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Code · REGISTER · 2006-03-23 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Notice of Application for Exemption under Section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), for an exemption from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder

25,000 words·~114 min read·/register/2006/03/23/06-2857·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. *Extension:* Rule 15c2-8, SEC File No. 270-421, OMB Control No. 3235-0481. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget (“OMB”) a request for extension of the previously approved collection of information discussed below. • Rule 15c2-8 Delivery of Prospectus Rule 15c2-8 under the Securities Exchange Act of 1934 requires broker-dealers to deliver preliminary or final prospectuses to specified persons in association with securities offerings.
This requirement ensures that information concerning issuers flows to purchasers of the issuers' securities in a timely fashion. It is estimated that there are approximately 8,000 broker-dealers, any of which potentially may participate in an offering subject to Rule 15c2-8. The Commission estimates that Rule 15c2-8 creates approximately 10,600 burden hours with respect to 120 initial public offerings and 460 other offerings. Please note that an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
Written comments regarding the above information should be directed to the following persons:
(i)Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or by sending an e-mail to *David_Rostker@omb.eop.gov* ; and
(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312; or send an e-mail to: *PRA_Mailbox@sec.gov* . Comments must be submitted to OMB within 30 days of this notice. March 16, 2006. Nancy M. Morris, Secretary. [FR Doc. E6-4174 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-12672] Issuer Delisting; Notice of Application of AvalonBay Communities, Inc. To Withdraw Its Common Stock, $.01 Par Value, and 8.70% Series H Cumulative Redeemable Preferred Stock, $.01 Par Value, From Listing and Registration on the Pacific Exchange, Inc. March 16, 2006. On March 13, 2006, AvalonBay Communities, Inc., a Maryland corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its common stock, $.01 par value, and 8.70% series H cumulative redeemable preferred stock, $.01 par value, (collectively “Securities”), from listing and registration on the Pacific Exchange, Inc. (“PCX”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). The Board of Directors (“Board”) of the Issuer approved resolutions on February 8, 2006 to withdraw the Securities from listing on PCX. The Issuer stated that the Board decided to withdraw the Securities from listing on PCX because the Issuer has determined that:
(i)The benefits of continued listing on PCX do not outweigh the incremental cost of the listing fees and the administrative burden associated with listing on PCX and
(ii)the Securities are listed, and will continue to list on the New York Stock Exchange, LLC (“NYSE”) which, based on recent trading volumes appears adequate to meet investors needs. The Issuer stated in its application that it has complied with applicable rules of PCX by providing PCX with the required documents governing the withdrawal of securities from listing and registration on PCX. The Issuer's application relates solely to the withdrawal of the Securities from listing on PCX and shall not affect their continued listing on NYSE or their obligation to be registered under Section 12(b) of the Act. 3 3 15 U.S.C. 78 *l* (b). Any interested person may, on or before April 11, 2006, comment on the facts bearing upon whether the application has been made in accordance with the rules of PCX, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Send an e-mail to *rule-comments@sec.gov.* Please include the File Number 1-12672 or; Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number 1-12672. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. 4 17 CFR 200.30-3(a)(1). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 4 Nancy M. Morris, Secretary. [FR Doc. E6-4176 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-00368] Issuer Delisting; Notice of Application of Chevron Corporation, To Withdraw Its Common Stock, $.75 Par Value, From Listing and Registration on the Pacific Exchange, Inc. March 16, 2006. On March 13, 2006, Chevron Corporation, a Delaware corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its common stock, $.75 par value (“Security”), from listing and registration on the Pacific Exchange, Inc. (“PCX”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). The Board of Directors (“Board”) of the Issuer approved a resolution on February 28, 2006 to withdraw the Security from listing on PCX. The Issuer stated that the Board decided to withdraw the Security from listing on PCX because the benefits of continued listing on PCX do not outweigh the incremental cost of the listing fees and the administrative burden associated with listing on PCX. The Issuer stated that the Security is listed on the New York Stock Exchange, LLC (“NYSE”) and will remain listed on NYSE. The Issuer stated in its application that it has complied with applicable rules of PCX by providing PCX with the required documents governing the withdrawal of securities from listing and registration on PCX. The Issuer's application relates solely to the withdrawal of the Security from listing on PCX and shall not affect its continued listing on NYSE or its obligation to be registered under Section 12(b) of the Act. 3 3 15 U.S.C. 78 *l* (b). Any interested person may, on or before April 11, 2006, comment on the facts bearing upon whether the application has been made in accordance with the rules of PCX, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Send an e-mail to *rule-comments@sec.gov.* Please include the File Number 1-00368 or; Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number 1-00368. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 4 4 17 CFR 200.30-3(a)(1). Nancy M. Morris, Secretary. [FR Doc. E6-4177 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-12998] Issuer Delisting; Notice of Application of TDC A/S (Formerly Tele Danmark A/S) To Withdraw Its American Depositary Shares (Evidenced by American Depositary Share Receipts, Each Representing One Half of One Ordinary Share, Par Value DKK 5 Each and Ordinary Shares, Par Value DKK 5), From Listing and Registration on the New York Stock Exchange, LLC March 17, 2006. On March 13, 2006, TDC A/S (formerly Tele Danmark A/S), a company incorporated under the laws of Denmark (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its American Depositary Shares (evidenced by American Depositary Share Receipts, each representing one half of one Ordinary Share, par value DKK 5 each) (“ADS”) and Ordinary Shares, par value DKK 5 each (“Shares”) (collectively, “Securities”), from listing and registration on the New York Stock Exchange, LLC (“NYSE”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). On March 3, 2006, the Board of Directors (“Board”) of the Issuer approved a resolution to withdraw the Securities from listing and registration on NYSE. The Issuer stated that the following reasons factored into the Board's decision to withdraw the Securities from listing on NYSE. First, the number of holders of the ADS resident in the United States decreased considerably in connection with the completion of the tender offer for all Securities (“Tender Offer”) by Nordic Telephone Company ApS (“Purchaser”) that expired on January 20, 2006. Pursuant to the Tender Offer, the Purchaser purchased 88.2% of the share capital of the Issuer. Based on information provided by Innisfree M&A Incorporated, as of early February 24, 2006, there were approximately 1,710 ADS accounts held by U.S. holders containing an aggregate of approximately 799,122 ADS (or the equivalent of 399,561 Ordinary Shares). Second, trading of the ADS on NYSE has also decreased since completion of the Tender Offer. The average daily trading volume of the ADS for the three-week period ending on February 24, 2006 was approximately 9,200. The average daily trading volume of the ADS for the corresponding three-week period in 2005 was approximately 32,800. The average daily trading volume of the ADS for the five-day period ending on February 24, 2006 was approximately 7,800. The average daily trading volume for the corresponding five-day period in 2005 was 71,100. The average daily trading volume of the ADS for the one-year period ending on February 24, 2006 was approximately 32,400. The daily trading volume on February 24, 2006 was approximately 3,900. These decreases, as well as the factors mentioned below, have caused the Issuer to re-evaluate the merits of maintaining its NYSE listing and registration under the Act. Third, the Issuer has adopted amendments to its articles of incorporation to permit the Purchaser to redeem all outstanding shares (including those represented by the ADS) not held by the Purchaser in a compulsory acquisition. The Board took notice of certain protests raised against the validity of said amendments; irrespective thereof the U.S. delisting were still considered to be in the best interest of the Issuer. In addition, in connection with the proposed delisting from NYSE, the Board also considered that the Board, following the extraordinary general meeting of the Issuer's shareholders held on February 28, 2006, does not include any directors who satisfy the “independence” standards under NYSE's corporate governance rules. The Issuer is therefore unable to comply with Subsection 303A.06 of the *Listed Company Manual* , which requires that the Issuer have an audit committee, each member of which satisfies the independence standards of the NYSE. The Board has therefore decided not to form an audit committee for the time being. As a result, the Issuer is in material non-compliance with NYSE's Corporate Governance Standards applicable to foreign private issuers. The Issuer stated that the Shares are currently listed on the Copenhagen Stock Exchange and the Issuer expects to seek to withdraw the Shares on the Copenhagen Stock Exchange. The Issuer stated in its application that it has complied with NYSE's rules governing an issuer's voluntary withdrawal of a security from listing and registration by providing NYSE with the required documents governing the removal of securities from listing and registration on NYSE. The Issuer's application relates solely to the withdrawal of the Securities from listing on NYSE and from registration under Section 12(b) of the Act, 3 and shall not affect their obligation to be registered under Section 12(g) of the Act. 4 3 15 U.S.C. 78 *l* (b). 4 15 U.S.C. 78 *l* (g). Any interested person may, on or before April 12, 2006, comment on the facts bearing upon whether the application has been made in accordance with the rules of NYSE, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/delist.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include the File Number 1-12998 or; Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number 1-12998. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5 5 17 CFR 200.30-3(a)(1). Nancy M. Morris, Secretary. [FR Doc. E6-4173 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. IC-27264; File No. 812-13253] SBL Fund and Security Management Company, LLC March 16, 2006. AGENCY: The Securities and Exchange Commission (“SEC” or the “Commission”). ACTION: Notice of Application for Exemption under Section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), for an exemption from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder. *Applicants:* SBL Fund (“SBL”) and Security Management Company, LLC (“SMC”) (collectively, “Applicants”). *Summary of Application:* Applicants seek an order to permit shares of SBL and shares of any other existing or future investment company that is designed to fund insurance products and for which SMC, or any of its affiliates, may serve as investment manager, investment adviser, sub-adviser, administrator, manager, principal underwriter or sponsor (SBL and such other investment companies being hereinafter referred to, collectively, as “Insurance Investment Companies”), or permit shares of any current or future series of any Insurance Investment Company (“Insurance Fund”), to be sold to and held by:
(1)Separate accounts funding variable annuity and variable life insurance contracts issued by both affiliated and unaffiliated life insurance companies;
(2)qualified pension and retirement plans outside of the separate account context (“Qualified Plans” or “Plans”);
(3)any investment manager to an Insurance Fund and affiliates thereof that is permitted to hold shares of an Insurance Fund consistent with the requirements of Treasury Regulation 1.817-5 (collectively, the “Manager”); and
(4)any insurance company general accounts that are permitted to hold shares of an Insurance Fund consistent with the requirements of Treasury Regulation 1.817-5. *Filing Date:* The application was filed on December 28, 2005 and amended and restated on March 1, 2006. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. *Hearing or Notification of Hearing:* An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing on the application by writing to the Secretary of the SEC and serving Applicants with a copy of the request, personally or by mail. Hearing requests must be received by the SEC by 5:30 p.m. on April 10, 2006 and should be accompanied by proof of service on the Applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of writer's interest, the reason for the request, and the issues contested. Persons may request notification of the date of the hearing by writing to the SEC's Secretary. ADDRESSES: Secretary, SEC, 100 F Street, NE., Washington, DC 20549-1090. Applicants, c/o Amy Lee, Associate General Counsel and Vice President, Security Benefit Corporation, One Security Benefit Place, Topeka, Kansas 66636-0001. FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, or Zandra Bailes, Branch Chief, Office of Insurance Products, Division of Investment Management at
(202)551-6795. SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application is available for a fee from the SEC's Public Reference Branch, 100 F Street, NE., Washington, DC 20549-0102 (202-551-8090). Applicants' Representations 1. SBL is a Kansas corporation organized on May 26, 1977 and is registered as an open-end management investment company under the 1940 Act. SBL is a series company currently comprising eighteen
(18)series (the “Insurance Funds”). Additional series of SBL and classes of additional Insurance Funds may be established in the future. 2. SMC serves as SBL's investment adviser. SMC is controlled by its members, Security Benefit Life Insurance Company (“SBLIC”) and Security Benefit Corporation (“SBC”). SBLIC, a Kansas stock life insurance company, is controlled by SBC. SBC is wholly-owned by Security Mutual Holding Company, which is in turn controlled by SBLIC policyholders. Pursuant to investment subadvisory agreements, SMC retains a sub-adviser for many Insurance Funds. Each sub-adviser is registered as an investment adviser with the Commission under the Investment Advisers Act of 1940. 3. SBL currently offers shares of the Insurance Funds only to separate accounts of affiliated insurance companies in order to fund benefits under flexible premium variable annuity contracts and variable life insurance policies. In the future, the Insurance Investment Companies intend to offer shares of the Insurance Funds to
(a)separate accounts of affiliated and unaffiliated insurance companies in order to fund variable annuity contracts and variable life insurance contracts (collectively, “Separate Accounts”);
(b)Qualified Plans;
(c)any investment manager to an Insurance Fund and affiliates thereof that is permitted to hold shares of an Insurance Fund consistent with the requirements of Treasury Regulation 1.817-5 (collectively, the “Manager”); and
