Self-Regulatory Organizations; Filing of Proposed Rule Change by the Chicago Board Options Exchange, Inc., Relating to Termination of Registered Representatives

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33826; File No. SR-CBOE-93-56]

Self-Regulatory Organizations; Filing of Proposed Rule Change by

the Chicago Board Options Exchange, Inc., Relating to Termination of

Registered Representatives

March 28, 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 December

14, 1993, the Chicago Board Options Exchange, Inc. (``CBOE'' or

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

(``SEC'' or ``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

Currently, paragraph (b), ``Termination,'' of CBOE Rule 9.3,

``Registration and Termination of Representatives,'' requires that a

member file with the CBOE's Department of Investigation a Uniform

Termination Notice for Securities Industry Registration (Form U-5)

immediately after the termination of employment for cause of a

Registered Representative. In addition, current CBOE Rule 9.3,

Interpretation and Policy .01 defines ``Termination for Cause.'' The

CBOE proposes to amend CBOE Rule 9.3(b) to require members to file with

the CBOE's Department of Compliance a termination notice for any

discharge or termination of employment of a registered person, and the

reason therefor, within 30 days of the termination. The proposal

deletes the current rule's definition of ``termination for cause'' and

adds paragraph (c), which requires members to file an amended Form U-5

with the Exchange's Department of Compliance if the member learns of

facts or circumstances which cause any information provided in the

notice to become inaccurate or incomplete. Finally, the proposal would

replace current Interpretation and Policy .01 with a new Interpretation

and Policy allowing members to fulfill CBOE Rule 9.3's filing

requirements by submitting their filings or submissions to the North

American Securities Administrators Association/National Association of

Securities Dealers, Inc. (``NASD'') Central Registration Depository

(``CRD'') within the time period allowed under CBOE Rule 9.3.

The text of the proposal 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 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

The purpose of the proposed rule change is to modify the manner in

which ``Terminations for Cause'' of employment or affiliation of any

Registered Representative are reported to the CBOE by its members.

Currently, under CBOE Rule 9.3, notices must be filed immediately with

the CBOE's Department of Investigation following the date of

termination by means of a Form U-5. However, the Department of

Investigation no longer exists at the CBOE, and a portion of the duties

previously performed by the Department of Investigation, including the

receipt of Form U-5 information, is now performed by the CBOE's

Department of Compliance. The proposal reflects this change by

requiring that filings be made with the Exchange's Department of

Compliance.

The proposal makes CBOE Rule 9.3 more encompassing by requiring

termination notices to be filed for any discharge or termination of

employment of a registered person, not just ``termination for cause.''

To that end, the CBOE proposes to eliminate the definition of the term

``Termination for Cause'' provided in current Interpretation and Policy

.01. The proposal also clarifies when termination notices must be

filed, i.e., ``immediately, but in no event later than thirty (30) days

following termination * * *.'' Finally, the proposal relieves CBOE

member organizations of the obligation to file Form U-5 information in

hard copy form and, instead, deems all CBOE Rule 9.3 filings and

submissions as made for purposes of that rule if they are filed with

the North American Securities Administrators Association/NASD CRD

within the time period set forth in CBOE Rule 9.3. The CBOE states that

this approach is possible because the Exchange's Department of

Compliance has been given direct electronic access to all Form U-5's

and amended Form U-5's filed by the CBOE's member organizations with

CRD, making the direct filing of hard copies with the CBOE no longer

necessary.

The CBOE anticipates that this rule change will reduce the costs to

members of copying, handling and mailing termination materials.

Further, the proposal will bring the CBOE's ``Termination for Cause''

reporting requirements in line with similar rules of the NASD (By-Law

Article IV, Section 3) and the New York Stock Exchange (Rule 345).

The CBOE believes that the proposed rule change is consistent with

Section 6(b) of the Act, in general, and with Section 6(b)(5), in

particular, in that it is designed to improve the CBOE's capacity to

enforce compliance with the provisions of the Act and the CBOE's rules

by enabling the Exchange to monitor more efficiently all discharges or

terminations of employment of registered persons, and, in general, to

protect investors and the public interest.

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

The CBOE does not believe that the proposed rule change will impose

any burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the

Proposed Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the

proposed rule change.

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

Commission Action

Within 35 days after 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 reason for so finding or (ii) as to

which the self-regulatory organization 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 at 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 above-mentioned

self-regulatory organization. All submissions should refer to the file

number in the caption above and should be submitted by April 22, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\1\

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\1\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-7823 Filed 3-31-94; 8:45 am]

BILLING CODE 8010-01-M