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Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Pacific Exchange, Inc. Relating to Hearing Fees for Issuer Requests for Review of Delisting Decisions

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Start Preamble February 5, 2002.

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 January 18, 2002, the Pacific Exchange, Inc. (“PCX” or “Exchange”), through its wholly owned subsidiary PCX Equities, Inc. (“PCXE” or “Corporation”) 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 PCXE. 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, through its wholly owned subsidiary PCXE, proposes to amend PCXE Rule 5.5(m) to require issuers to pay an appeal hearing fee of $2,500 in connection with their appeal of the Corporation's decision to delist a security. The text of the proposed rule change is available at the Office of the Secretary, the PCX, and the Commission.

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. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose

PCXE Rule 5.5(m) provides the procedures with which the Corporation complies in determining to delist a security for other than routine reasons (such as redemptions, maturities, etc.). In order to determine whether the security meets the maintenance criteria, the Corporation relies upon the objective data furnished by the issuer.[3] If it appears that the security no longer meets the maintenance requirements, the Corporation notifies the issuer in writing describing the basis on which the Corporation is considering delisting the security and proposes to meet with the issuer to hear reasons why the issuer believes the security should not be delisted.[4] If the issuer does not provide a sufficient basis demonstrating that it meets the current listing criteria, the Corporation will notify the issuer that it proposes to delist the security and that the issuer has the right to appeal the decision.[5] An issuer who wishes to appeal may, within five days of Start Printed Page 6570receiving written notice, petition the Secretary of the Corporation for an appeal hearing. The Secretary, in turn, processes the petition and forwards the request, along with the documentary evidence, to the Corporation's Board Appeals Committee, which conducts a special hearing in order to make a final determination on the merits of the issuer's petition.

The Corporation does not currently impose a fee in connection with the appeal of delisting decisions, and consequently, there is no disincentive for frivolous appeals of the Corporation's delisting decisions. This, coupled with the fact that the Corporation expends significant resources in accommodating appeals, has caused the Corporation to incur expenses that it is not capable of recovering. Given the increasing costs associated with an appeal hearing, i.e., the allocation of time incurred by the Corporation's Listing Qualifications Department, the Secretary of the Corporation, Corporation counsel and the Board Appeals Committee, the Exchange proposes to impose hearing fees in order to recoup some of its costs. Accordingly, the Corporation proposes to amend PCXE Rule 5.5(m) to require issuers to submit a fee of $2,500 in order to cover a portion of the cost of an appeal hearing. The proposed rule requires that the issuer submit the fee within five days of receiving written notice of the Corporation's decision to delist a security. During this time frame, the issuer will also be required to submit a written request for a hearing. If the issuer does not submit a hearing fee or a written statement by the time prescribed by the Corporation, the issuer will be deemed to have waived its right to appeal the delisting decision.

The Exchange believes that the proposed fee is fair and reasonable as it is intended to cover only a portion of the Corporation's expenses associated with the processing and hearing of delisting appeals.

2. Statutory Basis

The Exchange believes that its proposal is consistent with section 6(b) [6] of the Act, in general, and section 6(b)(4) of the Act,[7] in particular, because it provides for the equitable allocation of reasonable dues, fees and other charges among its members and issuers and other persons using its facilities.

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

The Exchange represents that the proposed rule change will impose no burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

The Exchange neither solicited nor received written comments with respect to 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 the self-regulatory organization consents, the Commission will:

A. By order approve the 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 at 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-PCX-2002-05 and should be submitted by March 5, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See PCXE 5.5(a), Maintenance Requirements and Delisting Procedures.

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4.  See PCXE 5.5(m)(1), Delisting Procedures.

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5.  See PCXE 5.5(m)(2).

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[FR Doc. 02-3305 Filed 2-11-02; 8:45 am]