[Federal Register Volume 65, Number 250 (Thursday, December 28, 2000)]
[Notices]
[Pages 82432-82435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-33122]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-43757; File No. SR-Phlx-00-13]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change, as Amended, by the Philadelphia Stock Exchange, Inc. Relating
to Timing Guidelines for Application in Disciplinary Hearings
December 20, 2000.
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 July 13, 2000, 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
Exchange. On August 23, 2000, the Phlx filed Amendment No. 1 to the
proposed rule change.\3\ On November 9, 2000, the Phlx filed Amendment
No. 2 to the proposed rule change.\4\ On November 22, 2000, the Phlx
filed Amendment No. 3 to the proposed rule change.\5\ On December 13,
2000, the Phlx filed Amendment No. 4 to the proposed rule change.\6\
The Commission is publishing this notice to solicit comments on the
proposed rule
[[Page 82433]]
change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division of
Market Regulation (``Division''), Commission (Aug. 22,
2000)(``Amendment No. 1''). In Amendment No. 1, the Phlx corrected
its rule language and clarified which language of the rule text was
to be added and deleted. The Phlx also added a paragraph describing
that the proposed would allow the Chairperson of the Business
Conduct Committee (``Committee'') to designate another person to
oversee the Chairperson's duties pursuant to Phlx rules.
The Phlx indicated that the designee would be a Business Conduct
Committee member. Telephone conversation between Charles Falgie,
Director of Enforcement/Counsel, Phlx, and Melinda Diller, Attorney,
Division, Commission (Sept. 1, 2000).
\4\ See Letter from Charles Falgie, Director or Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Commission (Nov.
8, 2000) (``Amendment No. 2''). In Amendment No. 2, the Phlx changed
the text of the rule language and revised time limits and the manner
in which a Respondent's request for a hearing is handled.
\5\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director, Division,
Commission (Nov. 20, 2000) (``Amendment No. 3''). In rule
change.\6\The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
\6\ See Letter from Charles Falgie, Director of Enforcement/
Counsel, Phlx, to Nancy Sanow, Assistant Director Division,
Commission (Dec. 13, 2000) (``Amendment No. 4''). In Amendment No.
4, the Phlx made a few technical corrections to the text of the
proposed rule.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Phlx proposes to amend Phlx Rule 960.5(a), (b), (c), and (d) to
provide timing guidelines for certain procedures conducted pursuant to
Phlx Rule 960.5. Revised Rule 960.5 proposes to adopt a timing
guideline of 120 days after the filing of a written Answer by a
Respondent to a Statement of Charges, within which time a hearing is
requested, for the scheduling of a hearing date.\7\ Also proposed is a
five business day timing guideline \8\ for the Chair of the Committee,
or its designee, after receiving a request from Counsel for the
Exchange, to schedule a hearing date and name a Hearing Panel. Further,
it is proposed that, should the request for a hearing come from the
Respondent, Counsel for the Exchange must request that a hearing date
be set and a Hearing Panel be named within ten business days of
receiving Respondent's request.\9\ An exchange of evidence and witness
lists between the parties, as well as providing same to the members of
the Hearing Panel, is to be completed not less than eight business days
prior to the scheduled hearing date.\10\ The proposed amendments
require that a transcript of the hearing be provided to the Hearing
Panel members and the Respondent within five business days of receipt
of the transcript by Counsel for the Exchange. The Respondent, along
with being provided a copy of the transcript, will be issued a bill for
its portion of the costs of the transcript.\11\ The costs of the
transcript, and producing copies, will be borne equally by the Exchange
and by Respondent.\12\ The Hearing Panel, upon receipt of the
transcript, would then have forty-five days to produce a hearing
report.\13\ Finally, the proposed amendments establish formal
procedures for the requesting and granting of adjournments of the
hearing date. Such requests are to be presented in writing to the
presiding person of the Hearing Panel, and will be considered for just
cause.\14\
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\7\ See also Chicago Board Options Exchange, Rule 17.8. Offers
of Settlement, Interpretations and Policies .02 (discussing a
similar timing guideline for scheduling a hearing date).
\8\ See Amendment No. 2, supra note 4: see also Amendment No. 3,
supra note 5. The Phlx confirmed that Amendment No. 3 incorrectly
indicates that the time periods for filing the hearing date and for
providing a transcript of the hearing to the Hearing Panel members
and the Respondent was initially ten days and later amended to five
days. However, these time periods have, and will remain, five days
throughout the filing. Telephone conservation between Charles
Falgie, Director of Enforcement/Counsel, Phlx, and Sapna C. Panel,
Law Clerk, Division, Commission (Nov. 27, 2000).
\9\ See Amendment No. 2, supra note 4; see also Amendment No. 3,
supra note 5.
\10\ See also Cincinnati Stock Exchange, Rule 8.6. Hearings,
Sub-Paragraph (b) Notice and List of Documents (discussing a similar
time frame for parties to exchange evidence and witness lists).
\11\ See Amendment No. 1, supra note 3.
\12\ See Amendment No. 1, supra note 3.
