regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.,
[Federal Register: July 27, 1998 (Volume 63, Number 143)]
[Notices]
[Page 40150-40151]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27jy98-114]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40229; File No. SR-NYSE-98-20]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to an Interpretation of Article IV, Section 14 of the Exchange Constitution
July 17, 1998.
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 July 10, 1998, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filedwith 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.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to interpret Article IV, Section 14 of the Exchange Constitution to provide that decisions of the Director of Arbitration regarding jurisdiction and hearing situs are not subject to review by the Exchange's Board of Directors.
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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 its 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.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
The purpose of the proposed resolution is to interpret Article IV, Section 14 of the Exchange Constitution so that decisions of the Director of Arbitration on issues of jurisdiction and hearings situs are not subject to review by the Exchange's Board at the request of a member, member organization, allied member or approved person. This section of the Exchange Constitution provides that where the Board has delegated its powers to an officer or employee, ``a member, member organization, allied member of approved person affected by a decision of any officer or employee * * * may require a review by the Board of such decision.'' No explicit exception is made for actions taken by the Director of Arbitration. Moreover, this provision is not applicable to persons other than members, member organizations, or allied members of approved persons affected by a decision of the Director of Arbitration. However, Exchange Rule 621 and applicable law provide for the review of the Director's decisions by arbitrators or the courts. In addition, the Board has the authority to interpret the Constitution.\1\
\1\ Article IV, Section 13.
The Director of Arbitration is ``charged with the duty of performing all ministerial duties in connection with matters submitted for arbitration.'' \2\ These duties include making the initial decisions regarding jurisdiction and hearing situs.\3\ Exchange Rule 613 deals with the situs of a hearing and provides that ``[t]he time and place for the initial hearing shall be determined by the Director of Arbitration and each hearing thereafter by the arbitrators.''
\2\ Exchange Rule 635.
\3\ Exchange Rules 600 and 613.
Article XI, Section 1 of the Exchange Constitution and Exchange Rule 600 establish the jurisdiction of the Exchange's arbitration forum.\4\ When a claim is submitted for arbitration at the Exchange, the Director of Arbitration, as part of the ``ministerial duties in connection with matters submitted for arbitration,'' determines whether the claim submitted falls within the parameters of the Exchange's jurisdiction.
\4\ ``Any controversy between parties who are members, allied members or member organizations and any controversy between a member, allied member or member organization and any other person arising out of the business of such member, allied member or member organization, or the dissolution of a member organization, shall at the instance of any such party, be submitted for arbitration in accordance with the provisions of this Constitution and such rules as the Board may from time to time adopt.'' (Article XI, Sec. 1).
``Any dispute, claim or controversy between a customer or non- member and a member, allied member, member organization and/or associated person arising in connection with the business of such member, allied member, member organization and/or associated person in connection with his activities as an associated person shall be arbitrated under the Constitution and Rules of the New York Stock Exchange, Inc. as provided by any duly executed and enforceable written agreement or upon the demand of the customer or non- member.'' Exchange Rule 600.
The arbitrators are empowered to interpret and determine the applicability of all provisions of the Arbitration Rules \5\ and thereby the Exchange believes they can overturn decisions of the Director of Arbitration regarding situs of he first hearing. Decisions of the Director Arbitration regarding jurisdiction are subject to review by the courts.\6\
\5\ See Exchange Rule 621.
\6\ Spear, Leeds & Kellogg v. Central Life Assurance Co., 85 F.3d 21 (2d Cir. 1996).
The NYSE notes that in the past, members have requested, and the Board has granted, review of the Director of Arbitration's decisions on jurisdiction and hearing situs.
The Exchange notes that interlocutory procedural decisions are rarely appealable in judicial and arbitral
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processes. Generally, they are reserved for consideration as part of any overall review of the lowest court's or arbitrator's decision. This reservation occurs in part because interlocutory appeals are frequently employed by parties simply to gain tactical advantage in the dispute. In addition, a substantive resolution of the conflict will often moot the procedural issues.
Inasmuch as this review by the Board of staff action is in the nature of an interlocutory appeal, the arbitrators and the courts may subsequently review the Board's decision. This may result in an unnecessary delay in the final resolution of an arbitration claim.
The Exchange notes that as a matter of statutory interpretation, when two statutes speak to the same subject matter, and one is general and the other is specific, the specific is usually interpreted to qualify or control the general. In this case, the Exchange Constitution and Rules, as well as the statutory framework within which alternative dispute resolution processes operate, create a specific scheme for review of administrative decisions of the Director of Arbitration.\7\ The Exchange believes that this specific scheme obviates the need for review of the Director's decisions under the Exchange Constitution's general scheme for Board review of staff actions. Accordingly, the Exchange believes it is well within the norms of statutory construction for the Board to interpret the specific scheme for the review of the decisions of the Director to displace the general scheme.
\7\ See NYSE Rule 621; see also Federal Arbitration Act, 9 U.S.C. 1 et seq.
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Statutory Basis
The Exchange believes that the proposed change is consistent with Section 6(b)(5) of the Act \8\ in that it promotes just and equitable principles of trade by insuring that members and member organizations and the public have a fair and impartial forum for the resolution of their disputes.
\8\ 15 U.S.C. 78f(b)(5).
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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.
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Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the publication of this notice is 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.
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Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 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 filedwith 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 Room. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-NYSE-98-20 and should be submitted by August 17, 1998.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\9\
\9\ 17 CFR 200.30-3(a)(12).
Jonathan G. Katz, Secretary.
[FR Doc. 98-19984Filed7-24-98; 8:45 am]
BILLING CODE 8010-01-M
