[Federal Register: June 7, 2006 (Volume 71, Number 109)]
[Notices]
[Page 33008-33009]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jn06-138]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53917; File No. SR-Amex-2005-116]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Amendment No. 1
Thereto Relating to Written Compliance and Supervisory Controls
June 1, 2006.
I. Introduction
On November 7, 2005, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
[[Page 33009]]
(``Commission'') pursuant to section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ the
proposed rule change relating to written compliance and supervisory
controls. Amex filed Amendment No. 1 to the proposed rule change on
April 6, 2006. The proposed rule change was published for comment in
the Federal Register on April 28, 2006.\3\ The Commission received no
comments on the proposal. This order approves the proposed rule change,
as amended.
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\1\ 15 U.S.C. 78s(b)(l).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 53708 (April 24,
2006), 71 FR 25254.
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II. Description of the Proposal
The Exchange is proposing to amend Amex Rule 320 to require members
and member organizations with employees to establish, maintain,
enforce, and keep current a system of compliance and supervisory
controls, including written compliance and supervisory policies and
procedures, that are reasonably designed to achieve compliance with
applicable securities laws and regulations and Exchange rules.\4\ In
addition to requiring that the written compliance and supervisory
policies and procedures be amended as necessary, the proposed rule
would require that a member's or member organization's supervisory
control employee provide reports, at least annually, to senior
management summarizing certain aspects of the compliance and
supervisory program.\5\
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\4\ See proposed Amex Rule 320(e). An Amex member or member
organization consisting of a sole individual (i.e., a sole
proprietorship) would be required to maintain a written compliance
manual specifying the obligations to which such member or member
organization is subject along with the processes and controls in
place that are reasonably designed to achieve compliance with such
obligations. See Amex Rule 320, proposed Commentary .08.
\5\ See proposed Amex Rule 320(e)(3).
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In addition, the Exchange proposed clarifying edits to the text of
Amex Rule 320, including: (1) Explicit references to a member's or
member organization's obligation to comply with Exchange rules in
addition to all applicable securities laws and regulations, and (2)
replacing references to ``member firm'' with references to ``member
organization.''
III. Discussion and Commission Findings
The Commission has reviewed carefully the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange,\6\ particularly section 6(b)(5) of the Act,\7\ which, among
other things, requires that the rules of a national securities exchange
be designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, to protect investors and the public interest.
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\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the Exchange's proposal to require its
members and member organizations to establish, maintain, enforce, and
keep current a system of compliance and supervisory controls, including
written compliance and supervisory policies and procedures, that are
reasonably designed to achieve compliance with applicable securities
laws and regulations and Exchange rules should help strengthen the
Exchange's regulatory program by increasing member awareness of the
laws and rules with which they must comply. It should also provide
members an additional incentive to be cognizant of changing regulatory
requirements. The Exchange will review the adequacy of its members' and
member organizations' compliance programs. Further, the requirement
that Amex members and member organizations adopt comprehensive written
compliance and supervisory policies and procedures, and report to
senior management on certain aspects of the compliance and supervisory
program, should result in the periodic assessment by members and member
organizations of the effectiveness of their compliance programs.
Accordingly, the proposed rule change should help Amex strengthen its
regulatory program for detecting, sanctioning, and deterring violations
of Exchange rules and securities laws and regulations and, therefore,
should promote just and equitable principles of trade.\8\ Furthermore,
the Commission believes that the Amex's proposal should enhance
investor protection by facilitating the Exchange's review of its
members' and member organizations' systems of compliance and
supervisory controls and by enhancing the compliance programs at the
member level.
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\8\ The Commission notes that a national securities exchange
must have the capacity to enforce compliance by its members with
applicable securities laws, regulations and the exchange's own
rules. See e.g., section 6(b)(1) of the Act, 15 U.S.C. 78f(b)(1).
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IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\9\ that the proposed rule change (File No. SR-Amex-2005-116), as
amended, be and hereby is, approved.
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\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-8802 Filed 6-6-06; 8:45 am]
BILLING CODE 8010-01-P