Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Chicago Stock Exchange, Inc. To Modify the Recommended Fine Schedule for the Submission of Late Financial and Operational Reports

[Federal Register Volume 64, Number 235 (Wednesday, December 8, 1999)]
[Notices]
[Pages 68709-68710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31786]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42189; File No. SR-CHX-99-12]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Stock Exchange, Inc. To Modify the Recommended 
Fine Schedule for the Submission of Late Financial and Operational 
Reports

December 1, 1999.

I. Introduction

    On August 30, 1999, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend to recommended fine 
schedule for the submission of late financial and operational reports. 
The proposal was amended on October 5, 1999.\3\ Notice of the proposed 
rule change appeared in the Federal Register on October 25, 1999.\4\ 
The Commission received no comments on the proposal. This order 
approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Angelo Evangelo, Senior Attorney, Market 
Regulation, CHX, to John Roeser, Attorney, Division of Market 
Regulation, Commission, dated October 1, 1999 (``Amendment No. 1'').
    \4\ See Securities Exchange Act Release No. 42025 (October 18, 
1999), 64 FR 25091.
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II. Description of the Proposal

    The Exchange proposes to change the fine schedule applicable for 
violations of Exchange Article XI, Rule 4, regarding the submission of 
late financial and operational reports. The failure to file required 
financial and operational reports in a timely manner subjects members 
to a sanction under

[[Page 68710]]

the Exchange's Minor Rule Violation Plan (``MRVP'' or ``Plan'').\5\ 
Currently, the Minor Rule Violation Panel (``Panel'') imposes late 
fining charges according to the following fine schedule.\6\
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    \5\ On May 30, 1996 the Commission approved a proposed rule 
change that established the Exchange's MRVP. See Securities Exchange 
Act Release No. 37255 (May 30, 1996), 61 FR 28918 (June 6, 
1996)(``Approval Order'').
    \6\ This fine schedule is also set forth under Exchange Article 
XI, Rule 4, Interpretation and Policy .02, which will be similarly 
amended to eliminate the fine schedule.

------------------------------------------------------------------------
                           Days late                             Amount
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1-30..........................................................      $100
31-60.........................................................       200
61-90.........................................................       400
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    The Exchange is now proposing to subject the late filing violations 
to the standard recommended fine schedule applicable to most other 
violations governed by the Plan. The standard recommended fine schedule 
imposes a $100 fine for the first violation within a rolling twelve 
month period and a $500 fine and $1000 fine for the second and third 
such violations.
    Unlike the current fine schedule, the proposed fine schedule would 
not expressly increase fines based on the number of days a particular 
report was filed late. However, the Exchange expects the Panel to 
exercise its discretion to enhance sanctions proportionally for reports 
that are more or less significantly overdue.\7\
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    \7\ See Amendment No. 1, supra note 3.
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III. Discussion

    1After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\8\ 
In particular, the Commission believes that the proposal is consistent 
with Sections 6(b)(6) \9\ and 6(b)(7) \10\ of the Act. The proposal is 
consistent with the requirements of Sections 6(b)(6) and 6(b)(7) in 
that it provides fair procedures and guidelines that enable the 
Exchange to appropriately discipline its members and persons associated 
with members for violations of the rules of the exchange.
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    \8\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \9\ Section 6(b)(6) requires the Commission to determine that 
the rules of the exchange provide that its members and persons 
associated with members shall be appropriately disciplined for 
violating the federal securities laws or the rules of the exchange 
by fine or other fitting sanction. 15 U.S.C. 78f(b)(6).
    \10\ Section 6(b)(7) requires the Commission to determine that 
the rules of the exchange provide a fair procedure for disciplining 
its members and persons associated with members. 15 U.S.C. 
78f(b)(7).
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    The Commission notes particularly that the fine schedule under the 
Plan is merely a recommended fine schedule, and that fines of more or 
less than the recommended fines, up to a maximum of $2500, may be 
imposed in appropriate circumstances.\11\ The Commission expects the 
Panel to exercise its discretion to deviate from the Plan's recommended 
fine schedule in determining fine amounts, as appropriate. Further, the 
Commission expects the Exchange to continue to resolve more serious 
violations of the rules through use of its formal disciplinary 
procedures, such as in the case of an egregious violation or a habitual 
offender.
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    \11\ See Approval Order, supra note 5.
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IV Conclusion

    For the foregoing reasons, the Commission believes that the 
proposed rule change is consistent with the Act and the rules and 
regulations thereunder applicable to a national securities exchange, 
and, in particular, with Sections 6(b)(6) and 6(b)(7) of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-CHX-99-12) is approved.

    \12\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-31786 Filed 12-7-99; 8:45 am]
BILLING CODE 8010-01-M