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Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Late Charges and Penalties for Non-Payment

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Information about this document as published in the Federal Register.

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Start Preamble December 21, 2000.

I. Introduction

On September 18, 2000, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) submitted to the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder,[2] a proposed rule change to amend its By-Law Article XIV, Section 14-5, “Penalty for Non-Payment,” and Phlx Rule 50, “Late Charge,” to clarify and provide consistent time periods for reporting delinquent accounts to the Phlx's Finance Committee and the Phlx's Board of Governors (“Board”).

The proposed rule change was published for comment in the Federal Register on November 8, 2000.[3] No comments were received on the proposal. This order approves the proposal.

II. Description of the Proposal

The Phlx proposes to amend Phlx Rule 50 to: (1) Impose a late charge on accounts unpaid 30 days after the date of the original invoice, rather than accounts unpaid 40 days after the date of the original invoice; (2) reduce the amount of the late charge from 2% simple interest to 1% simple interest for each 30-day period or fraction thereof, calculated on a daily basis, during which the accounts payable to the Phlx remain outstanding; and (3) provide that the Phlx's Finance Committee may waive the amount of the late charge, or a portion thereof, if the amount falls within guidelines established by the Board. The Phlx also proposes to eliminate from Phlx Rule 50 the requirement that the Phlx's Controller notify the board when an amount due to the Exchange remains outstanding for 90 days. Instead, Phlx Rule 50, as amended, requires the Phlx's controller to notify the Finance Committee when an amount due to the Phlx remains unpaid 50 days after the date of the Start Printed Page 83123original invoice. The Finance Committee will refer the matter to the Board if the amount due exceeds $10,000.

For amounts in excess of $10,000, Phlx By-Law Article XIV, Section 14-5, as amended, requires the Phlx's Controller, rather than the Secretary, to report to the Board: (1) A find and/or other monetary sanction unpaid 20 days after the amount becomes payable; and (2) a due, foreign currency option (“FCO”) user's fee, fee other charge or other amount due to the Phlx that is unpaid 50 days from the date of the original invoice. In addition, the Phlx proposes to amend Phlx By-Law 14-5 to provide that the Phlx's Committee on Admissions may dispose of a membership or FCO participation when an amount over $10,000 has not been paid within one year after payment was due.

III. Discussion

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with the requirements of Section 6 of the Act.[4] Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) [5] of the Act in that it is designed to modify the Exchange's fee collection process in a manner that promotes just and equitable principles of trade, prevents fraudulent and manipulative acts and practices, maintains fair and orderly markets, and protests investors and the public interest.[6] In addition, the Commission finds that the proposal is consistent with Section 6(b)(4) of the Act,[7] which provides that a registered national securities exchange must promulgate rules that provide for the equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities.

The Commission believes that the proposal to revise PHLX Rule 50 to impose a late charge 30 days after the date of the original invoice, rather than 40 days after the date of the original invoice, will help to encourage the prompt payment of amounts due to the Exchange. The Commission believes that the reduction of the late charge in PHLX Rule 50 from 2% simple interest to 1% simple interest is reasonable. In addition, the Commission believes that the proposal to allow the Finance Committee or its designee to waive a late charge or a portion of a late charge if the amount falls within guidelines established by the Board will provide the Finance Committee with flexibility in the administration of late charges.

PHLX Rule 50 currently requires the Controller to notify the Board if a member fails to pay dues, fees, fines, or other charges within 90 days. The Commission believes that the proposal to revise PHLX Rule 50 to require the Controller to notify the Finance Committee of the failure to pay a fine and/or other monetary sanction within 20 days, and of the failure to pay dues, fees, and other charges within 50 days, will facilitate the collection of amounts owed to the PHLX. The Commission believes that amending PHLX Rule 50 to require the Finance Committee to report to the matter to the Board when an amount due exceed $10,000 establishes a reasonable threshold for Board involvement in the collection process.

PHLX By-Law 14-5 currently states that the membership or participation of a member or FCO participant may be disposed of by the PHLX's Committee on Admissions when a due, fee, or fine has not been paid within one year. The Commission believes that amending PHLX By-Law 14-5 to specify that the Committee on Admissions may dispose of the participation or membership when an amount in excess of $10,000 has not been paid within a year will establish a threshold for action by the Committee on Admissions and notify members and participants of a circumstance under which the Committee on Admissions may dispose of a membership or FCO participation. With regard to unpaid amounts exceeding $10,000, the Commission finds that the PHLX's proposal to amend PHLX By-Law 14-5 to require the PHLX's Controller, rather than the Secretary, to report to the Board: (1) A fine and/or other monetary sanction unpaid 20 days after the amount becomes payable; and (2) a due, FCO user's fee, fee, other charge, or other amount due to the PHLX that is unpaid 50 days from the date of the original invoice is designed to increase the efficiency of the collection process.

IV. Conclusion

It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,[8] that the proposed rule change (SR-PHLX-00-64) be and hereby is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Securities Exchange Act Release No. 43489 (October 27, 2000), 65 FR 67031.

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6.  In approving this rule, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 00-33263 Filed 12-28-00; 8:45 am]

BILLING CODE 8010-01-M