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Code · REGISTER · 2005-10-25 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Notice

14,169 words·~64 min read·/register/2005/10/25/05-21272

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52630; File No. SR-Amex-2005-097] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change Relating to the Amex Listing Agreement October 18, 2005. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 29, 2005, the American Stock Exchange LLC (“Amex” 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 Exchange.
The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt a modified Amex Listing Agreement for the purpose of
(i)combining the two forms of Amex Listing Agreements presently available into one form of Amex Listing Agreement to be submitted to the Exchange by all issuers in connection with a listing application;
(ii)eliminating a representation by issuers of structured products, exchange-traded funds, trust issued receipts and other novel securities products regarding third party claims; and
(iii)making certain minor, non-substantive changes to the Amex Listing Agreement. The text of the proposed rule change is available on the Amex's Web site, *http://www.amex.com* , at the Amex's principal office, and at the Commission's Public Reference Room. 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 Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. The Exchange 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose To list on the Exchange, an issuer must execute an Amex Listing Agreement in connection with its listing application. The Exchange currently has two forms of Amex Listing Agreements:
(i)A listing agreement for securities listed pursuant to sections 106 (Currency and Index Warrants) and 107 (Other Securities) of the Amex Company Guide and pursuant to Amex Rules 1000 (Portfolio Depositary Receipts), 1000A (Index Fund Shares) and 1200 (Trust Issued Receipts) (the “Other Securities Listing Agreement”) and
(ii)a listing agreement for all other securities (the “Basic Securities Listing Agreement”). The Exchange proposes to consolidate the two forms of Amex Listing Agreements into one form for issuers of all types of securities. The Other Securities Listing Agreement and Basic Securities Listing Agreement differ in only one respect: In paragraph
(4)of the Other Securities Listing Agreement (“Paragraph (4)”), issuers represent that they will not implead, cross-claim against or sue the Exchange or its affiliates as a result of third party claims against the issuer. The Exchange created the Other Securities Listing Agreement in 2002 3 to address concerns about the Exchange's potential legal exposure, particularly in the area of intellectual property rights associated with exchange-traded funds, HOLDRs and other structured products. The adoption of Paragraph
(4)reflected the position that, even though the Exchange's sole involvement with any particular product is that it approved the product for listing and that the securities trade on the Exchange, it was foreseeable that litigation relating to the products could include the Exchange as a defendant and that the inclusion of Paragraph
(4)in the listing agreement might reduce the Exchange's legal exposure and litigation in some circumstances. 3 *See* Securities Exchange Act Release No. 46451 (September 10, 2002), 67 FR 57468 (September 3, 2002) (SR-Amex-2002-46). The Exchange now proposes to delete Paragraph
(4)from the Amex Listing Agreement. The Exchange believes that none of the listing agreement forms provided by other exchanges contain a provision similar to Paragraph (4). The Exchange believes that modification of the Amex Listing Agreement to more closely resemble the listing agreements provided by other exchanges will promote fair competition between exchange markets and benefit issuers of exchange-traded funds and other structured products by simplifying their responsibilities and obligations in connection with the listing process. The Exchange is also proposing other minor changes to the Amex Listing Agreement, to clarify existing provisions about which issuers have raised questions. 2. Statutory Basis The Amex believes that the proposed rule change is consistent with section 6(b) of the Act 4 in general and furthers the objectives of Section 6(b)(5) 5 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, 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; and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers, or to regulate by virtue of any authority conferred by the Act matters not related to the purpose of the Act or the administration of the Exchange. 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Amex believes that the proposed rule change would impose no 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 The Exchange did not solicit or receive any written comments with respect to the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of 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 Exchange 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, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Amex-2005-097 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-Amex-2005-097. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). 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 in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2005-097 and should be submitted on or before November 15, 2005. 6 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 6 Jonathan G. Katz, Secretary. [FR Doc. E5-5892 Filed 10-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52632; File No. SR-CHX-2005-21] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Approving Proposed Rule Change and Amendments Nos. 1 and 2 Thereto Requiring the Chicago Stock Exchange's Participants To Provide Electronic Mail Addresses to the Exchange October 19, 2005. Introduction On July 18, 2005, 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 require participants and participant firms to provide electronic mail addresses to the Exchange for use in transmitting notices and other communications. On August 30, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 On September 1, 2005, the Exchange filed Amendment No. 2 to the proposed rule change. 4 The proposed rule change, as amended, was published in the **Federal Register** on September 14, 2005. 5 No comments were received on the proposed rule change. This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Amendment No. 1. In Amendment No. 1, the Exchange made several modifications to the proposed rule change, including changes to the proposed rule text to require members to promptly update electronic mail addresses they provide to the Exchange, to clarify that the proposal will not supersede or modify any other provisions of Exchange rules that set out a specific method for the receipt of information from the Exchange, and to modify the notice to more closely conform it to the text of the proposed rule change. 4 *See* Amendment No. 2. In Amendment No. 2, the Exchange changed the text of the proposed rule so that it uses the term “electronic mail” instead of the term “e-mail.” 5 *See* Securities Exchange Act Release No. 52375 (September 1, 2005), 70 FR 54424. New Rule 17 of Article III shall provide that every Exchange participant and Exchange participant firm shall designate one or more electronic mail addresses for the purpose of receiving Exchange notices and communications and shall promptly update those electronic mail addresses when those addresses change or are no longer valid. New Rule 17 also provides that an authorized representative of the Exchange may elect to transmit notices or other communications to participants electronically, but that nothing in Rule 17 will supersede or modify either the method for service of process or other materials in any disciplinary proceeding or any other provisions of the Exchange rules setting out a specific method for the receipt of information from the Exchange. The Commission finds that the proposed rule change, as amended, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange. 6 The Commission believes that the proposed rule change is consistent with Section 6(b) of the Act, 7 in general, and furthers the objectives of Section 6(b)(5) of the Act, 8 in particular, in that it promotes just and equitable principles of trade, removes impediments to, and perfects the mechanism of, a free and open market and a national market system, and, in general, protects investors and the public interest, by allowing the Exchange to take advantage of technology to communicate with participants in a more efficient and cost-effective manner. 6 In approving this proposed rule change, the Commission has considered the proposed rule's impact of efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 7 15 U.S.C. 78(f)(b). 8 5 U.S.C. 78(f)(b)(5). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 9 that the proposed rule change (SR-CHX-2005-21), as amended, is approved. 9 15 U.S.C. 78s(b)(2). 10 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 Jonathan G. Katz, Secretary. [FR Doc. E5-5880 Filed 10-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52640; File No. SR-NYSE-2004-51] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of Proposed Rule and Amendment No. 1 Thereto Relating to a Proposed Interpretation to Rule 342 (Offices—Approval, Supervision, and Control) October 19, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 3, 2004, the New York Stock Exchange, Inc. (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (“SEC” or the “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. On September 28, 2005, the Exchange filed Amendment No. 1 to the proposed rule change, replacing the original filing in its entirety. