[Federal Register Volume 72, Number 192 (Thursday, October 4, 2007)]
[Notices]
[Page 56816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-19559]
[[Page 56816]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56573; File No. SR-CHX-2007-16]
Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.;
Order Granting Approval of Proposed Rule Change as Modified by
Amendment No. 1 Thereto To Amend Its Bylaws to Confirm That an Exchange
Director Cannot Participate in the Determination of Any Matter
Involving an Issuer of a Security Listed or To Be Listed on the
Exchange, if the Director is a Director, Officer, or Employee of the
Issuer
September 28, 2007.
I. Introduction
On July 27, 2007, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), 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 Article II, Section 7 of its bylaws to
confirm that, a CHX director cannot participate in the determination of
any matter involving an issuer of a security listed or to be listed on
the Exchange, if the CHX director is a director, officer, or employee
of the issuer. On August 10, 2007, CHX filed an amendment to the
proposed rule change.\3\ The proposed rule change, as modified by
Amendment No. 1, was published for comment in the Federal Register on
August 24, 2007.\4\ The Commission received no comments on the
proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Partial Amendment No. 1, the Exchange stated when a
director recuses himself or herself from a decision, the Exchange
would reflect that recusal in the minutes of the meeting at which
the recusal occurred, in accordance with its internal written
policies.
\4\ See Securities Exchange Act Release No. 56281 (August 17,
2007), 72 FR 48708.
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II. Description of the Proposal
CHX bylaws currently prohibit a CHX director from participating in
the determination of any matter in which the CHX director is personally
interested. In its filing, CHX stated that the proposal would add a
clarification to its bylaws by confirming certain situations when a CHX
director would be deemed ``personally interested'' in a matter
involving an issuer of a security listed or to be listed on the
Exchange. Specifically, under the proposal a CHX director is deemed
``personally interested'' when the CHX director is a director, officer,
or employee of the issuer of the security listed or to be listed on the
Exchange. Further, this proposed provision is non-exclusive and the
proposed changes to the bylaws specifically state that CHX would
evaluate other relationships between the CHX director and the issuer on
a case-by-case basis.
III. Discussion
After a careful review of the proposed rule change, the Commission
finds that the proposed rule change is consistent with the requirements
of the Act and the regulations thereunder applicable to a national
securities exchange.\5\ In particular, the Commission believes that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\6\
which requires that the rules of an exchange be designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\5\ In approving the proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78f(b)(4).
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The Commission notes that CHX's bylaws currently prohibit a CHX
director from participating in the determination of any matter in which
the CHX director is personally interested. However, in a matter
involving an issuer of a security listed or to be listed on the
Exchange, CHX's bylaws do not specify under what situations the CHX
director would be deemed personally interested. The proposal would
specifically state that a CHX director could not participate in a
matter involving an issuer listed or to be listed on the Exchange if
the CHX director is a director, officer, or employee of the issuer. As
noted above, this is not an exclusive list defining all situations
involving an issuer and a CHX director in which a CHX director would be
deemed ``personally interested'' and shall not participate in a matter
pursuant to CHX bylaws. Under the proposal, CHX would evaluate other
relationships between a CHX director and an issuer on a case-by-case
basis. Examples of other situations the Commission would expect to
involve a personal interest would include, among others, when a CHX
director is serving as a consultant to an issuer, is a significant
shareholder of the issuer or has some other relationship with the
issuer. Moreover, CHX represented that when CHX directors recuse
themselves from a decision, CHX would reflect such recusals in the
minutes of the meeting in which the recusal occurs, consistent with
CHX's internal written policies.
The Commission believes that it is good corporate practice for CHX
to confirm in its bylaws certain situations when an Exchange director
is deemed personally interested in a matter involving an issuer of a
security listed or to be listed on CHX and to reflect recusals in the
minutes of the meetings in which the recusal occurs. This will help to
ensure that matters involving the listing and delisting of issuer's
securities on CHX is considered in a fair and impartial manner which
furthers the protection of investors and the public interest consistent
with Section (6)(b)(5) of the Act. Based on the above, the Commission
believes that the proposal is consistent with the requirements of the
Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-CHX-2007-16) as modified by
Amendment No. 1, be, and hereby is, approved.
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\7\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-19559 Filed 10-3-07; 8:45 am]
BILLING CODE 8011-01-P