Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Board Options Exchange, Inc. Relating to the Reporting by the Exchange to the Central Registration Depository (``CRD'') of Information Concerning Pending Formal Exchange Disciplinary Proceedings

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34792; File No. SR-CBOE-94-33]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the Chicago Board Options Exchange, Inc. Relating to the

Reporting by the Exchange to the Central Registration Depository

(``CRD'') of Information Concerning Pending Formal Exchange

Disciplinary Proceedings

October 5, 1994.

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 15, 1994, the Chicago Board Options Exchange (``CBOE'' or

``Exchange'') filed with the Securities and Exchange Commission

(``Commission'') the proposed rule change as described in Items I, II,

and III below, which Items have been prepared by the CBOE. The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

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\1\15 U.S.C. 78s(b)(1) (1988).

\2\17 CFR 240.19b-4 (1991).

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

of the Proposed Rule Change

The CBOE proposes to add Rule 17.14 to the CBOE's rules to provide

for the reporting by the CBOE to the Central Registration Depository

(``CRD''), for disclosure to the public, of information concerning

pending formal CBOE disciplinary proceedings. In addition, the CBOE

proposes to renumber the provisions which are currently contained in

CBOE Rule 17.12 without affecting the substance of these provisions.

The text of the proposed rule change is available at the Office of the

Secretary, CBOE, and at the Commission.

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 CBOE 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

The purpose of the proposed rule change is to add Rule 17.14 to the

exchange's rules to provide for the reporting by the Exchange to the

CRD,\3\ for disclosure to the public, of information concerning pending

formal Exchange disciplinary proceedings.\4\ Currently, the Exchange

discloses to the CRD information with respect to formal Exchange

disciplinary proceedings only upon the conclusion of such proceedings.

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\3\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.

\4\The CBOE represents that information concerning final

disciplinary actions taken by the Exchange, the NASD, and other

SROs, as well as information concerning certain criminal convictions

contained in the CRD, has been disclosed to the public pursuant to

the NASD's 800 number service since October 1991. On July 1, 1993,

the Commission approved an NASD rule change to make more information

available to the public regarding pending disciplinary proceedings

or actions taken by federal or state agencies and SROs that relate

to securities and commodities transactions, and regarding criminal

indictments and information. See Securities Exchange Act Release No.

32568 (July 1, 1993), 58 FR 36723 (July 8, 1993). In addition, the

Commission recently approved rule changes by both the New York Stock

Exchange, Inc. and the Chicago Stock Exchange, Inc. to provide

information to the CRD concerning their pending formal disciplinary

proceedings. See Securities Exchange Act Release Nos. 33844 (March

31, 1994), 59 FR 16669 (April 7, 1994), and 34516 (August 10, 1994),

59 FR 42317 (August 7, 1994), and 34516 (August 10, 1994), 59 FR

42317 (August 17, 1994).

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Under the proposed rule change, the amount of information

concerning formal Exchange disciplinary proceedings\5\ reported by the

Exchange to the CRD would be expanded to include the issuance of a

statement of charges in such proceedings and all significant changes in

the status of such proceedings while such proceedings are pending. For

the purposes of Rule 17.14, a formal Exchange disciplinary proceeding

would be considered to be pending from the time that a statement of

charges is issued in the proceeding\6\ until the outcome of the

proceeding becomes final. In addition, under Rule 17.14, significant

changes in the status of a formal Exchange disciplinary proceeding

would be deemed to include, but not be limited to, the scheduling of a

disciplinary hearing, the issuance of a decision by the BCC, the filing

of an appeal to the Exchange's Board of Directors, and the issuance of

a decision by the Exchange's Board of Directors.

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\5\According to the Exchange, for the purposes of Rule 17.14, an

Exchange disciplinary proceeding would be considered to be a formal

disciplinary proceeding if it is initiated by the Exchange pursuant

to Exchange Rule 17.2, et seq.

\6\The Exchange states that CBOE Rule 17.4(b) provides, in part,

that whenever it shall appear to the Exchange's Business Conduct

Committee (``BCC'') from the report of the staff of the Exchange

that there is probable cause for finding a violation within the

disciplinary jurisdiction of the Exchange and that further

proceedings are warranted, the BCC shall direct the staff of the

Exchange to prepare a statement of charges against the person or

organization alleged to have committed a violation (the

``Respondent'') specifying the acts in which the Respondent is

charged to have engaged and setting forth the specific provisions of

the Act, as amended, the rules and regulations promulgated

thereunder, and the constitutional provisions, by-laws, rules,

interpretations, or resolutions of which such acts are in violation.

In addition, Rule 17.4(b) further provides that a copy of the

charges shall be served upon the Respondent.

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According to the Exchange, information on pending formal Exchange

disciplinary proceedings, among other events, is currently in the CRD,

but only to the extent that reports are made by Exchange 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

application form for broker-dealer registration. The proposed rule

change would expand the information available to the public concerning

pending formal Exchange disciplinary proceedings by requiring the

Exchange to report information concerning such pending proceedings to

the CRD.

In addition to the foregoing, the proposed rule change would

renumber the provisions which are currently contained in Rule 17.12

(Miscellaneous Provisions) without affecting the substance of these

provisions. Specifically, under the proposed rule change, the current

provisions of Rule 17.12 would be separated into two rules, Rule 17.12

and Rule 17.13.

The Exchange believes that the proposed rule change is consistent

with Section 6 of the Act, in general, and furthers the objectives of

Section 6(b)(5) of the Act,\7\ in particular, in that it will protect

investors and the public interest by enhancing the public's access to

information regarding disciplinary proceedings involving Exchange

members, member organizations, and associated persons.

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\7\15 U.S.C. Sec. 78f(b)(5) (1988).

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(B) Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will

impose any inappropriate burden on competition.

(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

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 Exchange 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. 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 in the

Commission's Public Reference Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing will also be available for

inspection and copying at the principal office of the CBOE. All

submissions should refer to File No. SR-CBOE. All submissions should

refer to File No. SR-CBOE-94-33 and should be submitted by November 3,

1994.

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 (1993)

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[FR Doc. 94-25279 Filed 10-12-94; 8:45 am]

BILLING CODE 8010-01-M