Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto Relating to Proposed New Rule 350A (“Business Entertainment”) Concerning Policies and Procedures Addressing Business Entertainment, 28534-28540 [E7-9668]
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28534
Federal Register / Vol. 72, No. 97 / Monday, May 21, 2007 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55766; File No. SR–NYSE–
2006–06]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of a Proposed Rule Change and
Amendment No. 1 Thereto Relating to
Proposed New Rule 350A (‘‘Business
Entertainment’’) Concerning Policies
and Procedures Addressing Business
Entertainment
May 15, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on February 15, 2006, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially prepared by NYSE. On
April 26, 2007, NYSE filed Amendment
No. 1 to the proposed rule change.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.4
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes new Rule
350A (‘‘Business Entertainment’’) to
address conflict of interest issues in
connection with the provision of
business entertainment by member
organizations to representatives of
customers or prospective customers.
Below is the text of the proposed rule
change. Proposed new language is
italicized.
Business Entertainment
Rule 350A
(a) General Requirements
No member organization or person
associated with a member organization
shall, directly or indirectly, provide any
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaced and superseded the
original rule filing in its entirety.
4 The Commission also is separately publishing a
notice by the National Association of Securities
Dealers, Inc. (‘‘NASD’’) to propose new IM–3060 on
business entertainment, which is substantially
similar to NYSE’s proposed rule text. See Securities
Exchange Act Release No. 55765 (May 15, 2007)
(SR–NASD–2006–044). The NYSE proposal and the
NASD proposal primarily differ in that the NYSE
proposal contains a ‘‘Notice to Customers’’
provision. See Section II(A)(1), Purpose section, and
Section IV, Solicitation of Comments section,
below.
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business entertainment to a customer
representative pursuant to the
establishment of, or during the course
of, a business relationship with any
customer that is intended or designed to
cause, or would be reasonably judged to
have the likely effect of causing, such
customer representative to act in a
manner that is inconsistent with:
(1) The best interests of the customer;
or
(2) The best interests of any person to
whom the customer owes a fiduciary
duty.
(b) Definitions
For purposes of this rule, the
following definitions shall apply:
(1) The term ‘‘customer’’ means:
(A) a person that maintains a
business relationship with a member
organization via the maintenance of an
account, through the conduct of
investment banking, or pursuant to
other securities-related activity; or
(B) a person whose customer
representative receives business
entertainment for the purpose of
encouraging such person to establish a
business relationship with a member
organization by opening an account
with the member organization or by
conducting investment banking or other
securities-related activity with the
member organization.
(2) The term ‘‘customer
representative’’ means a person who is
an employee, officer, director, or agent
of a customer, unless such person is a
family member of the customer.
(3) The term ‘‘family member’’ means
a person’s parents, mother-in-law or
father-in-law, spouse, brother or sister,
brother-in-law or sister-in-law, son-inlaw or daughter-in-law, and children.
(4) The term ‘‘business
entertainment’’ means any social event,
hospitality event, sporting event,
entertainment event, meal, leisure
activity, or event of like nature or
purpose, including business
entertainment offered in connection
with a charitable event, educational
event or business conference, as well as
any transportation or lodging related to
such activity or event, in which a person
associated with a member organization
accompanies a customer representative.
(A) If a customer representative is not
accompanied by an appropriate
associated person of the member
organization, any expenses associated
with the business entertainment will be
considered a gift under Rule 350 unless
exigent circumstances make it
impractical for an associated person to
attend. All instances where such exigent
circumstances are invoked must be
clearly and thoroughly documented and
be subject to the prior written approval
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of a designated supervisory person or, in
very limited circumstances where such
prior approval cannot reasonably be
obtained, to a prompt post-event review
to be conducted and documented by
such supervisory person.
(B) Anything of value given or
otherwise provided to a customer
representative that does not fall within
the definition of ‘‘business
entertainment’’ is a gift under Rule 350.
(C) In valuing business entertainment
expenses pursuant to this Rule, a
member organization’s written policies
and procedures must specify the
methodology to be used by the member
organization to calculate the value of
business entertainment. In general,
business entertainment expenses should
be valued at the higher of face value or
cost to the member organization.
(D) For purposes of this Rule, the
terms ‘‘person associated with a
member organization’’ or ‘‘associated
person’’ are defined to include: (1) A
natural person who is registered or has
applied for registration under the Rules
of the NYSE; (2) a sole proprietor,
partner, officer, director, or branch
manager of a member organization, or
other natural person occupying a
similar status or performing similar
functions, or a natural person engaged
in the investment banking or securities
business who is directly or indirectly
controlling or controlled by a member
organization, whether or not any such
person is registered or exempt from
registration with the NYSE or NASD.
(c) Written Policies and Procedures
(1) Each member organization must
have written policies and supervisory
procedures that:
(A) define forms of business
entertainment that are appropriate and
inappropriate using quantitative and/or
qualitative standards that address the
nature and frequency of the
entertainment provided, as well as the
type and class of any accommodations
or transportation provided in
connection with such business
entertainment; and
(B) make clear that anything of value
given or otherwise provided to a
customer representative that does not
fall within the definition of ‘‘business
entertainment’’ is a gift under Rule 350;
and
(C) impose either specific dollar limits
on business entertainment or require
advance written supervisory approval
beyond specified dollar thresholds; and
(D) are designed to detect and prevent
business entertainment that is intended
as, or could reasonably be perceived to
be intended as, an improper quid pro
quo or that could otherwise give rise to
a potential conflict of interest or
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undermine the performance of a
customer representative’s duty to a
customer or to any person to whom the
customer owes a fiduciary duty; and
(E) establish standards to ensure that
persons designated to supervise and
administer the written policies and
procedures are sufficiently qualified;
and
(F) require appropriate training and
education for all personnel who
supervise, administer, or are subject to
the written policies and procedures.
(2) A member organization’s written
policies and procedures may
distinguish, and set specifically tailored
standards for, business entertainment in
connection with events that are deemed
to be primarily educational, charitable,
or philanthropic in nature, provided
that such standards comply with the
requirements of this rule and are
explicitly addressed in the written
policies and procedures.
(d) Recordkeeping
(1) Each member organization’s
written policies and procedures must
require the maintenance of detailed
records of business entertainment
expenses provided to any customer
representative. The member
organization is not required to maintain
records of:
(A) business entertainment when the
total value of the business
entertainment, including all expenses
associated with the business
entertainment, does not exceed $50 per
day; or
(B) additional expenses incurred in
connection with otherwise recorded
business entertainment that do not, in
the aggregate, exceed $50 per day.
(2) Each member organization’s
written policies and procedures must
include provisions reasonably designed
to prevent member organization
associated persons from circumventing
the recordkeeping requirements in
contravention of the spirit and purpose
of this rule (e.g., a pattern of providing
a customer representative with business
entertainment valued at $48).
(3) Each member organization’s
written policies and procedures must
require that, upon a customer’s written
request, the member organization will
promptly make available to the
customer any records regarding
business entertainment provided to
customer representatives of that
customer.
(e) Notice to Customers
Each member organization must have
a system in place to give notice (e.g., via
the member organization’s Web site, a
disclosure document, or other
appropriate means) to customers that
utilize customer representatives subject
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to this rule that, upon a customer’s
written request, the member
organization will promptly provide
detailed information regarding the
manner and expense of any business
entertainment provided to their
customer representative(s) by such
member organization.
(f) Exemptions
(1) General Exemptions
This rule does not apply to any
member organization that does not
engage in business entertainment. For
any member organization that engages
in business entertainment, this rule
applies only with respect to business
entertainment provided to customer
representatives.
(2) Specific Exemption for Member
Organizations with Business
Entertainment Expenses Below $7,500
A member organization whose
business entertainment expenses in the
course of its fiscal year are below $7,500
shall be subject only to paragraphs (a),
(b), (c)(1)(D) and (E) of this rule and
shall otherwise be exempt from
paragraphs (c), (d) and (e). Each
member organization that relies on this
exemption must be able to evidence that
its business entertainment expenses are
below the $7,500 threshold.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NYSE included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below, and the most
significant aspects of such statements
are set forth in Sections A, B, and C
below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing new Rule
350A (‘‘Business Entertainment’’ or the
‘‘Rule’’) to address conflict of interest
issues in connection with the provision
of business entertainment by member
organizations to representatives of
customers or prospective customers.
Specifically, the proposed rule
addresses the concern that customer
representatives’ decisions to direct
business (e.g., order flow) to a given
member organization may be influenced
by lavish entertainment provided by a
member organization or a person
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associated with a member organization
(‘‘associated person’’), rather than on the
basis of the brokerage services to be
provided. Such conduct is potentially
violative of both Commission and selfregulatory organization rules (e.g., best
execution obligations).5
The Exchange has worked closely
with industry representatives and the
NASD to develop a substantially
uniform industry business
entertainment standard to address the
potential for such conflicts of interest.
