On July 14, 2003, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, a proposed rule change that would amend its rule regarding the PCX's Audit Committee. On August 21, 2003, PCX submitted by facsimile Amendment No. 1 to the proposed rule change. The proposed rule change, as modified by Amendment No. 1, was published for comment in the Federal Register on September 29, 2003. The Commission received no comments on the proposal.
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, the requirements of Section 6(b)(5) of the Act. Section 6(b)(5) requires, among other things, that the rules of the exchange be designed to prevent fraudulent and manipulative acts, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission notes that the proposed rule change specifies that all members of PCX's Audit Committee must be Public Governors. The PCX Constitution requires “Public Governors” to be representatives of the public and not a broker or dealer or affiliated with a broker or dealer. Previously, Audit Committee members were not required to be Public Governors. Furthermore, the proposed rule change requires that at least one member of the Audit Committee have accounting or financial management expertise, as the Board of Governors interprets such qualification in its business judgment. The Commission believes that the proposed change should help improve the Exchange's governance structure by requiring that all members of the Audit Committee be Public Governors and that at least one of those members have accounting or financial management expertise. In this way, the independence and effectiveness of the Audit Committee should be enhanced. Therefore, the Commission finds that the proposed rule change is consistent with the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-PCX-2003-36), as amended by Amendment No. 1, be, and hereby is, approved.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9
Jill M. Peterson,
3. See letter from Steven B. Maitlin, Senior Counsel, Regulatory Policy, PCX, to Leah Mesfin, Attorney, Division of Market Regulation, Commission, dated August 21, 2003 (“Amendment No. 1”). In Amendment No. 1, the Exchange replaced the term “independent Governors” in the proposed rule text with “Public Governors.”Back to Citation
4. Securities Exchange Act Release No. 48500 (September 17, 2003), 68 FR 56030 (September 29, 2003).Back to Citation
5. In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).Back to Citation
7. See PCX Constitution, Article II, Section 1(a).Back to Citation
[FR Doc. 04-2333 Filed 2-4-04; 8:45 am]
BILLING CODE 8010-01-P