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Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change and Amendment No. 1, and Notice of Filing and Order Granting Accelerated Approval of Amendment No. 2, by the New York Stock Exchange, Inc. to Amend the NYSE's Minor Rule Violation Plan

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Start Preamble October 16, 2001.

I. Introduction

On September 2, 1999, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“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 Minor Rule Violation Plan (“Plan”). On November 12, 1999, the Exchange amended the proposal.[3] Notice of the proposed rule change, as modified by Amendment No. 1, appeared in the Federal Register on December 20, 1999.[4] The Commission received no comments on the proposal. On October 9, 2001, the NYSE again amended the proposal.[5] This order approves the proposed rule change, as modified by Amendment Nos. 1 and 2.

II. Description of the Proposal

The proposed rule change would revise the “List of Exchange Rule Violations and Fines Applicable Thereto Pursuant to NYSE Rule 476A” for imposition of fines for minor violations of rules by adding to the list failure to comply with the provisions of NYSE Rules 35, 345A(b), and 440A. In addition, the proposal clarifies that paragraph (c) of currently listed NYSE Rule 472 encompasses telemarketing scripts.

III. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the proposed Amendment No. 2, including whether the proposed rule change, as modified by Amendment No. 2, is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. All submissions should refer to file number Start Printed Page 53650SR-NYSE-99-38 and should be submitted by November 13, 2001.

IV. Discussion and Commission Findings

The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange [6] and, in particular, the requirements of section 6 of the Act [7] and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change is consistent with section 6(b)(6) of the Act [8] because it provides an additional option for the appropriate discipline of the NYSE's members and persons associated with its members for certain rule violations. Finally, the Commission finds the proposal is consistent with Securities Exchange Act Rule 19d-1(c)(2) [9] that governs minor rule violation plans.

The Commission finds good cause for accelerating approval of Amendment No. 2 to the proposed rule change prior to the 30th day after publication in the Federal Register. Amendment No. 2 removes the Regulatory Element of the Continuing Education requirements from the list of rules the NYSE administers pursuant to the Plan. The Commission notes that the National Association of Securities Dealers, (“NASD”), at the Commission's request, removed the Continuing Education Regulatory Element requirement from its proposal regarding administration of rules pursuant to its minor rule violation plan.[10] Amendment No. 2 ensures that the NYSE and the NASD have the same disciplinary options for their members and associated persons with regard to violations of Continuing Education requirements. Accordingly, the Commission finds that good cause exists, consistent with section 6(b)(6) of the Act,[11] and section 19(b) of the Act [12] to accelerate approval of Amendment No. 2 to the proposed rule change.

In approving this proposal, the Commission in no way minimizes the importance of compliance with these rules, and all other rules subject to the imposition of fines under the Plan. The Commission believes that the violation of any self-regulatory organizations' rules, as well as Commission rules, is a serious matter. However, in an effort to provide the Exchange with greater flexibility in addressing certain violations, the Plan provides a reasonable means to address rule violations that do not rise to the level of requiring formal disciplinary proceedings. The Commission expects that the NYSE will continue to conduct surveillance with due diligence, and make a determination based on its findings whether fines of more or less than the recommended amount are appropriate for violations of rules under the Plan, on a case by case basis, or if a violation requires formal disciplinary action.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[13] and Rule 19d-1(c)(2) [14] thereunder, that the proposed rule change (SR-NYSE-99-38), as amended, be, and it hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[15]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See November 10, 1999 letter from James E. Buck, Senior Vice President and Secretary, NYSE, to Richard C. Strasser, Assistant Director, Division of Market Regulation (“Division”), Commission (“Amendment No. 1”). In Amendment No. 1, the NYSE made technical changes to the proposal.

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4.  See Securities Exchange Act Release No. 42225 (December 13, 1999), 64 FR 71162.

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5.  See October 5, 2001 letter from James E. Buck, Senior Vice President and Secretary, NYSE, to Nancy Sanow, Assistant Director, Division, Commission (“Amendment No. 2”). In Amendment No. 2, at the request of Division staff, the NYSE removed NYSE Rule 345A(a) (Regulatory Element Continuing Education Requirements) from the proposed additions to the List of Exchange Rules Subject to Rule 476A Procedures.

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

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10.  See Securities Exchange Act Release No. 44512 (July 3, 2001), 66 FR 36812 (July 13, 2001) (SR-NASD-00-39).

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[FR Doc. 01-26591 Filed 10-22-01; 8:45 am]