The Exchange initially contemplated a
strictly prescriptive approach that
established specific quantitative dollar
standards for all broker-dealers.
However, for the reasons discussed in
detail below, such an approach was
ultimately deemed impracticable as it
neither reasonably addressed the
regulatory issue in question nor the
business realities of Exchange
membership. In light of the practical
difficulties associated with the
imposition of a single quantitative
standard across the spectrum of brokerdealer business models, the proposed
rule takes a more principle-based
approach with flexible prescriptive
elements and guidelines.
Background
In attempting to codify business
entertainment guidelines, the Exchange
was faced with developing an approach
that addresses regulatory concerns, is
practical, and does not unreasonably
nor unduly interfere with brokerdealers’ legitimate commercial and
business relationships. The primary
merit of adopting a strictly prescriptive
approach with fixed dollar limits is that
it provides bright line standards that,
arguably, could facilitate industry
compliance. However, imposing a fixed
dollar standard is not without practical
problems. For example, it does not take
into account regional differences—
which is to say that what might be
considered ‘‘lavish’’ or ‘‘excessive’’ in
one city might not necessarily be
deemed so in another. Further, what
might be considered appropriate
entertainment for an investment
banking/institutional client base might
be considered lavish and/or excessive in
a retail customer context.
Since terms such as ‘‘lavish’’ or
‘‘excessive’’ can be subjective and
standards of appropriateness may vary
5 Although not explicitly defined by the
Commission, when acting as an agent for its
customers, a broker-dealer owes such customers a
duty of best execution. See NYSE Rule 123A.41
which provides that a broker handling a market
order is to use due diligence to execute the order
at the best price or prices available under the
published market procedures of the Exchange.
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according to factors noted above, the
NYSE concluded that the idea of
prescribing industry-wide dollar
amount standards was impracticable. A
specific dollar threshold could not be
established that would justifiably apply
to all broker-dealers, taking into account
variances in size and business model,
and the range of customer types (e.g.,
investment banking, institutional, retail,
and those with fiduciary obligations
such as investment advisers and
pension fund representatives).
Further, a uniform standard would
give rise to unintended effects related to
firm participation in, or sponsorship of,
charitable events. There is also frequent
linkage between education and
entertainment that would likely become
problematic. In many instances, firms
combine legitimate educational
functions with lodging, meals and
entertainment, making it difficult to
separate business expenses from
entertainment expenses under a
prescriptive regulatory scheme.
Thus, the Exchange is proposing a
more flexible, principle-based approach
that would require each firm to develop,
within a prescribed regulatory
framework, standards that are effective
and appropriate for its business model
that would be administered via
procedures that are transparent and well
documented.
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Outline of the Proposed Rule
General Prohibition
Subsection (a) of proposed Rule 350A
imposes the general prohibition that ‘‘no
member organization or person
associated with a member organization
shall, directly or indirectly, provide any
business entertainment to a customer
representative pursuant to the
establishment of, or during the course
of, a business relationship with any
customer that is intended or designed to
cause, or would be reasonably judged to
have the likely effect of causing, such
customer representative to act in a
manner that is inconsistent with: (1)
The best interests of the customer or (2)
the best interests of any person to whom
the customer owes a fiduciary duty.’’
The general nature of this prohibition
recognizes that no rule of this type can
identify and specifically address each
and every potential conflict-of-interest
scenario that may arise. Note, however,
that the prohibition against provision of
entertainment ‘‘directly or indirectly’’ is
intended to prevent circumvention of
the spirit of the rule. For instance, it
would be a violation of the Rule if an
associated person of a member
organization were to either utilize his or
her personal funds in an effort to evade
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the dictates of the Rule, or to encourage
an employee of a member organization
subsidiary to provide entertainment on
behalf of the member organization. Note
also that the purpose of the proposed
Rule is to address customer
representative conflicts of interest that
could adversely affect the customer. The
Rule would not apply to business
entertainment provided by an associated
person directly to individual (natural
person) customers or potential
customers.
Definition of Key Terms
Proposed Rule 350A(b) defines the
terms ‘‘customer,’’ ‘‘customer
representative’’ and ‘‘business
entertainment’’ as follows:
‘‘Customer’’
The term ‘‘customer’’ means ‘‘(1) A
person 6 that maintains a business
relationship with a member
organization via the maintenance of an
account, through the conduct of
investment banking, or pursuant to
other securities-related activity, or (2) a
person whose customer representative
receives business entertainment for the
purpose of encouraging such person to
establish a business relationship with a
member organization by opening an
account with the member organization
or by conducting investment banking or
other securities-related activity with the
member organization.’’
‘‘Customer Representative’’
The term ‘‘customer representative’’
means ‘‘a person who is an employee,
officer, director, or agent of a customer,
unless such person is a family member 7
of the customer.’’ The ‘‘family member’’
exemption is proposed to exclude
instances where an individual has
power of attorney over the account of a
close family member’s account, such
accounts opened under the Uniform
Gifts to Minors Act or instances where
a person exercises discretion over their
spouse’s account. The Exchange does
not believe such arrangements are likely
to result in the types of conflicts the
proposed rule is intended to address
and their inclusion would thus
constitute an undue regulatory burden
on membership.
6 NYSE Rule 2 defines the term ‘‘person’’ to mean
‘‘a natural person, corporation, partnership,
association, joint stock company, trust, fund or any
organized group of persons whether incorporated or
not.
7 The term ‘‘family member’’ is defined as ‘‘a
person’s parents, mother-in-law or father-in-law,
spouse, brother or sister, brother-in-law or sister-inlaw, son-in-law or daughter-in-law, and children.’’
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‘‘Business Entertainment’’ 8
The term ‘‘business entertainment’’
means ‘‘any social event, hospitality
event, sporting event, entertainment
event, meal, leisure activity, or event of
like nature or purpose, including
business entertainment offered in
connection with a charitable event,
educational event or business
conference, as well as any
transportation or lodging related to such
activity or event, in which an associated
person of a member organization
accompanies a customer representative’’
(absent ‘‘exigent circumstances,’’
discussed below). Anything of value
given or otherwise provided to a
customer representative that does not
fall within the definition of ‘‘business
entertainment’’ is a gift subject to NYSE
Rule 350 (‘‘Compensation or Gratuities
to Employees of Others’’).
‘‘Associated Person’’
The terms ‘‘person associated with a
member organization’’ or ‘‘associated
person’’ are defined to include: (1) A
natural person who is registered or has
applied for registration under the Rules
of the NYSE; (2) a sole proprietor,
partner, officer, director, or branch
manager of a member organization, or
other natural person occupying a similar
status or performing similar functions,
or a natural person engaged in the
investment banking or securities
business who is directly or indirectly
controlling or controlled by a member
organization, whether or not any such
person is registered or exempt from
registration with the NYSE or NASD.
The Exchange has been asked about
the extent to which the proposed rule
change reaches business entertainment
conducted outside the United States,
particularly entertainment provided by
persons who are employed in
commonly controlled affiliates of a
financial services company operating in
the United States and/or foreign
jurisdictions. As an initial matter,
proposed Rule 350A reaches all
business entertainment of a member
organization and persons associated
with a member organization, even if
such entertainment occurs outside of
the United States or is provided to
foreign individuals. However, the
Exchange does not believe that all
persons who are employed in
commonly controlled affiliates of a
financial services company operating in
the United States and/or foreign
jurisdictions are necessarily associated
persons of the member organization,
even if they report to a person who, in
8 See also sections titled ‘‘Exigent Circumstances’’
and ‘‘Valuation of Business Entertainment’’ below.
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another capacity, is an associated
person of a member organization.
An associated person of a member
organization may have management and
supervisory responsibilities for nonmember affiliates of a financial services
company, located within or outside of
the United States, without the result
that the persons being managed and
supervised in the non-member affiliates
would necessarily be deemed associated
persons of the member organization. It
is the view of the Exchange that in such
instances the following factors establish
that an employee of a non-member
affiliate is not an associated person of
the member organization: (1) The
manager/supervisor of that employee is
recognized in the member organization
as having a scope of responsibilities
outside of the member organization; (2)
the exercise of the management and
supervision over that employee by such
manager/supervisor is not controlled by
the member organization, is reviewable
for purposes of performance and
compensation outside of the member
organization, and is not conducted for
the benefit of the member organization;
and (3) the employee of the non-member
affiliate is not otherwise employed or
engaged in the investment banking or
securities business of the member
organization or controlled by the
member organization in respect of such
activities.