(d)any insurance company general accounts that are permitted to hold shares of an Insurance Fund consistent with the requirements of Treasury Regulation 1.817-5 (“General Accounts”). 4. Insurance companies whose Separate Account(s) may now or in the future own shares of the Insurance Funds are referred to herein as “Participating Insurance Companies.” The Participating Insurance Companies have established or will establish their own separate accounts and design their own variable contracts. Each Participating Insurance Company has or will have the legal obligation to satisfy all applicable requirements under both state and federal law. Participating Insurance Companies may rely on Rules 6e-2 and 6e-3(T), although some Participating Insurance Companies, in connection with variable life insurance contracts, may rely on individual exemptive orders as well. 5. The Insurance Investment Companies intend to offer shares of the Insurance Funds directly to Qualified Plans outside of the separate account context. Qualified Plans may choose any of the Insurance Funds that are offered as the sole investment under the Plan or as one of several investments. Plan participants may or may not be given an investment choice depending on the terms of the Plan itself. Shares of any of the Insurance Funds sold to such Qualified Plans would be held or deemed to be held by the trustee(s) of said Plans. Certain Qualified Plans, including Section 403(b)(7) Plans and Section 408(a) Plans, may vest voting rights in Plan participants instead of Plan trustees. Exercise of voting rights by participants in any such Qualified Plans, as opposed to the trustees of such Plans, cannot be mandated by the Applicants. Each Plan must be administered in accordance with the terms of the Plan and as determined by its trustee or trustees. 6. Shares of each Insurance Fund also may be offered to the Manager or to General Accounts, in reliance on regulations issued by the Treasury Department (Treas. Reg. 1.817-5) that established diversification requirements for variable annuity and variable life insurance contracts (“Treasury Regulations”). Treasury Regulation 1.817-5(f)(3)(ii) permits such sales as long as the return on shares held by the Manager or General Accounts is computed in the same manner as for shares held by the Separate Accounts, and the Manager or the General Accounts do not intend to sell to the public shares of the Insurance Investment Company that they hold. An additional restriction is imposed by the Treasury Regulations on sales to the Manager, who may hold shares only in connection with the creation or management of the Insurance Investment Company. Applicants anticipate that sales in reliance on these provisions of the Treasury Regulations generally will be made to the Manager for the purpose of providing necessary capital required by Section 14(a) of the 1940 Act. Applicants' Legal Analysis 1. Applicants request that the Commission issue an order pursuant to Section 6(c) of the 1940 Act granting exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder (including any comparable provisions of a permanent rule that replaces Rule 6e-3(T)), to the extent necessary to permit shares of each Insurance Investment Company to be offered and sold to, and held by:
(1)Separate Accounts funding variable annuity contracts and scheduled premium and flexible premium variable life insurance contracts issued by both affiliated and unaffiliated life insurance companies;
(2)Qualified Plans;
(3)any Manager to an Insurance Fund; and
(4)General Accounts. 2. Section 6(c) authorizes the Commission to exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provision or provisions of the 1940 Act and/or of any rule thereunder if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. 3. In connection with the funding of scheduled premium variable life insurance contracts issued through a separate account organized as a unit investment trust (“Trust Account”), Rule 6e-2(b)(15) provides partial exemptions from Sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act. The exemptions granted to an insurance company by Rule 6e-2(b)(15) are available only where each registered management investment company underlying the Trust Account (“underlying fund”) offers its shares “ *exclusively* to variable life insurance separate accounts of the life insurer or of any affiliated life insurance company * * *.” (emphasis added). Therefore, the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium variable life insurance separate account that owns shares of an underlying fund that also offers its shares to a variable annuity separate account of the same company or of any affiliated life insurance company. The use of a common underlying fund as the underlying investment medium for both variable annuity and variable life insurance separate accounts of the same life insurance company or of any affiliated life insurance company is referred to herein as “mixed funding.” In addition, the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium variable life insurance separate account that owns shares of an underlying fund that also offers its shares to separate accounts funding variable contracts of one or more unaffiliated life insurance companies. The use of a common underlying fund as the underlying investment medium for variable life insurance separate accounts of one insurance company and separate accounts funding variable contracts of one or more unaffiliated life insurance companies is referred to herein as “shared funding.” Moreover, because the relief under Rule 6e-2(b)(15) is available only where shares are offered *exclusively* to variable life insurance separate accounts, additional exemptive relief may be necessary if the shares of the Insurance Investment Companies are also to be sold to General Accounts, Qualified Plans or the Manager. 4. In connection with the funding of flexible premium variable life insurance contracts issued through a Trust Account, Rule 6e-3(T)(b)(15) provides partial exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act to the extent that those sections have been deemed by the Commission to require “pass-through” voting with respect to an underlying fund's shares. The exemptions granted to a separate account by Rule 6e-3(T)(b)(15) are available only where all of the assets of the separate account consist of the shares of one or more underlying funds which offer their shares “ *exclusively* to separate accounts of the life insurer, or of any affiliated life insurance company, offering either scheduled contracts or flexible contracts, or both; or which also offer their shares to variable annuity separate accounts of the life insurer or of an affiliated life insurance company” (emphasis added). Therefore, Rule 6e-3(T) permits mixed funding with respect to a flexible premium variable life insurance separate account, subject to certain conditions. However, Rule 6e-3(T) does not permit shared funding because the relief granted by Rule 6e-3(T)(b)(15) is not available with respect to a flexible premium variable life insurance separate account that owns shares of an underlying fund that also offers its shares to separate accounts (including variable annuity and flexible premium and scheduled premium variable life insurance separate accounts) of unaffiliated life insurance companies. The relief provided by Rule 6e-3(T) is not relevant to the purchase of shares of the Insurance Investment Companies by Qualified Plans, the Manager or General Accounts. However, because the relief granted by Rule 6e-3(T)(b)(15) is available only where shares of the underlying fund are offered exclusively to separate accounts, or to life insurers in connection with the operation of a separate account, additional exemptive relief may be necessary if the shares of the Insurance Investment Companies are also to be sold to Qualified Plans, the Manager or General Accounts. 5. The relief provided by Rule 6e-3(T) is not relevant to the purchase of shares of the Insurance Investment Companies by Qualified Plans, the Manager or General Accounts. However, because the relief granted by Rule 6e-3(T)(b)(15) is available only where shares of the underlying fund are offered exclusively to separate accounts, or to life insurers in connection with the operation of a separate account, additional exemptive relief may be necessary if the shares of the Insurance Investment Companies are also to be sold to Qualified Plans, the Manager or General Accounts. None of the relief provided for in Rules 6e-2(b)(15) and 6e-3(T)(b)(15) relates to Qualified Plans, the Manager or General Accounts, or to an underlying fund's ability to sell its shares to such purchasers. It is only because some of the Separate Accounts that may invest in the Insurance Investment Companies may themselves be investment companies that rely upon Rules 6e-2 and 6e-3(T) and wish to continue to rely upon the relief provided in those Rules, that the Applicants are applying for the requested relief. If and when a material irreconcilable conflict arises in the context of the application between the Separate Accounts or between Separate Accounts on the one hand and Qualified Plans, the Manager or General Accounts on the other hand, the Participating Insurance Companies, Qualified Plans, the Manager and the General Accounts must take whatever steps are necessary to remedy or eliminate the conflict, including eliminating the Insurance Funds as eligible investment options. Applicants have concluded that investment by the Manager or the inclusion of Qualified Plans and General Accounts as eligible shareholders should not increase the risk of material irreconcilable conflicts among shareholders. However, Applicants further assert that even if a material irreconcilable conflict involving the Qualified Plans, Manager or General Accounts arose, the Qualified Plans, Manager or General Accounts, unlike the Separate Accounts, can simply redeem their shares and make alternative investments. By contrast, insurance companies cannot simply redeem their separate accounts out of one fund and invest in another. Time consuming, complex transactions must be undertaken to accomplish such redemptions and transfers. Applicants thus argue that allowing the Manager, General Accounts or Qualified Plans to invest directly in the Insurance Investment Companies should not increase the opportunity for conflicts of interest. 6. Applicants assert that the Treasury Regulations made it possible for shares of an investment company to be held by a Qualified Plan, the investment company's investment manager or its affiliates or General Accounts without adversely affecting the ability of shares in the same investment company to also be held by separate accounts of insurance companies in connection with their variable life insurance contracts. Section 817(h) of the Internal Revenue Code of 1986, as amended (“Code”), imposes certain diversification standards on the underlying assets of separate accounts funding variable annuity contracts and variable life contracts. In particular, the Code provides that such contracts shall not be treated as an annuity contract or life insurance contract for any period (and any subsequent period) for which the separate account investments are not, in accordance with regulations prescribed by the Treasury Department, adequately diversified. The Treasury Regulations provide that, in order to meet the diversification requirements, all of the beneficial interests in the investment company must be held by the segregated asset accounts of one or more insurance companies. However, the Treasury Regulations also contain certain exceptions to this requirement, one of which allows shares of an investment company to be held by the trustee of a qualified pension or retirement plan without adversely affecting the ability of shares in the same investment company to also be held by the separate accounts of insurance companies in connection with their variable annuity and variable life contracts (Treas. Reg. § 1.817-5(f)(3)(iii)). 7. Applicants also assert that the Treasury Regulations contain another exception that permits the Insurance Funds to sell shares to General Accounts or the Manager subject to certain conditions (Treas. Reg. § 1.817-5(f)(3)(i), (ii)). 8. The promulgation of Rules 6e-2(b)(15) and 6e-3(T)(b)(15) preceded the issuance of the Treasury Regulations which made it possible for shares of an investment company to be held by a Qualified Plan, the investment company's investment manager or its affiliates or General Accounts without adversely affecting the ability of shares in the same investment company to also be held by the separate accounts of insurance companies in connection with their variable life insurance contracts. Thus, the sale of shares of the same investment company to separate accounts through which variable life insurance contracts are issued, to Qualified Plans, to the investment company's investment manager and its affiliates or General Accounts (collectively, “eligible shareholders”) could not have been envisioned at the time of the adoption of Rules 6e-2(b)(15) and 6e-3(T)(b)(15), given the then-current tax law. 9. Paragraph
(3)of Section 9(a) of the 1940 Act provides, among other things, that it is unlawful for any company to serve as investment adviser to or principal underwriter for any registered open-end investment company if an affiliated person of that company is subject to a disqualification enumerated in Sections 9(a)(1) or (a)(2). Rule 6e-2(b)(15)(i) and
(ii)and Rule 6e-3(T)(b)(15)(i) and
(ii)provide exemptions from Section 9(a) under certain circumstances, subject to the limitations discussed above on mixed and shared funding. These exemptions limit the application of the eligibility restrictions to affiliated individuals or companies that directly participate in the management or administration of the underlying management investment company. The relief provided by Rules 6e-2(b)(15)(i) and 6e-3(T)(b)(15)(i) permits a person disqualified under Section 9(a) to serve as an officer, director, or employee of the life insurer, or any of its affiliates, so long as that person does not participate directly in the management or administration of the underlying fund. The relief provided by Rules 6e-2(b)(15)(ii) and 6e-3(T)(b)(15)(ii) permits the life insurer to serve as the underlying fund's investment manager or principal underwriter, provided that none of the insurer's personnel who are ineligible pursuant to Section 9(a) are participating in the management or administration of the fund. The partial relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount of monitoring of an insurer's personnel that would otherwise be necessary to ensure compliance with Section 9 to that which is appropriate in light of the policy and purposes of Section 9. Those Rules recognize that it is not necessary for the protection of investors or the purposes fairly intended by the policy and provisions of the 1940 Act to apply the provisions of Section 9(a) to the many individuals in an insurance company complex, most of whom typically will have no involvement in matters pertaining to investment companies in that organization. Applicants assert that it is also unnecessary to apply Section 9(a) of the 1940 Act to the many individuals in various unaffiliated insurance companies (or affiliated companies of Participating Insurance Companies) that may utilize the Insurance Funds as the funding medium for variable contracts. There is no regulatory purpose in extending the monitoring requirements to embrace a full application of Section 9(a)'s eligibility restrictions because of mixed funding or shared funding and sales to Qualified Plans, the Manager or General Accounts. Those Participating Insurance Companies are not expected to play any role in the management or administration of the Insurance Funds. Those individuals who participate in the management or administration of the Insurance Funds will remain the same regardless of which separate accounts, insurance companies, Qualified Plans or General Accounts use the Insurance Funds. Therefore, applying the monitoring requirements of Section 9(a) because of investment by separate accounts of other Participating Insurance Companies would not serve any regulatory purpose. Furthermore, the increased monitoring costs would reduce the net rates of return realized by contract owners and Plan participants. Moreover, the relief requested should not be affected by the sale of shares of the Insurance Investment Companies to Qualified Plans, the Manager or General Accounts. The insulation of the Insurance Investment Companies from those individuals who are disqualified under the 1940 Act remains in place. Because Qualified Plans, the Manager, and General Accounts are not investment companies and will not be deemed affiliates solely by virtue of their shareholdings, no additional relief is necessary. 10. Sections 13(a), 15(a), and 15(b) of the 1940 Act have been deemed by the Commission to require “pass-through” voting with respect to underlying fund shares held by a separate account. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940 Act provide partial exemptions from those sections to permit the insurance company to disregard the voting instructions of its contract owners in certain limited circumstances. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A)(1) under the 1940 Act provide that the insurance company may disregard the voting instructions of its contract owners in connection with the voting of shares of an underlying fund if such instructions would require such shares to be voted to cause such underlying funds to make (or refrain from making) certain investments that would result in changes in the subclassification or investment objectives of such underlying funds or to approve or disapprove any contract between an underlying fund and its investment manager, when required to do so by an insurance regulatory authority (subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of such Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) under the 1940 Act provide that the insurance company may disregard contract owners' voting instructions if the contract owners initiate any change in such underlying fund's investment policies, principal underwriter, or any investment manager (provided that disregarding such voting instructions is reasonable and subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and