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE is filing with the Commission a proposed Interpretation of Exchange Rule 342 (Offices—Approval, Supervision, and Control) to permit the waiver of the qualified resident branch office manager requirement for “limited purpose offices” with more than three registered representatives. The text of the proposed rule change is available on the NYSE Web site ( *http://www.nyse.com/pdfs/NYSE-2004-51_A-1.pdf* ), at the principal office of the NYSE, and in the Commission's Public Reference Room. 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 Exchange 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 Exchange 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 1. Purpose Synopsis The Exchange proposes amendments to NYSE Rule 342 that would permit members and member organizations to seek a waiver of the qualified (Series 9/10—General Sales Supervisor, Options/General or Series 24—General Securities Principal (after July 1, 2001) examinations) resident branch office manager requirement for “Limited Purpose Offices” with more than three registered representatives (“RRs”). “Limited Purpose Office” is a proposed new category that would include branch office locations with RRs that conduct limited business activities, or that have limited registration qualifications ( *e.g.* , Series 6—Investment Company and Variable Contracts Products Representative or Series 52—Municipal Securities Representative). The proposed rule change sets forth a process by which members and member organizations may seek a waiver from the Exchange of the on-site branch office manager requirement on a case-by-case basis, following prescribed criteria as set forth in the proposed Interpretation. Background Currently, except for “small offices,” all member and member organization branch offices are required to have an on-site qualified manager. The Interpretation of NYSE Rule 342.15 limits a small office to a total of three RRs. If an office has three or fewer RRs, the office is not required to have a qualified branch office manager on-site. Instead, the small office must be under the close supervision and control of the main office or other designated branch office that has a qualified branch office manager on-site. In addition, supervision and control procedures must be made part of the member's or member organization's written plan of supervision. Recently, member organizations with branch offices that have a limited scope of activities, but that don't meet the definition of “small office” under the Interpretation, have approached the Exchange seeking relief from the requirement that such offices have a qualified branch office manager on-site. As members and member organizations have been faced with ever changing demographics of their workforce, as well as with evolving regulatory and market environments, many have responded by fundamentally altering the ways in which their business is conducted. For example, there has been a large increase in the number of small, multi-function offices that offer a combination of services related not only to securities brokerage, but also to banking and insurance products. Concurrently, advances in technology have resulted in increasingly sophisticated surveillance capabilities that enable members and member organizations to more effectively supervise and control the business activities of their associated persons in such offices from remote locations, such as another branch office or a firm's main office. Given these surveillance and monitoring capabilities, and the often-limited scope of securities-related business activities conducted in many offices, the requirement to have an on-site qualified branch office manager may often be neither practical nor necessary. Consequently, the Exchange has re-examined its “four-or-more” standard for requiring on-site supervision, and considered whether alternate criteria, such as limited securities sales activity coupled with proper risk-based supervisory controls and follow-up, should be determining factors for granting regulatory relief currently available only to small offices. 3 3 *See* SR-NYSE-2002-34 (Definition of Branch Office). The Exchange has taken a similar risk-based approach in its definition of branch office and the exceptions to that definition for remote locations. Prior to the adoption of the Gramm-Leach-Bliley Act (the “GLBA”), 4 banks were completely exempted from the definition of the terms “broker” and “dealer” under the Exchange Act. 5 The GLBA amended the definition of these terms and replaced the full exception with functional exceptions. Thus, under the current terms of the Exchange Act, banks must either limit their securities activities to those that fit within the functional exceptions, or conduct those activities through a registered broker-dealer. As a result, many banks with affiliated broker-dealers have entered into business arrangements with those broker-dealers to ensure that non-excepted “broker” or “dealer” activities are properly conducted. 4 Pub. L. 106-102, 113 Stat. 1338 (1999). The GLBA lowered barriers between the banking and securities industries erected by the Banking Act of 1933 (known as the Glass-Steagall Act) Pub. L. 73-66, ch. 89, 48 Stat. 162
(1933)(codified in various sections of 12 U.S.C.). 5 15 U.S.C. 78a *et seq.* (Before the GLBA, Exchange Act Section 3(a)(4) defined the term “broker” as “any person engaged in the business of effecting transactions in securities for the account of others, but does not include a bank. Before the GLBA, Exchange Act Section 3(a)(5) defined the term “dealer” as “any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise, but does not include a bank * * *”) One common practice is for the two entities to “dually employ” those bank personnel acting in a broker or dealer capacity with both the bank and the registered broker-dealer. This enables banking personnel to register and qualify for securities license exam qualifications, such as the Series 6 (Investment Company and Variable Contracts Products Representative), the Series 7 (General Securities Registered Representative) and the Series 66 (Uniform Combined State Law), in order to conduct broker and dealer activities on behalf of the registered broker-dealer affiliate. Other broker-dealer alliances, primarily with insurance companies and investment companies, have also engaged in similar business arrangements involving dual employment and referrals among various registered entities. Because the dually employed persons often primarily conduct business ( *e.g.* , banking, insurance, mutual funds) other than broker or dealer activities, they typically physically remain on bank, insurance company, or investment company premises. However, because they are employees of the registered broker-dealer as well, the office is considered a branch office pursuant to NYSE Rule 342. If it is a branch office with more than three RRs, it is required to have a qualified branch office manager on-site. As noted above, the Interpretation of NYSE Rule 342 currently exempts only small offices—defined as offices with three or fewer RRs—from the on-site qualified branch office manager requirement. This does not offer much flexibility to shared, multi-function broker-dealer offices that have more than three RRs but don't offer a full line of securities products and services. Often, offering a limited selection of securities products is an accommodation to the bank's, insurance company's or investment company's customers, and these products are complementary to such entities' traditional activities. In fact, many broker-dealer business models are becoming more reliant on offices of more than three RRs servicing geographically isolated locations with an abbreviated securities product/services menu. Because of the limited scope of securities-related business conducted in these offices, members and member organizations often have the technological capability to adequately supervise and control them without having a qualified branch office manager on-site. Supervision Pursuant to NYSE Rule 342, all offices of members and member organizations must be subject to an effective system of supervision and control. As broker-dealers have incorporated technological advancements into their business activities, they have been able to make greater use of electronic means to enhance overall supervision and control. For instance, firms have enacted policies and procedures that require their RRs to communicate through internal e-mail systems, which are used by supervisors and firms for monitoring and surveillance purposes. Centralized communication networks are likewise used to monitor the trading and handling of funds in customer accounts serviced in branch offices. All such activities are generally transacted through a broker-dealer's internal order management system, which feeds surveillance systems and exception reports. The reports these systems can provide monitor activities as diverse as registration and continuing education status; daily trade review; new accounts review and approval; errors and corrections; employee trade and monthly statement review; outside business activity; selling away; customer address changes; customer complaints; blue sky monitoring; cancel and rebills; fund switch exceptions; missing documentation; various risk and product limits; and correspondence review and approval. With regard to correspondence, broker-dealers have utilized a variety of systems to organize electronic correspondence, such as e-mail, so that it can be monitored and reviewed in a timely manner. In addition, these systems have enabled