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Undefined Terms
Any term not specifically defined in
Rule 350A shall have the meaning
ascribed to it as otherwise defined or
understood within the rules of the
Exchange and the interpretations
thereof.
Exigent Circumstances
As noted above, the definition of
‘‘business entertainment’’ generally
prescribes that if a customer
representative is not accompanied by an
appropriate associated person of the
member organization, any expenses
associated with the business
entertainment will be considered a gift
under NYSE Rule 350. An exception to
this requirement is proposed to address
instances when exigent circumstances
make it impractical for an associated
person to attend a business
entertainment event.9 All instances
where such exigent circumstances are
invoked must be clearly and thoroughly
documented and be subject to the prior
written approval of a designated
supervisory person or, in very limited
circumstances where such prior
approval cannot reasonably be obtained,
9 See
Rule 350A(b)(4)(A).
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to a prompt post-event review to be
conducted and documented by such
supervisory person.
The Exchange believes that the
‘‘exigent circumstances’’ exception
provides necessary flexibility in light of
real-world, last minute emergency
situations that could arise that would
make it difficult, if not impossible, for
an appropriate member organization
associated person to attend a business
entertainment event with a customer
representative. Examples of exigent
circumstances would be a sick child, an
accident, or some other sudden
overriding circumstance. The Exchange
does not believe this provision would
lead to circumvention of the spirit or
substance of the proposed rule since all
such occurrences are subject to detailed
documentation such that any patterns of
abuse would become quickly apparent
to supervisory personnel.
Written Policies and Supervisory
Procedures Required
Pursuant to the general directive of
proposed Rule 350A(a), Rule 350A(c)
would require that each member
organization have written policies and
supervisory procedures applicable to
business entertainment that incorporate
prescribed elements. The following
prescribed elements, outlined under
subsection (c)(1), are applicable to all
member organizations except those with
business expenses below $7,500, which
are subject only to subsection (c)(1)(D)
and (c)(1)(E): 10
(A) The policies and procedures must
define forms of business entertainment
that are ‘‘appropriate’’ and
‘‘inappropriate,’’ using quantitative and/
or qualitative standards that address the
nature and frequency of the
entertainment provided, as well as the
type and class of any accommodations
or transportation provided in
connection with such business
entertainment. This provision
recognizes that, in order to establish
meaningful standards that are
enforceable, firms must have objective
bases upon which to determine the
appropriateness of business
entertainment. It also recognizes that,
given the wide range of broker-dealer
business models, it is impractical to
require a single, industry-wide set of
standards. Further, by placing the
responsibility on firm personnel to
develop firm-specific standards has the
benefit of fostering internal discussion
and serious consideration of issues
10 See proposed Rule 350A(f) and section below
entitled ‘‘Specific Exemptions for Member
Organizations with Business Entertainment
Expenses Below $7,500.’’
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related to the provision of business
entertainment in both an ethical and
practical context.
(B) The policies and procedures must
make clear that anything of value given
or otherwise provided to a customer
representative that does not fall within
the definition of ‘‘business
entertainment’’ is a gift under NYSE
Rule 350.
(C) The policies and procedures must
impose either specific dollar limits on
business entertainment or require prior
written supervisory approval when such
entertainment expenses will exceed
certain specified dollar thresholds. This
provision would require firms to make
objective, ‘‘hard number’’ value
determinations regarding generally
acceptable levels of business
entertainment. Not only would this
approach have the benefit of
establishing unambiguous standards, it
would also encourage the selfcomparison of such standards among
firms of similar size and circumstance.
This, in conjunction with feedback from
regulatory organizations, would likely
result in the establishment of
‘‘unofficial,’’ but generally accepted
industry standards over time.
(D) The policies and procedures must
be designed to detect and prevent
business entertainment that is intended
as, or could reasonably be perceived to
be intended as, an improper quid pro
quo or that could otherwise give rise to
a potential conflict of interest, or
undermine the performance of a
customer representative’s duty to a
customer or to any person to whom the
customer owes a fiduciary duty. In
addition to highlighting the core
purpose of the Rule, this provision is
intended to make clear that member
organizations are expected to take a
proactive approach with respect to
potential violations of their business
entertainment policy.
(E) The policies and procedures must
establish standards to ensure that
persons designated to supervise and
administer the written policies and
procedures are sufficiently qualified.
Since the Rule does not prescribe exam
qualifications or other standardized
qualification requirements for
supervisors or administrators of
business entertainment policies and
procedures, member organizations must
formalize a process to ensure that
informed determinations are made with
regard to the ability of persons assigned
such responsibilities.11
11 See NYSE Rule 345A(b). Note also that
although Rule 350A, as proposed in Amendment
No. 1, does not include a specific requirement that
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(F) The policies and procedures must
provide appropriate education and
training to all personnel who supervise,
administer, or are subject to the written
policies and procedures prescribed by
the proposed Rule. This provision is
intended to ensure that all relevant
personnel are familiar with, and have a
clear understanding of, the firm’s
business entertainment policies and
procedures. Such education and
training could be provided as part of the
‘‘Firm Element’’ requirement of NYSE
Rule 345A (‘‘Continuing Education for
Registered Persons’’).12
Certain ‘‘Business Entertainment’’
Standards May Be Distinguished
In addition to the above requirements,
the proposed Rule 13 would make clear
that the written policies and supervisory
procedures may distinguish, and set
specifically tailored standards for,
business entertainment deemed to be
primarily educational in nature or
closely associated with a charitable
event or philanthropic cause. This
provision recognizes that certain types
of events that could be characterized as
business entertainment, or that include
entertainment as an element, might
serve a larger purpose than those strictly
or primarily intended to solicit
business. Any such standards to be
utilized must be explicitly addressed in
the member’s organization policies and
procedures, and must still comply with
all requirements of the proposed Rule.
Recordkeeping Requirements
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In order to ensure that expenses can
be tracked and analyzed for potential
improprieties, proposed Rule 350A(d)
makes clear that each member
organization’s written policies and
procedures must require maintenance of
detailed records of business
entertainment expense provided to any
customer representative. Further, such
policies and procedures must require
that, upon a customer’s written request,
each member organization will
promptly make available to a customer
any records regarding business
entertainment provided to customer
representatives of that customer.
members test business entertainment policies and
procedures, such policies and procedures are
subject to NYSE Rule 342.23 which requires the
development and maintenance of adequate controls
over each business activity and the establishment
of procedures for independent verification and
testing of those business activities. Telephone call
between Rebekah Liu, Special Counsel, Division of
Market Regulation (‘‘Division’’), Commission, and
Steve Kasprzak, Principal Counsel, NYSE, May 15,
2007.
12 See NYSE Rule 345A(b).
13 See Rule 350A(c)(2).
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However, in order not to impose an
undue regulatory burden, the proposed
Rule includes an exemption to the
recordkeeping requirement for de
minimis or incidental expenses that
would not reasonably be expected to
influence the behavior of a customer
representative. Specifically, records
would not be required to be maintained
for:
(1) Business entertainment when its
total value, including all associated
expenses, does not exceed $50 per day
(such as a $45 dinner, or an inexpensive
dinner and movie which, in the
aggregate, cost less than $50); or
(2) Additional expenses incurred in
connection with otherwise recorded
business entertainment that do not, in
the aggregate, exceed $50 per day (such
as a hot dog and soda purchased at a
professional sporting event where the
cost of the ticket—presuming it is
greater than $50—has been duly
recorded as a business entertainment
expense).14
Each member organization’s written
policies and procedures must include
provisions reasonably designed to
prevent member organization associated
persons from circumventing the
recordkeeping requirements in
contravention of the spirit and purpose
of this rule (e.g., a pattern of providing
a customer representative with business
entertainment valued at $48, or the
disaggregation of events—such as a $40
dinner followed by a $40 sporting
event—required by the Rule to be
aggregated and recorded).
As discussed more fully below, the
recordkeeping requirements of proposed
Rule 350A(d) shall not apply to member
organizations with annual business
entertainment expenses below $7,500.
Valuation of Business Entertainment
The definition of the term ‘‘business
entertainment’’ states that each member
organization’s written policies and
procedures must specify the
methodology to be used by the member
organization to calculate the value of
business entertainment.15 In general,
business entertainment expenses should
be valued at the higher of face value or
cost to the member organization. Thus,
if a theatre ticket with a face value of
$100 is obtained at a cost to the member
organization of $300, the ticket would
be valued at the higher purchase price.
14 Member organizations should be aware,
however, that they may need to track such expenses
under other NYSE or Commission rules.