(C)of Rules 6e-2 and 6e-3(T)). 11. Rule 6e-2 recognizes that a variable life insurance contract is an insurance contract; it has important elements unique to insurance contracts; and it is subject to extensive state regulation of insurance. In adopting Rule 6e-2(b)(15)(iii), the Commission expressly recognized that state insurance regulators have authority, pursuant to state insurance laws or regulations, to disapprove or require changes in investment policies, investment advisers, or principal underwriters. The Commission also expressly recognized that state insurance regulators have authority to require an insurer to draw from its general account to cover costs imposed upon the insurer by a change approved by contract owners over the insurer's objection. The Commission therefore deemed such exemptions necessary “to assure the solvency of the life insurer and performance of its contractual obligations by enabling an insurance regulatory authority or the life insurer to act when certain proposals reasonably could be expected to increase the risks undertaken by the life insurer.” In this respect, flexible premium variable life insurance contracts are identical to scheduled premium variable life insurance contracts; therefore, Rule 6e-3(T)'s corresponding provisions presumably were adopted in recognition of the same factors. State insurance regulators have much the same authority with respect to variable annuity separate accounts as they have with respect to variable life insurance separate accounts. Insurers generally assume both mortality and expense risks under variable annuity contracts. Therefore, variable annuity contracts pose some of the same kinds of risks to insurers as variable life insurance contracts. The Commission staff has not addressed the general issue of state insurance regulators' authority in the context of variable annuity contracts, and has not developed a single comprehensive exemptive rule for variable annuity contracts. 12. Applicants assert that the Insurance Investment Companies' sale of shares to Qualified Plans, the Manager or General Accounts will not have any impact on the relief requested herein in this regard. Shares of the Insurance Funds sold to Qualified Plans would be held by the trustees of such Plans. The exercise of voting rights by Qualified Plans, whether by the trustees, by participants, by beneficiaries, or by investment managers engaged by the Plans, does not present the type of issues respecting the disregard of voting rights that are presented by variable life separate accounts. With respect to the Qualified Plans, which are not registered as investment companies under the 1940 Act, there is no requirement to pass through voting rights to Plan participants. Similarly, the Manager and General Accounts are not subject to any pass-through voting requirements. Accordingly, unlike the case with insurance company separate accounts, the issue of the resolution of material irreconcilable conflicts with respect to voting is not present with Qualified Plans, the Manager or General Accounts. 13. Applicants assert that shared funding by unaffiliated insurance companies does not present any issues that do not already exist where a single insurance company is licensed to do business in several or all states. A particular state insurance regulatory body could require action that is inconsistent with the requirements of other states in which the insurance company offers its policies. The fact that different Participating Insurance Companies may be domiciled in different states does not create a significantly different or enlarged problem. 14. Applicants further assert that shared funding by unaffiliated Participating Insurance Companies is, in this respect, no different than the use of the same investment company as the funding vehicle for affiliated Participating Insurance Companies, which Rules 6e-2(b)(15) and 6e-3(T)(b)(15) permit under various circumstances. Affiliated Participating Insurance Companies may be domiciled in different states and be subject to differing state law requirements. Affiliation does not reduce the potential, if any exists, for differences in state regulatory requirements. In any event, the conditions discussed below are designed to safeguard against and provide procedures for resolving any adverse effects that differences among state regulatory requirements may produce. 15. Applicants assert that the right under Rules 6e-2(b)(15) and 6e-3(T)(b)(15) of an insurance company to disregard contract owners' voting instructions does not raise any issues different from those raised by the authority of state insurance administrators over separate accounts. Under Rules 6e-2(b)(15) and 6e-3(T)(b)(15), an insurer can disregard contract owner voting instructions only with respect to certain specified items and under certain specified conditions. Affiliation does not eliminate the potential, if any exists, for divergent judgments as to the advisability or legality of a change in investment policies, principal underwriter, or investment adviser initiated by contract owners. The potential for disagreement is limited by the requirements in Rules 6e-2 and 6e-3(T) that the insurance company's disregard of voting instructions be reasonable and based on specific good faith determinations. However, a particular Participating Insurance Company's disregard of voting instructions nevertheless could conflict with the majority of contract owner voting instructions. The Participating Insurance Company's action could arguably be different than the determination of all or some of the other Participating Insurance Companies (including affiliated insurers) that the contract owners' voting instructions should prevail, and could either preclude a majority vote approving the change or could represent a minority view. If the Participating Insurance Company's judgment represents a minority position or would preclude a majority vote, the Participating Insurance Company may be required, at an Insurance Investment Company's election, to withdraw its separate account's investment in that Insurance Investment Company, and no charge or penalty would be imposed as a result of such withdrawal. 16. With respect to voting rights, it is possible to provide an equitable means of giving such voting rights to contract owners and to Qualified Plans, the Manager or General Accounts. The transfer agent(s) for the Insurance Investment Companies will inform each shareholder, including each separate account, each Qualified Plan, the Manager and each General Account, of its share ownership, in an Insurance Investment Company. Each Participating Insurance Company will then solicit voting instructions in accordance with the “pass-through” voting requirement. Investment by Qualified Plans or General Accounts in any Insurance Investment Company will similarly present no conflict. The likelihood that voting instructions of insurance company contract owners will ever be disregarded or the possible withdrawal referred to immediately above is extremely remote and this possibility will be known, through prospectus disclosure, to any Qualified Plan or General Account choosing to invest in an Insurance Fund. Moreover, even if a material irreconcilable conflict involving Qualified Plans or General Accounts arises, the Qualified Plans or General Accounts may simply redeem their shares and make alternative investments. Votes cast by the Qualified Plans or General Accounts, of course, cannot be disregarded but must be counted and given effect. 17. Applicants assert that there is no reason why the investment policies of an Insurance Fund would or should be materially different from what they would or should be if such Insurance Fund funded only variable annuity contracts or variable life insurance policies, whether flexible premium or scheduled premium policies. Each type of insurance product is designed as a long-term investment program. Similarly, the investment strategy of Qualified Plans and General Accounts (i.e., long-term investment) coincides with that of variable contracts and should not increase the potential for conflicts. Each of the Insurance Funds will be managed to attempt to achieve its investment objective, and not to favor or disfavor any particular Participating Insurance Company or type of insurance product or other investor. There is no reason to believe that different features of various types of contracts will lead to different investment policies for different types of variable contracts. The sale and ultimate success of all variable insurance products depends, at least in part, on satisfactory investment performance, which provides an incentive for the Participating Insurance Company to seek optimal investment performance. 18. Furthermore, Applicants assert that no one investment strategy can be identified as appropriate to a particular insurance product. Each pool of variable annuity and variable life insurance contract owners is composed of individuals of diverse financial status, age, insurance and investment goals. A fund supporting even one type of insurance product must accommodate these diverse factors in order to attract and retain purchasers. Permitting mixed and shared funding will provide economic justification for the growth of the Insurance Investment Company. In addition, permitting mixed and shared funding will facilitate the establishment of additional series serving diverse goals. The broader base of contract owners and shareholders can also be expected to provide economic justification for the creation of additional series of each Insurance Investment Company with a greater variety of investment objectives and policies. 19. Applicants note that Section 817(h) of the Code is the only section in the Code where separate accounts are discussed. Section 817(h) imposes certain diversification standards on the underlying assets of variable annuity contracts and variable life contracts held in the portfolios of management investment companies. Treasury Regulation 1.817-5, which established diversification requirements for such portfolios, specifically permits, in paragraph (f)(3), among other things, “qualified pension or retirement plans,” “the general account of a life insurance company,” “the manager * * * of an investment company” and separate accounts to share the same underlying management investment company. Therefore, neither the Code nor the Treasury Regulations nor Revenue Rulings thereunder present any inherent conflicts of interest if Qualified Plans, Separate Accounts, the Manager and General Accounts all invest in the same underlying fund. 20. Applicants assert that the ability of the Insurance Investment Companies to sell their respective shares directly to Qualified Plans, the Manager or General Accounts does not create a “senior security,” as such term is defined under Section 18(g) of the 1940 Act, with respect to any variable contract, Qualified Plan, Manager or General Accounts. As noted above, regardless of the rights and benefits of contract owners or Plan participants, the Separate Accounts, Qualified Plans, the Manager and the General Accounts have rights only with respect to their respective shares of the Insurance Investment Companies. They can only redeem such shares at net asset value. No shareholder of any of the Insurance Investment Companies has any preference over any other shareholder with respect to distribution of assets or payment of dividends. 21. Applicants assert that permitting an Insurance Investment Company to sell its shares to the Manager in compliance with Treas. Reg. 1.817-5 will enhance Insurance Investment Company management without raising significant concerns regarding material irreconcilable conflicts. Applicants assert that the Insurance Investment Companies may be deemed to lack an insurance company “promoter” for purposes of Rule 14a-2 under the 1940 Act. Accordingly, Applicants assert that such Insurance Investment Companies will be subject to the requirements of Section 14(a) of the 1940 Act, which generally requires that an investment company have a net worth of $100,000 upon making a public offering of its shares. 22. Applicants assert that given the conditions of Treas. Reg. 1.817-5(i)(3) and the harmony of interest between an Insurance Investment Company, on the one hand, and its Manager or a Participating Insurance Company, on the other, little incentive for overreaching exists. Applicants assert that such investments should not implicate the concerns discussed above regarding the creation of material irreconcilable conflicts. Instead, Applicants assert that permitting investment by the Manager will permit the orderly and efficient creation and operation of Insurance Investment Companies, and reduce the expense and uncertainty of using outside parties at the early stages of Insurance Investment Company operations. 23. Applicants assert that various factors have limited the number of insurance companies that offer variable contracts. These factors include the costs of organizing and operating a funding medium, the lack of expertise with respect to investment management (principally with respect to stock and money market investments) and the lack of name recognition by the public of certain Participating Insurance Companies as investment experts. In particular, some smaller life insurance companies may not find it economically feasible, or within their investment or administrative expertise, to enter the variable contract business on their own. Use of the Insurance Investment Companies as a common investment medium for variable contracts, Qualified Plans and General Accounts would help alleviate these concerns, because Participating Insurance Companies, Qualified Plans and General Accounts will benefit not only from the investment and administrative expertise of SMC, or any other investment manager to an Insurance Fund, but also from the cost efficiencies and investment flexibility afforded by a large pool of funds. Therefore, making the Insurance Investment Companies available for mixed and shared funding and permitting the purchase of Insurance Investment Company shares by Qualified Plans and General Accounts may encourage more insurance companies to offer variable contracts, and this should result in increased competition with respect to both variable contract design and pricing, which can be expected to result in more product variation. Mixed and shared funding also may benefit variable contract owners by eliminating a significant portion of the costs of establishing and administering separate funds. Furthermore, granting the requested relief should result in an increased amount of assets available for investment by the Insurance Investment Companies. This may benefit variable contract owners by promoting economies of scale, by reducing risk through greater diversification due to increased money in the Insurance Investment Companies, or by making the addition of new Insurance Funds more feasible. Applicants' Conditions Applicants consent to the following conditions: 1. A majority of the Board of Trustees or Board of Directors (“Board”) of each Insurance Investment Company shall consist of persons who are not “interested persons” of the Insurance Investment Company, as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the Commission (“Independent Board Members”), except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any trustee or director, then the operation of this condition shall be suspended:
(i)For a period of 90 days if the vacancy or vacancies may be filled by the Board;
(ii)for a period of 150 days if a vote of shareholders is required to fill the vacancy or vacancies; or
(iii)for such longer period as the Commission may prescribe by order upon application or by future rule. 2. Each Board will monitor the respective Insurance Investment Company for the existence of any material irreconcilable conflict among and between the interests of the contract owners of all Separate Accounts, participants of Qualified Plans, the Manager or General Accounts investing in that Insurance Investment Company, and determine what action, if any, should be taken in response to such conflicts. A material irreconcilable conflict may arise for a variety of reasons, including:
