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Notice

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 712, Independent Audit

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Start Preamble February 8, 2007.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 Start Printed Page 7105(“Act”) [1] , and Rule 19b-4 thereunder,[2] notice is hereby given that on December 21, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Phlx. The Exchange has designated this proposal as one establishing or changing a due, fee, or other charge imposed by Phlx under Section 19(b)(3)(A)(ii) [3] of the Act and Rule 19b-4(f)(2) [4] thereunder, which renders the proposal effective upon filing with the Commission. 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 Phlx, pursuant to Section 19(b)(1) of the Act [5] and Rule 19b-4 thereunder,[6] proposes to amend Phlx Rule 712, Independent Audit, to clarify that in certain circumstances a member organization may request an extension of time to file its annual audit from the Exchange in writing prior to the due date of the annual audit, and to provide for the imposition of a fee to be assessed for the late filing of an annual audited financial statement (“annual audit”).

The proposed new language is set forth below, with new text italicized:

Rules of the Board of Governors

* * * * *

Independent Audit

Rule 712. Each member organization doing any business with the public shall at least once each calendar year cause to be made an audit of its affairs, conducted in accordance with applicable audit requirements of the Securities and Exchange Commission and such other requirements as deemed appropriate by the Exchange, by independent public accountants and shall have such accountants prepare an answer to the financial questionnaire of the Exchange based upon such audit.

Pursuant to Rule 17a-5(d), promulgated under the Exchange Act, all broker-dealers are required to file annually audited financial statements (“Annual Audits”) with their Designated Examining Authority and the SEC, no more than 60 days after the date of the year end financial statements. A member organization unable to meet the filing deadline for its Annual Audit as a result of exceptional circumstances may request an extension of time, in writing, prior to the filing due date. Annual Audits not received by the Exchange by the due date, or revised due date if an extension has been granted, will be subject to a late fee as set forth below for each week or any part thereof that the Annual Audit has not been filed, as calculated based on the due date or revised due date for filing the Annual Audit. (Implemented on a running three-year basis.)

(i) $100 per week for the first late filing in a three-year period.

(ii) $300 per week for the second late filing in a three-year period.

(iii) $1,000 per week for the third late filing in a three-year period.

* * * * *

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 Phlx 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 Phlx has substantially 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

Currently, Rule 712 sets forth the provisions governing the requirements for an annual audit to be conducted in accordance with audit requirements as set forth by the Securities and Exchange Commission and other requirements as deemed appropriate by the Exchange. The proposed amendment is designed to clarify that, if a member organization is unable to meet the filing deadline for its annual audit as a result of exceptional circumstances, the member organization may request an extension of time to file its annual audit in writing prior to the due date of the annual audit.[7] In addition, the proposed amendment is intended to encourage the prompt filing of annual audits by those member organizations designated to the Exchange for examining purposes through the assessment of a late filing fee. Pursuant to the amended Rule, the Exchange may issue progressively higher fees for all subsequent violations within the running three-year time period.[8]

2. Statutory Basis

The Exchange believes that its proposal to amend its schedule of fees is consistent with Section 6(b) of the Act [9] in general, and furthers the objectives of Section 6(b)(4) of the Act [10] in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members.

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 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

No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act [11] and paragraph (f)(2) of Rule 19b-4 [12] thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

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. Comments may be submitted by any of the following methods: Start Printed Page 7106

Electronic Comments

Paper Comments

  • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2006-88. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/​rules/​sro.shtml). 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 the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2006-88 and should be submitted on or before March 7, 2007.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13

Florence E. Harmon,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  15 U.S.C. 78s(b)(3)(A)(ii).

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7.  Requests for extensions of time to file an annual audit should be submitted to the Exchange.

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8.  The Exchange may present repeated or aggravated failures to file such annual audits on a timely basis to the Exchange's Business Conduct Committee for disciplinary action under Exchange Rules.

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11.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. E7-2549 Filed 2-13-07; 8:45 am]

BILLING CODE 8010-01-P