15 See Rule 350A(a)(4)(C).
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
Provision of Business Entertainment
Records to Customers/Notice
Requirement
Proposed Rule 350A(e) requires that
each member organization’s written
policies and procedures provide that,
upon a customer’s written request, the
member organization will promptly
make available to the customer any
business entertainment records
regarding business entertainment
provided any customer representative of
that customer. Further, each member
organization must have a system in
place to give notice (e.g., via the
member organization’s Web site, a
disclosure document, or other
appropriate means) to customers that
utilize customer representatives subject
to this rule that, upon a customer’s
written request, the member
organization will promptly provide such
information. The Exchange notes that
the ‘‘notice’’ provision will encourage
the expansion of monitoring and
controls on business entertainment
beyond broker-dealers to the employers
of business entertainment recipients.
Application of Proposed Rule 350A
General Application
Subsection (f)(1) makes clear that the
proposed Rule does not apply to any
member organization that does not
engage in business entertainment. Thus,
for example, if a member organization
provides no business entertainment as
defined by the proposed Rule, it would
not be required to establish otherwise
applicable policies and procedures. This
subsection further clarifies that the
proposed rule applies only with respect
to business entertainment provided to
customer representatives. Thus, as
noted above, it would not be applicable
to situations where a member
organization directly provides business
entertainment to natural person
customers or potential natural person
customers.16
Specific Exemptions for Member
Organizations With Business
Entertainment Expenses Below $7,500
The concerns that the proposed rule
seek to address are not presented by
those member organizations that, in the
aggregate, do not devote significant
resources to business entertainment.
Consequently, the proposed rule
provides for a partial exemption, under
subsection (f)(2), for those member
organizations with annual business
entertainment expenses below $7,500.
16 Telephone call between Steve Kuan, Special
Counsel, Division, Commission, and Steve
Kasprzak, Principal Counsel, NYSE, May 7, 2007.
E:\FR\FM\21MYN1.SGM
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Federal Register / Vol. 72, No. 97 / Monday, May 21, 2007 / Notices
The provision prescribes that the $7,500
ceiling be measured on a fiscal year
basis. Each member organization that
relies on the exemption must evidence
that its business entertainment expenses
are below the threshold.
Specifically, member organizations
below the $7,500 threshold would be
exempt from the written ‘‘Policies and
Procedures’’ provisions of proposed
Rule 350A(c)(1) except for subsections
(D) and (E). Subsection (D) requires
written policies and procedures to
detect and prevent business
entertainment that is intended as, or
could reasonably be perceived to be
intended as, an improper quid pro quo
or that could otherwise give rise to a
potential conflict of interest, or
undermine the performance of a
customer representative’s duty to a
customer or to any person to whom the
customer owes a fiduciary duty.
Subsection (E) requires the
establishment of standards to ensure
that persons designated to supervise and
administer the written policies and
procedures are sufficiently qualified.
Member organizations below the
$7,500 threshold would also be exempt
from the prescribed recordkeeping
provisions of proposed Rule 350A(d).
As noted above, however, member
organizations must be able to evidence
that its business entertainment expenses
were below the threshold over the
course of their fiscal year.
In addition, member organizations
below the $7,500 threshold would be
exempt from the requirement, under
Rule 350A(e) to have a system in place
to give notice (e.g., via a website,
disclosure document, or other
appropriate means) to customers that
utilize customer representatives that,
upon a customer’s written request, the
member organization will promptly
provide detailed information regarding
the manner and expense of any business
entertainment provided to their
customer representatives by such
member organization.
Note that member organizations that
avail themselves of the specified
exemptions under proposed subsection
(f)(2) would still be fully subject to
proposed Rule 350A(a) which imposes
the general prohibition that ‘‘no member
organization or person associated with a
member organization shall, directly or
indirectly, provide any business
entertainment to a customer
representative pursuant to the
establishment of, or during the course
of, a business relationship with any
customer that is intended or designed to
cause, or would be reasonably judged to
have the likely effect of causing, such
customer representative to act in a
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15:57 May 18, 2007
Jkt 211001
28539
Interpretive Guidance/Practical Criteria
As discussed above, required written
policies and procedures addressing
business entertainment must include
criteria that the member organization
will utilize to evaluate the propriety of
business entertainment in various
contexts. Although not included in the
Rule text itself, the Exchange intends to
include in an Information Memo
released in conjunction with the
approval of proposed Rule 350A the
following factors to be considered when
establishing such criteria:
conflict-of-interest issues related to
business entertainment, therefore
approval of the proposal is requested.
The Exchange further requests an
effective date of 6 months from approval
in order to give membership sufficient
time to sufficiently upgrade systems and
develop procedures to effectively
comply with the Rule’s requirements.
The Exchange will announce the
effective date in an Information Memo.
2. Statutory Basis
manner that is inconsistent with: (1)
The best interests of the customer or (2)
the best interests of any person to whom
the customer owes a fiduciary duty.’’
With Respect to the Entertainment
(a) Whether the nature, cost, or extent
of the entertainment could reasonably
give rise to an actual or perceived
conflict of interest, or encourage a quid
pro quo business transaction;
(b) Whether the nature, cost, and
extent of the entertainment is consistent
with the nature of the business
relationship and the relationship of the
parties involved;
(c) Whether the provision of any
transportation, lodging, or other
accommodations is appropriate;
(d) Whether the entertainment would
be considered usual and customary
within the industry;
(e) Whether the cost of the
entertainment is consistent with the
location (city and/or establishment) in
which the entertainment takes place;
(f) Whether the entertainment extends
to the client’s spouse or to guests of the
client;
(g) Whether the entertainment might
otherwise reasonably be perceived to be
improper.
With Respect to the Client
(a) Whether the recipient of the
entertainment has fiduciary duties (e.g.,
to a public company, a state, or a
municipality) that may give rise to
specific legal or ethical considerations;
(b) The frequency of entertainment
provided to the client;
(c) The frequency of firm contact with
the client in the ordinary course of
business.
With Respect to the Business Purpose
(a) Whether the entertainment is in
recognition of a completed deal;
(b) Whether the entertainment is
educational/philanthropic in nature, or
strictly recreational.
In closing, the Exchange believes that
the proposed Rule is an effective and
practical approach to address the
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
The proposed rule change is
consistent with Section 6 of the Act,17
in general, and furthers the objectives of
Section 6(b)(5),18 in particular, in that it
is designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and national market system, and in
general, to protect investors and the
public interest. The Exchange believes
the proposed amendments are
consistent with this section in that they
permit firms to develop and maintain
business relationships while requiring
controls that mitigate potential conflicts
of interest that can arise in such
relationships.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which NYSE consents, the
Commission will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
17 15
18 15
E:\FR\FM\21MYN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(5).
21MYN1
28540
Federal Register / Vol. 72, No. 97 / Monday, May 21, 2007 / Notices
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
The Commission notes that the
NYSE’s proposed Rule 350A(e) provides
that the NYSE member organization
must have a system in place to give
notice (e.g., via the member
organization’s Web site, a disclosure
document, or other appropriate means)
to customers that use customer
representatives that upon a customer’s
written request, the NYSE member will
provide detailed information regarding
the manner and expense of any business
entertainment provided by the NYSE
member to the customer
representative,19 while the NASD’s
proposal does not contain a similar
notice provision.20 The Commission is
soliciting comment on this difference
between the NYSE and NASD proposed
rules and specifically whether NASD
should have a similar notification
provision for customers utilizing
customer representatives.
Comments may be submitted by any
of the following methods:
Electronic Comments
pwalker on PROD1PC71 with NOTICES
• Use the Commission’s Internet
comment form (www.sec.gov/rules/
sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2006–06 on the
subject line.
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of the filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSE–2006–06 and should
be submitted on or before June 11, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to
delegated authority.21
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E7–9668 Filed 5–18–07; 8:45 am]
BILLING CODE 8010–01–P
SOCIAL SECURITY ADMINISTRATION
Agency Information Collection
Activities: Proposed Request and
Comment Request
The Social Security Administration
(SSA) publishes a list of information
collection packages that will require
clearance by the Office of Management
and Budget (OMB) in compliance with
Pub. L. 104–13, the Paperwork
Reduction Act of 1995, effective October
Paper Comments
1, 1995. The information collection
• Send paper comments in triplicate
packages that may be included in this
to Nancy M. Morris, Secretary,
notice are for new information
Securities and Exchange Commission,
collections, approval of existing
100 F Street, NE., Washington, DC
information collections, revisions to
20549–1090.
