’’) to examine common
members for compliance with the
financial responsibility requirements
imposed by the Act, or by Commission
or SRO rules. When an SRO has been
named as a common member’s DEA, all
other SROs to which the common
member belongs are relieved of the
responsibility to examine the firm for
compliance with applicable financial
responsibility rules.
On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
broker-dealers’ compliance with the
financial responsibility requirements.
Rule 17d–1 does not relieve an SRO
from its obligation to examine a
common member for compliance with
its own rules and provisions of the
federal securities laws governing
matters other than financial
responsibility, including sales practices,
and trading activities and practices.
To address regulatory duplication in
these other areas, on October 28, 1976,
the Commission adopted Rule 17d–2
under the Act.8 This rule permits SROs
to propose joint plans allocating
regulatory responsibilities with respect
to common members. Under paragraph
(c) of Rule 17d–2, the Commission may
declare such a plan effective if, after
5 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session. 32 (1975).
6 17 CFR 240.17d–1 and 17 CFR 240.17d–2.
7 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18809 (May 3, 1976).
8 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49093 (November 8,
1976).
VerDate Aug<31>2005
17:19 Jan 25, 2007
Jkt 211001
providing for notice and comment, it
determines that the plan is necessary or
appropriate in the public interest and
for the protection of investors, to foster
cooperation and coordination among the
SROs, to remove impediments to and
foster the development of a national
market system and a national clearance
and settlement system, and in
conformity with the factors set forth in
Section 17(d) of the Act. Commission
approval of a plan filed pursuant to Rule
17d–2 relieves an SRO of those
regulatory responsibilities allocated by
the plan to another SRO.
II. The Plan
On September 8, 1983, the
Commission approved the SRO
participants’ plan for allocating
regulatory responsibilities pursuant to
Rule 17d–2.9 On May 23, 2000, the
Commission approved an amendment to
the plan that added the ISE as a
participant.10 On November 8, 2002, the
Commission approved another
amendment that replaced the original
plan in its entirety and, among other
things, allocated regulatory
responsibilities among all the
participants in a more equitable
manner.11 On February 5, 2004, the
parties submitted an amendment to the
plan, primarily to include the BSE,
which was establishing a new options
trading facility to be known as the
Boston Options Exchange (‘‘BOX’’), as
an SRO participant.12
The plan reduces regulatory
duplication for a large number of firms
currently members of two or more of the
SRO participants by allocating
regulatory responsibility for certain
options-related sales practice matters to
one of the SRO participants. Generally,
under the current plan, the SRO
participant responsible for conducting
options-related sales practice
examinations of a firm, and
investigating options-related customer
complaints and terminations for cause
of associated persons of that firm, is
known as the firm’s ‘‘Designated
Options Examining Authority’’
(‘‘DOEA’’). Pursuant to the current plan,
9 See Securities Exchange Act Release No. 20158
(September 8, 1983), 48 FR 41256 (September 14,
1983).
10 See Securities Exchange Act Release No. 42816
(May 23, 2000), 65 FR 24759 (May 31, 2000). This
Amendment also updated the corporate names of
the Amex, the Midwest Stock Exchange (now
known as the Chicago Stock Exchange, Inc.), and
the Pacific Stock Exchange Incorporated (now
known as the NYSE Arca, Inc.).
11 See Securities Exchange Act Release No. 46800
(November 8, 2002), 67 FR 69774 (November 19,
2002).
12 See Securities Exchange Act Release No. 49197
(February 5, 2004), 69 FR 7046. (February 12, 2004).
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
3883
any other SRO of which the firm is a
member is relieved of these
responsibilities during the period the
firm is assigned to a DOEA.
III. Proposed Amendment to the Plan
On December 5, 2006, the parties
submitted a proposed amendment to the
plan. The purpose of the amendment is
to: (i) Provide that NASD and NYSE will
be DOEAs under the plan, (ii) provide
that the Designated Examination
Authority pursuant to Commission Rule
17d–1 under the Act for a broker-dealer
that is a member of more than one SRO
participant (but not a member of the
NASD or the NYSE) shall perform the
regulatory responsibility under the
agreement as if such DEA were the
DOEA, (iii) to incorporate a more formal
procedure for updating the list of
common rules, and (iv) make certain
other changes to the plan. The amended
agreement replaces the previous
agreement in its entirety. The text of the
proposed amended 17d–2 plan is as
follows (additions are italicized;
deletions are bracketed): 13
*
*
*
*
*
Agreement by and among the American
Stock Exchange, LLC, the Boston Stock
Exchange, Inc., the Chicago Board
Options Exchange, Inc., the
International Securities Exchange, [Inc.]
LLC, the National Association of
Securities Dealers, Inc., the New York
Stock Exchange, [Inc.] LLC, the [Pacific
Exchange] NYSE Arca Inc., and the
Philadelphia Stock Exchange, Inc.,
Pursuant to Rule 17d–2 under the
Securities Exchange Act of 1934.
This agreement (‘‘Agreement’’), by
and among the American Stock
Exchange, LLC, the Boston Stock
Exchange, Inc., the Chicago Board
Options Exchange, Inc., the
International Securities Exchange, [Inc.]
LLC, the National Association of
Securities Dealers, Inc. (‘‘NASD’’), the
New York Stock Exchange, [Inc.]LLC
(‘‘NYSE’’), the [Pacific Exchange] NYSE
Arca Inc., and the Philadelphia Stock
Exchange, Inc., hereinafter collectively
referred to as the Participants, is made
this [14th] 1st day of [January, 2004]
December, 2006, pursuant to the
provisions of Rule 17d–2 under the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’), which allows for
plans among self-regulatory
organizations to allocate regulatory
responsibility. This Agreement shall be
administered by a committee known as
the Options Self-Regulatory Council (the
‘‘Council’’).
13 Changes are marked from the most recent plan
approved by the Commission on February 5, 2004.
See supra note 12.
E:\FR\FM\26JAN1.SGM
26JAN1
sroberts on PROD1PC70 with NOTICES
3884
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Notices
Whereas, the Participants are desirous
of allocating regulatory responsibilities
with respect to [their common members
(members of two or more of the
Participants)] broker-dealers, and
persons associated therewith, that are
members FN1 of more than one
Participant (the ‘‘Common Members’’)
and conduct a public business for
compliance with [common rules]
Common Rules (as hereinafter defined)
relating to the conduct by broker-dealers
of accounts for listed options [or], index
warrants, currency index warrants and
currency warrants (collectively,
‘‘Covered Securities’’); and
Whereas, the Participants are desirous
of executing a plan for this purpose
pursuant to the provisions of Rule 17d–
2 and filing such plan with the
Securities and Exchange Commission
(‘‘SEC’’ or the ‘‘Commission’’) for its
approval;
Now, therefore, in consideration of
the mutual covenants contained
hereafter, the Participants agree as
follows:
I. [Except as otherwise provided
herein,]As used herein the term
Designated Options Examining
Authority (‘‘DOEA’’) shall mean the
NASD and NYSE insofar as each
[Participant] shall [assume] perform
Regulatory Responsibility (as hereinafter
defined) for its broker-dealer members
that also are [both (i)] members of [more
than one] another Participant
[(hereinafter the ‘‘Common Members’’)
and (ii)],and allocated to it in
accordance with the terms hereof. [For
purposes of this Agreement, a
Participant shall be considered to be the
Designated Options Examining
Authority (‘‘DOEA’’) of each Common
Member allocated to it.] The Designated
Examination Authority (‘‘DEA’’)
pursuant to SEC Rule 17d–1 under the
Securities Exchange Act (‘‘Rule 17d–1’’)
for a broker-dealer that is a member of
more than one Participant (but not a
member of a DOEA) shall perform the
Regulatory Responsibility under the
Agreement as if such DEA were the
DOEA.