firms to index, store and search e-mails for investigative and surveillance purposes. Proposal Given that the development of technologically sophisticated systems has automated and enhanced so many aspects of the supervisory process and expanded the range of supervisory functions that can be conducted remotely, the Exchange believes more flexibility and discretion is needed to determine whether a qualified on-site branch office manager is necessary for offices with more than three RRs if only a limited range of securities-related services is offered, or if a limited level of such activity is conducted. The proposed Interpretation would address this need. Further, it would give increased flexibility to member organizations that acquire new offices through merger, acquisition or regulatory change, to structure their business activities in compliance with Exchange supervisory requirements. Under the proposed Interpretation, members and member organizations seeking a waiver of the on-site qualified branch office manager requirement for limited purpose offices would be required to provide a written plan of risk-based supervision and control acceptable to the Exchange. Notwithstanding the grant of a waiver, all limited purpose offices would be required to be under the close supervision and control of a qualified person, as defined under NYSE Rule 342.13, at the main office or other designated branch office. The Exchange believes that allowing a risk-based approach to supervision for limited purpose offices would benefit members' and member organizations' diverse business models while maintaining the integrity of their supervision and control systems. The proposed Interpretation sets forth factors to be used in determining whether a location qualifies as a limited purpose office and the supervisory requirements for each such office, including:
(i)The number of registered persons in the office (the RR to offsite Branch Office Manager ratio), their registration category, and the functions they perform (the nature and level of the RRs' responsibilities would be taken into account);
(ii)The scope and types of business activities conducted (in general, the nature of business should not pose special risks or otherwise warrant on-site supervision);
(iii)The nature and complexity of products and services offered (likewise, the products and services offered should not pose special risks or otherwise warrant on-site supervision);
(iv)The volume of business done ( *e.g.* , annual revenues, number of transactions, number of customers, *etc* . Locations with high activity levels would generally be deemed more likely to require an on-site manager);
(v)The adequacy of procedures to supervise the limited purpose office activities; and
(vi)The adequacy and independence of systems and supervisory persons for regular and “for cause” internal and third party inspections and audits. 6 6 *See also* NYSE Info Memo 04-38 regarding independence of supervision and internal controls. With respect to factors
(v)and
(vi)above, the Exchange expects members and member organizations to present a system of supervision and control reasonably designed to detect and prevent regulatory violations and which otherwise meets the requirements of NYSE Rule 342. Such a system should include, but is not limited to, the following elements, where applicable:
(1)Clearly articulated policies and procedures, and sufficient resources to implement them;
(2)systematic monitoring of activity using routine and exception reporting criteria;
(3)an appropriate system of follow-up and review if “red flags” are detected, and mechanisms for verifying that deficiencies are corrected;
(4)routine and “for cause” inspections, including possible use of unannounced surprise inspections;
(5)offsite monitoring of trading, handling of funds, and use of personal computers;
(6)adequate designation of supervisors and clearly delineated supervisory responsibilities, including a system of review and follow-up to ensure that such supervision is sufficiently independent and is diligently exercised;
(7)monitoring of outside business activities and outside accounts;
(8)monitoring and surveillance of internal and external communications; and
(9)the education and training of RRs and their supervisors to ensure they understand their responsibilities under the firm's procedures and all applicable securities laws. In addition to the elements enumerated above, members and member organizations should also take into consideration relevant guidance provided by the Exchange and other regulatory bodies when developing their supervisory plan for a proposed limited purpose office. 7 7 *See, e.g.* , NYSE Info Memo 04-38 (Amendments to Rules 342, 401, 408 and 410 Relating to Supervision and Internal Controls) (July 26, 2004); SEC Division of Market Regulation Staff Legal Bulletin No. 17: Remote Office Supervision (March 19, 2004). All of the above factors will be considered as a whole to determine whether an application for limited purpose office status should be granted. However, any one factor could cause an application to be delayed or rejected by the Exchange if it raises a substantive issue with respect to the appropriateness or advisability of a remote supervisory arrangement. If an application for limited purpose office status encompasses more than one office, pursuant to a categorical description or plan, the member organization must submit the proposed list of prospective offices so as to disclose the scope of the request. Members and member organizations will be responsible for maintaining a readily available, current and accurate list of all locations either specifically approved and designated by the Exchange as a limited purpose office, or otherwise designated as such pursuant to a general categorical description or plan approved by the Exchange. Further, any material change with respect to the representations made by any member or member organization pursuant to this Interpretation with respect to any location so approved and designated must be promptly brought to the attention of the Exchange for reconsideration. 2. Statutory Basis The basis for the proposed rule change is the requirement under Section 6(b)(5) 8 of the Exchange Act 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. 8 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of 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 Exchange 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, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2004-51 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-NYSE-2004-51. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). 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 in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2004-51 and should be submitted on or before November 15, 2005. 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. E5-5879 Filed 10-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52634; File No. SR-PCX-2005-111] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change To Establish Certain Fees With Respect to Transactions Executed Through the Intermarket Trading System October 19, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on October 4, 2005, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I and II below, which Items have been prepared by the PCX. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons, and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to enter into arrangements with other national securities exchanges to pass certain fees they have collected from members for transactions executed on another exchange through the Intermarket Trading System (“ITS”). This proposal does not require changes to PCX rule text. 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 Exchange 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 III below. The Exchange 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 1. Purpose Section 31 of the Act 3 requires each national securities exchange to pay the Commission a fee based on the aggregate dollar amount of certain sales of securities (“covered sales”). Rules 31 and 31T, adopted by the Commission in June 2004, 4 established procedures for the calculation and collection of Section 31 fees on such covered sales. Rule 31 requires each national securities exchange that owes Section 31 fees to submit a completed Form R31 to the Commission each month, beginning with July 2004. Rule 31T required each exchange to submit a completed Form R31 for each of the months September 2003 to June 2004, inclusive. Each national securities exchange must report its covered sales volume based on the data from a designated clearing agency, when available. The designated clearing agency for covered sales of equity securities is the National Securities Clearing Corporation (“NSCC”). These covered sales are reported in Part I of Form R31, and each exchange is required to “provide in Part I only the data supplied to it by a designated clearing agency.” 5 The data supplied by NSCC for the period September 2003 through August 2004 did not accurately reflect the aggregate dollar value of the covered sales occurring on each exchange to permit reports to be made in accordance with new Rules 31 and 31T. In particular, the data NSCC reported to each national securities exchange included non-covered sales data for sales originating on one exchange and executed on another exchange through the ITS. 6 3 15 U.S.C. 78ee. 4 *See* Securities Exchange Act Release No. 49928 (June 28, 2004), 69 FR 41060 (July 7, 2004) (“Adopting Release”). 5 17 CFR 240.31(b)(5). 