OMB-approved information collections,
All submissions should refer to File
and extensions (no change) of OMBNumber SR–NYSE–2006–06. This file
approved information collections.
number should be included on the
SSA is soliciting comments on the
subject line if e-mail is used. To help the accuracy of the agency’s burden
Commission process and review your
estimate; the need for the information;
comments more efficiently, please use
its practical utility; ways to enhance its
only one method. The Commission will quality, utility, and clarity; and on ways
post all comments on the Commission’s to minimize burden on respondents,
Internet Web site (www.sec.gov/rules/
including the use of automated
sro.shtml). Copies of the submission, all collection techniques or other forms of
subsequent amendments, all written
information technology. Written
statements with respect to the proposed comments and recommendations
rule change that are filed with the
regarding the information collection(s)
Commission, and all written
should be submitted to the OMB Desk
communications relating to the
Officer and the SSA Reports Clearance
Officer. The information can be mailed,
19 As noted above, according to the Exchange the
faxed or e-mailed to the individuals at
notice provision will encourage the expansion of
the addresses and fax numbers listed
monitoring and controls on business entertainment
below:
beyond broker-dealers to the employers of business
entertainment recipients.
20 See infra footnote 3.
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21 17
Jkt 211001
PO 00000
CFR 200.30–3(a)(12).
Frm 00079
Fmt 4703
Sfmt 4703
(OMB), Office of Management and
Budget, Attn: Desk Officer for SSA.
Fax: 202–395–6974. E-mail address:
OIRA_Submission@omb.eop.gov.
(SSA), Social Security Administration,
DCFAM, Attn: Reports Clearance
Officer, 1333 Annex Building, 6401
Security Blvd., Baltimore, MD 21235.
Fax: 410–965–6400. E-mail address:
OPLM.RCO@ssa.gov.
I. The information collections listed
below are pending at SSA and will be
submitted to OMB within 60 days from
the date of this notice. Therefore, your
comments should be submitted to SSA
within 60 days from the date of this
publication. You can obtain copies of
the collection instruments by calling the
SSA Reports Clearance Officer at 410–
965–0454 or by writing to the address
listed above.
1. eData Registration/Account
Modification—20 CFR 401.45—0960NEW
Collection Background
Section 5 U.S.C. 552a, (e)(10) of the
Privacy Act of 1974 requires agencies to
establish appropriate administrative,
technical, and physical safeguards to
ensure the security and confidentiality
of records. Also, Section (f)(2) & (3)
requires agencies to establish
requirements for identifying an
individual who requests a record or
information pertaining to that
individual and to establish procedures
for disclosure of personal information.
SSA promulgated Privacy Act rules in
the Code of Federal Regulations,
Subpart B. Procedures for verifying
identity are at 20 CFR 401.45.
Collection Description
The eData Services Web site allows
various external organizations to submit
files to a variety of SSA systems and in
some cases receive return files. The
users include State/local government
agencies, other Federal agencies, and
some nongovernmental business
entities. The SSA systems that process
data transferred via eData include, but
are not limited to, systems responsible
for disability processing and benefit
determination or termination. The
information collected on form SSA–118
(Government to Government Services
Online Web site Registration Form) to
register organizations is used
exclusively to maintain the identity of
the requester within eData. The
requestor is already a known entity to a
sponsor within SSA. The SSA sponsor
completes the registration forms and the
information is submitted to SSA’s User
Interface Team (UIT). Once this is
completed, SSA provides the requestor
E:\FR\FM\21MYN1.SGM
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]]>Agencies
[Federal Register Volume 72, Number 97 (Monday, May 21, 2007)]
[Notices]
[Pages 28534-28540]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9668]
[[Page 28534]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55766; File No. SR-NYSE-2006-06]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto
Relating to Proposed New Rule 350A (``Business Entertainment'')
Concerning Policies and Procedures Addressing Business Entertainment
May 15, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on February 15, 2006, the New York Stock Exchange
LLC (``NYSE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been substantially
prepared by NYSE. On April 26, 2007, NYSE filed Amendment No. 1 to the
proposed rule change.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced and superseded the original rule
filing in its entirety.
\4\ The Commission also is separately publishing a notice by the
National Association of Securities Dealers, Inc. (``NASD'') to
propose new IM-3060 on business entertainment, which is
substantially similar to NYSE's proposed rule text. See Securities
Exchange Act Release No. 55765 (May 15, 2007) (SR-NASD-2006-044).
The NYSE proposal and the NASD proposal primarily differ in that the
NYSE proposal contains a ``Notice to Customers'' provision. See
Section II(A)(1), Purpose section, and Section IV, Solicitation of
Comments section, below.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes new Rule 350A (``Business Entertainment'') to
address conflict of interest issues in connection with the provision of
business entertainment by member organizations to representatives of
customers or prospective customers. Below is the text of the proposed
rule change. Proposed new language is italicized.
Business Entertainment
Rule 350A
(a) General Requirements
No member organization or person associated with a member
organization shall, directly or indirectly, provide any business
entertainment to a customer representative pursuant to the
establishment of, or during the course of, a business relationship with
any customer that is intended or designed to cause, or would be
reasonably judged to have the likely effect of causing, such customer
representative to act in a manner that is inconsistent with:
(1) The best interests of the customer; or
(2) The best interests of any person to whom the customer owes a
fiduciary duty.
(b) Definitions
For purposes of this rule, the following definitions shall apply:
(1) The term ``customer'' means:
(A) a person that maintains a business relationship with a member
organization via the maintenance of an account, through the conduct of
investment banking, or pursuant to other securities-related activity;
or
(B) a person whose customer representative receives business
entertainment for the purpose of encouraging such person to establish a
business relationship with a member organization by opening an account
with the member organization or by conducting investment banking or
other securities-related activity with the member organization.
(2) The term ``customer representative'' means a person who is an
employee, officer, director, or agent of a customer, unless such person
is a family member of the customer.
(3) The term ``family member'' means a person's parents, mother-in-
law or father-in-law, spouse, brother or sister, brother-in-law or
sister-in-law, son-in-law or daughter-in-law, and children.
(4) The term ``business entertainment'' means any social event,
hospitality event, sporting event, entertainment event, meal, leisure
activity, or event of like nature or purpose, including business
entertainment offered in connection with a charitable event,
educational event or business conference, as well as any transportation
or lodging related to such activity or event, in which a person
associated with a member organization accompanies a customer
representative.
(A) If a customer representative is not accompanied by an
appropriate associated person of the member organization, any expenses
associated with the business entertainment will be considered a gift
under Rule 350 unless exigent circumstances make it impractical for an
associated person to attend. All instances where such exigent
circumstances are invoked must be clearly and thoroughly documented and
be subject to the prior written approval of a designated supervisory
person or, in very limited circumstances where such prior approval
cannot reasonably be obtained, to a prompt post-event review to be
conducted and documented by such supervisory person.
(B) Anything of value given or otherwise provided to a customer
representative that does not fall within the definition of ``business
entertainment'' is a gift under Rule 350.
(C) In valuing business entertainment expenses pursuant to this
Rule, a member organization's written policies and procedures must
specify the methodology to be used by the member organization to
calculate the value of business entertainment. In general, business
entertainment expenses should be valued at the higher of face value or
cost to the member organization.
(D) For purposes of this Rule, the terms ``person associated with a
member organization'' or ``associated person'' are defined to include:
(1) A natural person who is registered or has applied for registration
under the Rules of the NYSE; (2) a sole proprietor, partner, officer,
director, or branch manager of a member organization, or other natural
person occupying a similar status or performing similar functions, or a
natural person engaged in the investment banking or securities business
who is directly or indirectly controlling or controlled by a member
organization, whether or not any such person is registered or exempt
from registration with the NYSE or NASD.
(c) Written Policies and Procedures
(1) Each member organization must have written policies and
supervisory procedures that:
(A) define forms of business entertainment that are appropriate and
inappropriate using quantitative and/or qualitative standards that
address the nature and frequency of the entertainment provided, as well
as the type and class of any accommodations or transportation provided
in connection with such business entertainment; and
(B) make clear that anything of value given or otherwise provided
to a customer representative that does not fall within the definition
of ``business entertainment'' is a gift under Rule 350; and
(C) impose either specific dollar limits on business entertainment
or require advance written supervisory approval beyond specified dollar
thresholds; and
(D) are designed to detect and prevent business entertainment that
is intended as, or could reasonably be perceived to be intended as, an
improper quid pro quo or that could otherwise give rise to a potential
conflict of interest or
[[Page 28535]]
undermine the performance of a customer representative's duty to a
customer or to any person to whom the customer owes a fiduciary duty;
and
(E) establish standards to ensure that persons designated to
supervise and administer the written policies and procedures are
sufficiently qualified; and
(F) require appropriate training and education for all personnel
who supervise, administer, or are subject to the written policies and
procedures.
(2) A member organization's written policies and procedures may
distinguish, and set specifically tailored standards for, business
entertainment in connection with events that are deemed to be primarily
educational, charitable, or philanthropic in nature, provided that such
standards comply with the requirements of this rule and are explicitly
addressed in the written policies and procedures.