II. As used herein, the term
‘‘Regulatory Responsibility’’ shall mean
the [inspection,] examination and
enforcement responsibilities relating to
compliance by [the] broker-dealers that
are members of more than one
Participant (the ‘‘Common Members
[and persons associated therewith]’’)
with the rules of the applicable
Participant that are substantially similar
to the rules of the other Participants (the
FN1 In the case of the Boston Stock Exchange, Inc.,
members are those persons who are options
participants (as defined in BOX Rules).
VerDate Aug<31>2005
17:19 Jan 25, 2007
Jkt 211001
‘‘Common Rules’’) [and the provisions
of the Act and the rules and regulations
thereunder], insofar as they apply to the
conduct of accounts for Covered
Securities. [In discharging its Regulatory
Responsibility, a DOEA may act directly
and perform such responsibilities itself
or may make arrangements for the
performance of such responsibilities on
its behalf by The Options Clearing
Corporation, a national securities
exchange registered with the SEC under
Section 6(a) of the Act or a national
securities association registered with the
SEC under Section 15A of the Act, but
excluding an association registered for
the limited purpose of regulating the
activities of members who are registered
as brokers or dealers in security futures
products. Without limiting the
foregoing, a non-exhaustive list of the
current,] A list of the current Common
Rules of each Participant applicable to
the conduct of accounts for Covered
Securities is attached hereto as Exhibit
A. Each year within 30 days of the
anniversary date of the commencement
of operation of this Agreement, each
Participant shall submit in writing to
each DOEA and DEA performing as a
DOEA for any members of such
Participant any revisions to Exhibit A
reflecting changes in the rules of the
Participant or DOEAs, and confirm that
all other rules of the Participant listed
in Exhibit A continue to meet the
definition of Common Rules as defined
in this Agreement. Within 30 days from
the date that each DOEA has received
revisions and/or confirmation that no
change has been made to Exhibit A from
all Participants, the DOEAs shall
confirm in writing to each Participant
whether the rules listed in any updated
Exhibit A are Common Rules as defined
in this Agreement. Notwithstanding
anything herein to the contrary, it is
explicitly understood that the term
‘‘Regulatory Responsibility’’ does not
include, and each of the Participants
shall (unless allocated pursuant to Rule
17d–2 otherwise than under this
Agreement) retain full responsibility for,
each of the following:
(a) [s]Surveillance and enforcement
with respect to trading activities or
practices involving its own marketplace,
including without limitation its rules
relating to the rights and obligations of
specialists and other market makers;
(b) [r]Registration pursuant to its
applicable rules of associated persons;
(c) [d]Discharge of its duties and
obligations as a [Designated Examining
Authority pursuant to Rule 17d–1 under
the Act]DEA; and;
(d) [e]Evaluation of advertising,
responsibility for which shall remain
with the Participant to which a
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
Common Member submits same for
approval[; and
(e) any rules of a Participant that are
not substantially similar to the rules of
all of the other Participants].
III. Apparent violations of another
Participant’s rules discovered by a
DOEA, but which rules are not within
the scope of the discovering DOEA’s
Regulatory Responsibility, shall be
referred to the relevant Participant for
such action as the Participant to which
such matter has been referred deems
appropriate. Notwithstanding the
foregoing, nothing contained herein
shall preclude a DOEA in its discretion
from requesting that another Participant
conduct an enforcement proceeding on
a matter for which the requesting DOEA
has Regulatory Responsibility. If such
other Participants agree[s], the
Regulatory Responsibility in such case
shall be deemed transferred to the
accepting Participant. Each Participant
agrees, upon request, to make available
promptly all relevant files, records and/
or witnesses necessary to assist another
Participant in an investigation or
enforcement proceeding.
IV. [This Agreement shall be
administered by a committee known as
the Options Self-Regulatory Council (the
‘‘Council’’).] The Council shall be
composed of one representative
designated by each of the Participants.
Each Participant shall also designate
one or more persons as its alternate
representative(s). In the absence of the
representative of a Participant, such
alternate representative shall have the
same powers, duties and responsibilities
as the representative. Each Participant
may, at any time, by notice to the then
Chair of the Council, replace its
representative and/or its alternate
representative on such Council. A
majority of the Council shall constitute
a quorum and, unless specifically
otherwise required, the affirmative vote
of a majority of the Council members
present (in person, by telephone or by
written consent) shall be necessary to
constitute action by the Council. From
time to time, the Council shall elect one
member [of the Council] from the
DOEAs to serve as Chair and another
from the Council to serve as Vice Chair
(to substitute for the Chair in the event
of his or her unavailability at a meeting
of the Council) [for such term as shall
be designated and until his or her
successor is duly elected, provided that
in the event a Participant replaces a
representative who is acting as Chair or
Vice Chair, such representative shall
also assume the position of Chair or
Vice Chair, as applicable]. All notices
and other communications for the
E:\FR\FM\26JAN1.SGM
26JAN1
sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Notices
Council shall be sent to it in care of the
Chair or to each of the representatives.
V. The Council shall determine the
times and locations of Council meetings,
provided that the Chair, acting alone,
may also call a meeting of the Council
in the event the Chair determines that
there is good cause to do so. To the
extent reasonably possible, notice of any
meeting shall be given at least ten
business days prior thereto.
Notwithstanding anything herein to the
contrary, representatives shall always be
given the option of participating in any
meeting telephonically at their own
expense rather than in person.
VI. For the purpose of fulfilling the
Participants’ [DOEA] Regulatory
Responsibilities, the [Council] DOEAs
shall allocate Common Members that
conduct a public [options] business in
Covered Securities among [Participants]
DOEAs from time to time in such
manner as the [Council] DOEAs deem[s]
appropriate, provided that any such
allocation shall be based on the
following principles except to the extent
affected [Participants] DOEAs consent:
(a) The [Council] DOEAs may not
allocate a member to a [Participant]
DOEA unless the member is a member
of that [Participant] DOEA, nor shall any
member be allocated to a Participant
that is not a DOEA or DEA acting as a
DOEA.
