[Federal Register: November 30, 2004 (Volume 69, Number 229)]
[Notices]
[Page 69660-69661]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no04-101]
[[Page 69660]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50731; File No. SR-PC-2004-104]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To
Extend for an Additional Six-Month Period a Pilot Rule Relating to
Waiver of California Arbitrator Disclosure Standards
DATE: November 23, 2004.
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 October 25, 2004, the Pacific Exchange, Inc. (``PCX'' 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 the self-
regulatory organization. The PCX filed the proposed rule change
pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PCX and its wholly owned subsidiary PCX Equities, Inc.
(``PCXE'') are proposing to extend the pilot rule in PCX Rule 12.1(i)
and PCXE Rule 12.2(h), which requires industry parties in arbitration
to waive application of contested California arbitrator disclosure
standards, upon the request of customers (and, in industry cases, upon
the request of associated persons with claims of statutory employment
discrimination), for an additional six-month pilot period, until May
25, 2005.
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
On November 21, 2002, the Commission approved, for a six-month
pilot period, the Exchange's proposal to amend PCX and PCXE arbitration
rules to require industry parties in arbitration to waive application
of contested California arbitrator disclosure standards, upon the
request of customers or, in employment discrimination cases, upon the
request of associated persons.\5\ The Commission approved an extension
of the pilot on May 15, 2003,\6\ November 19, 2003 \7\ and May 24,
2004.\8\ The pilot period is currently set to expire on November 24,
2004.
---------------------------------------------------------------------------
\5\ See Exchange Act Release No. 46881 (November 21, 2002), 67
FR 71224 (November 29, 2002) (Order approving SR-PCX-2002-71).
\6\ See Exchange Act Release No. 47872 (May 15, 2003), 68 FR
28869 (May 27, 2003) (Order approving SR-PCX-2003-22).
\7\ See Exchange Act Release No. 48806 (November 19, 2003), 68
FR 66521 (November 26, 2003) (Order approving SR-PCX-2003-61).
\8\ See Exchange Act Release No. 49758 (May 24, 2004), 69 FR
30734 (May 28, 2004) (Order approving SR-PCX-2004-25).
---------------------------------------------------------------------------
On July 1, 2002, the Judicial Council of the State of California
adopted new rules that mandated extensive disclosure requirements for
arbitrators in California (the ``California Standards''). The
California Standards are intended to address perceived conflicts of
interest in certain commercial arbitration proceedings. As a result of
the imposition of the California Standards on arbitrations conducted
under the auspices of self-regulatory organizations (``SROs''), the
National Association of Securities Dealers, Inc. (``NASD'') and the New
York Stock Exchange (``NYSE'') suspended the appointment of arbitrators
for cases pending in California and filed ajoint complaint in federal
court for declaratory relief in which they contend that the California
Standards cannot lawfully be applied to NASD and NYSE because the
California Standards are preempted by federal law and are inapplicable
to SROs under state law.\9\ Subsequently, in the interest of continuing
to provide investors with an arbitral forum in California pending the
resolution of the applicability of the California Standards, the NASD
and NYSE filed separate rule proposals with the Commission that would
temporarily require their members to waive the California Standards if
all non-member parties to arbitration have done so. The Commission
approved the NASD's rule proposal on September 26, 2002 \10\ and the
NYSE's rule proposal on November 12, 2002.\11\ Both the NASD and the
NYSE filed rule proposals to further extend the pilot period for
additional six-month periods.\12\
---------------------------------------------------------------------------
\9\ See Motion for Declaratory Judgment, NASD Dispute
Resolution, Inc. and New York Stock Exchange, Inc., v. Judicial
Council of California, filed in the United States District Court for
the Northern District of California, No. C 02 3486 SBA (July 22,
2002), available on the NASD Web site at: http://www.nasdadr.com/pdf-text/072202_ca_complaint.pdf
.
\10\ See Exchange Act Release No. 46562 (September 26, 2002), 67
FR 62085 (October 3, 2002) (Order approving SR-NASD-2002-126).