6 As a result of this and other inaccuracies in the data reported by NSCC, the national securities exchanges were unable to report accurate information on Form R31, unless they made adjustments to the NSCC data based on data other than that provided by NSCC. On October 6, 2004, the Commission's Division of Market Regulation (“Division”) issued a “no-action” letter advising exchanges for whom NSCC acts as a designated clearing agency under Rule 31, that the Division staff would not recommend that the Commission take enforcement action if a national securities exchange adjusts the data provided by NSCC to accurately reflect covered sales occurring on the national securities exchange. *See* letter from Robert L.D. Colby, Deputy Director, Division, Commission to Ellen J. Neely, Senior Vice President and General Counsel, Chicago Stock Exchange, Inc. (“CHX”), dated October 6, 2004. Section 31 requires that national securities exchanges pay a fee based on the aggregate dollar amount of sales of securities transacted on the exchange. Given the specific language of Section 31, the Commission in the Adopting Release for Rules 31 and 31T advised that the current methodology for treating sales of securities that occur through ITS 7 was no longer appropriate and that “it would be simpler and more transparent for each covered [self-regulatory organization (“SRO”)] to report all covered sales that occur on its market.” The Commission further stated: 7 In the Adopting Release, the Commission described the current methodology: “SRO A sends an ITS commitment to a member of SRO B to sell a security, and the commitment is executed on SRO B. Under existing arrangements, SRO A pays the Section 31 fee arising from this trade and passes the fee to its member that initiated the trade. * * * [T]he SROs devised this system because SRO B does not have the ability to require members of SRO A to reimburse it for the cost of its Section 31 fees.” Adopting Release, 69 FR at 41067. The Commission acknowledges that a covered SRO on which a covered sale occurs as a result of an incoming ITS order may not be able to collect funds to pay the Section 31 fee from one of its own members. However, Section 31 does not address the manner or extent to which covered SROs may seek to recover the amounts that they pay pursuant to Section 31 from their members. Covered SROs may wish to devise new arrangements for passing fees between themselves so that the funds are collected from the covered SRO that originated the ITS order. 8 8 *Id.* The Commission further noted that any such arrangements devised by the SROs would have to be established pursuant to Section 19(b) of the Act and Rule 19b-4 thereunder. A subcommittee of the ITS Operating Committee 9 (“Subcommittee”) has had discussions in order to devise new arrangements for passing fees between the ITS participants that
(1)were collected from their members for the months of September 2003 through August 2004; and
(2)are being collected from their members beginning in September 2004 and continuing. This proposed rule change is being submitted by the PCX with the understanding that the other exchanges participating in the proposed arrangement devised by the subcommittee will be submitting substantially similar rule change proposals. 10 9 The ITS participants are American Stock Exchange LLC, Boston Stock Exchange, Chicago Board Options Exchange, CHX, National Association of Securities Dealers (“NASD”), National Stock Exchange, New York Stock Exchange (“NYSE”), PCX, and Philadelphia Stock Exchange. 10 NASD has determined not to participate in the arrangement for passing fees between exchanges although they participated in many of the conference calls regarding the proposed arrangement. Pursuant to the new arrangement being proposed, each ITS participant exchange determines whether it has received and executed more in dollar value of covered sales than it has originated and sent to each other ITS participant exchange. For example, for the historical period, September 2003 through August 2004, SRO A sent ITS commitments for covered sales whose dollar value was $150 million to SRO B for execution. SRO A collected fees from its members to fund its Section 31 obligation for those covered sales executed on SRO B. SRO B, as the executing market center, is obligated to pay the Section 31 fee to the SEC. During the same period, SRO B sent ITS commitments for covered sales whose dollar value was $210 million to SRO A. SRO B collected fees from its members for those covered sales executed on SRO A. SRO A, as the executing market center, is obligated to pay the Section 31 fee to the SEC. Since SRO A executed a greater dollar value of covered sales from SRO B than it sent to SRO B, the proposed arrangement requires SRO A to determine the amount of the fees collected by SRO B from its members based on the aggregate dollar value of covered sales from SRO B and executed on SRO A through ITS commitments. When invoicing SRO B, SRO A will deduct the amount of the fee it owes to SRO B ( *i.e.* , the fee amount based on SRO A's $210 million in aggregate covered sales less the fee amount based on SRO B's $150 million in aggregate covered sales) and will invoice only for the difference of $60 million. Once the fees have been invoiced and paid for the historical period, the ITS participant exchanges plan to use the same arrangement for the period beginning September 2004 and continuing. It is anticipated that the invoicing process will occur twice yearly to coincide with the March 15 and September 30 payment schedule for Section 31 fees set forth in the Act. To implement this proposed arrangement, an ITS participant exchange will require access to the aggregate dollar value of buy and sell transactions occurring through ITS. Under the proposed arrangement for fees collected for the months of September 2003 through August 2004, an ITS participant exchange may choose to use data obtained from the Inter-market Surveillance Information System (“ISIS”) or data that provides comparable information that includes aggregate dollar value of ITS transactions. 11 The ISIS data is sorted by originating market center ( *i.e.* , the sender of an ITS commitment) and receiving market center ( *i.e.* , the market center that executes the ITS commitment). Using this data, each ITS participant exchange can determine on a monthly basis the dollar value of all executed commitments sent to and received from another ITS participant exchange. 11 The NYSE has made available to the ITS participants spreadsheets for each month in the period using the ISIS data. At its meeting on February 23, 2005, the Subcommittee asked the Securities Industry Automation Corporation (“SIAC”) to determine the time and expense involved for SIAC to use the ITS database that it maintains to provide reports of the aggregate dollar value of buy and sell transactions occurring through ITS to the ITS participants. On March 15, 2005, representatives of the Subcommittee authorized SIAC to develop new reports. SIAC is in the process of developing these reports and expects to complete testing by August 31, 2005. Once SIAC can provide this data, it will no longer be necessary for ISIS data to be used. The new reports provided by SIAC will be used by ITS participants in connection with determining which ITS participant exchange will pay the fee for transactions occurring through ITS and which ITS participant exchange has collected the fee from its members. The PCX believes that the proposed arrangement is a fair and efficient means for passing fees collected at one ITS participant exchange based upon executions of covered sales occurring at another ITS participant exchange. The PCX acknowledges that the legal duty to report and pay the Section 31 fee remains with the ITS participant on which the sale was in fact transacted. 2. Statutory Basis This proposal would establish a process for SROs to enter into arrangements to pass fees they have collected from members for transactions executed on another SRO through ITS. For these reasons, the Exchange believes that the proposed rule change is consistent with the Act and the rules and regulations thereunder that are applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act. 12 Specifically, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, 13 in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and practices, and, in general, to protect investors and the public interest. In addition, the Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(4) of the Act, 14 which requires that the rules of an exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(5). 14 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will 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 No written comments were solicited or received with respect to the proposed rule change. III. 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. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-PCX-2005-111 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-PCX-2005-111. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). 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 in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the PCX. