Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Stock Exchange, Inc., Relating to Disclosure of Pending Formal Exchange Disciplinary Proceeding to the CRD

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34268; File No. SR-CHX-94-12]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the Chicago Stock Exchange, Inc., Relating to Disclosure of

Pending Formal Exchange Disciplinary Proceeding to the CRD

June 28, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. 78s(b)(1), notice if hereby given that on May 6,

1994, the Chicago Stock Exchange, Inc. (``CHX'') 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

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

The CHX proposes to add Rule 9 to Article XII of the Exchange's

Rules. Rule 9 to Article XII is proposed to be provided as follows:

The initiation of, and all significant changes in the status of,

a formal disciplinary proceeding brought by the Exchange shall be

reported by the Exchange to the Central Registration Depository

operated by the National Association of Securities Dealers, Inc. For

purposes of this Rule, significant changes in the status of a

pending formal disciplinary proceeding shall include, but are not

limited to, issuance of a decision by the President, the filing of

an appeal; to and/or the issuance of a decision by, a Judiciary

Committee, the Exchange's Executive Committee or Board of Governors.

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 self-regulatory organization

included statements governing 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 self-regulatory organization 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

The proposed rule change authorizes the Exchange to provide

information to the Central Registration Depository (``CRD'')\1\

concerning pending formal Exchange disciplinary proceedings for

disclosure to the public. A formal disciplinary proceeding is

considered to be pending from the time charges are issued\2\ until the

proceeding is completed.\3\ Currently, the Exchange discloses

information only on final Exchange disciplinary actions to the CRD.

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\1\The CRD is an automated industry database containing

employment and disciplinary history of members and associated

persons registered with self-regulatory organizations (``SROs'') and

state securities agencies. The CRD is operated by the National

Association of Securities Dealers, Inc. (``NASD'') with input on

policy and other matters from federal and state agencies and other

SROs, including the Exchange.

\2\CHX Article XII, Rule 1(b) provides, in part, that if in the

judgment of the President it shall appear that an accused has

committed a default or other offense in violation of the

Constitution or Rules of the Exchange the President shall, except as

hereinafter provided, direct the staff to prefer written charges

against the accused. A copy of such charges shall be served upon the

accused. The accused shall also be served with written notice of

when and where the charges will be heard.

\3\See CHX Article XII, Rule 7.

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Information concerning final disciplinary actions taken by the

Exchange and other SROs and regulatory organizations and certain

criminal convictions contained in the CRD has been disclosed to the

public pursuant to the NASD's 800 number service since October 1991.\4\

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\4\The Commission subsequently approved the NASD's procedures

for operating its 800 number service in Securities Exchange Act

Release No. 30629 (April 23, 1992), 57 FR 18535 (April 30, 1992)

(File No. SR-NASD-91-39) (``800 Number Service Plan Approval

Order'').

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On July 1, 1993, the SEC approved an NASD rule change to make more

information available to the general public regarding pending

disciplinary proceedings or actions taken by federal or state

securities agencies and SROs that relate to securities or commodities

transactions, and regarding criminal indictments and informations.\5\

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\5\See Securities Exchange Act Release No. 32568 (July 1, 1993),

59 FR 36723 (July 8, 1993) (File No. SR-NASD-93-26) (``Pending Event

Disclosure Approval Order'').

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Information on pending SRO disciplinary proceedings, among other

events, is currently also in the CRD, to the extent that reports are

made by members, member organizations and associated persons pursuant

to their reporting obligations on the Uniform Application for

Securities Industry Registration or Transfer (Form U-4) and Form BD,

the uniform applications form for broker-dealer registration. However,

the Exchange does not currently report such pending events to the CRD.

The submission of information concerning pending formal

disciplinary proceedings directly by the Exchange would enhance the CRD

database since the CRD would not have to rely solely on reports from

members, member organizations and associated persons.

(2) Statutory Basis

The Exchange believes that the proposed rule change is consistent

with Section 6(b)(5) of the Act in that it is designed to promote just

and equitable principles of trade, to remove impediments and to perfect

the mechanism of a free and open market and a national market system,

and in general, to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will

impose a burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants or Others

No comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of this notice in the Federal

Register or within such other 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.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and

arguments concerning the foregoing. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. 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 at the

Commission's Public Reference Room, 450 Fifth Street NW., Washington,

DC 20549. Copies of the filing will also be available for inspection

and copying at the principal office of the CHX. All submissions should

refer to File No. SR-CHX-94-12 and should be submitted by July 26,

1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 94-16189 Filed 7-1-94; 8:45 am]

BILLING CODE 8010-01-M