[Federal Register: October 7, 2003 (Volume 68, Number 194)]
[Notices]
[Page 57947-57949]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc03-109]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48579; File No. SR-NYSE-2003-26]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc., To Amend an Interpretation
of NYSE Rule 345 to Provide for the Elimination of ``Registered
Representative-In-Charge'' as a Category Precluded From Being an
Independent Contractor
October 1, 2003.
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 September 3, 2003, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange''), filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by NYSE.\3\
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Commission staff made non-substantive changes to the
description of the proposed rule change and the format of this
Notice with the permission of the Exchange. Telephone conversations
between Mary Anne Furlong, Director, Rule and Interpretive
Standards, NYSE, and Andrew Shipe, Special Counsel, Division of
Market Regulation, Commission, September 12 and 16, 2003.
---------------------------------------------------------------------------
[[Page 57948]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE proposes to amend its Interpretation Handbook by eliminating,
from an existing Interpretation of NYSE Rule 345, a prohibition on
persons designated as ``Registered-Representative-In-Charge'' from
associating with members and member organizations as independent
contractors. Below is the text of the proposed rule change. Proposed
new language is italicized. Proposed deletions are in [brackets].
* * * * *
Rule 345 Employees--Registration, Approval, Records
(a) Registration
/01 Exceptions
No change.
/02 ``Independent Contractors''
The Exchange will not object to the assertion by a natural person
registered representative of ``independent contractor'' status if such
status will not preclude his or her characterization and treatment as
an ``employee'' for purposes of the Constitution and Rules of the
Exchange. Such salesperson and the member organization must agree that
the natural person is subject to the organization's direct, detailed
supervision, control and discipline and is covered by its fidelity
bond.
Once a member organization approves a registered representative's
status of ``independent contractor'' the following conditions must be
met:
1. No change.
2. No change.
3. No change.
4. No change.
Written notification of the cessation of ``independent contractor''
status is to be given to the Qualifications and Registrations
Department of the Exchange.
This interpretation does not apply to persons delegated supervisory
functions (e.g., Branch Office Manager[, Registered Representative-In-
Charge]), pursuant to Rule 342(b)(1) nor does it permit the
incorporation of registered representatives. (See Interpretation Memo
No. 78-7 dated December 27, 1978.)
This interpretation does not preclude a registered representative
who is the sole employee in a small office (e.g., a residence office)
or a registered representative who is designated as ``in-charge''
pursuant to Rule 342.15, provided such person has not been assigned or
delegated supervisory duties, from asserting and obtaining approval for
independent contractor status.
A registered representative who is designated as ``in-charge'' and
who seeks status as an independent contractor must submit all of the
documentation required in items 1 through 4, above, as well as a
written statement by the member or member organization that it has not
assigned or delegated any supervisory responsibilities to the
registered representative-in-charge.
(Also see Rule 342.15/02, page 3414.)
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE 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. NYSE 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
Rule 342 (``Offices `` Approval, Supervision and Control'')
requires, in part, that each office of a member or member organization
shall be under the supervision and control of the member or member
organization establishing it and of the person delegated such authority
and responsibility. Further, the structure and administration of
Exchange rules mandate that all employees of members and member
organizations, including registered representatives, be subject to the
direct and ongoing supervision and control of their member organization
employer.
In addition, Rule 342.15 provides that small offices (those with
three or fewer registered representatives) may be in the charge of a
qualified principal or manager who is either resident or non-resident
in that location. Interpretation /02 to Rule 342.15 provides that where
a qualified supervisor is not on the premises of a small office, a
resident registered representative is to be designated as ``in
charge.'' However, it is still required that all supervisory functions
(e.g., approval of accounts, review of account activity and
correspondence, etc.) are to be conducted by qualified supervisors.
Interpretation /02 to Rule 345(a) permits a registered
representative to be associated with a member or member organization as
an ``independent contractor'' provided such status does not preclude
the independent contractor's characterization and treatment as an
employee for purposes of the Constitution and Rules of the Exchange
(e.g., registration, qualification, supervision by the member or member
organization, and being subject to the Exchange's jurisdiction).
However, Interpretation /02 to Rule 345(a) prohibits persons delegated
supervisory responsibilities including persons designated as
``registered representative-in-charge,'' from claiming the status of
independent contractor.
The Exchange believes that persons delegated supervisory
responsibilities for members and member organizations generally must be
full-time employees (the Exchange has exemption authority under Rule
346(e)).
Member organizations have stated that the prohibition against a
registered representative-in-charge from being an independent
contractor is creating unnecessary burdens in small offices with two or
three registered representatives, all of whom may wish to be
independent contractors. Typically, the type of office that would have
independent contractors is one with limited securities sales
activities, e.g., the registered representatives work part-time for
their member or member organizations and part-time selling products or
services for affiliated or non-affiliated companies, such as banking,
tax preparation, or accounting services. These individuals usually are
employed by the non-member organization and conduct their limited
securities activities through an independent contractor relationship
with the member or member organization.
The Exchange proposes the elimination of ``registered
representative-in-charge'' as a category of registered person precluded
from being an independent contractor under this interpretation. In this
regard, the Exchange has determined that members and member
organizations generally assign administrative as opposed to supervisory
functions to persons they designate as registered representatives-in-
charge. Pursuant to an existing written interpretation (Rule 342.15/
02), primary supervision is carried out by qualified branch managers,
(persons who have passed the General Securities Sales Supervisor
Qualification
[[Page 57949]]
Examination, Series 9 and 10) at designated parent branch offices or
the main office of the member or member organization in accordance with
its overall written plan of supervision.
Accordingly, Interpretation /02 to Rule 345(a) will be amended to
permit registered representatives-in-charge to associate with members
and member organizations as independent contractors provided that the
member or member organization neither assigns nor delegates supervisory
responsibilities to such persons. Further, in addition to the documents
already required to be submitted under this Interpretation in seeking
approval of independent contractor status (e.g., Employment Agreement,
Consent to Jurisdiction Form, written assurances that the member or
member organization will supervise and control all activities of the
independent contractor the same as it regulates the activities of all
other registered representatives), (see NYSE Interpretation 345(a) /
02), the member or member organization would be required to submit a
written statement confirming that it has not assigned or delegated any
supervisory responsibilities to such person.
2. Statutory Basis
The statutory basis for the proposed rule change is Section
6(b)(5)\4\ of the Exchange Act, which requires, among other things,
that the rules of the Exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade and in general to protect investors and the public
interest.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act.
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 self-regulatory organization 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 proposal 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 NYSE. All submissions
should refer to File No. SR-NYSE-2003-26 and should be submitted by
October 28, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-25341 Filed 10-6-03; 8:45 am]
BILLING CODE 8010-01-P