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-PCX-2005-111 and should be submitted on or before November 15, 2005. IV. Commission's Findings and Order Granting Accelerated Approval of a Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange. 15 In particular, the Commission believes that the proposal is consistent with Section 6(b)(4) of the Act, 16 which requires that the rules of an exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. National securities exchanges obtain funds to pay their Section 31 fees to the Commission by charging fees to broker-dealers who generate the covered sales on which Section 31 fees are based. An exchange can obtain most of these funds by imposing a fee on one of its members whenever the member is on the sell side of a transaction. However, when the exchange accepts an ITS commitment to buy, the ultimate seller is a party on another market. The exchange lacks the ability to pass a fee to that seller directly, because the seller may not be a member of the exchange. Under the proposed arrangement, which the Commission understands will be adopted by each of the ITS participant exchanges, 17 the exchange that routed the ITS commitment away will continue to collect a fee from the broker-dealer that placed the sell order. Then, with respect to each ITS participant exchange, the exchange will determine whether it is a net sender or net receiver of ITS trades and send fees to or accept fees from each other exchange accordingly. The Commission believes this is an equitable manner for the exchanges to obtain funds to pay their Section 31 fees on covered sales resulting from ITS trades. 15 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 16 15 U.S.C. 78f(b)(4). 17 *See* letter from George W. Mann, Jr., Executive Vice President and General Counsel, BSE, and Chairman, Subcommittee, to Michael Gaw, Assistant Director, Division, Commission, dated September 29, 2005. Under Section 19(b)(2) of the Act, 18 the Commission may not approve any proposed rule change prior to the thirtieth day after the date of publication of the notice of filing thereof, unless the Commission finds good cause for so doing. The Commission hereby finds good cause for approving the proposed rule change prior to the thirtieth day after publishing notice of filing thereof in the **Federal Register** . In this case, the Commission does not believe a comment period is necessary because all of the parties affected by the proposed fee—the other ITS participant exchanges—have already consented to and will adopt the same fee arrangement. 19 18 15 U.S.C. 78s(b)(2). 19 *See supra* note 17. For the reasons set forth above, the Commission finds good cause to accelerate approval of the proposed rule change pursuant to Section 19(b)(2) of the Act. 20 20 *Id* . V. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 21 that the proposed rule change (SR-PCX-2005-111) is hereby approved on an accelerated basis. 21 *Id* . For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 22 22 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-5891 Filed 10-24-05; 8:45 am] BILLING CODE 8010-01-P SOCIAL SECURITY ADMINISTRATION Office of the Commissioner; Cost-of-Living Increase and Other Determinations for 2006 AGENCY: Social Security Administration. ACTION: Notice. SUMMARY: The Commissioner has determined—
(1)A 4.1 percent cost-of-living increase in Social Security benefits under title II of the Social Security Act (the Act), effective for December 2005;
(2)An increase in the Federal Supplemental Security Income
(SSI)monthly benefit amounts under title XVI of the Act for 2006 to $603 for an eligible individual, $904 for an eligible individual with an eligible spouse, and $302 for an essential person;
(3)The student earned income exclusion to be $1,460 per month in 2006 but not more than $5,910 in all of 2006;
(4)The dollar fee limit for services performed as a representative payee to be $33 per month ($64 per month in the case of a beneficiary who is disabled and has an alcoholism or drug addiction condition that leaves him or her incapable of managing benefits) in 2006;
(5)The national average wage index for 2004 to be $35,648.55;
(6)The Old-Age, Survivors, and Disability Insurance (OASDI) contribution and benefit base to be $94,200 for remuneration paid in 2006 and self-employment income earned in taxable years beginning in 2006;
(7)The monthly exempt amounts under the Social Security retirement earnings test for taxable years ending in calendar year 2006 to be $1,040 and $2,770;
(8)The dollar amounts (“bend points”) used in the primary insurance amount benefit formula for workers who become eligible for benefits, or who die before becoming eligible, in 2006 to be $656 and $3,955;
(9)The dollar amounts (“bend points”) used in the formula for computing maximum family benefits for workers who become eligible for benefits, or who die before becoming eligible, in 2006 to be $838, $1,210, and $1,578;
(10)The amount of taxable earnings a person must have to be credited with a quarter of coverage in 2006 to be $970;
(11)The “old-law” contribution and benefit base to be $69,900 for 2006;
(12)The monthly amount deemed to constitute substantial gainful activity for statutorily blind individuals in 2006 to be $1,450, and the corresponding amount for non-blind disabled persons to be $860;
(13)The earnings threshold establishing a month as a part of a trial work period to be $620 for 2006; and
(14)Coverage thresholds for 2006 to be $1,500 for domestic workers and $1,300 for election workers. FOR FURTHER INFORMATION CONTACT: Jeffrey L. Kunkel, Office of the Chief Actuary, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235,
(410)965-3013. Information relating to this announcement is available on our Internet site at *http://www.socialsecurity.gov/OACT/COLA/index.html.* For information on eligibility or claiming benefits, call 1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet site, Social Security Online, at *http://www.socialsecurity.gov.* SUPPLEMENTARY INFORMATION: In accordance with the Act, the Commissioner must publish within 45 days after the close of the third calendar quarter of 2005 the benefit increase percentage and the revised table of “special minimum” benefits (section 215(i)(2)(D)). Also, the Commissioner must publish on or before November 1 the national average wage index for 2004 (section 215(a)(1)(D)), the OASDI fund ratio for 2005 (section 215(i)(2)(C)(ii)), the OASDI contribution and benefit base for 2006 (section 230(a)), the amount of earnings required to be credited with a quarter of coverage in 2006 (section 213(d)(2)), the monthly exempt amounts under the Social Security retirement earnings test for 2006 (section 203(f)(8)(A)), the formula for computing a primary insurance amount for workers who first become eligible for benefits or die in 2006 (section 215(a)(1)(D)), and the formula for computing the maximum amount of benefits payable to the family of a worker who first becomes eligible for old-age benefits or dies in 2006 (section 203(a)(2)(C)). Cost-of-Living Increases General The next cost-of-living increase, or automatic benefit increase, is 4.1 percent for benefits under titles II and XVI of the Act. Under title II, OASDI benefits will increase by 4.1 percent for individuals eligible for December 2005 benefits, payable in January 2006. This increase is based on the authority contained in section 215(i) of the Act (42 U.S.C. 415(i)). Under title XVI, Federal SSI payment levels will also increase by 4.1 percent effective for payments made for the month of January 2006 but paid on December 30, 2005. This is based on the authority contained in section 1617 of the Act (42 U.S.C. 1382f). Automatic Benefit Increase Computation Under section 215(i) of the Act, the third calendar quarter of 2005 is a cost-of-living computation quarter for all the purposes of the Act. The Commissioner is, therefore, required to increase benefits, effective for December 2005, for individuals entitled under section 227 or 228 of the Act, to increase primary insurance amounts of all other individuals entitled under title II of the Act, and to increase maximum benefits payable to a family. For December 2005, the benefit increase is the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of 2004 to the third quarter of 2005. Section 215(i)(1) of the Act provides that the Consumer Price Index for a cost-of-living computation quarter shall be the arithmetic mean of this index for the 3 months in that quarter. We round the arithmetic mean, if necessary, to the nearest 0.1. The Department of Labor's Consumer Price Index for Urban Wage Earners and Clerical Workers for each month in the quarter ending September 30, 2004, is: for July 2004, 184.9; for August 2004, 185.0; and for September 2004, 185.4. The arithmetic mean for this calendar quarter is 185.1. The corresponding Consumer Price Index for each month in the quarter ending September 30, 2005, is: for July 2005, 191.0; for August 2005, 192.1; and for September 2005, 195.0. The arithmetic mean for this calendar quarter is 192.7. Thus, because the Consumer Price Index for the calendar quarter ending September 30, 2005, exceeds that for the calendar quarter ending September 30, 2004 by 4.1 percent (rounded to the nearest 0.1), a cost-of-living benefit increase of 4.1 percent is effective for benefits under title II of the Act beginning December 2005. Section 215(i) also specifies that an automatic benefit increase under title II, effective for December of any year, will be limited to the increase in the national average wage index for the prior year if the “OASDI fund ratio” for that year is below 20.0 percent. The OASDI fund ratio for a year is the ratio of the combined assets of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds at the beginning of that year to the combined expenditures of these funds during that year. (The expenditures in the ratio's denominator exclude transfer payments between the two trust funds, and reduce any transfers to the Railroad Retirement Account by any transfers from that account into either trust fund.) For 2005, the OASDI fund ratio is assets of $1,686,839 million divided by estimated expenditures of $528,693 million, or 319.1 percent. Because the 319.1-percent OASDI fund ratio exceeds 20.0 percent, the automatic benefit increase for December 2005 is not limited. Title II Benefit Amounts In accordance with section 215(i) of the Act, in the case of workers and family members for whom eligibility for benefits (i.e., the worker's attainment of age 62, or disability or death before age 62) occurred before 2006, benefits will increase by 4.1 percent beginning with benefits for December 2005 which are payable in January 2006. In the case of first eligibility after 2005, the 4.1 percent increase will not apply. For eligibility after 1978, benefits are generally determined using a benefit formula provided by the Social Security Amendments of 1977 (Pub. L. 95-216), as described later in this notice. For eligibility before 1979, we determine benefits by means of a benefit table. You may obtain a copy of this table by writing to: Social Security Administration, Office of Public Inquiries, Windsor Park Building, 6401 Security Boulevard, Baltimore, MD 21235. The table is also available on the Internet at *www.socialsecurity.gov/OACT/ProgData/tableForm.html.