(i)An action by any state insurance regulatory authority;
(ii)a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities;
(iii)an administrative or judicial decision in any relevant proceeding;
(iv)the manner in which the investments of any Insurance Fund are being managed;
(v)a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners, Plan trustees, or Plan participants;
(vi)a decision by a Participating Insurance Company to disregard the voting instructions of contract owners; or
(vii)if applicable, a decision by a Qualified Plan to disregard the voting instructions of Plan participants. 3. Any Qualified Plan that executes a fund participation agreement upon becoming an owner of 10% or more of the assets of an Insurance Investment Company (“Participating Qualified Plan”), any Participating Insurance Company (on their own behalf, as well as by virtue of any investment of general account assets in all Insurance Investment Companies), and the Manager (collectively, “Participants”) will report any potential or existing conflicts to the Board. Each of the Participants will be responsible for assisting the Board in carrying out the Board's responsibilities under these conditions by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by each Participating Insurance Company to inform the Board whenever contract owner voting instructions are disregarded and, if pass-through voting is applicable, an obligation by each Qualified Plan that is a Participant to inform the Board whenever it has determined to disregard Plan participant voting instructions. The responsibility to report such information and conflicts and to assist the Board will be a contractual obligation of all Participating Insurance Companies and Qualified Plans investing in an Insurance Investment Company under their agreements governing participation in the Insurance Investment Company, and such agreements shall provide that such responsibilities will be carried out with a view only to the interests of the contract owners or, if applicable, Plan participants. 4. If it is determined by a majority of the Board of an Insurance Investment Company, or a majority of its Independent Board Members, that a material irreconcilable conflict exists, the relevant Participating Insurance Companies and Participating Qualified Plans shall, at their expense or, at the discretion of a Manager to an Insurance Investment Company, at that Manager's expense, and to the extent reasonably practicable (as determined by a majority of the Independent Board Members), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including:
(i)Withdrawing the assets allocable to some or all of the Separate Accounts from the relevant Insurance Investment Company or any series therein and reinvesting such assets in a different investment medium (including another Insurance Fund, if any);
(ii)in the case of Participating Insurance Companies, submitting the question of whether such segregation should be implemented to a vote of all affected contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity contract owners or variable life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change;
(iii)withdrawing the assets allocable to some or all of the Qualified Plans from the affected Insurance Investment Company or any Insurance Fund and reinvesting those assets in a different investment medium; and
(iv)establishing a new registered management investment company or managed separate account. If a material irreconcilable conflict arises because of a Participating Insurance Company's decision to disregard contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Participating Insurance Company may be required, at the Insurance Investment Company's election, to withdraw its Separate Account's investment in the Insurance Investment Company, and no charge or penalty will be imposed as a result of such withdrawal. If a material irreconcilable conflict arises because of a Qualified Plan's decision to disregard Plan participant voting instructions, if applicable, and that decision represents a minority position or would preclude a majority vote, the Qualified Plan may be required, at the election of the Insurance Investment Company, to withdraw its investment in the Insurance Investment Company, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take remedial action in the event of a Board determination of a material irreconcilable conflict and to bear the cost of such remedial action shall be a contractual obligation of all Participating Insurance Companies and Qualified Plans under their agreements governing participation in the Insurance Investment Company, and these responsibilities will be carried out with a view only to the interests of the contract owners or, as applicable, Plan participants. For the purposes of this Condition (4), a majority of the Independent Board Members shall determine whether or not any proposed action adequately remedies any material irreconcilable conflict, but in no event will the Insurance Investment Company or its Manager be required to establish a new funding medium for any variable contract. No Participating Insurance Company shall be required by this Condition
(4)to establish a new funding medium for any variable contract if an offer to do so has been declined by vote of a majority of contract owners materially adversely affected by the material irreconcilable conflict. No Qualified Plan shall be required by this Condition
(4)to establish a new funding medium for such Qualified Plan if
(i)a majority of Plan participants materially and adversely affected by the material irreconcilable conflict vote to decline such offer or
(ii)pursuant to governing Plan documents and applicable law, the Plan makes such decision without Plan participant vote. 5. The Board's determination of the existence of a material irreconcilable conflict and its implications shall be made known promptly in writing to all Participants. 6. Participating Insurance Companies will provide pass-through voting privileges to all variable contract owners whose contracts are funded through a registered Separate Account for so long as the Commission continues to interpret the 1940 Act as requiring pass-through voting privileges for variable contract owners. Accordingly, such Participating Insurance Companies will vote shares of each Insurance Fund held in their registered Separate Accounts in a manner consistent with voting instructions timely received from such contract owners. Each Participating Insurance Company will vote shares of each Insurance Fund held in its registered Separate Accounts for which no timely voting instructions are received, as well as shares held by its General Accounts, in the same proportion as those shares for which voting instructions are received. Participating Insurance Companies shall be responsible for assuring that each of their registered Separate Accounts investing in an Insurance Investment Company calculates voting privileges in a manner consistent with all other Participating Insurance Companies. The obligation to vote an Insurance Investment Company's shares and to calculate voting privileges in a manner consistent with all other registered Separate Accounts investing in an Insurance Investment Company shall be a contractual obligation of all Participating Insurance Companies under their agreements governing participation in the Insurance Investment Company. Each Plan will vote as required by applicable law and governing Plan documents. 7. An Insurance Fund will make its shares available under a variable contract and/or Qualified Plans at or about the same time it accepts any seed capital from any Manager or any General Account of a Participating Insurance Company. 8. An Insurance Investment Company will notify all Participating Insurance Companies and Qualified Plans that disclosure regarding potential risks of mixed and shared funding may be appropriate in prospectuses for any of the Separate Accounts and in Plan documents. Each Insurance Investment Company will disclose in its prospectus that:
(i)Shares of the Insurance Investment Company are offered to insurance company Separate Accounts that fund both variable annuity and variable life insurance contracts, and to Qualified Plans and General Accounts;
(ii)due to differences of tax treatment or other considerations, the interests of various contract owners participating in the Insurance Investment Company and the interests of Qualified Plans or General Accounts investing in the Insurance Investment Company might at some time be in conflict; and
(iii)the Board will monitor the Insurance Investment Company for any material conflicts and determine what action, if any, should be taken. 9. All reports received by the Board of potential or existing conflicts, and all Board action with regard to determining the existence of a conflict, notifying Participants of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request. 10. If and to the extent Rule 6e-2 and Rule 6e-3(T) under the 1940 Act are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules thereunder with respect to mixed or shared funding on terms and conditions materially different from any exemptions granted in the order requested in the application, then each Insurance Investment Company and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable. 11. Each Insurance Investment Company will comply with all provisions of the 1940 Act requiring voting by shareholders (which, for these purposes, shall be the persons having a voting interest in the shares of that Insurance Investment Company), and in particular each Insurance Investment Company will either provide for annual meetings (except insofar as the Commission may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act (although SBL is not one of the trusts described in Section 16(c) of the 1940 Act) as well as with Section 16(a) of the 1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further, each Insurance Investment Company will act in accordance with the Commission's interpretation of the requirements of Section 16(a) of the 1940 Act with respect to periodic elections of directors (or trustees) and with whatever rules the Commission may promulgate with respect thereto. 12. As long as the Commission continues to interpret the 1940 Act as requiring pass-through voting privileges for variable contract owners, the Managers will vote their shares in the same proportion as all contract owners having voting rights with respect to the relevant Insurance Investment Company; provided, however, that the Manager or any General Account shall vote their shares in such other manner as may be required by the Commission or its staff. 13. The Participants shall at least annually submit to the Board of an Insurance Investment Company such reports, materials or data as the Board may reasonably request so that it may fully carry out the obligations imposed upon it by the conditions contained in the application and said reports, materials and data shall be submitted more frequently, if deemed appropriate, by the Board. The obligations of Participating Insurance Companies and Participating Qualified Plans to provide these reports, materials and data to the Board of the Insurance Investment Company when it so reasonably requests, shall be a contractual obligation of the Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in each Insurance Investment Company. 14. If a Qualified Plan should become an owner of 10% or more of the assets of an Insurance Investment Company, the Insurance Investment Company shall require such Plan to execute a participation agreement with such Insurance Investment Company which includes the conditions set forth herein to the extent applicable. A Qualified Plan will execute an application containing an acknowledgment of this condition upon such Plan's initial purchase of the shares of any Insurance Investment Company. Conclusion For the reasons and upon the facts summarized above, Applicants assert that the requested exemptions are appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jill M. Peterson, Assistant Secretary. [FR Doc. E6-4187 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53510; File No. SR-Amex-2006-24] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Adoption of a Licensing Fee for Options on the First Trust Morningstar Dividend Leaders Index Fund Shares March 17, 2006. 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 March 14, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) submitted to 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. Amex filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act, 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. 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. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify its Options Fee Schedule by adopting a per contract license fee for the orders of specialists, registered options traders (“ROTs”), firms, non-member market makers, and broker-dealers in connection with options transactions in the First Trust Morningstar Dividend Leaders Index Fund (symbol: FDL). The text of the proposed rule change is available on Amex's Web site at *http://www.amex.com,* at the principal office of Amex, 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, Amex 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. Amex 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 Amex proposes to adopt a per contract licensing fee for options on FDL. This fee change will be assessed on members commencing March 15, 2006. The Exchange has entered into numerous agreements with various index providers for the purpose of trading options on certain exchange-traded funds (“ETFs”), such as FDL. This requirement to pay an index license fee to a third party is a condition to the listing and trading of these ETF options. In many cases, the Exchange is required to pay a significant licensing fee to the index provider that may not be reimbursed. In an effort to recoup the costs associated with certain index licenses, the Exchange has established a per contract licensing fee for the orders of specialists, ROTs, firms, non-member market makers, and broker-dealers, which is collected on every option transaction in designated products in which such market participant is a party. 5 5 *See, e.g.* , Securities Exchange Act Release No. 52493 (September 22, 2005), 70 FR 56941 (September 29, 2005) (SR-Amex-2005-087). The purpose of this proposal is to charge an options licensing fee in connection with options on FDL. Specifically, Amex seeks to charge an options licensing fee of $0.10 per contract side for FDL options for specialist, ROT, firm, non-member market maker, and broker-dealer orders executed on the Exchange. In all cases, the fees will be charged only to the Exchange members through whom the orders are placed. The proposed options licensing fee will allow the Exchange to recoup its costs in connection with the index license fee for the trading of the FDL options. The fees will be collected on every order of a specialist, ROT, firm, non-member market maker, and broker-dealer executed on the Exchange. The Exchange believes that the proposal to require payment of a per contract licensing fee in connection with FDL options by those market participants that are the beneficiaries of Exchange index license agreements is justified and consistent with the rules of the Exchange. The Exchange notes that it has, in recent years, revised a number of fees to better align Exchange fees with the actual cost of delivering services and reduce Exchange subsidies of such services. Amex believes that the implementation of this proposal is consistent with the reduction and/or elimination of these subsidies. Amex also believes that these fees will help to allocate to those market participants engaging in transactions in FDL options a fair share of the related costs of offering such options. The Exchange asserts that the proposal is equitable as required by Section 6(b)(4) of the Act. 6 In connection with the adoption of an options licensing fee for FDL options, the Exchange believes that charging an options licensing fee, where applicable, to all market participant orders except for customer orders is reasonable given the competitive pressures in the industry. Accordingly, the Exchange seeks, through this proposal, to better align its transaction charges with the cost of providing products. 6 Section 6(b)(4) of the Act 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. *See* 15 U.S.C. 78f(b)(4). 