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Code · REGISTER · 2006-05-26 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Notice of Social Security ruling

15,586 words·~71 min read·/register/2006/05/26/06-4855

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

BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53843; File No. SR-Amex-2006-49] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend Until June 5, 2007, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals May 19, 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 May 17, 2006, 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 and II below, which Items have been prepared by the Amex.
The Amex filed the proposal pursuant to section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon the filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 5 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Amex proposes to amend Commentary .05 to Amex Rule 903, “Series of Options Open for Trading,” to extend until June 5, 2007, its pilot program for listing options series on selected stocks trading below $20 at one-point intervals (“Pilot Program”).
The text of the proposed rule change is available on the Amex's Web site ( *http://www.amex.com* ), at the Amex's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change.
The text of these statements may be examined at the places specified in Item IV below. The 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 The Pilot Program was established in June 2003, 5 with two one-year extensions granted by the Commission in June 2004 and June 2005. 6 The Amex believes that the Pilot Program has operated as designed, providing investors with greater flexibility in achieving their investment strategies in connection with stocks trading below $20.
Accordingly, the Amex believes that a one-year extension, through June 5, 2007, is reasonable and consistent with the intent of the Pilot Program. 5 *See* Securities Exchange Act Release No. 48024 (June 12, 2003), 68 FR 36617 (June 18, 2003) (order approving File No. SR-Amex-2003-36) (“Pilot Approval Order”). 6 *See* Securities Exchange Act Release Nos. 49813 (June 4, 2004), 69 FR 33088 (June 14, 2004) (File No. SR-Amex-2004-45) (notice of filing and immediate effectiveness of extension of the Pilot Program through June 5, 2005); and 51770 (May 31, 2005), 70 FR 33226 (June 7, 2005) (File No.
SR-Amex-2005-40) (notice of filing and immediate effectiveness of extension of the Pilot Program through June 5, 2006) (collectively, “Pilot Program Extension Notices”). The Pilot Program permits the Exchange to select a total of five individual stocks on which options series may be listed at $1 strike price intervals. To be eligible for the Pilot Program, an underlying stock must close below $20 on its primary market on the previous trading day. If selected, the Exchange may list $1 strike prices at $1 intervals from $3 to $20, consistent with the terms of the Pilot Program.
Under the Pilot Program, a $1 strike price may not be listed that is greater than $5 from the underlying stock's closing price on its primary market on the previous day. The Exchange may also list $1 strikes on any other options class designated by another options exchange that employs a similar pilot program approved by the Commission. The Pilot Program prohibits the Exchange from listing $1 strikes on any series of individual equity options classes that have greater than nine months until expiration.
In addition, the Exchange is restricted from listing any series that would result in strike prices being $0.50 apart. To date, the Exchange believes that the Pilot Program has been beneficial to investors and the options market by providing investors with greater flexibility in the trading of equity options that overlie stocks trading below $20. In this manner, options investors are able to better tailor their strategies through the availability of $1 strikes. The Pilot Program Report, attached as Exhibit 3, provides data regarding the Pilot Program as required in the Pilot Program Extension Notices. 7 The Amex notes that, as the data indicates, the $1 strikes exhibited higher volume and open interest than the “standard” strike price intervals.
Specifically, the five options classes selected by the Amex for $1 strikes had a trading volume of 1,308,261 contracts, while the “standard” strikes for the same options classes had a trading volume 1,350,314 contracts. Of even greater significance is the difference in open interest between the $1 strikes and “standard” strikes. As of April 28, 2006, $1 strikes open interest totaled 475,183 contracts versus 65,264 contracts for “standard” strikes. Given the limited nature of the Pilot Program, the Exchange submits that the impact on systems has been minimal.
Accordingly, the Amex believes that an extension of the Pilot Program for one year through June 5, 2007, is warranted. 7 *See* Pilot Program Extension Notices, *supra* note 6. 2. Statutory Basis The Amex believes that the proposed rule change is consistent with the section 6(b) of the Act, 8 in general, and furthers the objective of section 6(b)(5) of the Act, 9 in particular, in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5).