* Section 215(i)(2)(D) of the Act requires that, when the Commissioner determines an automatic increase in Social Security benefits, the Commissioner will publish in the **Federal Register** a revision of the range of the primary insurance amounts and corresponding maximum family benefits based on the dollar amount and other provisions described in section 215(a)(1)(C)(i). We refer to these benefits as “special minimum” benefits. These benefits are payable to certain individuals with long periods of relatively low earnings. To qualify for such benefits, an individual must have at least 11 “years of coverage.” To earn a year of coverage for purposes of the special minimum benefit, a person must earn at least a certain proportion of the “old-law” contribution and benefit base (described later in this notice). For years before 1991, the proportion is 25 percent; for years after 1990, it is 15 percent. In accordance with section 215(a)(1)(C)(i), the table below shows the revised range of primary insurance amounts and corresponding maximum family benefit amounts after the 4.1 percent automatic benefit increase. Special Minimum Primary Insurance Amounts and Maximum Family Benefits Payable for December 2005 Number of years of coverage Primary insurance amount Maximum family benefit 11 $33.20 $50.40 12 67.30 101.80 13 101.70 153.10 14 135.70 204.10 15 169.60 255.20 16 203.90 306.80 17 238.20 358.30 18 272.40 409.40 19 306.40 460.70 20 340.70 511.80 21 375.00 563.50 22 408.90 614.60 23 443.60 666.60 24 477.70 717.50 25 511.80 768.20 26 546.50 820.50 27 580.20 871.50 28 614.50 922.60 29 648.50 974.20 30 682.70 1,024.90 Title XVI Benefit Amounts In accordance with section 1617 of the Act, maximum SSI Federal benefit amounts for the aged, blind, and disabled will increase by 4.1 percent effective January 2006. For 2005, we derived the monthly benefit amounts for an eligible individual, an eligible individual with an eligible spouse, and for an essential person—$579, $869, and $290, respectively—from corresponding yearly unrounded Federal SSI benefit amounts of $6,955.39, $10,431.91, and $3,485.67. For 2006, these yearly unrounded amounts increase by 4.1 percent to $7,240.56, $10,859.62, and $3,628.58, respectively. Each of these resulting amounts must be rounded, when not a multiple of $12, to the next lower multiple of $12. Accordingly, the corresponding annual amounts, effective for 2006, are $7,236, $10,848, and $3,624. Dividing the yearly amounts by 12 gives the corresponding monthly amounts for 2006—$603, $904, and $302, respectively. In the case of an eligible individual with an eligible spouse, we equally divide the amount payable between the two spouses. Title VIII of the Act provides for special benefits to certain World War II veterans residing outside the United States. Section 805 provides that “[t]he benefit under this title payable to a qualified individual for any month shall be in an amount equal to 75 percent of the Federal benefit rate [the maximum amount for an eligible individual] under title XVI for the month, reduced by the amount of the qualified individual's benefit income for the month.” Thus the monthly benefit for 2006 under this provision is 75 percent of $603, or $452.25. Student Earned Income Exclusion A blind or disabled child, who is a student regularly attending school, college, or university, or a course of vocational or technical training, can have limited earnings that are not counted against his or her SSI benefits. The maximum amount of such income that may be excluded in 2005 is $1,410 per month but not more than $5,670 in all of 2005. These amounts increase based on a formula set forth in regulation 20 CFR 416.1112. To compute each of the monthly and yearly maximum amounts for 2006, we increase the corresponding unrounded amount for 2005 by the latest cost-of-living increase. If the amount so calculated is not a multiple of $10, we round it to the nearest multiple of $10. The unrounded monthly amount for 2005 is $1,407.25. We increase this amount by 4.1 percent to $1,464.95, which we then round to $1,460. Similarly, we increase the unrounded yearly amount for 2005, $5,672.63, by 4.1 percent to $5,905.21 and round this to $5,910. Thus the maximum amount of the income exclusion applicable to a student in 2006 is $1,460 per month but not more than $5,910 in all of 2006. Fee for Services Performed as a Representative Payee Sections 205(j)(4)(A)(i) and 1631(a)(2)(D)(i) of the Act permit a qualified organization to collect from an individual a monthly fee for expenses incurred in providing services performed as such individual's representative payee. Currently the fee is limited to the lesser of:
(1)10 percent of the monthly benefit involved; or
(2)$32 per month ($61 per month in any case in which the individual is entitled to disability benefits and the Commissioner has determined that payment to the representative payee would serve the interest of the individual because the individual has an alcoholism or drug addiction condition and is incapable of managing such benefits). The dollar fee limits are subject to increase by the automatic cost-of-living increase, with the resulting amounts rounded to the nearest whole dollar amount. Thus we increase the current amounts by 4.1 percent to $33 and $64 for 2006. National Average Wage Index for 2004 General Under various provisions of the Act, several amounts increase automatically with annual increases in the national average wage index. The amounts are:
(1)The OASDI contribution and benefit base;
(2)the exempt amounts under the retirement earnings test;
(3)the dollar amounts, or “bend points,” in the primary insurance amount and maximum family benefit formulas;
(4)the amount of earnings required for a worker to be credited with a quarter of coverage;
(5)the “old-law” contribution and benefit base (as determined under section 230 of the Act as in effect before the 1977 amendments);
(6)the substantial gainful activity amount applicable to statutorily blind individuals; and
(7)the coverage threshold for election officials and election workers. Also, section 3121(x) of the Internal Revenue Code requires that the domestic employee coverage threshold be based on changes in the national average wage index. In addition to the amounts required by statute, two amounts increase automatically under regulatory requirements. The amounts are
(1)the substantial gainful activity amount applicable to non-blind disabled persons, and
(2)the monthly earnings threshold that establishes a month as part of a trial work period for disabled beneficiaries. Computation The determination of the national average wage index for calendar year 2004 is based on the 2003 national average wage index of $34,064.95 announced in the **Federal Register** on October 26, 2004 (69 FR 62497), along with the percentage increase in average wages from 2003 to 2004 measured by annual wage data tabulated by the Social Security Administration (SSA). The wage data tabulated by SSA include contributions to deferred compensation plans, as required by section 209(k) of the Act. The average amounts of wages calculated directly from these data were $32,678.48 and $34,197.63 for 2003 and 2004, respectively. To determine the national average wage index for 2004 at a level that is consistent with the national average wage indexing series for 1951 through 1977 (published December 29, 1978, at 43 FR 61016), we multiply the 2003 national average wage index of $34,064.95 by the percentage increase in average wages from 2003 to 2004 (based on SSA-tabulated wage data) as follows, with the result rounded to the nearest cent. Amount Multiplying the national average wage index for 2003 ($34,064.95) by the ratio of the average wage for 2004 ($34,197.63) to that for 2003 ($32,678.48) produces the 2004 index, $35,648.55. The national average wage index for calendar year 2004 is about 4.65 percent greater than the 2003 index. OASDI Contribution and Benefit Base General The OASDI contribution and benefit base is $94,200 for remuneration paid in 2006 and self-employment income earned in taxable years beginning in 2006. The OASDI contribution and benefit base serves two purposes:
(a)It is the maximum annual amount of earnings on which OASDI taxes are paid. The OASDI tax rate for remuneration paid in 2006 is 6.2 percent for employees and employers, each. The OASDI tax rate for self-employment income earned in taxable years beginning in 2006 is 12.4 percent. (The Hospital Insurance tax is due on remuneration, without limitation, paid in 2006, at the rate of 1.45 percent for employees and employers, each, and on self-employment income earned in taxable years beginning in 2006, at the rate of 2.9 percent.)