(d) Recordkeeping
(1) Each member organization's written policies and procedures must
require the maintenance of detailed records of business entertainment
expenses provided to any customer representative. The member
organization is not required to maintain records of:
(A) business entertainment when the total value of the business
entertainment, including all expenses associated with the business
entertainment, does not exceed $50 per day; or
(B) additional expenses incurred in connection with otherwise
recorded business entertainment that do not, in the aggregate, exceed
$50 per day.
(2) Each member organization's written policies and procedures must
include provisions reasonably designed to prevent member organization
associated persons from circumventing the recordkeeping requirements in
contravention of the spirit and purpose of this rule (e.g., a pattern
of providing a customer representative with business entertainment
valued at $48).
(3) Each member organization's written policies and procedures must
require that, upon a customer's written request, the member
organization will promptly make available to the customer any records
regarding business entertainment provided to customer representatives
of that customer.
(e) Notice to Customers
Each member organization must have a system in place to give notice
(e.g., via the member organization's Web site, a disclosure document,
or other appropriate means) to customers that utilize customer
representatives subject to this rule that, upon a customer's written
request, the member organization will promptly provide detailed
information regarding the manner and expense of any business
entertainment provided to their customer representative(s) by such
member organization.
(f) Exemptions
(1) General Exemptions
This rule does not apply to any member organization that does not
engage in business entertainment. For any member organization that
engages in business entertainment, this rule applies only with respect
to business entertainment provided to customer representatives.
(2) Specific Exemption for Member Organizations with Business
Entertainment Expenses Below $7,500
A member organization whose business entertainment expenses in the
course of its fiscal year are below $7,500 shall be subject only to
paragraphs (a), (b), (c)(1)(D) and (E) of this rule and shall otherwise
be exempt from paragraphs (c), (d) and (e). Each member organization
that relies on this exemption must be able to evidence that its
business entertainment expenses are below the $7,500 threshold.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below, and the most significant aspects of such statements are
set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing new Rule 350A (``Business Entertainment''
or the ``Rule'') to address conflict of interest issues in connection
with the provision of business entertainment by member organizations to
representatives of customers or prospective customers. Specifically,
the proposed rule addresses the concern that customer representatives'
decisions to direct business (e.g., order flow) to a given member
organization may be influenced by lavish entertainment provided by a
member organization or a person associated with a member organization
(``associated person''), rather than on the basis of the brokerage
services to be provided. Such conduct is potentially violative of both
Commission and self-regulatory organization rules (e.g., best execution
obligations).\5\
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\5\ Although not explicitly defined by the Commission, when
acting as an agent for its customers, a broker-dealer owes such
customers a duty of best execution. See NYSE Rule 123A.41 which
provides that a broker handling a market order is to use due
diligence to execute the order at the best price or prices available
under the published market procedures of the Exchange.
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The Exchange has worked closely with industry representatives and
the NASD to develop a substantially uniform industry business
entertainment standard to address the potential for such conflicts of
interest. The Exchange initially contemplated a strictly prescriptive
approach that established specific quantitative dollar standards for
all broker-dealers. However, for the reasons discussed in detail below,
such an approach was ultimately deemed impracticable as it neither
reasonably addressed the regulatory issue in question nor the business
realities of Exchange membership. In light of the practical
difficulties associated with the imposition of a single quantitative
standard across the spectrum of broker-dealer business models, the
proposed rule takes a more principle-based approach with flexible
prescriptive elements and guidelines.
Background
In attempting to codify business entertainment guidelines, the
Exchange was faced with developing an approach that addresses
regulatory concerns, is practical, and does not unreasonably nor unduly
interfere with broker-dealers' legitimate commercial and business
relationships. The primary merit of adopting a strictly prescriptive
approach with fixed dollar limits is that it provides bright line
standards that, arguably, could facilitate industry compliance.
However, imposing a fixed dollar standard is not without practical
problems. For example, it does not take into account regional
differences--which is to say that what might be considered ``lavish''
or ``excessive'' in one city might not necessarily be deemed so in
another. Further, what might be considered appropriate entertainment
for an investment banking/institutional client base might be considered
lavish and/or excessive in a retail customer context.
Since terms such as ``lavish'' or ``excessive'' can be subjective
and standards of appropriateness may vary
[[Page 28536]]
according to factors noted above, the NYSE concluded that the idea of
prescribing industry-wide dollar amount standards was impracticable. A
specific dollar threshold could not be established that would
justifiably apply to all broker-dealers, taking into account variances
in size and business model, and the range of customer types (e.g.,
investment banking, institutional, retail, and those with fiduciary
obligations such as investment advisers and pension fund
representatives).
Further, a uniform standard would give rise to unintended effects
related to firm participation in, or sponsorship of, charitable events.
There is also frequent linkage between education and entertainment that
would likely become problematic. In many instances, firms combine
legitimate educational functions with lodging, meals and entertainment,
making it difficult to separate business expenses from entertainment
expenses under a prescriptive regulatory scheme.
Thus, the Exchange is proposing a more flexible, principle-based
approach that would require each firm to develop, within a prescribed
regulatory framework, standards that are effective and appropriate for
its business model that would be administered via procedures that are
transparent and well documented.
Outline of the Proposed Rule
General Prohibition
Subsection (a) of proposed Rule 350A imposes the general
prohibition that ``no member organization or person associated with a
member organization shall, directly or indirectly, provide any business
entertainment to a customer representative pursuant to the
establishment of, or during the course of, a business relationship with
any customer that is intended or designed to cause, or would be
reasonably judged to have the likely effect of causing, such customer
representative to act in a manner that is inconsistent with: (1) The
best interests of the customer or (2) the best interests of any person
to whom the customer owes a fiduciary duty.''
The general nature of this prohibition recognizes that no rule of
this type can identify and specifically address each and every
potential conflict-of-interest scenario that may arise. Note, however,
that the prohibition against provision of entertainment ``directly or
indirectly'' is intended to prevent circumvention of the spirit of the
rule. For instance, it would be a violation of the Rule if an
associated person of a member organization were to either utilize his
or her personal funds in an effort to evade the dictates of the Rule,
or to encourage an employee of a member organization subsidiary to
provide entertainment on behalf of the member organization. Note also
that the purpose of the proposed Rule is to address customer
representative conflicts of interest that could adversely affect the
customer. The Rule would not apply to business entertainment provided
by an associated person directly to individual (natural person)
customers or potential customers.
Definition of Key Terms
Proposed Rule 350A(b) defines the terms ``customer,'' ``customer
representative'' and ``business entertainment'' as follows:
``Customer''
The term ``customer'' means ``(1) A person \6\ that maintains a
business relationship with a member organization via the maintenance of
an account, through the conduct of investment banking, or pursuant to
other securities-related activity, or (2) a person whose customer
representative receives business entertainment for the purpose of
encouraging such person to establish a business relationship with a
member organization by opening an account with the member organization
or by conducting investment banking or other securities-related
activity with the member organization.''
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\6\ NYSE Rule 2 defines the term ``person'' to mean ``a natural
person, corporation, partnership, association, joint stock company,
trust, fund or any organized group of persons whether incorporated
or not.
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``Customer Representative''
The term ``customer representative'' means ``a person who is an
employee, officer, director, or agent of a customer, unless such person
is a family member \7\ of the customer.'' The ``family member''
exemption is proposed to exclude instances where an individual has
power of attorney over the account of a close family member's account,
such accounts opened under the Uniform Gifts to Minors Act or instances
where a person exercises discretion over their spouse's account. The
Exchange does not believe such arrangements are likely to result in the
types of conflicts the proposed rule is intended to address and their
inclusion would thus constitute an undue regulatory burden on
membership.
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\7\ The term ``family member'' is defined as ``a person's
parents, mother-in-law or father-in-law, spouse, brother or sister,
brother-in-law or sister-in-law, son-in-law or daughter-in-law, and
children.''
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``Business Entertainment'' \8\
The term ``business entertainment'' means ``any social event,
hospitality event, sporting event, entertainment event, meal, leisure
activity, or event of like nature or purpose, including business
entertainment offered in connection with a charitable event,
educational event or business conference, as well as any transportation
or lodging related to such activity or event, in which an associated
person of a member organization accompanies a customer representative''
(absent ``exigent circumstances,'' discussed below). Anything of value
given or otherwise provided to a customer representative that does not
fall within the definition of ``business entertainment'' is a gift
subject to NYSE Rule 350 (``Compensation or Gratuities to Employees of
Others'').
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\8\ See also sections titled ``Exigent Circumstances'' and
``Valuation of Business Entertainment'' below.