2. Statutory Basis Amex believes that the proposed fee change is consistent with Section 6(b)(4) of the Act 7 regarding the equitable allocation of reasonable dues, fees and other charges among exchange members and other persons using exchange facilities. 7 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition Amex believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change establishes or changes a due, fee, or other charge applicable only to a member imposed by the Exchange, and, therefore, has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 8 and subparagraph (f)(2) of Rule 19b-4 thereunder. 9 At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 240.19b-4(f)(2). 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-2006-24 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC, 20549-1090. All submissions should refer to File Number SR-Amex-2006-24. 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 Amex. 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-2006-24 and should be submitted on or before April 13, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4181 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53398A; File No. SR-Amex-2005-107] Self-Regulatory Organizations; American Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Relating To Amending Exchange Delisting Rules To Conform to Recent Amendments to Commission Rules Regarding Removal From Listing and Withdrawal From Registration March 17, 2006. Correction In FR Document No. E6-3490, beginning on page 12738 for Monday March 13, 2006, the release heading in the text of column 2 on page 12738, which provides a description of the release, was incorrectly stated. The heading should read as follows: Self-Regulatory Organizations; American Stock Exchange LLC.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Relating to Amending Exchange Delisting Rules to Conform to Recent Amendments to Commission Rules Regarding Removal from Listing and Withdrawal from Registration Also in FR Document No. E6-3490, beginning on page 12738 for Monday March 13, 2006, the first full sentence in the text of column 2 on page 12738, which states that the American Stock Exchange, Inc. filed with the Securities and Exchange Commission a proposed rule change, was incorrectly stated. The sentence should read as follows: Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on October 24, 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 substantially prepared by the Exchange. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 3 Nancy M. Morris, Secretary. [FR Doc. E6-4185 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53491; File No. SR-ISE-2006-13] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Fee Changes March 16, 2006. 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 March 13, 2006, the International Securities Exchange, Inc. (“ISE” 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 ISE. ISE has designated the proposed rule change as one establishing or changing a due, fee, or other charge, pursuant to Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. 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. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change ISE is proposing to amend its Schedule of Fees to establish fees for transactions in options on 3 Premium Products. 5 The text of the proposed rule change is available on ISE's Web site at *http://www.iseoptions.com* , at the Office of the Secretary at ISE, and at the Commission's Public Reference Room. 5 “Premium Products” are defined in the Schedule of Fees as the products enumerated therein. 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 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend its Schedule of Fees to establish fees for transactions in options on the following 3 Premium Products: Standard & Poor's MidCap 400 Depository Receipts (“MDY”), 6 iShares MSCI Canada Index Fund (“EWC”), 7 and iShares MSCI EAFE Index Fund (“EFA”). 8 Specifically, the Exchange is proposing to adopt an execution fee and a comparison fee for all transactions in options on MDY, EWC and EFA. 9 The amount of the execution fee and comparison fee for products covered by this filing would be $0.15 and $0.03 per contract, respectively, for all Public Customer Orders 10 and Firm Proprietary orders. The amount of the execution fee and comparison fee for all Market Maker transactions would be equal to the execution fee and comparison fee currently charged by the Exchange for Market Maker transactions in equity options. 11 The Exchange believes the proposed rule change will further the Exchange's goal of introducing new products to the marketplace that are competitively priced. 6 “Standard & Poor's®,” “S&P®,” “S&P 400®,” “Standard & Poor's Depositary Receipts®,” “SPDR®,” “Standard & Poor's MidCap 400 Depositary Receipts TM ,” and “MidCap SPDRs TM ,” are trademarks of The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and have been licensed for use by PDR Services LLC and the American Stock Exchange LLC (“Amex”) in connection with the listing and trading of MidCap SPDRs (“MDY”) on the Amex. MDY is not sponsored, sold, or endorsed by Standard & Poor's, (“S&P”), a division of McGraw-Hill, and S&P makes no representation regarding the advisability of investing in MDY. McGraw-Hill and S&P have not licensed or authorized ISE to
(i)engage in the creation, listing, provision of a market for trading, marketing, and promotion of options on MDY or
(ii)to use and refer to any of their trademarks or service marks in connection with the listing, provision of a market for trading, marketing, and promotion of options on MDY or with making disclosures concerning options on MDY under any applicable federal or state laws, rules, or regulations. McGraw-Hill and S&P do not sponsor, endorse, or promote such activity by ISE and are not affiliated in any manner with ISE. 7 iShares® is a registered trademark of Barclays Global Investors, N.A. (“BGI”), a wholly owned subsidiary of Barclays Bank PLC. “MSCI Canada Index” and “MSCI EAFE Index” are service marks of Morgan Stanley Capital International (“MSCI”) and have been licensed for use for certain purposes by BGI. All other trademarks and service marks are the property of their respective owners. Neither MSCI Canada Index Fund (“EWC”) nor MSCI EAFE Index Fund (“EFA”) are sponsored, endorsed, issued, sold or promoted by MSCI. BGI and MSCI have not licensed or authorized ISE to
(i)engage in the creation, listing, provision of a market for trading, marketing, and promotion of options on EWC and EFA or
(ii)to use and refer to any of their trademarks or service marks in connection with the listing, provision of a market for trading, marketing, and promotion of options on EWC and EFA or with making disclosures concerning options on EWC and EFA under any applicable federal or state laws, rules or regulations. BGI and MSCI do not sponsor, endorse, or promote such activity by ISE, and are not affiliated in any manner with ISE. 8 *See id.* 9 These fees will be charged to Exchange members. Under a pilot program that is set to expire on July 31, 2006, these fees will also be charged to Linkage Orders (as defined in ISE Rule 1900). 10 Public Customer Order is defined in Exchange Rule 100(a)(33) as an order for the account of a Public Customer. Public Customer is defined in Exchange Rule 100(a)(32) as a person that is not a broker or dealer in securities. 11 The execution fee is currently between $.21 and $.12 per contract side, depending on the Exchange Average Daily Volume, and the comparison fee is currently $.03 per contract side. 2. Statutory Basis The Exchange believes that the statutory basis for the proposal is the requirement under Section 6(b)(4) of the Act 12 that an exchange have an equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. 12 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition ISE believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 13 and subparagraph (f)(2) of Rule 19b-4 thereunder 14 because it establishes or changes a due, fee, or other charge. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 13 15 U.S.C. 78s(b)(3)(A)(ii). 14 17 CFR 240.19b-4(f)(2). 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-ISE-2006-13 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2006-13. 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 ISE. 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-ISE-2006-13 and should be submitted on or before April 13, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4184 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53505; File No. SR-NASD-2006-032] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change and Amendment No. 1 Thereto To Reduce Routing Charges for Non-NASD Members March 16, 2006. 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 March 1, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. On March 15, 2006, Nasdaq submitted Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons, and at the same time is granting accelerated approval of the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 adds a technical correction to the rule text. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to reduce routing charges for non-NASD members that use Nasdaq systems and to eliminate for those non-members a volume-based port fee waiver for non-NASD members that use Nasdaq's INET facility. The filing would apply to these non-members a pricing schedule similar to the schedule that Nasdaq instituted for members. 4 Nasdaq requests approval to implement these reduced non-member fees on an accelerated basis with a retroactive effective date of March 1, 2006, the same date these fee changes became applicable to members. 4 *See* File No. SR-NASD-2006-031 (March 1, 2006). The text of the proposed rule change, as amended, is below. Proposed new language is in *italics.* Proposed deletions are in [brackets]. 7010. System Services
(a)through
(h)No change.
(i)Nasdaq Market Center, Brut, and Inet Order Execution and Routing
(1)through
(6)No change.
(7)The fees applicable to non-members using Nasdaq's Brut and Inet Facilities shall be the fees established for members under Rule 7010(i), as amended by SR-NASD-2005-019, SR-NASD-2005-035, SR-NASD-2005-048, SR-NASD-2005-071, SR-NASD-2005-125, SR-NASD-2005-137, SR-NASD-2005-154, SR-NASD-2006-013, [and] SR-NASD-2006-023, *and SR-NASD-2006-031,* and as applied to non-members by SR-NASD-2005-020, SR-NASD-2005-038, SR-NASD-2005-049, SR-NASD-2005-072, SR-NASD-2005-126, SR-NASD-2005-138, SR-NASD-2005-155, SR-NASD-2006-014, [and] SR-NASD-2006-024, *and SR-NASD-2006-032.*
(j)through
(v)No change.
(w)INET System Connectivity
(1)No change.
(2)The INET connectivity fees applicable to non-members shall be the fees established for members under Rule 7010(w), as established by SR-NASD-2005-128 and amended by SR-NASD-2005-147 *,* [and] SR-NASD-2006-013, *and SR-NASD-2006-031,* and as applied to non-members by SR-NASD-2005-128, SR-NASD-2005-148, [and] SR-NASD-2006-014 *, and SR-NASD-2006-032.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change, as amended, and discussed any comments it received on the proposed rule change, as amended. The text of these statements may be examined at the places specified in Item III below. Nasdaq 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 Nasdaq states that this filing would apply to non-members a pricing schedule similar to that Nasdaq is instituting for members. 5 Nasdaq states that under that schedule, NASD members saw their routing charges reduced as follows: 5 *See* footnote 4, *supra* .
(1)From $0.0015 to $0.001, the fee per share executed for routing orders in New York Stock Exchange (“NYSE”) listed securities to venues other than the NYSE;
(2)From $0.0035 to $0.003, the fee per share executed for routing orders in securities listed on a venue other than the NYSE and routed to venues other than the American Stock Exchange (“AMEX”);
(3)From $0.0035 to $0.003, the fee per share executed for routing orders in Non-Nasdaq Exchange Traded Funds (“ETFs”) to venues other than the NYSE or AMEX. Finally, Nasdaq states that NASD members had eliminated the port fee waiver for Nasdaq's INET facility subscribers that for a calendar month average daily execution of orders in the INET system of in excess of 30 million shares of added liquidity. Nasdaq represents that this filing seeks to impose these exact changes on non-NASD members that use Nasdaq systems and seeks to do so on accelerated basis and retroactively to March 1, 2006, the same date these fee changes became applicable to members. 2. Statutory Basis Nasdaq believes that the proposed rule change, as amended, is consistent with the provisions of Section 15A of the Act, 6 in general, and with Section 15A(b)(5) of the Act, 7 in particular, in that the proposed rule change, as amended, provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the NASD operates or controls. 6 15 U.S.C. 78 *o* -3. 7 15 U.S.C. 78 *o* -3(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change, as amended, will result in 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 Nasdaq states that written comments were neither solicited nor received. III. 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-NASD-2006-032 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-032. 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 NASD. 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-NASD-2006-032 and should be submitted on or before April 13, 2006. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a self-regulatory organization. 8 Specifically, the Commission believes that the proposed rule change, as amended, is consistent with Section 15A(b)(5) of the Act, 9 which requires that the rules of the self-regulatory organization provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facilities or system which it operates or controls. 8 The Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78 *o* -3(b)(5). The Commission notes that this proposal would retroactively modify pricing for non-NASD members using the Nasdaq Facilities that would permit the schedule for non-NASD members to mirror the schedule applicable to NASD members that became effective March 1, 2006, pursuant to SR-NASD-2006-031. The Commission finds good cause for approving the proposed rule change, as amended, prior to the 30th day of the date of publication of the notice thereof in the **Federal Register** . The Commission notes that the proposed fees for non-NASD members are identical to those in SR-NASD-2006-031, which implemented those fees for NASD members and which became effective as of March 1, 2006. The Commission notes that this change will promote consistency in Nasdaq's fee schedule by applying the same pricing schedule with the same date of effectiveness for both NASD members and non-NASD members. Therefore, the Commission finds that there is good cause, consistent with Section 19(b)(2) of the Act, 10 to approve the proposed rule change, as amended, on an accelerated basis. 10 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 11 that the proposed rule change, as amended, (File No. SR-NASD-2006-032), is approved on an accelerated basis. 11 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4175 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53504; File No. SR-NASD-2006-031] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Reduce Routing Charges for NASD Members March 16, 2006. 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 March 1, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), 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 Nasdaq. Nasdaq has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the self-regulatory organization under Section 19(b)(3)(A)(ii) 3 of the Act and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. 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. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change Nasdaq proposes to reduce its routing fees and eliminate a port fee waiver currently available to certain INET users. Nasdaq states that it will implement the proposed rule change immediately. Nasdaq states that this filing is applicable only to NASD members. Nasdaq states that it is also submitting a separate filing to establish the same routing price reductions and port fee waiver elimination for non-NASD members that use its systems. 5 5 *See* File No. SR-NASD-2006-32 (March 1, 2006). The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in [brackets]. 6 6 Changes are marked to the rule text that appears in the electronic NASD Manual found at *http://www.nasd.com.* Prior to the date when The Nasdaq Stock Market LLC (“Nasdaq LLC”) commences operations, Nasdaq LLC will file a conforming change to the rules of Nasdaq LLC approved in Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131). 7010. System Services
(a)through
(h)No change.