(b)It is the maximum annual amount of earnings used in determining a person's OASDI benefits. Computation Section 230(b) of the Act provides the formula used to determine the OASDI contribution and benefit base. Under the formula, the base for 2006 shall be the larger of:
(1)The 1994 base of $60,600 multiplied by the ratio of the national average wage index for 2004 to that for 1992; or
(2)the current base ($90,000). If the resulting amount is not a multiple of $300, it shall be rounded to the nearest multiple of $300. Amount Multiplying the 1994 OASDI contribution and benefit base amount ($60,600) by the ratio of the national average wage index for 2004 ($35,648.55 as determined above) to that for 1992 ($22,935.42) produces the amount of $94,190.65. We round this amount to $94,200. Because $94,200 exceeds the current base amount of $90,000, the OASDI contribution and benefit base is $94,200 for 2006. Retirement Earnings Test Exempt Amounts General We withhold Social Security benefits when a beneficiary under the normal retirement age
(NRA)has earnings in excess of the applicable retirement earnings test exempt amount. (NRA is the age of initial benefit entitlement for which the benefit, before rounding, is equal to the worker's primary insurance amount. The NRA is age 65 for those born before 1938, and it gradually increases to age 67.) A higher exempt amount applies in the year in which a person attains his/her NRA, but only with respect to earnings in months prior to such attainment, and a lower exempt amount applies at all other ages below NRA. Section 203(f)(8)(B) of the Act, as amended by section 102 of Public Law 104-121, provides formulas for determining the monthly exempt amounts. The corresponding annual exempt amounts are exactly 12 times the monthly amounts. For beneficiaries attaining NRA in the year, we withhold $1 in benefits for every $3 of earnings in excess of the annual exempt amount for months prior to such attainment. For all other beneficiaries under NRA, we withhold $1 in benefits for every $2 of earnings in excess of the annual exempt amount. Computation Under the formula applicable to beneficiaries who are under NRA and who will not attain NRA in 2006, the lower monthly exempt amount for 2006 shall be the larger of:
(1)The 1994 monthly exempt amount multiplied by the ratio of the national average wage index for 2004 to that for 1992; or
(2)the 2005 monthly exempt amount ($1,000). If the resulting amount is not a multiple of $10, it shall be rounded to the nearest multiple of $10. Under the formula applicable to beneficiaries attaining NRA in 2006, the higher monthly exempt amount for 2006 shall be the larger of:
(1)The 2002 monthly exempt amount multiplied by the ratio of the national average wage index for 2004 to that for 2000; or
(2)the 2005 monthly exempt amount ($2,650). If the resulting amount is not a multiple of $10, it shall be rounded to the nearest multiple of $10. Lower Exempt Amount Multiplying the 1994 retirement earnings test monthly exempt amount of $670 by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1992 ($22,935.42) produces the amount of $1,041.38. We round this to $1,040. Because $1,040 is larger than the corresponding current exempt amount of $1,000, the lower retirement earnings test monthly exempt amount is $1,040 for 2006. The corresponding lower annual exempt amount is $12,480 under the retirement earnings test. Higher Exempt Amount Multiplying the 2002 retirement earnings test monthly exempt amount of $2,500 by the ratio of the national average wage index for 2004 ($35,648.55) to that for 2000 ($32,154.82) produces the amount of $2,771.63. We round this to $2,770. Because $2,770 is larger than the corresponding current exempt amount of $2,650, the higher retirement earnings test monthly exempt amount is $2,770 for 2006. The corresponding higher annual exempt amount is $33,240 under the retirement earnings test. Computing Benefits After 1978 General The Social Security Amendments of 1977 provided a method for computing benefits which generally applies when a worker first becomes eligible for benefits after 1978. This method uses the worker's “average indexed monthly earnings” to compute the primary insurance amount. We adjust the computation formula each year to reflect changes in general wage levels, as measured by the national average wage index. We also adjust, or “index,” a worker's earnings to reflect the change in general wage levels that occurred during the worker's years of employment. Such indexation ensures that a worker's future benefit level will reflect the general rise in the standard of living that will occur during his or her working lifetime. To compute the average indexed monthly earnings, we first determine the required number of years of earnings. Then we select that number of years with the highest indexed earnings, add the indexed earnings, and divide the total amount by the total number of months in those years. We then round the resulting average amount down to the next lower dollar amount. The result is the average indexed monthly earnings. For example, to compute the average indexed monthly earnings for a worker attaining age 62, becoming disabled before age 62, or dying before attaining age 62, in 2006, we divide the national average wage index for 2004, $35,648.55, by the national average wage index for each year prior to 2004 in which the worker had earnings. Then we multiply the actual wages and self-employment income, as defined in section 211(b) of the Act and credited for each year, by the corresponding ratio to obtain the worker's indexed earnings for each year before 2004. We consider any earnings in 2004 or later at face value, without indexing. We then compute the average indexed monthly earnings for determining the worker's primary insurance amount for 2006. Computing the Primary Insurance Amount The primary insurance amount is the sum of three separate percentages of portions of the average indexed monthly earnings. In 1979 (the first year the formula was in effect), these portions were the first $180, the amount between $180 and $1,085, and the amount over $1,085. We call the dollar amounts in the formula governing the portions of the average indexed monthly earnings the “bend points” of the formula. Thus, the bend points for 1979 were $180 and $1,085. To obtain the bend points for 2006, we multiply each of the 1979 bend-point amounts by the ratio of the national average wage index for 2004 to that average for 1977. We then round these results to the nearest dollar. Multiplying the 1979 amounts of $180 and $1,085 by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1977 ($9,779.44) produces the amounts of $656.15 and $3,955.10. We round these to $656 and $3,955. Accordingly, the portions of the average indexed monthly earnings to be used in 2006 are the first $656, the amount between $656 and $3,955, and the amount over $3,955. Consequently, for individuals who first become eligible for old-age insurance benefits or disability insurance benefits in 2006, or who die in 2006 before becoming eligible for benefits, their primary insurance amount will be the sum of:
(a)90 percent of the first $656 of their average indexed monthly earnings, plus
(b)32 percent of their average indexed monthly earnings over $656 and through $3,955, plus
(c)15 percent of their average indexed monthly earnings over $3,955. We round this amount to the next lower multiple of $0.10 if it is not already a multiple of $0.10. This formula and the rounding adjustment described above are contained in section 215(a) of the Act (42 U.S.C. 415(a)). Maximum Benefits Payable to a Family General The 1977 amendments continued the long established policy of limiting the total monthly benefits that a worker's family may receive based on his or her primary insurance amount. Those amendments also continued the then existing relationship between maximum family benefits and primary insurance amounts but did change the method of computing the maximum amount of benefits that may be paid to a worker's family. The Social Security Disability Amendments of 1980 (Pub. L. 96-265) established a formula for computing the maximum benefits payable to the family of a disabled worker. This formula applies to the family benefits of workers who first become entitled to disability insurance benefits after June 30, 1980, and who first become eligible for these benefits after 1978. For disabled workers initially entitled to disability benefits before July 1980, or whose disability began before 1979, we compute the family maximum payable the same as the old-age and survivor family maximum. Computing the Old-Age and Survivor Family Maximum The formula used to compute the family maximum is similar to that used to compute the primary insurance amount. It involves computing the sum of four separate percentages of portions of the worker's primary insurance amount. In 1979, these portions were the first $230, the amount between $230 and $332, the amount between $332 and $433, and the amount over $433. We refer to such dollar amounts in the formula as the “bend points” of the family-maximum formula. To obtain the bend points for 2006, we multiply each of the 1979 bend-point amounts by the ratio of the national average wage index for 2004 to that average for 1977. Then we round this amount to the nearest dollar. Multiplying the amounts of $230, $332, and $433 by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1977 ($9,779.44) produces the amounts of $838.41, $1,210.22, and $1,578.40. We round these amounts to $838, $1,210, and $1,578. Accordingly, the portions of the primary insurance amounts to be used in 2006 are the first $838, the amount between $838 and $1,210, the amount between $1,210 and $1,578, and the amount over $1,578. Consequently, for the family of a worker who becomes age 62 or dies in 2006 before age 62, we will compute the total amount of benefits payable to them so that it does not exceed:
(a)150 percent of the first $838 of the worker's primary insurance amount, plus
(b)272 percent of the worker's primary insurance amount over $838 through $1,210, plus