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``Associated Person''
The terms ``person associated with a member organization'' or
``associated person'' are defined to include: (1) A natural person who
is registered or has applied for registration under the Rules of the
NYSE; (2) a sole proprietor, partner, officer, director, or branch
manager of a member organization, or other natural person occupying a
similar status or performing similar functions, or a natural person
engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by a member
organization, whether or not any such person is registered or exempt
from registration with the NYSE or NASD.
The Exchange has been asked about the extent to which the proposed
rule change reaches business entertainment conducted outside the United
States, particularly entertainment provided by persons who are employed
in commonly controlled affiliates of a financial services company
operating in the United States and/or foreign jurisdictions. As an
initial matter, proposed Rule 350A reaches all business entertainment
of a member organization and persons associated with a member
organization, even if such entertainment occurs outside of the United
States or is provided to foreign individuals. However, the Exchange
does not believe that all persons who are employed in commonly
controlled affiliates of a financial services company operating in the
United States and/or foreign jurisdictions are necessarily associated
persons of the member organization, even if they report to a person
who, in
[[Page 28537]]
another capacity, is an associated person of a member organization.
An associated person of a member organization may have management
and supervisory responsibilities for non-member affiliates of a
financial services company, located within or outside of the United
States, without the result that the persons being managed and
supervised in the non-member affiliates would necessarily be deemed
associated persons of the member organization. It is the view of the
Exchange that in such instances the following factors establish that an
employee of a non-member affiliate is not an associated person of the
member organization: (1) The manager/supervisor of that employee is
recognized in the member organization as having a scope of
responsibilities outside of the member organization; (2) the exercise
of the management and supervision over that employee by such manager/
supervisor is not controlled by the member organization, is reviewable
for purposes of performance and compensation outside of the member
organization, and is not conducted for the benefit of the member
organization; and (3) the employee of the non-member affiliate is not
otherwise employed or engaged in the investment banking or securities
business of the member organization or controlled by the member
organization in respect of such activities.
Undefined Terms
Any term not specifically defined in Rule 350A shall have the
meaning ascribed to it as otherwise defined or understood within the
rules of the Exchange and the interpretations thereof.
Exigent Circumstances
As noted above, the definition of ``business entertainment''
generally prescribes that if a customer representative is not
accompanied by an appropriate associated person of the member
organization, any expenses associated with the business entertainment
will be considered a gift under NYSE Rule 350. An exception to this
requirement is proposed to address instances when exigent circumstances
make it impractical for an associated person to attend a business
entertainment event.\9\ All instances where such exigent circumstances
are invoked must be clearly and thoroughly documented and be subject to
the prior written approval of a designated supervisory person or, in
very limited circumstances where such prior approval cannot reasonably
be obtained, to a prompt post-event review to be conducted and
documented by such supervisory person.
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\9\ See Rule 350A(b)(4)(A).
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The Exchange believes that the ``exigent circumstances'' exception
provides necessary flexibility in light of real-world, last minute
emergency situations that could arise that would make it difficult, if
not impossible, for an appropriate member organization associated
person to attend a business entertainment event with a customer
representative. Examples of exigent circumstances would be a sick
child, an accident, or some other sudden overriding circumstance. The
Exchange does not believe this provision would lead to circumvention of
the spirit or substance of the proposed rule since all such occurrences
are subject to detailed documentation such that any patterns of abuse
would become quickly apparent to supervisory personnel.
Written Policies and Supervisory Procedures Required
Pursuant to the general directive of proposed Rule 350A(a), Rule
350A(c) would require that each member organization have written
policies and supervisory procedures applicable to business
entertainment that incorporate prescribed elements. The following
prescribed elements, outlined under subsection (c)(1), are applicable
to all member organizations except those with business expenses below
$7,500, which are subject only to subsection (c)(1)(D) and (c)(1)(E):
\10\
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\10\ See proposed Rule 350A(f) and section below entitled
``Specific Exemptions for Member Organizations with Business
Entertainment Expenses Below $7,500.''
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(A) The policies and procedures must define forms of business
entertainment that are ``appropriate'' and ``inappropriate,'' using
quantitative and/or qualitative standards that address the nature and
frequency of the entertainment provided, as well as the type and class
of any accommodations or transportation provided in connection with
such business entertainment. This provision recognizes that, in order
to establish meaningful standards that are enforceable, firms must have
objective bases upon which to determine the appropriateness of business
entertainment. It also recognizes that, given the wide range of broker-
dealer business models, it is impractical to require a single,
industry-wide set of standards. Further, by placing the responsibility
on firm personnel to develop firm-specific standards has the benefit of
fostering internal discussion and serious consideration of issues
related to the provision of business entertainment in both an ethical
and practical context.
(B) The policies and procedures must make clear that anything of
value given or otherwise provided to a customer representative that
does not fall within the definition of ``business entertainment'' is a
gift under NYSE Rule 350.
(C) The policies and procedures must impose either specific dollar
limits on business entertainment or require prior written supervisory
approval when such entertainment expenses will exceed certain specified
dollar thresholds. This provision would require firms to make
objective, ``hard number'' value determinations regarding generally
acceptable levels of business entertainment. Not only would this
approach have the benefit of establishing unambiguous standards, it
would also encourage the self-comparison of such standards among firms
of similar size and circumstance. This, in conjunction with feedback
from regulatory organizations, would likely result in the establishment
of ``unofficial,'' but generally accepted industry standards over time.
(D) The policies and procedures must be designed to detect and
prevent business entertainment that is intended as, or could reasonably
be perceived to be intended as, an improper quid pro quo or that could
otherwise give rise to a potential conflict of interest, or undermine
the performance of a customer representative's duty to a customer or to
any person to whom the customer owes a fiduciary duty. In addition to
highlighting the core purpose of the Rule, this provision is intended
to make clear that member organizations are expected to take a
proactive approach with respect to potential violations of their
business entertainment policy.
(E) The policies and procedures must establish standards to ensure
that persons designated to supervise and administer the written
policies and procedures are sufficiently qualified. Since the Rule does
not prescribe exam qualifications or other standardized qualification
requirements for supervisors or administrators of business
entertainment policies and procedures, member organizations must
formalize a process to ensure that informed determinations are made
with regard to the ability of persons assigned such
responsibilities.\11\
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\11\ See NYSE Rule 345A(b). Note also that although Rule 350A,
as proposed in Amendment No. 1, does not include a specific
requirement that members test business entertainment policies and
procedures, such policies and procedures are subject to NYSE Rule
342.23 which requires the development and maintenance of adequate
controls over each business activity and the establishment of
procedures for independent verification and testing of those
business activities. Telephone call between Rebekah Liu, Special
Counsel, Division of Market Regulation (``Division''), Commission,
and Steve Kasprzak, Principal Counsel, NYSE, May 15, 2007.
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[[Page 28538]]
(F) The policies and procedures must provide appropriate education
and training to all personnel who supervise, administer, or are subject
to the written policies and procedures prescribed by the proposed Rule.
This provision is intended to ensure that all relevant personnel are
familiar with, and have a clear understanding of, the firm's business
entertainment policies and procedures. Such education and training
could be provided as part of the ``Firm Element'' requirement of NYSE
Rule 345A (``Continuing Education for Registered Persons'').\12\
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\12\ See NYSE Rule 345A(b).
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Certain ``Business Entertainment'' Standards May Be Distinguished
In addition to the above requirements, the proposed Rule \13\ would
make clear that the written policies and supervisory procedures may
distinguish, and set specifically tailored standards for, business
entertainment deemed to be primarily educational in nature or closely
associated with a charitable event or philanthropic cause. This
provision recognizes that certain types of events that could be
characterized as business entertainment, or that include entertainment
as an element, might serve a larger purpose than those strictly or
primarily intended to solicit business. Any such standards to be
utilized must be explicitly addressed in the member's organization
policies and procedures, and must still comply with all requirements of
the proposed Rule.
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\13\ See Rule 350A(c)(2).
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Recordkeeping Requirements
In order to ensure that expenses can be tracked and analyzed for
potential improprieties, proposed Rule 350A(d) makes clear that each
member organization's written policies and procedures must require
maintenance of detailed records of business entertainment expense
provided to any customer representative. Further, such policies and
procedures must require that, upon a customer's written request, each
member organization will promptly make available to a customer any
records regarding business entertainment provided to customer
representatives of that customer.
However, in order not to impose an undue regulatory burden, the
proposed Rule includes an exemption to the recordkeeping requirement
for de minimis or incidental expenses that would not reasonably be
expected to influence the behavior of a customer representative.