(i)Nasdaq Market Center, Brut, and Inet Order Execution and Routing
(1)The following charges shall apply to the use of the order execution and routing services of the Nasdaq Market Center, Brut, and Inet (the “Nasdaq Facilities”) by members for all Nasdaq-listed securities subject to the Nasdaq UTP Plan and for Exchange-Traded Funds that are not listed on Nasdaq. The term “Exchange-Traded Funds” shall mean Portfolio Depository Receipts, Index Fund Shares, and Trust Issued Receipts as such terms are defined in Rule 4420(i), (j), and (l), respectively. Order Execution Order that accesses the Quote/Order of a market participant that does not charge an access fee to market participants accessing its Quotes/Orders through the Nasdaq Facilities: Charge to member entering order: Members with an average daily volume through the Nasdaq Facilities in all securities during the month of
(i)more than 30 million shares of liquidity provided, and
(ii)more than 50 million shares of liquidity accessed and/or routed $0.0028 per share executed (or, in the case of executions against Quotes/Orders at less than $1.00 per share, 0.1% of the total transaction cost). Other members $0.0030 per share executed (or, in the case of executions against Quotes/Orders at less than $1.00 per share, 0.1% of the total transaction cost). Credit to member providing liquidity: Members with an average daily volume through the Nasdaq Facilities in all securities during the month of more than 30 million shares of liquidity provided $0.0025 per share executed (or $0, in the case of executions against Quotes/Orders at less than $1.00 per share). Other members $0.0020 per share executed (or $0, in the case of executions against Quotes/Orders at less than $1.00 per share). Order that accesses the Quote/Order of a market participant that charges an access fee to market participants accessing its Quotes/ Orders through the Nasdaq Facilities: Charge to member entering order: Members with an average daily volume through the Nasdaq Facilities in all securities during the month of more than 500,000 shares of liquidity provided $0.001 per share executed (but no more than $10,000 per month). Other members $0.001 per share executed. Order Routing for Nasdaq-Listed Securities Any order entered by a member that is routed outside of the Nasdaq Facilities and that does not attempt to execute in the Nasdaq Facilities prior to routing The greater of
(i)$0.004 per share executed or
(ii)a pass-through of all applicable access fees charged by electronic communications networks that charge more than $0.003 per share executed. Any other order entered by a member that is routed outside of the Nasdaq Facilities: Members with an average daily volume through the Nasdaq Facilities in all securities during the month of
(i)more than 30 million shares of liquidity provided, and
(ii)more than 50 million shares of liquidity accessed and/or routed The greater of
(i)$0.0028 per share executed or
(ii)a pass-through of all applicable access fees charged by electronic communications networks that charge more than $0.003 per share executed. Other members The greater of
(i)$0.0030 per share executed or
(ii)a pass-through of all applicable access fees charged by electronic communications networks that charge more than $0.003 per share executed. Order Routing for Exchange-Traded Funds Not Listed On Nasdaq Order routed to the New York Stock Exchange (“NYSE”) through its DOT system See DOT fee schedule in Rule 7010(i)(6). Any other order entered by a member that is routed outside of the Nasdaq Facilities and that does not attempt to execute in the Nasdaq Facilities prior to routing $0.004 per share executed. Order routed to the American Stock Exchange (“Amex”) after attempting to execute in the Nasdaq Facilities $0.01 per share executed. Order routed through the Intermarket Trading System (“ITS”) after attempting to execute in the Nasdaq Facilities $0.0007 per share executed. Order routed to venues other than the NYSE and Amex after attempting to execute in the Nasdaq Facilities $0.003[5] per share executed.
(2)For purposes of assessing Nasdaq Facilities fees and credits hereunder,
(A)a Discretionary Order that executes prior to being displayed as a Quote/Order will always be deemed to be accessing liquidity unless it is executed by (or receives delivery of) a displayed Discretionary Order at a price in the discretionary price range of the displayed Discretionary Order, and
(B)a Discretionary Order that executes after being displayed as a Quote/Order will always be deemed to be providing liquidity, unless the displayed Discretionary Order executes against (or is delivered to) a Quote/Order or Non-Directed Order that has not been designated “Immediate or Cancel,” at a price in its discretionary price range.
(3)Closing Cross. Market-on-Close and Limit-on-Close orders executed in the Nasdaq Closing Cross $0.0005 per share executed. All other quotes and orders executed in the Nasdaq Closing Cross No charge for execution.
(4)Opening Cross. Members shall be assessed the following Nasdaq Market Center execution fees for quotes and orders executed in the Nasdaq Opening Cross: Market-on-Open, Limit-on-Open, Good-till-Cancelled, Immediate-or-Cancel, and Day orders executed in the Nasdaq Opening Cross $0.0005 per share executed for the net number of buy and sell shares up to a maximum of $10,000 per firm per month. All other quotes and orders executed in the Nasdaq Opening Cross No charge for execution.
(5)Except as provided in paragraph (6), the following charges shall apply to the use of the order execution and routing services of the Nasdaq Facilities by members for securities subject to the Consolidated Quotations Service and Consolidated Tape Association plans other than Exchange-Traded Funds (“Covered Securities”): Order Execution Order that accesses the Quote/Order of a Nasdaq Facility market participant: Charge to member entering order $0.0007 per share executed. Credit to member providing liquidity: Members with an average daily volume through the Nasdaq Facilities in Covered Securities during the month of more than 5 million shares of liquidity accessed, provided, or routed $0.0005 per share executed. Other members No credit. Order Routing Order routed to Amex $0.01 per share executed. Order routed through the ITS $0.0007 per share executed. Order routed to NYSE See DOT fee schedule in Rule 7010(i)(6). Order for NYSE-listed Covered Security routed to venue other than the NYSED $0.001 [5] per share executed Order for Covered Security listed on venue other than the NYSE and routed to venue other than Amex $0.003 [5] per share executed.
(6)The following classes shall apply to the use of the Nasdaq Facilities by members for routing to the NYSE through its DOT system for all securities, including Exchange-Traded Funds: Order charged a fee by the NYSE specialist $0.01 per share executed. Order that attempts to execute in the Nasdaq Facilities prior to routing and that is not charged a fee by the NYSE specialist No charge. Order that does not attempt to execute in the Nasdaq Facilities prior to routing and that is not charged a fee by the NYSE specialist: Average daily shares of liquidity routed through Nasdaq's DOT linkage by the member during the month: More than 30 million $0.0001 per share executed. Between 2,000,001 and 30 million $0.0003 per share executed. Between 250,001 and 2 million $0.0005 per share executed. Between 100,001 and 250,000 $0.001 per share executed. 100,000 or less $0.01 per share executed.
(7)The fees applicable to non-members using Nasdaq's Brut and Inet Facilities shall be the fees established for members under Rule 7010(i), as amended by SR-NASD-2005-019, SR-NASD-2005-035, SR-NASD-2005-048, SR-NASD-2005-071, SR-NASD-2005-125, SR-NASD-2005-137, SR-NASD-2005-154, SR-NASD-2006-013, and SR-NASD-2006-023, and as applied to non-members by SR-NASD-2005-020, SR-NASD-2005-038, SR-NASD-2005-049, SR-NASD-2005-072, SR-NASD-2005-126, SR-NASD-2005-138, SR-NASD-2005-155, SR-NASD-2006-014, and SR-NASD-2006-024.
(j)through
(v)No Change.
(w)INET System Connectivity
(1)The following charges shall apply to telecommunication protocols used to access Nasdaq's INET System: Port Fees: Connectivity to Harborside Financial Center and Secaucus Datacenters $400 per month for each port pair, other than Multicast ITCH ® data feed pairs, for which the fee is $1000 per month. Internet Ports: An additional $200 per month for each Internet port that requires additional bandwidth. Connectivity to Chicago Datacenter $800 per month for each port pair. [All port fees, not including Internet Bandwidth surcharges, will be waived for Subscribers that for a calendar month have an average daily share volume for executed orders exceeding 30 million shares of added liquidity.] INET Terminal Fees: Each ID is subject to a minimum commission fee of $50 per month unless it executes a minimum of 100,000 shares. Each ID receiving market data is subject to pass-through fees for use of these services. Pricing for these services is determined by the exchanges and/or market center. Each ID that is given web access is subject to a $50 monthly fee. Portal Fees: Each ID is subject to a monthly user fee of $150. Each ID receiving market data is subject to pass-through fees for use of these services. Pricing for these services is determined by the exchanges and/or market center.
(2)The INET connectivity fees applicable to non-members shall be the fees established for members under Rule 7010(w), as established by SR-NASD-2005-128 and amended by SR-NASD-2005-147 and SR-NASD-2006-013, and as applied to non-members by SR-NASD-2005-128, SR-NASD-2005-148, and SR-NASD-2006-014. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq 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. Nasdaq 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 In order to encourage greater use of Nasdaq routing facilities, Nasdaq is proposing to reduce its routing fees as follows:
(1)Nasdaq would reduce, from $0.0015 to $0.001, the fee per share executed for routing orders in New York Stock Exchange (“NYSE”) listed securities to venues other than the NYSE;
(2)Nasdaq would reduce, from $0.0035 to $0.003, the fee per share executed for routing orders in securities listed on a venue other than the NYSE and routed to venues other than the American Stock Exchange (“AMEX”);
(3)Nasdaq would reduce, from $0.0035 to $0.003, the fee per share executed for routing orders in Non-Nasdaq Exchange Traded Funds (“ETFs”) to venues other than the NYSE or AMEX. Finally, Nasdaq is proposing to eliminate the port fee waiver for Nasdaq's INET facility subscribers that for a calendar month average daily execution of orders in the INET system of in excess of 30 million shares of added liquidity. Nasdaq states that this port fee waiver is part of INET's legacy pricing structure and is inconsistent with Nasdaq's integrated pricing structure in which no other system provides such fee waivers. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act, 7 in general, and with Section 15A(b)(5) of the Act, 8 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the NASD operates or controls. In particular, Nasdaq states that the proposal will reduce routing costs for market participants and more closely unify Nasdaq pricing policies across all of its systems. 7 15 U.S.C. 78 *o* -3. 8 15 U.S.C. 78 *o* -3(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in 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 Nasdaq states that written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is subject to Section 19(b)(3)(A)(ii) of the Act 9 and subparagraph (f)(2) of Rule 19b-4 10 thereunder because it establishes or changes a due, fee, or other charge imposed by the self-regulatory organization. Accordingly, the proposal is effective upon Commission receipt of the filing. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 9 15 U.S.C. 78s(b)(3)(A)(ii). 10 17 CFR 240.19b-4(f)(2). 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-NASD-2006-031 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-031. 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 NASD. 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-NASD-2006-031 and should be submitted on or before April 13, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4186 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53497; File No. SR-PCX-2005-122] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to Amending Exchange Delisting Rules to Conform to Recent Amendments to Commission Rules Regarding Removal From Listing and Withdrawal from Registration March 16, 2006. 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 24, 2005, the Pacific Exchange, Inc. (“PCX” 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. 3 On January 6, 2006, the Exchange filed Amendent No. 1 to the proposed rule change. 4 The Commission is publishing this notice and order to solicit comments on the proposal, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 On March 6, 2006, the Exchange filed with the Commission a proposed rule change, which was effective upon filing, to change the name of the Exchange, as well as several other related entities, to reflect the recent acquisition of PCX by Archipelago Holdings, Inc. (“Archipelago”) and the merger of NYSE with Archipelago. *See* File No. SR- PCX-2006-24. All references herein have been changed to reflect the aforementioned rule change. 4 *See* letter from David Strandberg, Attorney, PCX, to Nancy J. Sanow, Assistant Director, Division of Market Regulation, Commission, dated January 5, 2006 (“Amendment No. 1”). In Amendment No. 1, PCX made changes to its rule text to clarify that the delisting procedures set forth therein apply to instances where the Exchange is considering delisting for reasons other than those set forth in subsection
(a)of Rule 12d2-2. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly-owned subsidiary NYSE Arca Equities, Inc., proposes to amend its rules governing the NYSE Arca Marketplace, the equities trading facility of NYSE Arca Equities, Inc. With this filing, the Exchange proposes to amend its rules to comply with new requirements under Commission Rule 12d2-2, as amended 5 (“Rule 12d2-2”) promulgated under Section 12(d) 6 of the Act. The text of the proposed rule change is below. Proposed new language is *italicized* ; proposed deletions are in [brackets]. 5 17 CFR 240.12d2-2. 6 15 U.S.C. 78s(d). *The following version of Rule 5.4(b) shall remain effective until April 24, 2006:* Rule 5.4(b). No changes. *The following version of Rule 5.4(b) shall become effective on April 24, 2006:* Rule 5.4(b). An issuer proposing to withdraw a security from listing on the Corporation shall submit *to the Corporation* a certified copy of a resolution adopted by the board of directors of the issuer authorizing withdrawal from listing and registrations, [and] a [statement setting forth in detail the reasons] *letter from an authorized officer of the issuer providing the specific reasons cited by the board of directors of the issuer* for the proposed withdrawal [and the facts in support thereof] *, and a copy of the Form 25 that the issuer has filed with the Securities and Exchange Commission in accordance with Rule 12d2-2 promulgated under Section 12(d) of the Securities Exchange Act of 1934, as amended, no later than the date of such filing.* The issuer may be required, under special circumstances, to submit the proposed withdrawal to the shareholders for their vote at a meeting for which proxies are solicited provided the security is not also listed on another exchange having similar requirements. *The Corporation, upon receiving written notification of the issuer's intent to withdraw its securities from listing and registration, shall post notice of such intent on the Exchange's website by the next business day and until the delisting becomes effective.* *The following version of Rule 5.5(m) shall remain effective until April 24, 2006:* Rule 5.5(m). No changes. *The following version of Rule 5.5(m) shall become effective on April 24, 2006:* Rule 5.5(m). Delisting Procedures Whenever the Corporation determines that it [is] *may be* appropriate to either suspend dealings in and/or remove securities from listing pursuant to Rule 5.3 or Rule 5.5, except for [other than routine] reasons *specified in subsection
(a)of Rule 12d2-2 promulgated under Section 12(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act Rule 12d2-2”)* [(e.g., redemptions, maturities, etc.)], or violations of Rule 5.3(k)(5) in which case the Corporation shall initiate delisting a listed company's securities, it will follow, insofar as practicable, the following procedures:
(1)Consideration of Commencement of Delisting Action ( *a* ) The Corporation shall notify the issuer in writing describing the basis on which the Corporation is considering the delisting of the company's security. Such notice shall be sent by certified mail and shall include the time and place of a meeting to be held by the Corporation to hear any reasons why the issuer believes its security should not be delisted. Generally, the issuer will be notified at least three
(3)weeks prior to the meeting and will be requested to submit a written response. [(2)] ( *b* ) If, after such meeting, the Corporation determines that the security should be delisted, the Corporation shall notify the issuer [by telephone] *in writing* (if possible, the same day of the meeting) [and in writing] of the delisting decision and the basis thereof. The written notice will also inform the issuer that it may appeal the decision to the Board of Directors and request a hearing. [(3)] ( *c* ) Concurrent with the Corporation's decision to delist the issuer's security, the Corporation will prepare a press announcement, which will be disseminated to the Market Makers and the investing public no later than the opening of trading the business day following the Corporation's decision (the Securities Qualification Department will also distribute the information to the ETP Holders). Accordingly, the suspension of trading in the issuer's security will become effective at the opening of business on the day following the Corporation's decision.