(c)134 percent of the worker's primary insurance amount over $1,210 through $1,578, plus
(d)175 percent of the worker's primary insurance amount over $1,578. We then round this amount to the next lower multiple of $0.10 if it is not already a multiple of $0.10. This formula and the rounding adjustment described above are contained in section 203(a) of the Act (42 U.S.C. 403(a)). Quarter of Coverage Amount General The amount of earnings required for a quarter of coverage in 2006 is $970. A quarter of coverage is the basic unit for determining whether a worker is insured under the Social Security program. For years before 1978, we generally credited an individual with a quarter of coverage for each quarter in which wages of $50 or more were paid, or with 4 quarters of coverage for every taxable year in which $400 or more of self-employment income was earned. Beginning in 1978, employers generally report wages on an annual basis instead of a quarterly basis. With the change to annual reporting, section 352(b) of the Social Security Amendments of 1977 amended section 213(d) of the Act to provide that a quarter of coverage would be credited for each $250 of an individual's total wages and self-employment income for calendar year 1978, up to a maximum of 4 quarters of coverage for the year. Computation Under the prescribed formula, the quarter of coverage amount for 2006 shall be the larger of:
(1)The 1978 amount of $250 multiplied by the ratio of the national average wage index for 2004 to that for 1976; or
(2)the current amount of $920. Section 213(d) further provides that if the resulting amount is not a multiple of $10, it shall be rounded to the nearest multiple of $10. Quarter of Coverage Amount Multiplying the 1978 quarter of coverage amount ($250) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1976 ($9,226.48) produces the amount of $965.93. We then round this amount to $970. Because $970 exceeds the current amount of $920, the quarter of coverage amount is $970 for 2006. “Old-Law” Contribution and Benefit Base General The “old-law” contribution and benefit base for 2006 is $69,900. This is the base that would have been effective under the Act without the enactment of the 1977 amendments. The “old-law” contribution and benefit base is used by:
(a)The Railroad Retirement program to determine certain tax liabilities and tier II benefits payable under that program to supplement the tier I payments which correspond to basic Social Security benefits,
(b)The Pension Benefit Guaranty Corporation to determine the maximum amount of pension guaranteed under the Employee Retirement Income Security Act (as stated in section 230(d) of the Social Security Act),
(c)Social Security to determine a year of coverage in computing the special minimum benefit, as described earlier, and
(d)Social Security to determine a year of coverage (acquired whenever earnings equal or exceed 25 percent of the “old-law” base for this purpose only) in computing benefits for persons who are also eligible to receive pensions based on employment not covered under section 210 of the Act. Computation The “old-law” contribution and benefit base shall be the larger of:
(1)the 1994 “old-law” base ($45,000) multiplied by the ratio of the national average wage index for 2004 to that for 1992; or
(2)the current “old-law” base ($66,900). If the resulting amount is not a multiple of $300, it shall be rounded to the nearest multiple of $300. Amount Multiplying the 1994 “old-law” contribution and benefit base amount ($45,000) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1992 ($22,935.42) produces the amount of $69,943.55. We round this amount to $69,900. Because $69,900 exceeds the current amount of $66,900, the “old-law” contribution and benefit base is $69,900 for 2006. Substantial Gainful Activity Amounts General A finding of disability under titles II and XVI of the Act requires that a person, except for a title XVI disabled child, be unable to engage in substantial gainful activity (SGA). A person who is earning more than a certain monthly amount (net of impairment-related work expenses) is ordinarily considered to be engaging in SGA. The amount of monthly earnings considered as SGA depends on the nature of a person's disability. Section 223(d)(4)(A) of the Act specifies a higher SGA amount for statutorily blind individuals under title II while Federal regulations (20 CFR 404.1574 and 416.974) specify a lower SGA amount for non-blind individuals. Both SGA amounts increase in accordance with increases in the national average wage index. Computation The monthly SGA amount for statutorily blind individuals under title II for 2006 shall be the larger of:
(1)Such amount for 1994 multiplied by the ratio of the national average wage index for 2004 to that for 1992; or
(2)such amount for 2005. The monthly SGA amount for non-blind disabled individuals for 2006 shall be the larger of:
(1)Such amount for 2000 multiplied by the ratio of the national average wage index for 2004 to that for 1998; or
(2)such amount for 2005. In either case, if the resulting amount is not a multiple of $10, it shall be rounded to the nearest multiple of $10. SGA Amount for Statutorily Blind Individuals Multiplying the 1994 monthly SGA amount for statutorily blind individuals ($930) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1992 ($22,935.42) produces the amount of $1,445.50. We then round this amount to $1,450. Because $1,450 is larger than the current amount of $1,380, the monthly SGA amount for statutorily blind individuals is $1,450 for 2006. SGA Amount for Non-Blind Disabled Individuals Multiplying the 2000 monthly SGA amount for non-blind individuals ($700) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1998 ($28,861.44) produces the amount of $864.61. We then round this amount to $860. Because $860 is larger than the current amount of $830, the monthly SGA amount for non-blind disabled individuals is $860 for 2006. Trial Work Period Earnings Threshold General During a trial work period, a beneficiary receiving Social Security disability benefits may test his or her ability to work and still be considered disabled. We do not consider services performed during the trial work period as showing that the disability has ended until services have been performed in at least 9 months (not necessarily consecutive) in a rolling 60-month period. In 2005, any month in which earnings exceed $590 is considered a month of services for an individual's trial work period. In 2006, this monthly amount increases to $620. Computation The method used to determine the new amount is set forth in our regulations at 20 CFR 404.1592(b). Monthly earnings in 2006, used to determine whether a month is part of a trial work period, is such amount for 2001 ($530) multiplied by the ratio of the national average wage index for 2004 to that for 1999, or, if larger, such amount for 2005. If the amount so calculated is not a multiple of $10, we round it to the nearest multiple of $10. Amount Multiplying the 2001 monthly earnings threshold ($530) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1999 ($30,469.84) produces the amount of $620.08. We then round this amount to $620. Because $620 is larger than the current amount of $590, the monthly earnings threshold is $620 for 2006. Domestic Employee Coverage Threshold General The minimum amount a domestic worker must earn so that such earnings are covered under Social Security or Medicare is the domestic employee coverage threshold. For 2006, this threshold is $1,500. Section 3121(x) of the Internal Revenue Code provides the formula for increasing the threshold. Computation Under the formula, the domestic employee coverage threshold amount for 2006 shall be equal to the 1995 amount of $1,000 multiplied by the ratio of the national average wage index for 2004 to that for 1993. If the resulting amount is not a multiple of $100, it shall be rounded to the next lower multiple of $100. Domestic Employee Coverage Threshold Amount Multiplying the 1995 domestic employee coverage threshold amount ($1,000) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1993 ($23,132.67) produces the amount of $1,541.05. We then round this amount to $1,500. Accordingly, the domestic employee coverage threshold amount is $1,500 for 2006. Election Worker Coverage Threshold General The minimum amount an election worker must earn so that such earnings are covered under Social Security or Medicare is the election worker coverage threshold. For 2006, this threshold is $1,300. Section 218(c)(8)(B) of the Act provides the formula for increasing the threshold. Computation Under the formula, the election worker coverage threshold amount for 2006 shall be equal to the 1999 amount of $1,000 multiplied by the ratio of the national average wage index for 2004 to that for 1997. If the amount so determined is not a multiple of $100, it shall be rounded to the nearest multiple of $100. Election Worker Coverage Threshold Amount Multiplying the 1999 election worker coverage threshold amount ($1,000) by the ratio of the national average wage index for 2004 ($35,648.55) to that for 1997 ($27,426.00) produces the amount of $1,299.81. We then round this amount to $1,300. Accordingly, the election worker coverage threshold amount is $1,300 for 2006. (Catalog of Federal Domestic Assistance: Program Nos. 96.001 Social Security-Disability Insurance; 96.002 Social Security-Retirement Insurance; 96.004 Social Security-Survivors Insurance; 96.006 Supplemental Security Income) Dated: October 18, 2005. Jo Anne B. Barnhart, Commissioner, Social Security Administration. [FR Doc. 05-21272 Filed 10-24-05; 8:45 am]
Connectionstraces to 15
9 references not yet in our index
  • 17 CFR 240.19
  • 15 USC 78(f)(b)
  • 5 USC 78(f)(b)(5)
  • Pub. L. 106-102
  • 113 Stat. 1338
  • Pub. L. 73-66
  • Pub. L. 95-216
  • Pub. L. 104-121
  • Pub. L. 96-265
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cites case law
Notices
Notice
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78c
Stat.Public Law 66
U.S.C.§ 78a
U.S.C.§ 78ee
C.F.R.§ 240.31
Cite17 CFR 240.19
Cite15 USC 78(f)(b)
Cite5 USC 78(f)(b)(5)
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