Thereafter, the pilot period was extended to September 30, 2003. See
Exchange Act Release No. 48187 (July 16, 2003), 68 FR 43553 (July
23, 2003) (Order approving SR-NASD-2003-106).
\11\ See Exchange Act Release No. 46816 (November 12, 2002), 67
FR 69793 (November 19, 2002) (Order approving SR-NYSE-2002-56).
Thereafter, the pilot period was extended to September 30, 2003. See
Exchange Act Release No. 47836 (May 12, 2003), 68 FR 27608 (May 20,
2003) (Order approving SR-NYSE-2003-16).
\12\ See Exchange Act Release No. 48553 (September 26, 2003), 68
FR 57494 (October 3, 2003) (Order approving SR-NASD-2003-144).
Exchange Act Release No. 49452 (March 19, 2004), 69 FR 17010 (March
31, 2004) (Order approving SR-NASD-2004-40). Exchange Act Release
No. 48552 (September 26, 2003), 68 FR 57496 (October 3, 2003) (Order
approving SR-NYSE-2003-28). Exchange Act Release No. 49521 (April 2,
2004), 69 FR 18661 (April 8, 2004) (Order approving SR-NYSE-2004-
18). Exchange Act Release No. 50447 (September 24, 2004), 69 FR
58567 (September 30, 2004) (Order approving SR-NASD-2004-126) and
Exchange Act Release No. 50449 (September 24, 2004), 69 FR 58985
(October 1, 2004) (Order approving SR-NYSE-2004-50).
---------------------------------------------------------------------------
Since the NASD's and NYSE's lawsuit relating to the application of
the California Standards has not been resolved, PCX is now requesting
an extension of the pilot for an additional six months (or until the
pending litigation has resolved the question of whether or not the
California Standards apply to SROs). PCX requests that the pilot be
extended for six months beginning on November 25, 2004. The extension
of time permits the Exchange to continue the arbitration process using
PCX rules regarding a4rbitration disclosures and not the California
Standards. No substantive changes are being made to the pilot program,
other than extending the operation of the pilot program.
2. Statutory Basis
The Exchange believes that the proposal is consistent with section
6(b) \13\ of the Act, in general, and furthers the objectives of
section
[[Page 69661]]
6(b)(5),\14\ in particular, in that it is designed to promote just and
equitable principles of trade by ensuring that members and member
organizations and the public have a fair and impartial forum for the
resolution of their disputes.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 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 Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
PCX has designated the proposed rule change as one that: (i) Does
not significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) does not become operative for 30 days from the date on which
it was filed, or such shorter time as the Commission may designate.
Therefore, the foregoing rule change has become effective pursuant to
section 19(b)(3)(A) of the Act \15\ and Rule 19b-4(f)(6)
thereunder.\16\ At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily abrogate the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\17\ the proposal
may not become operative for 30 days after the date of its filing, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, and the self-
regulatory organization must file notice of intent to file the proposed
rule change at least five business days beforehand. The PCX has
requested that the Commission waive the five-day pre-filing
requirements and the 30-day operative delay so that the proposed rule
change will become immediately effective upon filing.
---------------------------------------------------------------------------
\17\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that waiving the 30-day operative date is
consistent with the protection of investors and the public interest.
\18\ Waiving the pre-filing requirement and accelerating the operative
date will merely extend a pilot program that is designed to provide
investors with a mechanism to resolve disputes with broker-dealers.
During the period of this extension, the Commission and PCX will
continue to monitor the status of the previously discussed litigation.
For these reasons, the Commission designates that the proposed rule
change has become effective and operative immediately.
---------------------------------------------------------------------------
\18\ For purposes of accelerating the operative date of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
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:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-PCX-2004-104 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-PCX-2004-104. 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 Section, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such filing also will be
available for inspection and copying at the principal office of PCX.
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-PCX-2004-104
and should be submitted on or before December 21, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
Margaret H. McFarland,
Deputy Secretary.
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 04-26383 Filed 11-29-04; 8:45 am]
BILLING CODE 8010-01-M