[Federal Register: August 29, 2005 (Volume 70, Number 166)]
[Notices]
[Page 51104-51105]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au05-93]
[[Page 51104]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 52314; File No. SR-NYSE-2005-43]
Self-Regulatory Organizations; New York Stock Exchange, Inc.,
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to
Rule 607 Relating to the Classification of Arbitrators as Public or
Industry
August 22, 2005.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Exchange Act'' or ``Act''),\2\ and Rule 19b-4 thereunder,\3\
notice is hereby given that on June 17, 2005, the New York Stock
Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the proposed amendments to its
arbitration rules as described in Items I, II and III below, which
items have been prepared by the NYSE. On August 4, 2005, the NYSE filed
Amendment No. 1 to the proposed rule change (``Amendment No. 1'').\4\
The Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ In Amendment No. 1, which supplemented the original filing,
the Exchange modified the implementation date for the proposed rule
change and clarified certain aspects of the filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change consists of an amendment to New York Stock
Exchange, Inc. Rule 607 relating to the classification of arbitrators
as public or industry. The text of the proposed rule change, as
amended, is available on the NYSE's Web site (http://www.NYSE.com), at
the NYSE's principal office, and at the Commission's Public Reference
Room.
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 NYSE included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The 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
In arbitrations involving customers or non-members where the
damages are alleged to exceed $25,000, arbitration panels are comprised
of three arbitrators, two public arbitrators and one from the
securities industry. The customer or non-member may request at least a
majority of arbitrators from the securities industry.
Under Exchange Rule 607(a)(2), an arbitrator is currently
classified as being from the securities industry if he or she: (1) Is,
or within the past five years was, associated with certain entities
related to the securities industry (or is retired from, or spent a
substantial part of his or her career with such an entity); (2) is an
attorney or other professional who devoted 20 percent or more of his or
her work effort to securities industry clients within the past 2 years;
or (3) is registered under the Commodity Exchange Act, or is a member
of a registered futures association or any commodity exchange or is
associated with any such person.
Under Exchange Rule 607(a)(3), an arbitrator who is not from the
securities industry is classified as a public arbitrator. However, a
person cannot be classified as a public arbitrator if he or she has a
spouse or household member who is associated with certain entities
related to the securities industry.
The NYSE is concerned that some arbitrators currently classified as
public have affiliations with entities that have securities industry
ties such as banks, insurance companies, mutual funds, holding
companies and asset management firms. In an effort to enhance investor
confidence in the NYSE arbitration forum, and in order to further
ensure that persons serving as public arbitrators do not have ties to
the securities industry or related firms, the Exchange is proposing to
amend Rule 607. The proposed amendments would: (1) Expand the list of
entities engaged in the securities business by adding certain
membership categories not previously specifically mentioned (but,
nevertheless, contemplated by the current rule), and by adding a catch-
all for any ``other organization engaged in the securities business;''
(2) preclude any individual who is associated with any entity that
controls, is controlled by, or is under common control with an entity
on the expanded list from being classified as a public arbitrator; and
(3) preclude any individual from being classified as a public
arbitrator who has an immediate family member associated with an entity
on the expanded list. The amendment also defines which persons are
included within the term ``immediate family member.''
In order to ensure the integrity of the classification of public
arbitrators, the Exchange will update and reclassify arbitrators in
compliance with the amended rule, once approved.
The proposed amendments resemble a provision in the Uniform Code of
Arbitration (``UCA'') developed by the Securities Industry Conference
on Arbitration.\5\ Aside from word choice and punctuation, the
principal differences between the proposed rule change and the UCA are
as follows:
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\5\ The NASD has a rule similar to the UCA provision. See NASD
Rule 10308(a).
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The UCA states that a person with a spouse or other member
of the household who could be classified as being from the securities
industry as set forth immediately above will not be classified as a
public arbitrator. The NYSE proposed amendment expands the UCA
provisions by excluding a person from being classified as a public
arbitrator if the person has an ``immediate family member,'' which
includes a spouse, parents, children, siblings, mothers and fathers-in-
law, sons and daughters-in-law, and anyone who shares such person's
home (excluding domestic employees), associated with any of the
entities in the NYSE proposed amendment as set forth immediately above.
The NYSE proposed amendment states that a person will not
be classified as a public arbitrator if the person is associated with
an entity that, directly or indirectly, controls, is controlled by, or
is under common control with, a member, allied member, member
organization, broker/dealer, government securities broker, government
securities dealer, municipal securities dealer, registered investment
adviser, or other organization that is engaged in the securities
business. The UCA does not have this provision.
2. Statutory Basis
The NYSE believes that the proposed rule change is consistent with
Section 6(b) \6\ of the Act in general and Section 6(b)(5) of the Act
\7\ in particular in that it promotes 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NYSE 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
The NYSE has not solicited but has 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 the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
The Exchange has stated that the rule will become effective 90 days
following the publication in the Federal Register of the Commission's
approval of the rule change.
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. 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 e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSE-2005-43 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-NYSE-2005-43. 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 Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the NYSE. 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-NYSE-2005-43 and should be submitted on or before
September 19, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4715 Filed 8-26-05; 8:45 am]
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