Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Additions to the ``List of Exchange Rule Violations and Fines Applicable Thereto Pursuant to Rule 476A''

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33779; File No. SR-NYSE-93-38]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the New York Stock Exchange, Inc. Relating to Additions to

the ``List of Exchange Rule Violations and Fines Applicable Thereto

Pursuant to Rule 476A''

March 17, 1994.

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

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

21, 1993, the New York Stock Exchange, Inc. (``NYSE'' 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 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

This proposal would revise the Rule 476A Violations List for

imposition of fines for minor violations of rules and/or policies by

adding to the list Exchange Rules 304(h)(2), 345.12, 346(b) and (e),

346(f), 352(b) and (c), 440C and 472(c).\1\

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\1\The NYSE also has requested approval, under Rule 19d-1(c)(2),

17 CFR 240.19d-1(c)(2), to amend its Rule 19d-1 Minor Rule Violation

Enforcement and Reporting Plan to include Exchange Rules 304(h)(2),

345.12, 346(b) and (e), 346(f), 352(b) and (c), 440C and 472(c). See

letter from James E. Buck, Senior Vice President and Secretary,

NYSE, to Diana Luka-Hopson, Branch Chief, Exchange Regulation,

Division of Market Regulation, Commission, dated October 20, 1993.

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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 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 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

Rule 476A\2\ provides that the Exchange may impose a fine ranging

from $500 to $2,500 on an individual, and a fine ranging from $1,000 to

$5,000 on a member organization for a minor violation of certain

specified Exchange rules.

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\2\Rule 476A was approved by the Commission on January 25, 1985

in Securities Exchange Act Release No. 21688, 50 FR 5025 (February

5, 1985). Subsequent additions of rules to the Rule 476A Violations

List were made in: Securities Exchange Act Release No. 22037 (May

14, 1985), 50 FR 21008 (May 21, 1985); Securities Exchange Act

Release No. 22415 (September 17, 1985), 50 FR 38600 (September 23,

1985); Securities Exchange Act Release No. 22490 (October 1985), 50

FR 41084 (October 8, 1985); Securities Exchange Act Release No.

23104 (April 11, 1986), 51 FR 13307 (April 18, 1986); Securities

Exchange Act Release No. 24985 (October 5, 1987), 52 FR 41643

(October 29, 1987); Securities Exchange Act Release No. 25763 (May

27, 1988), 53 FR 20925 (June 7, 1988); Securities Exchange Act

Release No. 27878 (April 4, 1990), 55 FR 13345 (April 10, 1990);

Securities Exchange Act Release No. 28003 (May 8, 1990), 55 FR 20004

(May 14, 1990); Securities Exchange Act Release No. 28505 (October

2, 1990), 55 FR 41288 (October 10, 1990); Securities Exchange Act

Release No. 28995 (March 21, 1991), 56 FR 12967 (March 28, 1991);

Securities Exchange Act Release No. 30280 (January 22, 1992), 57 FR

3452 (January 29, 1992); Securities Exchange Act Release No. 30536

(March 31, 1992), 57 FR 12357 (April 9, 1992); and Securities

Exchange Act Release No. 32421 (June 7, 1993), 58 FR 32973 (June 14,

1993).

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The purpose of the Rule 476A procedure is to provide for a response

to a rule violation when a meaningful sanction is appropriate but when

initiation of a disciplinary proceeding under Rule 476 is not suitable

because such a proceeding would be more costly and time-consuming than

would be warranted given the minor nature of the violation. Rule 476A

provides for an appropriate response to minor violations of certain

Exchange rules while preserving the due process rights of the party

accused through specified, required procedures. The list of rules which

are eligible for 476A procedures specifies those rule violations which

may be the subject of fines under the rule and also includes a schedule

of fines.

In SR-NYSE-84-27, which initially set forth the provisions and

procedures of the Rule 476A, the Exchange indicated it would amend the

list of rules from time to time, as it considered appropriate, in order

to phase-in the implementation of Rule 476A as experience with it was

gained. The Exchange's regulatory divisions have amended the list since

its initial implementation to include either existing rules or newly

approved ones, which are appropriate for inclusion in this particular

disciplinary process when violations occur.

The Exchange is presently seeking approval to add certain Exchange

rules to the list of rules subject to possible imposition of fines

under Rule 476A procedures. The types of rules covered generally

include reporting, required approvals, record retention and conduct of

accounts for which determinations of violations can be made

objectively. They are as follows:

Rule 304(h)(2)--Requires member organizations to supply

the Exchange with information relating to the existence of any

statutory disqualification as defined in the Act to which an approved

person or any person associated with the approved person may be

subject.

Rule 345.12--Requires applications (Form U-4) for all

natural persons required to be registered with the Exchange to be filed

upon the candidate's employment and to be kept current.

Rule 346(b) and (3)--Rule 346(b) requires members, allied

members and employees of member organizations to receive prior written

consent of their employer to engage in any other business activity or

to be employed or compensated by any other person. Rule 346(e) provides

that persons delegated supervisory responsibilities must devote their

full time to the business of the member organization during business

hours, unless otherwise permitted by the Exchange (Rule 346.10).

Rule 346(g)--Provides that no member, member organization,

allied member, approved person or employee of any person in a control

relationship with a member or member organization shall be associated

with any person subject to a statutory disqualification as defined in

the Act.

Rule 352(b) and (c)--Prohibits a member, member

organization, allied member, registered representative or officer from

guaranteeing any customer against loss in any account and from sharing

in profits or losses in a customer's account.

Rule 440C--States that no member or member organization

should ``fail to deliver'' against a short sale until a diligent effort

has been made to borrow necessary securities to make delivery.

Rule 472(c)--Requires members and member organizations to

retain communications with customers and the public (e.g.,

advertisements, research reports, sales literature) for at least three

years. The communications must also contain the name of the person who

prepared the material, the name of the person approving its issuance,

and be readily available to the Exchange upon request.

2. Statutory Basis

The proposed rule change will advance the objectives of section

6(b)(6) of the Act in that it will provide a procedure whereby members,

allied members, employees and member organizations can be

``appropriately disciplined'' in those instances when a rule violation

is minor in nature, but a sanction more serious than a warning or

cautionary letter is appropriate. The proposed rule change provides a

fair procedure for imposing such sanctions, in accordance with the

requirements of sections 6(b)(7) and 6(d)(1) of the Act.

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

The Exchange has neither solicited nor 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 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.

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 Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such filing will also be available for

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

submissions should refer to File No. SR-NYSE-93-38 and should be

submitted by April 15, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-7052 Filed 3-24-94; 8:45 am]

BILLING CODE 8010-01-M