(2)Appeal Procedures [(4)] ( *a* ) If the issuer requests an appeal hearing, it must file its request along with
(i)a $2,500 delisting appeal fee and
(ii)an answer to the causes specified by the Corporation with the Secretary of the Corporation no later than five
(5)business days following service of notice of the proposed delisting. If the issuer does not request a hearing within the specified period of time, or it does not submit the $2,500 fee to the Corporation in the form and manner prescribed, the Corporation will submit an application to the Securities and Exchange Commission to strike the security from list of companies listed on the Corporation. The Corporation will furnish a copy of such application to the issuer in accordance with Section 12 of the Securities Exchange Act of 1934 and the Rules promulgated thereunder. [(5)] *(b)* If a request for a hearing is made and the requirements of Rule 5.5(m)[(4)] *(2)(a)* are met within the time specified, the issuer will be entitled to an appeal hearing and the Corporation will provide the issuer at least fifteen
(15)business days notice of the time and place of the hearing. [(6)] *(c)* The hearing shall be held before the Board Appeals Committee appointed by the Board of Directors for such purpose. Only those members of the Board Appeals Committee who attend the hearing may vote with respect to any decisions the Committee may make. [(7)] *(d)* Any documents or other written material the issuer wishes to consider should be submitted to the appropriate office of the Corporation at least five
(5)business days prior to the date of the hearing. [(8)] *(e)* At the hearing, the issuer must prove its case by presenting testimony, evidence, and argument to the Board Appeals Committee. The form and manner in which the actual hearing will be conducted will be established by the Board Appeals Committee so as to assure the orderly conduct of the proceeding. At the hearing, the Board Appeals Committee may require the issuer to furnish additional written information that has come to its attention. [(9)] *(f)* After the conclusion of the proceeding, the Board Appeals Committee shall make its decision. The decision of the Board Appeals Committee shall be in writing with one copy served upon the issuer and the second copy filed with the Secretary of the Corporation. Such decision shall be final and conclusive. *If the decision is that the security should be removed from listing, the Corporation shall follow the procedures set forth below. If the decision is that the security should not be removed from listing, the issuer shall receive a notice to that effect from the Corporation.* *(3) Public Notice of Delisting Action.* If the *final* decision is that the security of the issuer is to be removed from listing, *then, no fewer than ten
(10)days before the delisting becomes effective: (a)* an application *on Form 25* shall be submitted by the Corporation to the Securities and Exchange Commission to strike the security from listing and registration *in accordance with Exchange Act Rule 12d2-2,* [and] *(b)* a copy of such application shall be provided to the issuer in accordance with [Section 12 of the Securities Exchange Act of 1934 and the Rules promulgated thereunder] *Exchange Act Rule 12d2-2, and
(c)public notice of the Corporation's final determination to delist the security shall be made via a press release and posting on the Corporation's website until the delisting is effective.* [If the decision is that the security should not be removed from listing, the issuer shall receive a notice to that effect from the Corporation.] 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, as amended. 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 NYSE Arca Equities Rule 5.4(b) sets forth the Exchange procedures that apply when an issuer proposes to withdraw a security from listing on the Exchange. Rule 5.5(m) provides the applicable procedures when the Exchange considers removing securities from listing. The Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) and NYSE Arca Equities Rule 5.5(m) to comply with new requirements under Rule 12d2-2 and to otherwise clarify the Exchange's withdrawal and delisting procedures. The Exchange will implement the proposed rule change immediately upon approval by the Commission. The Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to comply with new requirements under Rule 12d2-2 relating to voluntary delistings by issuers. 7 Specifically, the Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to provide that an issuer proposing to withdraw a security from listing on the Exchange shall submit to the Exchange a copy of the Form 25 that the issuer has filed with the Commission in accordance with Rule 12d2-2 no later than the date of such filing. Further, the Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to provide that the Exchange, upon receiving notification by an issuer of its intent to withdraw its securities from listing and registration, will post notice of such intent on the Exchange's Web site by the next business day and will continue to post the notice until the delisting becomes effective. 7 Rule 12d2-2(c)(2)(iii) and (c)(3). In addition, the Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to clarify that the issuer, when proposing to withdraw its securities from listing and registration, must submit to the Exchange a “letter from an authorized officer of the issuer providing the specific reasons cited by the board of directors of the issuer for the proposed withdrawal,” rather than a “statement setting forth in detail the reasons for the proposed withdrawal and the facts in support thereof.” The Exchange wishes to make this clarification because it has received several inquiries from issuers on this particular part of the rule. The Exchange also proposes to amend NYSE Arca Equities Rule 5.5(m) to comply with new requirements under Rule 12d2-2 relating to the delisting procedures that apply when the Exchange determines that it may be appropriate to remove securities from listing. 8 Specifically, the Exchange proposes new Rule 5.5(m)(3) to provide that, in the event the Exchange makes a final decision to remove the security of an issuer from listing, the Exchange will take the following actions, no fewer than ten
(10)days before the delisting becomes effective:
(i)An application on Form 25 will be submitted by the Exchange to the Commission to strike the security from listing and registration in accordance with Rule 12d2-2;
(ii)a copy of such application will be provided to the issuer in accordance with Rule 12d2-2; and
(iii)public notice of the Exchange's final determination to delist the security will be made via a press release and posting on the Exchange's website until the delisting is effective. In connection with this proposed change, the Exchange also proposes to make reference to the above public notice procedures in the appeal procedures discussion in new NYSE Arca Equities Rule 5.5(m)(2)(f). 8 Rule 12d2-2(b). The Exchange also proposes to amend NYSE Arca Equities Rule 5.5(m) to make certain clarifications. In the introductory paragraph of the Rule, the Exchange proposes to clarify that the delisting procedures set forth therein apply to instances where the Exchange is considering delisting for reasons other than those set forth in subsection
(a)of Rule 12d2-2. In addition, the Exchange proposes to include headings in the Rule that clarify that the delisting procedures apply:
(i)When the Exchange is considering commencement of delisting action,
(ii)when an issuer chooses to appeal the Exchange's initial determination and,
(iii)when the Exchange takes final delisting action. In addition, the Exchange proposes to clarify in NYSE Arca Equities Rule 5.5(m)(1)(b) that the Exchange, when considering commencement of delisting action, will notify the issuer in writing, if possible, the same day of the meeting, rather than by telephone. The Exchange proposes this clarification because it is in accordance with the Exchange's current practices. 2. Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) 9 of the Act, in general, and furthers the objectives of Section 6(b)(5), 10 in particular, because it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments and perfect the mechanisms of a free and open market and to protect investors and the public interest. 9 15 U.S.C. 78f(b). 10 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, as amended, 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 Written comments on the proposed rule change, as amended, were neither solicited nor received. 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 self-regulatory organization consents, the Commission will:
(A)By order approve such 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-PCX-2005-122 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-PCX-2005-122. 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 offices of the NYSE Arca, Inc. 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-2005-122 and should be submitted on or before April 13, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Nancy M. Morris, Secretary. [FR Doc. E6-4182 Filed 3-22-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53518; File No. SR-Phlx-2005-93] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendments Nos. 1, 2, 3, 4 and 5 Thereto To Amend Its By-Laws and Charter in Connection With a Restructuring of Its Board of Governors March 20, 2006. 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 December 30, 2005, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which items have been prepared by the Phlx. On February 16, 2006, the Exchange filed Amendment No. 1 to the proposed rule change; 3 on March 10, 2006, the Exchange filed Amendment No. 2 to the proposed rule change; 4 on March 17, 2006, the Exchange filed Amendment No. 3 to the proposed rule change; 5 and on March 20, 2006, the Exchange filed Amendment Nos. 4 6 and 5 7 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Phlx revised the proposed definitions of the terms “Independent” and “Material Relationship” that are to be included in the Exchange's By-Laws and made clarifying changes to the purpose section and to the rule text of the proposed rule change. 4 In Amendment No. 2, the Phlx incorporated the proposed definition of “Independent Governor” in the Exchange's Restated Certificate of Incorporation (“Charter”); incorporated the definition of “Annual Independence Review” in the Exchange's By-Laws; revised the rule text to clarify the standards to be applied by the Nominating, Elections and Governance Committee in evaluating nominees for Independent Governor; described in the purpose section of the proposed rule change the selection criteria for the position of Vice-Chairman; and made clarifying changes to the rule text. 5 In Amendment No. 3, the Phlx revised the purpose section and the rule text of the proposed rule change to set forth that the Nominating, Elections and Governance Committee shall be composed of five persons as follows: Three Independent Governors (one of whom must be a Designated Independent Governor), one Stockholder Governor, and one Member Governor. 6 In Amendment No. 4, the Phlx deleted revisions, as proposed in the original filing, that would have capitalized the term “member” in various Charter provisions and reinstated in the Charter a reference to “member (as such term is defined in the Exchange Act).” 7 In Amendment No. 5, the Phlx revised the statutory basis section of the proposed rule change. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its By-Laws and Charter to revise the current structure of the Phlx Board of Governors (“Board”). Specifically, the Exchange proposes to:
(i)Voluntarily conform to certain aspects of the Commission's proposed SRO Governance Rulemaking, including the incorporation of the concept of “independent directors;” 8
(ii)create a single Vice-Chairman of the Board;
(iii)eliminate the distinction between On-Floor and Off-Floor Governors;
(iv)make changes to the election of Governors in the By-Laws and Charter; and
(v)make other modifications, including revising the composition of various Phlx standing committees. The text of the proposed rule change, as amended, is available at the Commission's Public Reference Room, at the Exchange's Web site ( *http://www.phlx.com* ) and at the Exchange's principal office. 8 *See* Securities Exchange Act Release No. 50669 (November 18, 2004), 69 FR 71126 (December 8, 2004) (“Proposed SRO Governance Rulemaking”). 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 Phlx included statements concerning the purpose of, and basis for, the proposed rule change, as amended, 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 The purpose of the proposed rule change is to address various governance issues in both the Exchange's By-Laws and Charter. Conformance to Certain Aspects of the Proposed SRO Governance Rulemaking One purpose of the proposed rule change is to amend the Exchange's By-Laws and Charter to voluntarily conform to certain aspects of the Proposed SRO Governance Rulemaking, including the concept of “independent directors” as set forth in the proposed rulemaking. 9 The Exchange proposes to convert all non-industry 10 positions to independent positions and to add an additional Independent Governor to ensure a majority of Independent Governors in accordance with the Proposed SRO Governance Rulemaking. 11 An Independent Governor would be defined as a Governor who has no material relationship with the Exchange or any affiliate of the Exchange, any member of the Exchange or any affiliate of such member, or any issuer of securities that are listed or traded on the Exchange or a facility of the Exchange. A material relationship would be defined as a relationship, compensatory or otherwise, that reasonably could affect the independent judgment or decision-making of a Governor. The Board would make this independence determination upon a Governor's nomination and no less frequently than annually and as often as necessary in light of a Governor's circumstances and pursuant to Article IV, Section 4-4 of the Phlx By-Laws to ensure that the status of all incumbent Independent Governors do not fall outside the definition of Independent. 12 The designation of “Independent” would replace the defined terms “public” 13 and “non-industry,” as presently set forth in the Phlx's By-Laws and Charter. Currently, the Board consists of 22 Governors. 14 Under this proposal, the Board would consist of 23 Governors. Accordingly, the Board would consist of a majority of Independent Governors. 9 *See id.* 10 Currently, “non-industry” is defined as follows: The term non-industry when used in the context of Governors or committee members shall mean
(a)public Governors;
(b)officers and employees of issuers of securities listed on the Exchange;
(c)persons affiliated with brokers and dealers that operate solely to assist the securities-related activities of the business of non-member affiliates (such as brokers or dealers established to
(i)distribute an affiliate's securities which are issued on a continuous or regular basis, or
(ii)process the limited buy and sell orders of the shares of employee owners of the affiliate);
(d)employees of an entity that is affiliated with a broker or dealer that does not account for a material portion of the revenues of the consolidated entity, and who are primarily engaged in the business of the non-member entity; and