\13\ See also Pacific Exchange, Rule 10.7. Decision (discussing
a similar time frame after receipt of the transcript in which to
produce a report); see also Amendment No. 2, supra note 4; see also
Amendment No. 3, supra note 5.
\14\ See Amendment No. 1, supra note 3.
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The proposed amendments also allow the Chair of the Committee to
name a designee.\15\ This is proposed for administrative purposes, such
as the Chair's unavailability due to illness, the need for recusal, or
other circumstances which may arise.
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\15\ See Amendment No. 1, supra note 3.
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Below is the text of the proposed rule change. Proposed new
language is italicized, and proposed deletions are in brackets.
Rule 960.5. Hearing
(a) Participants and Selection of Hearing Panels.
1. Request for a Hearing--A hearing on the Statement of Charges
shall, at the request of Respondent in his answer, or upon motion of
the Business Conduct Committee, be held before a Hearing Panel composed
of three persons to be appointed by the Chairman of the Business
Conduct Committee or their designee. Should the hearing be at the
request of the Respondent, counsel for the Exchange must provide notice
to the Chairman of the Business Conduct Committee or their designee
which requests the naming of a hearing panel within 10 business days of
receiving Respondents request for a hearing.
2. Selection of Hearing Panel--The Chairman of the Business Conduct
Committee or their designee shall name a Hearing Panel within 5
business days of either (i) receipt of notice from counsel for the
Exchange which requests the naming of a Hearing Panel, or (ii) upon
motion of the Business Conduct Committee for naming of a Hearing Panel.
The Chairman of the Business Conduct Committee or their designee shall
then promptly notify counsel for the Exchange and Respondent of the
names of the members of the Hearing Panel. The presiding person of each
Hearing Panel shall be a member of the Business Conduct Committee. The
other two persons on the Hearing Panel shall be members of the
Exchange, or general partners or officers of member organizations, or
such other persons whom the Chairman of the Business Conduct Committee
or their designee considers to be qualified. The Chairman of the
Business Conduct Committee or their designee shall select these two
other persons from those persons who shall have been designated by the
Chairman of the Board of Governors to serve on such hearing panels. In
making such selections the Chairman or their designee shall, to the
extent practicable, choose individuals whose background, experience and
training qualify them to consider and make determinations regarding the
subject matter to be presented to the Hearing Panel. He shall also
consider such factors as the availability of individual hearing
officers, the extent of their prior service on Hearing Panels and any
relationship between such persons and a respondent which might make it
inappropriate for such person to serve on the Hearing Panel.
3. Notice--Promptly after the selection of the panelists, the
Chairman of the Business Conduct Committee or their designee shall
cause written notice thereof to be given to the accused. If any person
involved in the disciplinary proceeding shall have knowledge of a
relationship between himself and any person selected for service on the
hearing Panel which might result in such panelist being unable to
render a fair and impartial decision, he shall give prompt written
notice thereof to the Chairman of the Business Conduct Committee or
their designee, specifying the nature of such relationship and the
grounds for contesting the qualification of such person to serve on the
Hearing Panel. The decision of the Chairman of the Committee or their
designee shall be final and conclusive with respect to the
qualification of any person to serve on the Hearing Panel.
(b) Notice of Hearing and Pre-Hearing Procedures.
1. Scheduling of a Hearing Date--A hearing on the Statement of
Charges shall be scheduled for no later than 120 days after the filing
of a written Answer by the Respondent wherein a hearing is requested.
Should the hearing be at the request of the Respondent, counsel for the
Exchange must provide notice to the Chairman of the Business Conduct
Committee or their designee which requests the setting of a hearing
date within 10 business days of receiving Respondents request for a
hearing. The request for a hearing date shall be made in writing to the
Chairman of the Business Conduct Committee or their designee by (i)
counsel for the Exchange, or (ii) on the motion of the Business Conduct
Committee.
2. Notice--The Respondent shall be given at least 15 business days
notice of the time and place of the hearing.
[[Page 82434]]
3. Requests for Adjournments--A request for an adjournment of the
hearing date shall be in writing and will be considered for just cause.
If the request is made by the Respondent, said request shall be
presented to the presiding person of the Hearing Panel with a copy to
counsel for the Exchange, who shall enter the request into the
Respondent's file. If the request is made by counsel for the Exchange,
said request shall be presented to the presiding person of the Hearing
Panel, with a copy to the Respondent, and in Respondent's file. The
presiding person of the Hearing Panel shall promptly consider the
request for an adjournment for just cause, rule on the request and
inform the parties, in writing if time permits, as to whether the
request was, or was not, granted. In the event that the request for an
adjournment for just cause is granted, the presiding person of the
Hearing Panel shall, at that time, schedule a new hearing date and so
inform the parties of the new date.
4. Exchange of Evidence--The Exchange and the Respondent shall, not
less than 8 business days in advance of the scheduled hearing date,
furnish to the members of the Hearing Panel and to each other (i)
copies of all documentary evidence each intends to present at the
hearing, and (ii) a list of witnesses, including names, addresses and
telephone numbers, that each intends to call at the Hearing.