(b) To the extent practical and desired
by the DOEAs, Common Members that
conduct a public [options] business in
Covered Securities shall be allocated
among the [Participants] DOEAs of
which they are members in such
manner as to equalize as nearly as
possible the allocation [among such
Participants. For example, if sixteen
Common Members that conduct a
public options business are members
only of three Participants, such
members shall be allocated among such
Participants such that no Participant is
allocated more than six such members
and no Participant is allocated less than
five such members] of such Common
Members among such DOEAs.
(c) To the extent practical and desired
by the DOEAs, the allocation of
Common Members shall take into
account the amount of customer activity
conducted by each member in Covered
Securities such that Common Members
shall be allocated among the
[Participants] DOEAs of which they are
members in such manner as most evenly
divides the Common Members with the
largest amount of customer activity
among such [Participants] DOEAs.
(d) [Insofar as practical, it is intended
that allocation of Common Members to
Participants will be rotated among the
applicable Participants and, more
VerDate Aug<31>2005
17:19 Jan 25, 2007
Jkt 211001
specifically, that Common Members
shall not be allocated to a Participant as
to which such member was allocated
within the previous two years.
(e)] The [Council] DOEAs shall make
general reallocations of Common
Members from time to time, as it deems
appropriate.
([f]e) All Participants shall promptly
notify the DOEAs no later than the next
scheduled meeting of any change in
membership of Common Members.
Whenever a Common Member ceases to
be a member of its DOEA, [the] that
DOEA shall promptly inform the
[Council] other DOEAs, which [shall]
will promptly review the matter and
reallocate the Common Member to
[another Participant] the extent
practical.
([g]f) A DOEA may request that a
Common Member that is allocated to it
be reallocated to another [Participant]
DOEA by giving thirty days written
notice thereof. The [Council] DOEAs, in
[its] their discretion[,] may approve
such request and reallocate such
Common Member to another
[Participant] DOEA.
([h]g) All determinations by the
[Council] DOEAs with respect to
allocations, if there are more than two
DOEAs, shall be by the affirmative vote
of a majority of the DOEAs of which
such firm is a Common Member,
otherwise by negotiation and consensus.
[Participants that, at the time of such
determination, share the applicable
Common Member being allocated; a
Participant shall not be entitled to vote
on any allocation relating to a Common
Member unless the Common Member is
a member of such Participant.
(i) Allocations for calendar years 2004
and 2005 shall also be subject to the
provisions set forth at Appendix A
hereof, which provisions shall control
in the event of any conflict between
them and the provisions set forth
above.]
VII. Each DOEA shall conduct [a
routine inspection and] an examination
of each Common Member allocated to it
on a cycle not less frequently than
[determined by the Council] agreed
upon by all DOEAs. The other
Participants agree that, upon request,
relevant information in their respective
files relative to a Common Member will
be made available to the applicable
DOEA. At each meeting of the Council,
each [Participant] DOEA shall be
prepared to report on the status of its
examination program for the previous
quarter and any period prior thereto that
has not previously been reported to the
Council. In the event a DOEA believes
it will not be able to complete the
examination cycle for its allocated
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
3885
firms, it will so advise the Council. The
[Council will] DOEAs may undertake to
remedy this situation by reallocating
selected firms [and, if necessary,] or
lengthening the cycles for selected
firms, with the approval of all other
DOEAs.
VIII. Each [Participant] DOEA will[,
upon request,] promptly furnish a copy
of the Examination report[, or
applicable portions thereof] relating to
Covered Securities, of any examination
made pursuant to the provisions of this
Agreement to each other Participant of
which the Common Member examined
is a member.
IX. [Each Participant will routinely
forward to each other Participant of
which a Common Member is a member,
copies of all communications regarding
deficiencies relating to Covered
Securities noted in a report of
examination conducted by each
Participant. If an examination relating to
Covered Securities conducted by a
Participant reveals no deficiencies, such
fact will also, upon request, be
communicated to each other Participant
of which the Common Member
concerned is a member.
X.] Each DOEA’s Regulatory
Responsibility shall for each Common
Member allocated to it include
investigations into terminations ‘‘for
cause’’ of associated persons relating to
Covered Securities, unless such
termination is related solely to another
Participant’s market. In the latter
instance, that Participant to whose
market the termination for cause relates
shall discharge Regulatory
Responsibility with respect to such
termination for cause. In connection
with a DOEA’s examination,
investigation and/or enforcement
proceeding regarding a Covered
Security-related termination for cause,
the other Participants of which the
Common Member is a member shall
furnish, upon request, copies of all
pertinent materials related thereto in
their possession. As used in this
Section, ‘‘for cause’’ shall include,
without limitation, terminations
characterized on Form U5 under the
label ‘‘Permitted to Resign,’’
‘‘Discharge’’ or ‘‘Other.’’
X[I]. Each DOEA shall discharge the
Regulatory Responsibility for each
Common Member allocated to it relative
to a Covered Securities-related customer
complaintFN2 [or Form U4 filing] unless
such complaint [or filing] is uniquely
related to another Participant’s market.
In the latter instance, the DOEA shall
FN2 For purposes of complaints, they can be
reported pursuant to Form U4, Form U5 or RE–3
and any amendments thereto.
E:\FR\FM\26JAN1.SGM
26JAN1
sroberts on PROD1PC70 with NOTICES
3886
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Notices
forward the matter to that Participant to
whose market the matter relates, and the
latter shall discharge Regulatory
Responsibility with respect thereto. If a
Participant receives a customer
complaint for a Common Member
related to a Covered Security for which
the Participant is not the DOEA, the
Participant shall promptly forward a
copy of such complaint to the DOEA.
XI[I]. Any written notice required or
permitted to be given under this
Agreement shall be deemed given if sent
by certified mail, return receipt
requested, or by a comparable means of
electronic communication to each
Participant entitled to receipt thereof, to
the attention of the Participant’s
representative on the Council at the
Participant’s then principal office or by
e-mail at such address as the
representative shall have filed in writing
with the Chair.
[XIII. The costs incurred by each
Participant in discharging its Regulatory
Responsibility under this Agreement are
not reimbursable. However, any
Participants may agree that one or more
will compensate the other(s) for costs.]
[XIV]XII. The Participants shall notify
the Common Members of this
Agreement by means of a uniform joint
notice approved by the Council.
[XV]XIII. This Agreement may be
amended in writing duly approved by
each Participant.
[XVI]XIV. Any of the Participants may
manifest its intention to cancel its
participation in this Agreement at any
time [upon the] by giving [to] the
Council [of] written notice thereof at
least 90 days prior to the effective date
of such cancellation. Upon receipt of
such notice the Council shall allocate,
in accordance with the provisions of
this Agreement, [those] any Common
Members for which the petitioning party
was the DOEA. Until such time as the
Council has completed the reallocation
described above, the petitioning
Participant shall retain all its rights,
privileges, duties and obligations
hereunder.
