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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. To Amend NYSE Rule 407 (“Transactions-Employees of Members, Member Organizations and the Exchange”)

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Information about this document as published in the Federal Register.

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This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble November 21, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] notice is hereby given that on October 22, 2001, the New York Stock Exchange, Inc. (“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 prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend NYSE Rule 407 (“Transactions—Employees of Members, Member Organizations and the Exchange”) and incorporate and amend an existing written interpretation into the rule in Start Printed Page 63085order to require that associated persons obtain their employers' written approval prior to entering into private securities transactions. In addition, the Exchange proposes to define the terms “securities or commodities account,” “private securities transactions” and “other financial institutions.”

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange 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 is 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

NYSE Rule 407(b) requires that members, allied members and employees to obtain the prior written consent of their employers in order to open and maintain a securities or commodities account at another broker-dealer, investment adviser, bank or other financial institution. Further, employers of such associated persons must receive duplicate confirmations and statements of such accounts. In this regard, the Exchange believes that NYSE Rule 407 helps members and member organizations maintain the integrity of their information barriers and employee trading policies and assists members and member organizations in monitoring employee trading for possible insider trading violations and manipulative and deceptive devices.

An existing interpretation of NYSE Rule 407 in the NYSE Interpretation Handbook requires that members, allied members and employees associated with members or member organizations notify their employers of any private securities transactions, where such securities transactions are typically negotiated directly with an issuer and not through an account with a broker-dealer or bank.

The Exchange proposes to amend NYSE Rule 407 and incorporate and amend the interpretation noted above into the rule to require that associated persons of members or member organizations obtain their employers' written approval (rather than notification) prior to entering into private securities transactions. The Exchange also proposes that associated persons effecting private securities transactions shall arrange for duplicate confirmations and statement (or their equivalents) to be sent to another person designated by their member or member organization under NYSE Rule 342(b)(1) (“Offices—Approval, Supervision and Control”) to periodically review such transactions.

In addition, the Exchange proposes to define the terms “securities or commodities account,” “private securities transactions” and “other financial institution.” The Exchange proposes that the term “securities or commodities account” shall include limited or general partnership interests in investment partnerships.

The Exchange proposes that the term “private securities transactions” shall include all transactions in the securities of issuing entities that are not public, whether or not such transactions are negotiated directly with the issuer. It shall include, but not be limited to, interests in oil and gas ventures, real estate syndications, participations in tax shelters and in other investment vehicles, and shares issued prior to a public distribution by such issuing entities.

The Exchange proposes that the term “other financial institution” shall include, but is not limited to, insurance companies, trust companies, credit unions and investment companies.

In addition, the Exchange proposes to amend NYSE Rule 407 to provide the Exchange with the general authority to waive any of the requirements of the rule upon written request of a member or member organization that has the obligation to approve the account and where good cause is shown. For example, a member or member organization that is required to approve an account of an employee associated with such member or member organization may not wish to receive duplicate confirmations and statements because such employee does not have the direct or indirect power to make any investment decisions at another member or member organizations.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,[3] which provides, among other things, that the rules of the Exchange be designed to prevent fraudulent and manipulative acts and practices and promote just and equitable principles of trade.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will 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 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 the Exchange 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.

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. 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 Exchange. All submissions should refer to File No. SR-NYSE-2001-44 and should be submitted by December 26, 2001.

Start Printed Page 63086

For the Commission, by the Division of Market Regulations, pursuant to the delegated authority.[4]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

[FR Doc. 01-29930 Filed 12-3-01; 8:45 am]

BILLING CODE 8010-01-M