B. Self-Regulatory Organization's Statement on Burden on Competition The Amex believes that the proposed rule change will impose no burden on competition that is not necessary or appropriate in the 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 Amex has filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 Because the foregoing proposed rule change:
(1)Does not significantly affect the protection of investors or the public interest;
(2)does not impose any significant burden on competition; and
(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Amex has asked the Commission to waive the five-day pre-filling notice requirement and the 30-day operative delay so that the proposal will be effective on June 5, 2006. The Commission waives the five-day pre-filing notice requirement. In addition, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Pilot Program to continue without interruption through June 5, 2007. 12 For this reason, the Commission designates that the proposal become operative on June 5, 2006. 13 12 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 As set forth in the Commission's initial approval of the Pilot Program, if the Amex proposes to:
(1)Extend the Pilot Program;
(2)expand the number of options eligible for inclusion in the Pilot Program; or
(3)seek permanent approval of the Pilot Program, it must submit a Pilot Program report to the Commission along with the filing of its proposal to extend, expand, or seek permanent approval of the Pilot Program. The Amex must file any such proposal and the Pilot Program report with the Commission at least 60 days prior to the expiration of the Pilot Program. The Pilot Program report must cover the entire time the Pilot Program was in effect and must include:
(1)Data and written analysis on the open interest and trading volume for options (at all strike price intervals) selected for the Pilot Program;
(2)delisted options series (for all strike price intervals) for all options selected for the Pilot Program;
(3)an assessment of the appropriateness of $1 strike price intervals for the options the Amex selected for the Pilot Program;
(4)an assessment of the impact of the Pilot Program on the capacity of the Amex's, the Options Price Reporting Authority's, and vendors' automated systems;
(5)any capacity problems or other problems that arose during the operation of the Pilot Program and how the Amex addressed them;
(6)any complaints that the Amex received during the operation of the Pilot Program and how the Amex addressed them; and
(7)any additional information that would help to assess the operation of the Pilot Program. *See* Pilot Approval Order, *supra* note 5. 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. 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 No. SR-Amex-2006-49 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 No. SR-Amex-2006-49. 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 will also be available for inspection and copying at the principal office of the 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 No. SR-Amex-2006-49 and should be submitted on or before June 16, 2006. 14 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 Nancy M. Morris, Secretary. [FR Doc. E6-8129 Filed 5-25-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53835; File No. SR-NYSE-2006-31] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the NYSE Retail Trading Product and the NYSE Program Trading Product May 18, 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 May 8, 2008, the New York Stock Exchange LLC (“NYSE” 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 NYSE. The Exchange has filed the proposal pursuant to section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) 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). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to introduce two new market data products: The NYSE Retail Trading Product and the NYSE Program Trading Product. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.nyse.com* ), at the NYSE's Office of the Secretary, 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, NYSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Clause (b)(16) of Exchange Rule 132B (“Order Tracking Requirements”) requires members to record the type of account for which each order is submitted. NYSE proposes to make available to vendors and investors the following:
(1)The NYSE Retail Trading Product will consist of
(A)a real-time datafeed of certain execution report information that has been recorded as trades for accounts of “individual investors” 5 and
(B)an end-of-day summary of the retail trading activity on the Exchange for that day, including total buy-and-sell retail share volume for each stock traded. 5 For this purpose, the “account of an individual investor” means an account covered by section 11(a)(1)(E) of the Act. That section refers to the “account of a natural person, or a trust created by a natural person for himself or another natural person.”
(2)The NYSE Program Trading Product will consist of
(A)a real-time datafeed of certain execution report information that has been recorded as program trades 6 and
(B)an end-of-day summary of program trading activity on the Exchange for that day, including total index arbitrage (as opposed to non-index arbitrage) program trading volume. 6 For this purpose, “program trading” has the definition that Supplementary Material .40(b) to NYSE Rule 80A (“Index Arbitrage Trading Restrictions”) gives to that term. Each published report of a trade execution that is included in the datafeed for either product shall indicate such information as the security's symbol, the size of the trade, the time of the trade's execution and other related information. 7 (More information regarding the NYSE Retail Trading Product and the NYSE Program Trading Product can be found on the NYSE Web site at *http://www.nysedata.com/InfoTools.* ) The Exchange believes the NYSE Retail Trading Product should provide investors with increased information regarding individual investors' trading activity on the Exchange. Similarly, the NYSE Program Trading Product should provide investors with increased information regarding program trading activity. 