XV[II]. The cancellation of its
participation in this Agreement by any
Participant shall not terminate this
Agreement as to the remaining
Participants. This Agreement will only
terminate following notice to the
Commission, in writing, by the then
Participants that they intend to
terminate the Agreement and the
expiration of the applicable notice
period. Such notice shall be given at
least six months prior to the intended
date of termination, provided that in the
event a notice of cancellation is received
from a Participant that, assuming the
effectiveness thereof, would result in
VerDate Aug<31>2005
17:19 Jan 25, 2007
Jkt 211001
there being just one remaining member
of the Council, notice to the
Commission of termination of this
Agreement shall be given promptly
upon the receipt of such notice of
cancellation, which termination shall be
effective upon the effectiveness of the
cancellation that triggered the notice of
termination to the Commission.
Exhibit A 14—Participant Rules
Applicable to the Conduct of Covered
Securities: Rules Enforced Under 17d-2
Agreement
Opening Of Accounts
No Participant nor the Council nor
any of their respective directors,
governors, officers, employees or
representatives shall be liable to any
other Participant in this Agreement for
any liability, loss or damage resulting
from or claimed to have resulted from
any delays, inaccuracies, errors or
omissions with respect to the provision
of Regulatory Responsibility as provided
hereby or for the failure to provide any
such Responsibility, except with respect
to such liability, loss or damages as
shall have been suffered by one or more
of the Participants and caused by the
willful misconduct of one or more of the
other participants or their respective
directors, governors, officers, employees
or representatives. No warranties,
express or implied, are made by any or
all of the Participants or the Council
with respect to any Regulatory
Responsibility to be performed by each
of them hereunder.
AMEX—Rules 411 [and], 921 and 1101
CBOE—Rule 9.7
ISE—Rule 608
NASD—Rules 2860(b)(16)[;], IM–2860–2
& 2843
NYSE—Rule[s] 721 [and 405]
PHLX—Rule 1024(b)
[PCX] NYSE Arca—Rule 9.2(a) and Rule
9.18(b)
BSE/BOX Supervision—Chapter XI,
Section 9
AMEX—Rules 411 [and], 922 and 1104
CBOE—Rule 9.8
ISE—Rule 609
NASD—Rules 2860(b)(20),
2860(b)(17)(B), 2846 & 2849
NYSE—Rule[s] 722[, 342 and 343]
PHLX—Rule 1025
[PCX] NYSE Arca—Rule 9.2(b)
BSE/BOX Suitability—Chapter XI,
Section 10
AMEX—Rules 923 & 1102
CBOE—Rule 9.9
ISE—Rule 610
NASD—Rule 2860(b)(19) & 2844
NYSE—Rule 723
PHLX—Rule 1026
[PCX] NYSE Arca—Rule 9.18(c)
BSE/BOX—Chapter XI, Section 11
*
*
*
*
*
Relief From Responsibility
IV. Solicitation of Comments
Pursuant to Section 17(d)(1)(A) of the
Securities Exchange Act of 1934 and
Rule 17d–2 promulgated pursuant
thereto, the Participants join in
requesting the Securities and Exchange
Commission, upon its approval of this
Agreement or any part thereof, to relieve
those Participants which are from time
to time participants in this Agreement
which are not the DOEA as to a
Common Member of any and all
Regulatory Responsibility with respect
to the matters allocated to the DOEA.
In Witness Whereof, the Participants
hereto have executed this Agreement as
of the date and year first above written.
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:
Limitation of Liability
[Appendix A—Allocation Provisions for
Calendar Years 2004 and 2005
The allocation for calendar year 2004 shall
be performed in accordance with the
provisions of Section VI, provided that there
shall be a partial allocation to the Boston
Stock Exchange, Inc. whereby the Boston
Stock Exchange, Inc. is allocated one-half of
its share of the total number of Common
Members. For calendar year 2005, there shall
be a reallocation whereby the Boston Stock
Exchange, Inc. shall receive from the other
DOEAs a number of Common Members to
make the allocation equitable.]
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number S7–966 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number S7–966. This file number
should be included on the subject line
if e-mail is used. To help the
14 This is a partial list of the rules provided to the
Commission. The full list of rules provided to the
Commission is available at the principal offices of
each of the SROs and at the Commission’s Public
Reference Room.
E:\FR\FM\26JAN1.SGM
26JAN1
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Notices
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 (https://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
available for inspection and copying at
the principal office of each of the SROs.
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 S7–966 and should be
submitted on or before February 16,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–1220 Filed 1–25–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
sroberts on PROD1PC70 with NOTICES
Sunshine Act Meetings
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold the following meetings during
the week of January 29, 2007:
Open Meetings will be held on
Wednesday, January 31, 2007 at 10 a.m.
and 2 p.m. in the Auditorium, Room
LL–002, and Closed Meetings will be
held on Wednesday, January 31, 2007 at
11 a.m. and Thursday, February 1, 2007
at 2 p.m.
Commissioners, Counsels to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meetings. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
15 17
CFR 200.30–3(a)(34).
VerDate Aug<31>2005
17:19 Jan 25, 2007
Jkt 211001
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a) (3), (5), (7), 9(ii)
and (10) permit consideration of the
scheduled matters at the Closed
Meetings.
Commissioner Casey, as duty officer,
voted to consider the items listed for the
closed meetings in closed session.
The subject matter of the Open
Meeting scheduled for Wednesday,
January 31, 2007 at 10 a.m. will be:
The Commission will hear oral argument
on an appeal by Phlo Corporation, a beverage
manufacturer and an issuer of publicly
traded securities that also acts as transfer
agent for its own securities, its president and
chief executive officer James B. Hovis (‘‘J.
Hovis’’), and its executive vice president and
secretary, Anne P. Hovis (‘‘A. Hovis’’), who
also served as Phlo’s general counsel,
(together, ‘‘Respondents’’) from the decision
of an administrative law judge. The law judge
found that Phlo willfully violated provisions
requiring transfer agents to turnaround at
least ninety percent of all routine items
received in a month within three business
days and willfully failed to make records
available for examination by Commission
staff. The law judge concluded that A. Hovis
willfully aided and abetted and was a cause
of Phlo’s failure to complete transfers in a
timely manner and failure to make records
available for examination.
The law judge further found that Phlo
failed to make timely filings of annual and
quarterly reports with the Commission
between March 2003 and November 2005.
The law judge found that J. Hovis willfully
aided and abetted and was a cause of Phlo’s
violations of the periodic reporting
requirements.
The law judge assessed civil money
penalties of $100,000 against Phlo, $25,000
against J. Hovis, and $50,000 against A.
Hovis, revoked Phlo’s registration as a
transfer agent, barred A. Hovis from
associating with any transfer agent, and
imposed cease-and-desist orders as to all
Respondents.
Among the issues likely to be argued are
whether Respondents violated the provisions
charged, and, if so, whether and to what
extent sanctions should be imposed.
The subject matter of the Closed
Meeting scheduled for January 31, 2007
at 11 a.m. will be:
Post-argument discussion.
