Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to an Interpretation With Respect to Rule 409 (``Statements of Accounts to Customers'')

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33824; File No. SR-NYSE-94-2]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

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

Interpretation With Respect to Rule 409 (``Statements of Accounts to

Customers'')

March 28, 1994.

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

(``Act''),\1\ notice is hereby given that on February 22, 1994, 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. On March 2, 1994, the

NYSE submitted to the Commission Amendment No. 1 to the proposal.\2\

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).

\2\See letter from Patricia Dorilio, Senior Special Counsel,

Rule and Interpretive Standards, NYSE to Cheryl Dunfee, Attorney,

Exchange Branch, Division of Market Regulation, Commission, dated

March 1, 1994. This letter enclosed four new pages to the proposal.

The NYSE sent new pages 3, 4, 13, and 14 to replace those in the

original proposal.

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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 interpretation with respect

to the meaning and administration of existing Exchange Rule 409

(``Statements of Accounts to Customers'').

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. 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 aspect of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

1. Purpose

The purpose of the proposed rule change is to set forth an

interpretation concerning the meaning and administration of Exchange

Rule 409 with respect to the establishment of standards for Exchange

members and member organizations holding foreign customer accounts. It

is intended that this interpretation will be published as an

Interpretation Memorandum for inclusion in the Exchange Interpretation

Handbook.

Exchange Rule 409 addresses the requirement of member organizations

to send statements of accounts and confirmations to customers. One of

the purposes of Rule 409 is to ensure that member organization's

communications to customers are sent to appropriate and/or authorized

persons.

Rule 409(b)(2) provides that customer mail (i.e. statements,

confirmations and other communications) may not be addressed to any

member, member organization or in care of an employee of any member

organization. This, in effect, prohibits the receipt and retention by a

member, member organization, registered representative or other

associated person, of customer mail. The rule, however, does permit the

Exchange to waive the rule's requirements, upon written request. The

Exchange has received requests from member organizations to permit them

to hold mail for certain foreign customers who have represented in

writing that they do not wish to receive such correspondence. Reasons

for such requests have included inefficient local mail services

(resulting in misrouted mail or opened mail) or unstable political

climates. In order to review and approve such requests, the Exchange

has established guidelines. The Exchange is proposing this written

interpretation to codify the procedures and standards for reviewing

requests from member organizations to hold foreign customer mail.

The proposed interpretation provides that the Exchange will

consider written requests from members and member organizations for the

implementation of procedures for temporarily holding foreign customer

mail. Such requests will be required to provide certain details and

representations concerning supervisory procedures that the member or

member organization will have in place with respect to holding mail.

Specifically, members and member organizations will be required to

obtain, at least on an annual basis, a written request from the

customer to have mail temporarily held at the premises of the firm and

providing appropriate reasons for such request. Additionally, the

organization's written procedures must address, at a minimum that: such

accounts will receive frequent supervisory review with special

attention given to discretionary accounts; the communications will be

reviewed annually by the compliance/internal audit department or by

person(s) delegated such responsibility pursuant to Exchange Rule 342

(independent of the branch), and such review will include a test that

the communications are held pursuant to written customer instructions;

a log of the communications will be maintained which shows the date of

transmittal of the communications to the customer; and that endeavors

will be made to orally communicate the substance of the communications

directly to the customer and that a written record is kept of all

meetings and conversations with the customer.

The Exchange believes that this proposed interpretation will give

members and member organizations the flexibility to hold mail upon

customer request, while providing appropriate safeguards through

enhanced supervisory procedures.

2. Statutory Basis

The proposed rule change is consistent with the requirements of

Section 6(b)(5) of the Act, which requires that the rules of the

Exchange be designed to prevent fraudulent and manipulative acts and

practices, to promote just and equitable principles of trade, and in

general, to protect investors and the public interest, in that it

establishes standards that enable members and member organizations to

meet customer requests yet provide customer protection through

appropriate monitoring and supervision.

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

The Exchange believes that the proposal does not 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

Comments were neither solicited nor 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 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-94-2 and should be

submitted by April 26, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-8080 Filed 4-4-94; 8:45 am]

BILLING CODE 8010-01-M