[Federal Register: February 19, 1999 (Volume 64, Number 33)] [Notices] [Page 8421-8422] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr19fe99-143] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-41049; File No. SR-CSE-98-03] Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Cincinnati Stock Exchange, Inc. Regarding Regulatory Cooperation February 11, 1999. I. Introduction On October 26, 1998, the Cincinnati Stock Exchange, Inc. (``CSC'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder.\2\ In its proposal, the CSE seeks to amend its disciplinary rules to provide for regulatory cooperation by Exchange members in connection with actions initiated by other self-regulatory organizations (``SROs''). Notice of the proposal was published in the Federal Register on December 18, 1998.\3\ The Commission received no comments on the proposal. This order approves the proposal. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 40782 (Dec. 11, 1998), 63 FR 70172. --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposes to amend Rule 8.2 by adding subsections (f) and (g). Subsection (f) would require members, member organizations, persons associated with a member or member organization, and other persons or entities over whom the Exchange has jurisdiction to testify before another SRO and to furnish information in connection with a regulatory inquiry, investigation, examination, or disciplinary proceeding resulting from an agreement entered into by the Exchange pursuant to subsection (g). Further, subsection (f) would require these persons and entities not to impede such a proceeding. In addition, the new subsection (g) provides that the Exchange may enter into agreements with domestic and foreign SROs providing for the exchange of information and other forms of mutual [[Page 8422]] assistance for market surveillance, investigative, enforcement, and other regulatory purposes. Under the proposed rule change, the Exchange also makes explicit that persons or entities, required to furnish information or testimony pursuant to a regulatory agreement, will be afforded the same rights and procedural protections that such persons or entities would have if the Exchange had initiated the request for information or testimony. III. Discussion 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. Specifically, the Commission believes the proposal is consistent with Section 6(b)(5) of the Act,\4\ which requires that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \4\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- This proposal, which is similar to other exchanges' proposals that were approved by the Commission,\5\ grew out of a meeting of the Intermarket Surveillance Group (``ISG'') to coordinate more effectively surveillance and investigative information sharing arrangements in the stock and options markets.\6\ The Commission believes that the proposed rule change achieves a reasonable balance between the need for regulatory cooperation and protection of the procedural rights of Exchange members and others from whom information or testimony is requested. The rule would provide the Exchange with the authority to seek cooperation by certain persons with respect to inquiries and investigations resulting from regulatory agreements between the Exchange and another SRO while explicitly providing any person or entity required to furnish information or testimony pursuant to the rule with the same procedural rights that they would have if the request was pursuant to an Exchange-initiated inquiry or investigation. --------------------------------------------------------------------------- \5\ See, e.g., Securities and Exchange Act Release Nos. 39557 (Jan. 16, 1998), 63 FR 3940 (Jan. 27, 1998) (notice of filing and immediate effectiveness of SR-CHX-97-33); and 35646 (April 25, 1995), 60 FR 21227 (May 1, 1995) (order approving SR-PSE-95-02). \6\ The ISG is an organization of securities industry SROs formed in 1983 to coordinate and develop intermarket surveillance programs designed to identify and combat fraudulent and manipulative acts and practices. To promote its purposes, members agree to exchange such information as is necessary for ISG members to perform their self-regulatory and market surveillance functions. --------------------------------------------------------------------------- The Commission believes that the proposed rule change will further the interest of the public and provide for the protection of investors by allowing the Exchange to assist other SROs conduct prompt inquiries into possible trading violations and other possible misconduct. As the marketplaces become more global and interlinked, the Commission believes that it is important that the SROs coordinate their investigatory activities to prevent fraudulent and manipulative acts and practices in all marketplaces. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\7\ that the proposed rule change (SR-CSE-98-03) is approved. \7\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\8\ --------------------------------------------------------------------------- \8\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 99-4118 Filed 2-18-99; 8:45 am] BILLING CODE 8010-01-M