The subject matter of the Open
Meeting scheduled for January 31, 2007
at 2 p.m. will be:
1. The Commission will consider whether
to propose amendments to extend its
interactive data voluntary reporting program
to permit mutual funds to submit as exhibits
to their registration statements supplemental
tagged information contained in the risk/
return summary section of their
prospectuses. The risk/return summary
section contains key mutual fund
information, including investment objectives
and strategies, risks, and costs.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
3887
2. The Commission will consider whether
to propose rules to implement provisions of
the Credit Rating Agency Reform Act of 2006.
The subject matter of the Closed
Meeting scheduled for Thursday,
February 1, 2007 will be:
Formal orders of investigation;
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings of an
enforcement nature;
Resolution of litigation claims;
An adjudicatory matter; and
Other matters relating to enforcement
proceedings
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: January 24, 2007.
Nancy M. Morris,
Secretary.
[FR Doc. 07–372 Filed 1–24–07; 3:57 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55136; File No. SR–FICC–
2006–17]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change
Relating to Clearing Fund Deficiency
Calls
January 19, 2007.
I. Introduction
October 16, 2006, the Fixed Income
Clearing Corporation (‘‘FICC’’) 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 to adjust
the deadline for satisfying a clearing
fund deficiency call from 10:30 a.m. to
9:30 a.m. in the Schedule of Timeframes
in FICC’s Government Securities
Division (‘‘GSD’’) rulebook. The
proposed rule change was published for
comment in the Federal Register on
December 6, 2006.2 No comment letters
were received on the proposal. This
order approves the proposal.
1 15
U.S.C. 78s(b)(1).
Exchange Act Release No. 54819
(Nov. 27, 2006), 71 FR 70817.
2 Securities
E:\FR\FM\26JAN1.SGM
26JAN1
]]>Agencies
[Federal Register Volume 72, Number 17 (Friday, January 26, 2007)]
[Notices]
[Pages 3882-3887]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1220]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55145; File No. S7-966]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Amendment to the Plan for the
Allocation of Regulatory Responsibilities Among the American Stock
Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board
Options Exchange, Inc., the International Securities Exchange, LLC, the
National Association of Securities Dealers, Inc., the New York Stock
Exchange, LLC, the NYSE Arca, Inc., and the Philadelphia Stock
Exchange, Inc.
January 22, 2007.
Pursuant to Sections 17(d) \1\ of the Securities Exchange Act of
1934 (``Act'') and Rule 17d-2 thereunder,\2\ notice is hereby given
that on December 5, 2006, the American Stock Exchange, LLC (``Amex''),
the Boston Stock Exchange, Inc. (``BSE''), the Chicago Board Options
Exchange, Inc. (``CBOE''), the International Securities Exchange, LLC
(``ISE''), the National Association of Securities Dealers, Inc.
(``NASD''), the New York Stock Exchange, LLC (``NYSE''), the NYSE Arca,
Inc. (``PCX''), and the Philadelphia Stock Exchange, Inc. (``Phlx'')
(collectively the ``SRO participants'') filed with the Securities and
Exchange Commission (``Commission'') an amendment to their January 14,
2004 plan for the allocation of regulatory responsibility.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
national securities exchange and registered securities association
(``SRO'') to examine for, and enforce, compliance by its members and
persons associated with its members with the Act, the rules and
regulations thereunder, and the SRO's own rules, unless the SRO is
relieved of this responsibility pursuant to Section 17(d) or 19(g)(2)
\4\ of the Act.
[[Page 3883]]
Without this relief, the statutory obligation of each individual SRO
could result in a pattern of multiple examinations of broker-dealers
that maintain memberships in more than one SRO (``common members'').
This regulatory duplication would add unnecessary expenses for common
members and their SROs.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------
Section 17(d)(1) of the Act was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\5\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules and regulations, or to perform other
specified regulatory functions.
---------------------------------------------------------------------------
\5\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session. 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\6\ Rule 17d-1, adopted on
April 20, 1976,\7\ authorizes the Commission to name a single SRO as
the designated examining authority (``DEA'') to examine common members
for compliance with the financial responsibility requirements imposed
by the Act, or by Commission or SRO rules. When an SRO has been named
as a common member's DEA, all other SROs to which the common member
belongs are relieved of the responsibility to examine the firm for
compliance with applicable financial responsibility rules.
---------------------------------------------------------------------------
\6\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2.
\7\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18809 (May 3, 1976).
---------------------------------------------------------------------------
On its face, Rule 17d-1 deals only with an SRO's obligations to
enforce broker-dealers' compliance with the financial responsibility
requirements. Rule 17d-1 does not relieve an SRO from its obligation to
examine a common member for compliance with its own rules and
provisions of the federal securities laws governing matters other than
financial responsibility, including sales practices, and trading
activities and practices.
To address regulatory duplication in these other areas, on October
28, 1976, the Commission adopted Rule 17d-2 under the Act.\8\ This rule
permits SROs to propose joint plans allocating regulatory
responsibilities with respect to common members. Under paragraph (c) of
Rule 17d-2, the Commission may declare such a plan effective if, after
providing for notice and comment, it determines that the plan is
necessary or appropriate in the public interest and for the protection
of investors, to foster cooperation and coordination among the SROs, to
remove impediments to and foster the development of a national market
system and a national clearance and settlement system, and in
conformity with the factors set forth in Section 17(d) of the Act.
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an
SRO of those regulatory responsibilities allocated by the plan to
another SRO.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49093 (November 8, 1976).
---------------------------------------------------------------------------
II. The Plan
On September 8, 1983, the Commission approved the SRO participants'
plan for allocating regulatory responsibilities pursuant to Rule 17d-
2.\9\ On May 23, 2000, the Commission approved an amendment to the plan
that added the ISE as a participant.\10\ On November 8, 2002, the
Commission approved another amendment that replaced the original plan
in its entirety and, among other things, allocated regulatory
responsibilities among all the participants in a more equitable
manner.\11\ On February 5, 2004, the parties submitted an amendment to
the plan, primarily to include the BSE, which was establishing a new
options trading facility to be known as the Boston Options Exchange
(``BOX''), as an SRO participant.\12\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 20158 (September 8,
1983), 48 FR 41256 (September 14, 1983).
\10\ See Securities Exchange Act Release No. 42816 (May 23,
2000), 65 FR 24759 (May 31, 2000). This Amendment also updated the
corporate names of the Amex, the Midwest Stock Exchange (now known
as the Chicago Stock Exchange, Inc.), and the Pacific Stock Exchange
Incorporated (now known as the NYSE Arca, Inc.).
\11\ See Securities Exchange Act Release No. 46800 (November 8,
2002), 67 FR 69774 (November 19, 2002).
\12\ See Securities Exchange Act Release No. 49197 (February 5,
2004), 69 FR 7046. (February 12, 2004).