5. Pre-Hearing Conferences--Where appropriate, t[T]he presiding
person of the Hearing Panel[, where appropriate,] \16\ shall schedule a
pre-hearing conference to be held not less than 8 business days in
advance of the scheduled hearing date, to be attended by
representatives of the Exchange, each of the Respondents and a member
of the Hearing Panel. The pre-hearing conference shall be held for the
purpose of clarifying and simplifying issues and otherwise expediting
the proceeding. At such conference, and if they have not done so
previously, the Exchange and the Respondents shall furnish to the
Hearing Panel and to each other (i) copies of all documentary evidence
such intends to present at the Hearing, and (ii) a list of witnesses,
including names, addresses and telephone numbers, that each intends to
call at the Hearing.
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\16\ Phlx confirmed that it inadvertently indicated in its
original filing and subsequent amendments that the phrase ``the
presiding person of the Hearing Panel'' was new language; this
phrase, however, was already a part of Phlx Rule 960.5. Telephone
conversation between Charles Falgie, Director of Enforcement/
Counsel, Phlx, and Sapna C. Patel, Attorney, Division, Commission
(Dec. 19, 2000).
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[; t]The Exchange and Respondent shall also attempt to stipulate to the
authenticity of documents and to facts issues not in dispute, and any
other items which will serve to expedite the hearing of the matter.
(c) Conduct of Hearing. The Hearing Panel shall determine all
questions concerning the admissibility of evidence and shall otherwise
regulate the conduct of the hearing. Formal rules of evidence shall not
apply. The charges shall be present by a representative of the Exchange
who, along with Respondent, may present evidence and produce witnesses
who shall testify under oath and shall be subject to cross examination.
The Hearing Panel may, on its own motion, request the production of
documentary evidence and witnesses and may also question witnesses. A
transcript of the hearing shall be made and shall become a part of the
record. The costs of the making of such a transcript, including, but
not limited to, the costs for the court reporter, reproduction of the
transcript and producing copies thereof, shall be equally borne by the
Exchange and by Respondent. Counsel for the Exchange shall provide a
copy of the transcript of the hearing to each member of the Hearing
Panel within 5 business days of receiving the transcript. The
Respondent shall be issued a bill for its portion of the costs along
with its copy of the transcript.
(d) Recommendation of Hearing Panel. Based on its review of the
entire record of the proceeding, the Hearing Panel shall submit a
written hearing report to the Business Conduct Committee containing:
(i) Proposed findings of fact concerning the allegations in the
statement of charges; (ii) conclusions as to whether a violation within
the disciplinary jurisdiction of the Exchange has occurred and an
enumeration of such violations; and (iii) recommendations as to
appropriate sanctions. The Hearing Panel shall complete such a hearing
report no later than 45 days after counsel for the Exchange has served
the members of the Hearing Panel with a copy of the transcript of the
hearing. The hearing report shall be presented to the Business Conduct
Committee at the next Business Conduct Committee meeting after the
report is completed.
Interpretation and Policies
.01 Intervention. Any person not otherwise a party may intervene as
a party to the hearing upon demonstrating to the satisfaction of the
Hearing Panel that he has an interest in the subject of hearing and
that the disposition of the matter, may, as a practical matter, impair
or impede his ability to protect that interest. Also, the Hearing Panel
may in its discretion permit a person to intervene as a party to the
hearing when the person's claim or defense and the main action have
questions of law or fact in common. Any person wishing to intervene as
a party to a hearing shall file with the Hearing Panel a notice
requesting the right to intervene, stating the grounds therefor, and
setting forth the claim or defense for which intervention is sought.
.02 The Hearing Panel, in exercising its discretion concerning
intervention, shall take into consideration whether the intervention
will unduly delay or prejudice the adjudication of the rights of the
original parties.
* * * * *
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
The Exchange is proposing to implement certain timing guidelines to
promote efficient handling of enforcement matters during the hearing
process. Although the Exchange currently utilizes these guidelines as
Exchange procedure, the Exchange believes that incorporating them
expressly into Exchange rules may promote more effective implementation
and monitoring of the timing guidelines, as well as fairness and due
process both for respondents to a Statement of Charges authorized by
the Committee, and to the Exchange and its Committees.
The Exchange believes that the proposed revisions promote notions
of fairness, due process and consistency for the members of the
Exchange and its disciplinary arm, the Committee, as they are intended
to prevent undue delay, as well alleviate the vexation that such delays
may cause.
[[Page 82435]]
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b)\17\ of the Act in general, and furthers the objectives of
Sections 6(b)(6)\18\ and 6(b)(7)\19\ of the Act in particular, in that
it is designed to ensure that Exchange members, and persons associated
with members, are appropriately disciplined for violations of the
provisions of the Act, the rules and regulations thereunder, or the
rules of the Exchange, as well as providing a fair procedure for the
disciplining of Exchange members, and persons associated with members,
by fostering a prompt, efficient disciplinary process.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(6).
\19\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx does not believe that the proposed rule change, as
amended, will impose any burden on competition.
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 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 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, as amended, 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 Phlx. All submissions should refer to File No.
SR-Phlx-00-13 and should be submitted by January 18, 2001.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-33122 Filed 12-27-00; 8:45 am]
BILLING CODE 8010-01-M