(e)other individuals who would not be industry Governors or committee members. Phlx By-Laws Article I, Section 1-1(t). 11 *See supra* at note 8. 12 “Independent” would be defined in the Phlx By-Laws, Article 1, Section 1-1(o) as follows: The term “Independent,” when used in the context of Governor or Committee Members, shall mean persons affirmatively determined by the Board as having no Material Relationship with the Exchange or any affiliate of the Exchange, any member of the Exchange or any affiliate of such member, or any issuer of securities that are listed or traded on the Exchange or a facility of the Exchange. 13 “Public” is defined in the Phlx By-Laws Article I, Section 1-1(y) as follows: The term “public” when used in the context of Governors or committee members shall mean non-industry persons who have no material business relationship with a broker, dealer or the Exchange.” The proposed rule change would delete the definition of “public” from the Phlx By-Laws. 14 *See* Phlx Charter Article Seventh, and Phlx By-Laws Article IV, Section 4-1. Single Vice-Chairman The Phlx proposes to amend its By-Laws and Charter to create, in proposed Phlx By-Laws Article V, Section 5-2, a single Vice-Chairman of the Board who would be recommended by the Chairman for nomination by the Nominating, Elections and Governance Committee and elected by the stockholders. The Vice-Chairman would not be subject to a term limit. The Vice-Chairman would be an individual who, anytime within the prior three years, has been a Member primarily engaged in business on the Exchange's equity market or equity options market or is a general partner, executive officer (vice-president or above) or a Member associated with a Member Organization primarily engaged in business on the Exchange's equity market or equity options market. Currently, the By-Laws require two Vice-Chairmen of the Board, with one Vice-Chairman elected as an On-Floor Governor by the Members, and the other Vice-Chairman elected as an Off-Floor Governor by the stockholders. The Exchange proposes this change to conform to a structure that is more typical of a for-profit stock corporation and also because the two Vice-Chairmen model is not sustainable if the “On-Floor” and “Off-Floor” distinctions are eliminated, as discussed below. Elimination of the “On-Floor” and “Off-Floor” Governor Distinction The Exchange proposes to eliminate the distinction between “On-Floor” 15 and “Off-Floor” 16 Governors, in both its By-Laws and Charter, to allow for greater stockholder representation and, specifically, representation on the Board of the six recently acquired strategic investors. 17 Presently, there are five Off-Floor Industry Governors elected by the stockholders and five On-Floor Industry Governors elected by the Members. The Exchange proposes to replace this current model with nine positions that would consist of six positions elected by stockholders, two Member positions and one Philadelphia Board of Trade (“PBOT”) position. The Member positions and the PBOT position would be elected by Members of the Exchange. 15 Phlx By-Laws Article IV, Section 4-1 provides that an “On-Floor Governor” is “an industry Governor and is a member primarily engaged in business on the Exchange's Equity Floor or a general partner, executive officer (vice president and above) or member associated with a member organization primarily engaged in business on the Exchange's Equity Floor (On-Floor Equity Governor) * * * [and] is an industry Governor and is a member of the Philadelphia Board of Trade (On-Floor PBOT Governor) * * * [and] is an industry Governor and is a member primarily engaged in business as a specialist on the Exchange's Equity Options Floor or a general partner, executive officer (vice president and above) or a member associated with a member organization primarily engaged in specialist business on the Exchange's Equity Options Floor (On-Floor Equity Options Specialist Governor) * * * [and] is an industry Governor and is a member primarily engaged in business as a registered options trader on the Exchange's Equity Options Floor or a general partner, executive officer (vice president and above) or a member associated with a member organization primarily engaged in registered options trader business on the Exchange's Equity Options Floor (On-Floor Equity Options Registered Options Trader Governor); and * * * who is an industry Governor and is a member primarily engaged in business on the Exchange's Equity Options Floor as a floor broker (On-Floor Equity Options Broker Governor).” 16 Phlx By-Laws Article IV, Section 4-1 provides that “Off-Floor Governors” are “industry Governors and general partners, executive officers (vice president or above), or members or participants associated with member or participant organizations which conduct a non-member or non participant public customer business and shall individually not be primarily engaged in business activities on the Exchange Floor.” 17 During 2005, six firms invested in the Exchange: Citigroup Financial Products, Inc.; Credit Suisse First Boston NEXT Fund, Inc.; Morgan Stanley & Co., Inc., UBS Securities LLC; Citadel Derivatives Group, LLC; and Merrill Lynch, Pierce Fenner & Smith, Inc. Election of Governors The Exchange proposes to amend its By-Laws and Charter to reflect that two of the Independent Governors will be nominated and elected by the Members of the Exchange, as will both Member Governors and the PBOT Governor, in order to maintain the 20% fair representation of membership on the Board. 18 The Exchange represents that the proposed amendments to its Charter and By-Laws, in and of themselves, would require minimal changes to the present composition of the Board, subject to a formal analysis and determination by the Board of the qualifications of the Independent Governors, and would be largely a reclassification of Board positions. 18 *See* Section 6(b)(3) of the Act, 15 U.S.C. 78f(b)(3). *See also* Proposed SRO Governance Rulemaking. The Exchange states that it is proposing to voluntarily adopt certain concepts addressed in the Commission's Proposed SRO Governance Rulemaking. The Exchange would conform the composition of the Board to the provisions of the proposed rule change as follows: upon the approval of the proposed rule change by the Commission, the Exchange will hold an Annual Meeting of Member and Member Organizations, to be followed by the Annual Meeting of Stockholders to elect the class of Governors for 2006. The class of 2006 Governors will be nominated and elected pursuant to the Charter and By-Laws, as proposed to be amended, with two of the nine Board positions being nominated and selected by the Members and elected by the Trustee of the Series Class A Preferred Stock. The classes of 2007 and 2008 Governors will be permitted to complete their terms but will be appointed by the Nominating, Elections and Governance Committee, with the approval of the Board, to fill the new positions established by the amendments until which time those positions come up for election in either 2007 and 2008 respectively. 19 Following the election of the class of 2006, over 20% of the Governors serving on the Board will have been nominated and elected by the Members. 19 *See* Phlx By-Laws Article IV, Section 4-7. Stockholder Meetings With regard to its Charter, the Phlx seeks to remove Article Ninth to allow greater flexibility in the Exchange's governance processes. In the absence of this Article, the issue of obtaining the written consent of the stockholders of the Exchange for any action in lieu of a meeting will be governed by Delaware General Corporation Law, which will allow stockholders to take actions outside of a stockholder meeting by less-than-unanimous written consent. Other Modifications To conform with the proposed changes to the Board's composition described above, the Exchange also proposes to amend its By-Laws and Charter sections relating to Board Committees as follows: 20 20 The Exchange notes that no changes are being made to Phlx By-Laws Article X, Section 10-9, its Audit Committee provision. The Commission recently approved a proposed rule change to amend this provision of the Phlx By-Laws to require, among other things, that the members of the Audit Committee be “Independent Governors.” *See* Securities Exchange Act Release No. 53356 (February 23, 2006), 71 FR 10741 (March 2, 2006) (SR-Phlx-2004-37). • The following committees are not affected by the changes described herein with the exception of minor technical modifications: ○ Admissions ○ Options Allocation, Evaluation and Securities Committee ○ Equity Allocation Evaluation and Securities Committee ○ Floor Procedure ○ Foreign Currency Options ○ Marketing ○ Options ○ The Automation Committee currently allows for the Chairman of the Committee to be designated as a Non-Industry or Off-Floor Governor. The proposal would change this designation to a Stockholder or Independent Governor. ○ The Business Conduct Committee is currently composed of three Non-Industry Governors (one of whom must be Public); one Equity Floor Member; one Equity Options Floor Member; one At-Large Floor Member; and three Off-Floor Members. The proposal would modify the composition as follows: Three Independent Governors; four Members or persons associated with a Member Organization; one Member who primarily conducts business on the Equity Floor; and one Member who primarily conducts business on the Equity Options Floor. ○ The Compensation Committee is currently composed of one Chairman (who must be a Non-Industry Governor); two Non-Industry Governors (one of whom must be a Public Governor); and the two Vice-Chairmen of the Board. The proposal would modify the composition as follows: Four Independent Governors (one of whom must serve as chairman of the committee) and the Vice-Chairman of the Board. ○ The Executive Committee is currently composed of the Chairman of the Board; the two Vice-Chairmen of the Board; the Chairman of the Finance Committee; one Chairman of a floor committee not represented by the On-Floor Vice-Chairman; one Chairman of a floor committee not represented by the Off-Floor Vice-Chairman; one Off-Floor Governor; and two Non-Industry Governors (one of whom must be a Public Governor). The proposal would modify the composition as follows: the Chairman of the Board; the Vice-Chairman of the Board; two Stockholder Governors; two Independent Governors; the Chairman of the Finance Committee; and two Chairmen of Floor Committees. ○ The Finance Committee is currently composed as follows: the Chairman of the Board; the two Vice-Chairmen of the Board; one On-Floor Member (who may be a Governor); one Off-Floor Member (who may be a Governor); and four Non-Industry Governors (one whom must be a Public Governor). The proposal would modify the composition as follows: the Chairman and Vice-Chairman of the Board; two Members or persons associated with a Member Organization, who may be Governors (one of whom conducts business primarily on the Equity or Equity Options Floor); one Stockholder Governor; and four Independent Governors. The Chairman of this committee would be the Vice-Chairman of the Board, a Stockholder Governor or a Member Governor. ○ The Nominating and Elections Committee would be renamed the Nominating, Elections and Governance Committee. The purpose of this change is to have the Committee's name more properly reflect the existing role and function of this Committee. No substantive changes in the Committee's functions are proposed. The Nominating and Elections Committee is currently composed of the following: The Chairman (who must be a Non-Industry Public Governor); three Non-Industry Governors; one Off-Floor Member (who may be a Governor); one On-Floor Equity Governor; and one On-Floor Equity Options Governor. The proposal would modify the composition as follows: Three Independent Governors (one of whom must be a Designated Independent Governor); one Stockholder Governor; and one Member Governor. The Nominating, Elections and Governance Committee would select its Chairman from among the members of such Committee who are Independent Governors. Constituted in this manner, the interests of the Members of the Exchange, by virtue of the Member Governor and the Designated Independent Governor who are both elected by the Members, would be represented by at least 20% of the Committee in compliance the fair representation requirement of Section 6(b)(3) of the Act. 21 21 15 U.S.C. 78f(b)(3). ○ The Quality of Markets Committee would not change in any way, except that “Non-Industry Governors” would be called “Independent Governors” and “Industry Governors” would be called “Stockholder Governors.” In addition, various technical modifications have been made to the Phlx By-Laws for purposes of consistency. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 22 in general, and furthers the objectives of Section 6(b)(3) of the Act 23 in particular, in that it is designed to assure a fair representation of its members in the selection of its directors and administration of its affairs because the members will elect five Designated Governors, including two Designated Independent Governors, one PBOT Governor, and 2 Member Governors. The Exchange also believes that its proposal furthers the objectives of Section 6(b)(3) of the Act 24 because the Nominating, Elections and Governance Committee will consist of three Independent Governors (one of whom must be a Designated Independent Governor), one Stockholder Governor, and one Member Governor, with the Designated Independent Governor elected by the Members, ensuring greater Member representation. 22 15 U.S.C. 78f(b). 23 15 U.S.C. 78f(b)(3). 24 15 U.S.C. 78f(b)(3). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would 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 either solicited or received by the Exchange. III. Date of Effectiveness of the Proposed Rule 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 self-regulatory organization 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. The Phlx has requested accelerated approval of the proposed rule change. While the Commission will not grant accelerated approval at this time, the Commission will consider granting accelerated approval of the proposal at the close of the comment period, 21 days from the date of publication of the proposal in the **Federal Register** . 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 No. SR-Phlx-2005-93 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2005-93. 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 Commissions 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 Phlx. 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-Phlx-2005-93 and should be submitted by April 13, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 25 25 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. 06-2857 Filed 3-21-06; 11:52 am]
Connectionstraces to 7
3 references not yet in our index
  • 15 USC 78
  • 17 CFR 240.12
  • 17 CFR 240.19
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Notices
Notice of Application for Exemption under Section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), for an exemption from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder
U.S.C.§ 3501
C.F.R.§ 200.30-3
C.F.R.§ 1.817-5
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
U.S.C.§ 78c
Cite15 USC 78
Cite17 CFR 240.12
Cite17 CFR 240.19
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