---------------------------------------------------------------------------
The plan reduces regulatory duplication for a large number of firms
currently members of two or more of the SRO participants by allocating
regulatory responsibility for certain options-related sales practice
matters to one of the SRO participants. Generally, under the current
plan, the SRO participant responsible for conducting options-related
sales practice examinations of a firm, and investigating options-
related customer complaints and terminations for cause of associated
persons of that firm, is known as the firm's ``Designated Options
Examining Authority'' (``DOEA''). Pursuant to the current plan, any
other SRO of which the firm is a member is relieved of these
responsibilities during the period the firm is assigned to a DOEA.
III. Proposed Amendment to the Plan
On December 5, 2006, the parties submitted a proposed amendment to
the plan. The purpose of the amendment is to: (i) Provide that NASD and
NYSE will be DOEAs under the plan, (ii) provide that the Designated
Examination Authority pursuant to Commission Rule 17d-1 under the Act
for a broker-dealer that is a member of more than one SRO participant
(but not a member of the NASD or the NYSE) shall perform the regulatory
responsibility under the agreement as if such DEA were the DOEA, (iii)
to incorporate a more formal procedure for updating the list of common
rules, and (iv) make certain other changes to the plan. The amended
agreement replaces the previous agreement in its entirety. The text of
the proposed amended 17d-2 plan is as follows (additions are
italicized; deletions are bracketed): \13\
---------------------------------------------------------------------------
\13\ Changes are marked from the most recent plan approved by
the Commission on February 5, 2004. See supra note 12.
---------------------------------------------------------------------------
* * * * *
Agreement by and among the American Stock Exchange, LLC, the Boston
Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the
International Securities Exchange, [Inc.] LLC, the National Association
of Securities Dealers, Inc., the New York Stock Exchange, [Inc.] LLC,
the [Pacific Exchange] NYSE Arca Inc., and the Philadelphia Stock
Exchange, Inc., Pursuant to Rule 17d-2 under the Securities Exchange
Act of 1934.
This agreement (``Agreement''), by and among the American Stock
Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board
Options Exchange, Inc., the International Securities Exchange, [Inc.]
LLC, the National Association of Securities Dealers, Inc. (``NASD''),
the New York Stock Exchange, [Inc.]LLC (``NYSE''), the [Pacific
Exchange] NYSE Arca Inc., and the Philadelphia Stock Exchange, Inc.,
hereinafter collectively referred to as the Participants, is made this
[14th] 1st day of [January, 2004] December, 2006, pursuant to the
provisions of Rule 17d-2 under the Securities Exchange Act of 1934 (the
``Exchange Act''), which allows for plans among self-regulatory
organizations to allocate regulatory responsibility. This Agreement
shall be administered by a committee known as the Options Self-
Regulatory Council (the ``Council'').
[[Page 3884]]
Whereas, the Participants are desirous of allocating regulatory
responsibilities with respect to [their common members (members of two
or more of the Participants)] broker-dealers, and persons associated
therewith, that are members \FN1\ of more than one Participant (the
``Common Members'') and conduct a public business for compliance with
[common rules] Common Rules (as hereinafter defined) relating to the
conduct by broker-dealers of accounts for listed options [or], index
warrants, currency index warrants and currency warrants (collectively,
``Covered Securities''); and
---------------------------------------------------------------------------
\FN1\ In the case of the Boston Stock Exchange, Inc., members
are those persons who are options participants (as defined in BOX
Rules).
---------------------------------------------------------------------------
Whereas, the Participants are desirous of executing a plan for this
purpose pursuant to the provisions of Rule 17d-2 and filing such plan
with the Securities and Exchange Commission (``SEC'' or the
``Commission'') for its approval;
Now, therefore, in consideration of the mutual covenants contained
hereafter, the Participants agree as follows:
I. [Except as otherwise provided herein,]As used herein the term
Designated Options Examining Authority (``DOEA'') shall mean the NASD
and NYSE insofar as each [Participant] shall [assume] perform
Regulatory Responsibility (as hereinafter defined) for its broker-
dealer members that also are [both (i)] members of [more than one]
another Participant [(hereinafter the ``Common Members'') and (ii)],and
allocated to it in accordance with the terms hereof. [For purposes of
this Agreement, a Participant shall be considered to be the Designated
Options Examining Authority (``DOEA'') of each Common Member allocated
to it.] The Designated Examination Authority (``DEA'') pursuant to SEC
Rule 17d-1 under the Securities Exchange Act (``Rule 17d-1'') for a
broker-dealer that is a member of more than one Participant (but not a
member of a DOEA) shall perform the Regulatory Responsibility under the
Agreement as if such DEA were the DOEA.
II. As used herein, the term ``Regulatory Responsibility'' shall
mean the [inspection,] examination and enforcement responsibilities
relating to compliance by [the] broker-dealers that are members of more
than one Participant (the ``Common Members [and persons associated
therewith]'') with the rules of the applicable Participant that are
substantially similar to the rules of the other Participants (the
``Common Rules'') [and the provisions of the Act and the rules and
regulations thereunder], insofar as they apply to the conduct of
accounts for Covered Securities. [In discharging its Regulatory
Responsibility, a DOEA may act directly and perform such
responsibilities itself or may make arrangements for the performance of
such responsibilities on its behalf by The Options Clearing
Corporation, a national securities exchange registered with the SEC
under Section 6(a) of the Act or a national securities association
registered with the SEC under Section 15A of the Act, but excluding an
association registered for the limited purpose of regulating the
activities of members who are registered as brokers or dealers in
security futures products. Without limiting the foregoing, a non-
exhaustive list of the current,] A list of the current Common Rules of
each Participant applicable to the conduct of accounts for Covered
Securities is attached hereto as Exhibit A. Each year within 30 days of
the anniversary date of the commencement of operation of this
Agreement, each Participant shall submit in writing to each DOEA and
DEA performing as a DOEA for any members of such Participant any
revisions to Exhibit A reflecting changes in the rules of the
Participant or DOEAs, and confirm that all other rules of the
Participant listed in Exhibit A continue to meet the definition of
Common Rules as defined in this Agreement. Within 30 days from the date
that each DOEA has received revisions and/or confirmation that no
change has been made to Exhibit A from all Participants, the DOEAs
shall confirm in writing to each Participant whether the rules listed
in any updated Exhibit A are Common Rules as defined in this Agreement.
Notwithstanding anything herein to the contrary, it is explicitly
understood that the term ``Regulatory Responsibility'' does not
include, and each of the Participants shall (unless allocated pursuant
to Rule 17d-2 otherwise than under this Agreement) retain full
responsibility for, each of the following:
(a) [s]Surveillance and enforcement with respect to trading
activities or practices involving its own marketplace, including
without limitation its rules relating to the rights and obligations of
specialists and other market makers;
(b) [r]Registration pursuant to its applicable rules of associated
persons;
(c) [d]Discharge of its duties and obligations as a [Designated
Examining Authority pursuant to Rule 17d-1 under the Act]DEA; and;
(d) [e]Evaluation of advertising, responsibility for which shall
remain with the Participant to which a Common Member submits same for
approval[; and
(e) any rules of a Participant that are not substantially similar
to the rules of all of the other Participants].