Specifically, records would not be required to be maintained for:
(1) Business entertainment when its total value, including all
associated expenses, does not exceed $50 per day (such as a $45 dinner,
or an inexpensive dinner and movie which, in the aggregate, cost less
than $50); or
(2) Additional expenses incurred in connection with otherwise
recorded business entertainment that do not, in the aggregate, exceed
$50 per day (such as a hot dog and soda purchased at a professional
sporting event where the cost of the ticket--presuming it is greater
than $50--has been duly recorded as a business entertainment
expense).\14\
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\14\ Member organizations should be aware, however, that they
may need to track such expenses under other NYSE or Commission
rules.
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Each member organization's written policies and procedures must
include provisions reasonably designed to prevent member organization
associated persons from circumventing the recordkeeping requirements in
contravention of the spirit and purpose of this rule (e.g., a pattern
of providing a customer representative with business entertainment
valued at $48, or the disaggregation of events--such as a $40 dinner
followed by a $40 sporting event--required by the Rule to be aggregated
and recorded).
As discussed more fully below, the recordkeeping requirements of
proposed Rule 350A(d) shall not apply to member organizations with
annual business entertainment expenses below $7,500.
Valuation of Business Entertainment
The definition of the term ``business entertainment'' states that
each member organization's written policies and procedures must specify
the methodology to be used by the member organization to calculate the
value of business entertainment.\15\ In general, business entertainment
expenses should be valued at the higher of face value or cost to the
member organization. Thus, if a theatre ticket with a face value of
$100 is obtained at a cost to the member organization of $300, the
ticket would be valued at the higher purchase price.
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\15\ See Rule 350A(a)(4)(C).
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Provision of Business Entertainment Records to Customers/Notice
Requirement
Proposed Rule 350A(e) requires that each member organization's
written policies and procedures provide that, upon a customer's written
request, the member organization will promptly make available to the
customer any business entertainment records regarding business
entertainment provided any customer representative of that customer.
Further, each member organization must have a system in place to give
notice (e.g., via the member organization's Web site, a disclosure
document, or other appropriate means) to customers that utilize
customer representatives subject to this rule that, upon a customer's
written request, the member organization will promptly provide such
information. The Exchange notes that the ``notice'' provision will
encourage the expansion of monitoring and controls on business
entertainment beyond broker-dealers to the employers of business
entertainment recipients.
Application of Proposed Rule 350A
General Application
Subsection (f)(1) makes clear that the proposed Rule does not apply
to any member organization that does not engage in business
entertainment. Thus, for example, if a member organization provides no
business entertainment as defined by the proposed Rule, it would not be
required to establish otherwise applicable policies and procedures.
This subsection further clarifies that the proposed rule applies only
with respect to business entertainment provided to customer
representatives. Thus, as noted above, it would not be applicable to
situations where a member organization directly provides business
entertainment to natural person customers or potential natural person
customers.\16\
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\16\ Telephone call between Steve Kuan, Special Counsel,
Division, Commission, and Steve Kasprzak, Principal Counsel, NYSE,
May 7, 2007.
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Specific Exemptions for Member Organizations With Business
Entertainment Expenses Below $7,500
The concerns that the proposed rule seek to address are not
presented by those member organizations that, in the aggregate, do not
devote significant resources to business entertainment. Consequently,
the proposed rule provides for a partial exemption, under subsection
(f)(2), for those member organizations with annual business
entertainment expenses below $7,500.
[[Page 28539]]
The provision prescribes that the $7,500 ceiling be measured on a
fiscal year basis. Each member organization that relies on the
exemption must evidence that its business entertainment expenses are
below the threshold.
Specifically, member organizations below the $7,500 threshold would
be exempt from the written ``Policies and Procedures'' provisions of
proposed Rule 350A(c)(1) except for subsections (D) and (E). Subsection
(D) requires written policies and procedures to detect and prevent
business entertainment that is intended as, or could reasonably be
perceived to be intended as, an improper quid pro quo or that could
otherwise give rise to a potential conflict of interest, or undermine
the performance of a customer representative's duty to a customer or to
any person to whom the customer owes a fiduciary duty. Subsection (E)
requires the establishment of standards to ensure that persons
designated to supervise and administer the written policies and
procedures are sufficiently qualified.
Member organizations below the $7,500 threshold would also be
exempt from the prescribed recordkeeping provisions of proposed Rule
350A(d). As noted above, however, member organizations must be able to
evidence that its business entertainment expenses were below the
threshold over the course of their fiscal year.
In addition, member organizations below the $7,500 threshold would
be exempt from the requirement, under Rule 350A(e) to have a system in
place to give notice (e.g., via a website, disclosure document, or
other appropriate means) to customers that utilize customer
representatives that, upon a customer's written request, the member
organization will promptly provide detailed information regarding the
manner and expense of any business entertainment provided to their
customer representatives by such member organization.
Note that member organizations that avail themselves of the
specified exemptions under proposed subsection (f)(2) would still be
fully subject to proposed Rule 350A(a) which imposes the general
prohibition that ``no member organization or person associated with a
member organization shall, directly or indirectly, provide any business
entertainment to a customer representative pursuant to the
establishment of, or during the course of, a business relationship with
any customer that is intended or designed to cause, or would be
reasonably judged to have the likely effect of causing, such customer
representative to act in a manner that is inconsistent with: (1) The
best interests of the customer or (2) the best interests of any person
to whom the customer owes a fiduciary duty.''
Interpretive Guidance/Practical Criteria
As discussed above, required written policies and procedures
addressing business entertainment must include criteria that the member
organization will utilize to evaluate the propriety of business
entertainment in various contexts. Although not included in the Rule
text itself, the Exchange intends to include in an Information Memo
released in conjunction with the approval of proposed Rule 350A the
following factors to be considered when establishing such criteria:
With Respect to the Entertainment
(a) Whether the nature, cost, or extent of the entertainment could
reasonably give rise to an actual or perceived conflict of interest, or
encourage a quid pro quo business transaction;
(b) Whether the nature, cost, and extent of the entertainment is
consistent with the nature of the business relationship and the
relationship of the parties involved;
(c) Whether the provision of any transportation, lodging, or other
accommodations is appropriate;
(d) Whether the entertainment would be considered usual and
customary within the industry;
(e) Whether the cost of the entertainment is consistent with the
location (city and/or establishment) in which the entertainment takes
place;
(f) Whether the entertainment extends to the client's spouse or to
guests of the client;
(g) Whether the entertainment might otherwise reasonably be
perceived to be improper.
With Respect to the Client
(a) Whether the recipient of the entertainment has fiduciary duties
(e.g., to a public company, a state, or a municipality) that may give
rise to specific legal or ethical considerations;
(b) The frequency of entertainment provided to the client;
(c) The frequency of firm contact with the client in the ordinary
course of business.
With Respect to the Business Purpose
(a) Whether the entertainment is in recognition of a completed
deal;
(b) Whether the entertainment is educational/philanthropic in
nature, or strictly recreational.
In closing, the Exchange believes that the proposed Rule is an
effective and practical approach to address the conflict-of-interest
issues related to business entertainment, therefore approval of the
proposal is requested. The Exchange further requests an effective date
of 6 months from approval in order to give membership sufficient time
to sufficiently upgrade systems and develop procedures to effectively
comply with the Rule's requirements. The Exchange will announce the
effective date in an Information Memo.
2. Statutory Basis
The proposed rule change is consistent with Section 6 of the
Act,\17\ in general, and furthers the objectives of Section
6(b)(5),\18\ in particular, in that it is designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and national market system, and in
general, to protect investors and the public interest. The Exchange
believes the proposed amendments are consistent with this section in
that they permit firms to develop and maintain business relationships
while requiring controls that mitigate potential conflicts of interest
that can arise in such relationships.
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\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which NYSE consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
[[Page 28540]]
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.
The Commission notes that the NYSE's proposed Rule 350A(e) provides
that the NYSE member organization must have a system in place to give
notice (e.g., via the member organization's Web site, a disclosure
document, or other appropriate means) to customers that use customer
representatives that upon a customer's written request, the NYSE member
will provide detailed information regarding the manner and expense of
any business entertainment provided by the NYSE member to the customer
representative,\19\ while the NASD's proposal does not contain a
similar notice provision.\20\ The Commission is soliciting comment on
this difference between the NYSE and NASD proposed rules and
specifically whether NASD should have a similar notification provision
for customers utilizing customer representatives.
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\19\ As noted above, according to the Exchange the notice
provision will encourage the expansion of monitoring and controls on
business entertainment beyond broker-dealers to the employers of
business entertainment recipients.
\20\ See infra footnote 3.
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Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (www.sec.gov/
rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2006-06 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-NYSE-2006-06. 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 (www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSE-2006-06 and should be submitted on or before June 11, 2007. For
the Commission, by the Division of Market Regulation, pursuant to
delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E7-9668 Filed 5-18-07; 8:45 am]
BILLING CODE 8010-01-P