III. Apparent violations of another Participant's rules discovered
by a DOEA, but which rules are not within the scope of the discovering
DOEA's Regulatory Responsibility, shall be referred to the relevant
Participant for such action as the Participant to which such matter has
been referred deems appropriate. Notwithstanding the foregoing, nothing
contained herein shall preclude a DOEA in its discretion from
requesting that another Participant conduct an enforcement proceeding
on a matter for which the requesting DOEA has Regulatory
Responsibility. If such other Participants agree[s], the Regulatory
Responsibility in such case shall be deemed transferred to the
accepting Participant. Each Participant agrees, upon request, to make
available promptly all relevant files, records and/or witnesses
necessary to assist another Participant in an investigation or
enforcement proceeding.
IV. [This Agreement shall be administered by a committee known as
the Options Self-Regulatory Council (the ``Council'').] The Council
shall be composed of one representative designated by each of the
Participants. Each Participant shall also designate one or more persons
as its alternate representative(s). In the absence of the
representative of a Participant, such alternate representative shall
have the same powers, duties and responsibilities as the
representative. Each Participant may, at any time, by notice to the
then Chair of the Council, replace its representative and/or its
alternate representative on such Council. A majority of the Council
shall constitute a quorum and, unless specifically otherwise required,
the affirmative vote of a majority of the Council members present (in
person, by telephone or by written consent) shall be necessary to
constitute action by the Council. From time to time, the Council shall
elect one member [of the Council] from the DOEAs to serve as Chair and
another from the Council to serve as Vice Chair (to substitute for the
Chair in the event of his or her unavailability at a meeting of the
Council) [for such term as shall be designated and until his or her
successor is duly elected, provided that in the event a Participant
replaces a representative who is acting as Chair or Vice Chair, such
representative shall also assume the position of Chair or Vice Chair,
as applicable]. All notices and other communications for the
[[Page 3885]]
Council shall be sent to it in care of the Chair or to each of the
representatives.
V. The Council shall determine the times and locations of Council
meetings, provided that the Chair, acting alone, may also call a
meeting of the Council in the event the Chair determines that there is
good cause to do so. To the extent reasonably possible, notice of any
meeting shall be given at least ten business days prior thereto.
Notwithstanding anything herein to the contrary, representatives shall
always be given the option of participating in any meeting
telephonically at their own expense rather than in person.
VI. For the purpose of fulfilling the Participants' [DOEA]
Regulatory Responsibilities, the [Council] DOEAs shall allocate Common
Members that conduct a public [options] business in Covered Securities
among [Participants] DOEAs from time to time in such manner as the
[Council] DOEAs deem[s] appropriate, provided that any such allocation
shall be based on the following principles except to the extent
affected [Participants] DOEAs consent:
(a) The [Council] DOEAs may not allocate a member to a
[Participant] DOEA unless the member is a member of that [Participant]
DOEA, nor shall any member be allocated to a Participant that is not a
DOEA or DEA acting as a DOEA.
(b) To the extent practical and desired by the DOEAs, Common
Members that conduct a public [options] business in Covered Securities
shall be allocated among the [Participants] DOEAs of which they are
members in such manner as to equalize as nearly as possible the
allocation [among such Participants. For example, if sixteen Common
Members that conduct a public options business are members only of
three Participants, such members shall be allocated among such
Participants such that no Participant is allocated more than six such
members and no Participant is allocated less than five such members] of
such Common Members among such DOEAs.
(c) To the extent practical and desired by the DOEAs, the
allocation of Common Members shall take into account the amount of
customer activity conducted by each member in Covered Securities such
that Common Members shall be allocated among the [Participants] DOEAs
of which they are members in such manner as most evenly divides the
Common Members with the largest amount of customer activity among such
[Participants] DOEAs.
(d) [Insofar as practical, it is intended that allocation of Common
Members to Participants will be rotated among the applicable
Participants and, more specifically, that Common Members shall not be
allocated to a Participant as to which such member was allocated within
the previous two years.
(e)] The [Council] DOEAs shall make general reallocations of Common
Members from time to time, as it deems appropriate.
([f]e) All Participants shall promptly notify the DOEAs no later
than the next scheduled meeting of any change in membership of Common
Members. Whenever a Common Member ceases to be a member of its DOEA,
[the] that DOEA shall promptly inform the [Council] other DOEAs, which
[shall] will promptly review the matter and reallocate the Common
Member to [another Participant] the extent practical.
([g]f) A DOEA may request that a Common Member that is allocated to
it be reallocated to another [Participant] DOEA by giving thirty days
written notice thereof. The [Council] DOEAs, in [its] their
discretion[,] may approve such request and reallocate such Common
Member to another [Participant] DOEA.
([h]g) All determinations by the [Council] DOEAs with respect to
allocations, if there are more than two DOEAs, shall be by the
affirmative vote of a majority of the DOEAs of which such firm is a
Common Member, otherwise by negotiation and consensus. [Participants
that, at the time of such determination, share the applicable Common
Member being allocated; a Participant shall not be entitled to vote on
any allocation relating to a Common Member unless the Common Member is
a member of such Participant.
(i) Allocations for calendar years 2004 and 2005 shall also be
subject to the provisions set forth at Appendix A hereof, which
provisions shall control in the event of any conflict between them and
the provisions set forth above.]
VII. Each DOEA shall conduct [a routine inspection and] an
examination of each Common Member allocated to it on a cycle not less
frequently than [determined by the Council] agreed upon by all DOEAs.
The other Participants agree that, upon request, relevant information
in their respective files relative to a Common Member will be made
available to the applicable DOEA. At each meeting of the Council, each
[Participant] DOEA shall be prepared to report on the status of its
examination program for the previous quarter and any period prior
thereto that has not previously been reported to the Council. In the
event a DOEA believes it will not be able to complete the examination
cycle for its allocated firms, it will so advise the Council. The
[Council will] DOEAs may undertake to remedy this situation by
reallocating selected firms [and, if necessary,] or lengthening the
cycles for selected firms, with the approval of all other DOEAs.
VIII. Each [Participant] DOEA will[, upon request,] promptly
furnish a copy of the Examination report[, or applicable portions
thereof] relating to Covered Securities, of any examination made
pursuant to the provisions of this Agreement to each other Participant
of which the Common Member examined is a member.
IX. [Each Participant will routinely forward to each other
Participant of which a Common Member is a member, copies of all
communications regarding deficiencies relating to Covered Securities
noted in a report of examination conducted by each Participant. If an
examination relating to Covered Securities conducted by a Participant
reveals no deficiencies, such fact will also, upon request, be
communicated to each other Participant of which the Common Member
concerned is a member.
X.] Each DOEA's Regulatory Responsibility shall for each Common
Member allocated to it include investigations into terminations ``for
cause'' of associated persons relating to Covered Securities, unless
such termination is related solely to another Participant's market. In
the latter instance, that Participant to whose market the termination
for cause relates shall discharge Regulatory Responsibility with
respect to such termination for cause. In connection with a DOEA's
examination, investigation and/or enforcement proceeding regarding a
Covered Security-related termination for cause, the other Participants
of which the Common Member is a member shall furnish, upon request,
copies of all pertinent materials related thereto in their possession.
As used in this Section, ``for cause'' shall include, without
limitation, terminations characterized on Form U5 under the label
``Permitted to Resign,'' ``Discharge'' or ``Other.''
X[I]. Each DOEA shall discharge the Regulatory Responsibility for
each Common Member allocated to it relative to a Covered Securities-
related customer complaintFN2 [or Form U4 filing] unless such complaint
[or filing] is uniquely related to another Participant's market. In the
latter instance, the DOEA shall
[[Page 3886]]
forward the matter to that Participant to whose market the matter
relates, and the latter shall discharge Regulatory Responsibility with
respect thereto. If a Participant receives a customer complaint for a
Common Member related to a Covered Security for which the Participant
is not the DOEA, the Participant shall promptly forward a copy of such
complaint to the DOEA.
---------------------------------------------------------------------------
FN2 For purposes of complaints, they can be reported pursuant to
Form U4, Form U5 or RE-3 and any amendments thereto.
---------------------------------------------------------------------------
XI[I]. Any written notice required or permitted to be given under
this Agreement shall be deemed given if sent by certified mail, return
receipt requested, or by a comparable means of electronic communication
to each Participant entitled to receipt thereof, to the attention of
the Participant's representative on the Council at the Participant's
then principal office or by e-mail at such address as the
representative shall have filed in writing with the Chair.
[XIII. The costs incurred by each Participant in discharging its
Regulatory Responsibility under this Agreement are not reimbursable.
However, any Participants may agree that one or more will compensate
the other(s) for costs.]
[XIV]XII. The Participants shall notify the Common Members of this
Agreement by means of a uniform joint notice approved by the Council.
[XV]XIII. This Agreement may be amended in writing duly approved by
each Participant.
[XVI]XIV. Any of the Participants may manifest its intention to
cancel its participation in this Agreement at any time [upon the] by
giving [to] the Council [of] written notice thereof at least 90 days
prior to the effective date of such cancellation. Upon receipt of such
notice the Council shall allocate, in accordance with the provisions of
this Agreement, [those] any Common Members for which the petitioning
party was the DOEA. Until such time as the Council has completed the
reallocation described above, the petitioning Participant shall retain
all its rights, privileges, duties and obligations hereunder.
XV[II]. The cancellation of its participation in this Agreement by
any Participant shall not terminate this Agreement as to the remaining
Participants. This Agreement will only terminate following notice to
the Commission, in writing, by the then Participants that they intend
to terminate the Agreement and the expiration of the applicable notice
period. Such notice shall be given at least six months prior to the
intended date of termination, provided that in the event a notice of
cancellation is received from a Participant that, assuming the
effectiveness thereof, would result in there being just one remaining
member of the Council, notice to the Commission of termination of this
Agreement shall be given promptly upon the receipt of such notice of
cancellation, which termination shall be effective upon the
effectiveness of the cancellation that triggered the notice of
termination to the Commission.
Limitation of Liability
No Participant nor the Council nor any of their respective
directors, governors, officers, employees or representatives shall be
liable to any other Participant in this Agreement for any liability,
loss or damage resulting from or claimed to have resulted from any
delays, inaccuracies, errors or omissions with respect to the provision
of Regulatory Responsibility as provided hereby or for the failure to
provide any such Responsibility, except with respect to such liability,
loss or damages as shall have been suffered by one or more of the
Participants and caused by the willful misconduct of one or more of the
other participants or their respective directors, governors, officers,
employees or representatives. No warranties, express or implied, are
made by any or all of the Participants or the Council with respect to
any Regulatory Responsibility to be performed by each of them
hereunder.
Relief From Responsibility
Pursuant to Section 17(d)(1)(A) of the Securities Exchange Act of
1934 and Rule 17d-2 promulgated pursuant thereto, the Participants join
in requesting the Securities and Exchange Commission, upon its approval
of this Agreement or any part thereof, to relieve those Participants
which are from time to time participants in this Agreement which are
not the DOEA as to a Common Member of any and all Regulatory
Responsibility with respect to the matters allocated to the DOEA.
In Witness Whereof, the Participants hereto have executed this
Agreement as of the date and year first above written.
[Appendix A--Allocation Provisions for Calendar Years 2004 and 2005
The allocation for calendar year 2004 shall be performed in
accordance with the provisions of Section VI, provided that there
shall be a partial allocation to the Boston Stock Exchange, Inc.
whereby the Boston Stock Exchange, Inc. is allocated one-half of its
share of the total number of Common Members. For calendar year 2005,
there shall be a reallocation whereby the Boston Stock Exchange,
Inc. shall receive from the other DOEAs a number of Common Members
to make the allocation equitable.]
Exhibit A \14\--Participant Rules Applicable to the Conduct of Covered
Securities: Rules Enforced Under 17d-2 Agreement
---------------------------------------------------------------------------
\14\ This is a partial list of the rules provided to the
Commission. The full list of rules provided to the Commission is
available at the principal offices of each of the SROs and at the
Commission's Public Reference Room.
---------------------------------------------------------------------------
Opening Of Accounts
AMEX--Rules 411 [and], 921 and 1101
CBOE--Rule 9.7
ISE--Rule 608
NASD--Rules 2860(b)(16)[;], IM-2860-2 & 2843
NYSE--Rule[s] 721 [and 405]
PHLX--Rule 1024(b)
[PCX] NYSE Arca--Rule 9.2(a) and Rule 9.18(b)
BSE/BOX Supervision--Chapter XI, Section 9
AMEX--Rules 411 [and], 922 and 1104
CBOE--Rule 9.8
ISE--Rule 609
NASD--Rules 2860(b)(20), 2860(b)(17)(B), 2846 & 2849
NYSE--Rule[s] 722[, 342 and 343]
PHLX--Rule 1025
[PCX] NYSE Arca--Rule 9.2(b)
BSE/BOX Suitability--Chapter XI, Section 10
AMEX--Rules 923 & 1102
CBOE--Rule 9.9
ISE--Rule 610
NASD--Rule 2860(b)(19) & 2844
NYSE--Rule 723
PHLX--Rule 1026
[PCX] NYSE Arca--Rule 9.18(c)
BSE/BOX--Chapter XI, Section 11
* * * * *
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:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-966 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-966. This file number
should be included on the subject line if e-mail is used. To help the
[[Page 3887]]
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 (https://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
available for inspection and copying at the principal office of each of
the SROs. 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 S7-966
and should be submitted on or before February 16, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1220 Filed 1-25-07; 8:45 am]
BILLING CODE 8011-01-P