7 NYSE will only include in the NYSE Retail Trading Product and the NYSE Program Trading Product information that is attached to execution reports. While the NYSE believes the information contained in the NYSE Retail Trading Product and the NYSE Program Trading Product is accurate, the NYSE does not guarantee the completeness or accuracy of account information submitted by order entry firms on which the InfoTools product is based. Pursuant to the proposed rule change, the Exchange proposes to introduce the NYSE Retail Trading Product and the NYSE Program Trading Product without charge as a 60-day pilot program, commencing 30 days from the Exchange's submission of the proposed rule change to the Commission. In a companion proposed rule change that the Exchange has filed contemporaneously with the proposed rule change ( *see* File No. SR-NYSE-2006-32), the Exchange proposes to establish fees for the NYSE Retail Trading Product and the NYSE Program Trading Product. The Exchange plans to commence to impose those fees upon the later of Commission approval of that filing and the end of the pilot program. The Exchange is not proposing to impose any attribution requirements on vendors displaying NYSE Trading Information. However, the Exchange believes that it is incumbent on vendors to identify and display information in a manner that avoids investor confusion. This is especially true at a time when markets are offering investors, who have grown accustomed to viewing consolidated information over the past three decades, many new exchange-specific information services. Thus, while the Exchange is not proposing to impose any attribution requirement, it does propose to have vendors provide, by link or otherwise, a description of the NYSE Retail Trading Product and NYSE Program Trading Product in a manner that is reasonably transparent and accessible to subscribers of the two products. The Exchange will require the Exhibit A to each vendor's contract with the Exchange for the receipt and redistribution of the NYSE Retail Trading Product and NYSE Program Trading Product to describe how the vendor will make the description available. The description should read substantially as follows: NYSE Rule 132B requires each NYSE member firm to record for each order that it submits to the Exchange such information as whether the firm is placing the order for the account of a retail customer or whether the order results from program trade trading activity. NYSE uses this information to produce the NYSE Retail Trading Product and NYSE Program Trading Product, each of which includes real-time information relating to retail trading and program trading activity, respectively, as well as daily summaries and historical databases of that information. While the NYSE believes the information contained in the NYSE Retail Trading Product and NYSE Program Trading Product is accurate, Customer understands that its agreement with NYSE provides that NYSE
(1)reserves all rights to that information,
(2)does not guarantee the completeness or accuracy of account information submitted by order entry firms on which the InfoTools product is based, and
(3)shall not be liable for any loss due either to their negligence or to any cause beyond their reasonable control. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of section 6(b) of the Act, 8 in general, and with section 6(b)(5) of the Act, 9 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will 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 The Exchange has not solicited, and does not intend to solicit, comments regarding the proposed rule change. The Exchange has not received any unsolicited written comments from Exchange participants or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change is subject to section 19(b)(3)(A)(iii) of the Act 10 and Rule 19b-4(f)(6) thereunder 11 because the proposal:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative prior to 30 days after the date of filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the Exchange has given the Commission notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. NYSE satisfied the five-day pre-filing requirement. 10 15 U.S.C. 78s(b)(3)(A)(iii). 11 17 CFR 240.19b-4(f)(6). 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. 12 12 15 U.S.C. 78s(b)(3)(C). 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-NYSE-2006-31 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-NYSE-2006-31. 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 the filing also will be available for inspection and copying at the principal office of the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-31 and should be submitted on or before June 16, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-8095 Filed 5-25-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53840; File No. SR-NYSE-2005-58] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Exchange Rule 312(f) Regarding Changes Within Member Organizations May 19, 2006. Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 19b-4 thereunder, 2 notice is hereby given that on August 15, 2005, the New York Stock Exchange, Inc. (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (“SEC” or the “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. On May 5, 2006, NYSE filed Amendment No. 1 to the proposed rule change. 3 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 Amendment No. 1 replaces the rule text in the original filing in its entirety and proposes to clarify that Rule 312(f) applies only to non-investment grade debt and equity securities. Amendment No. 1 also adds Material Associated Persons (“MAPs”), as that term is used in Rule 17h-1T of the Exchange Act, to the class of persons for whose securities the solicitation of trades is prohibited. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE is filing with the SEC the proposed amendment to Exchange Rule 312(f) to, among other changes, permit the recommendation of purchases and sales of shares of companies controlled and under common control with member organizations (other than MAPs), 4 subject to appropriate customer disclosure of the relationship. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in brackets. 4 Exchange Act Rule 17h-1T describes certain indicia of MAP status:
(i)Legal relationship between the broker or dealer and the associated person;
(ii)overall financing requirements of the broker or dealer and the associated person, and the degree, if any, to which the broker or dealer and the associated person are financially dependent on each other;
(iii)degree, if any, to which the broker or dealer or its customers rely on the associated person for operational support or services in connection with the broker's or dealer's business;
(iv)level of risk present in the activities of the broker's or dealer's associated persons; and
(v)extent to which the associated person has the authority or the ability to cause a withdrawal of capital from the broker or dealer. Changes Within Member Organizations Rule 312(a) to
(e)no changes. (f)( *1* ) After the completion of a distribution of its *equity or non-investment grade debt* securities *or those of any organization controlling the member organization or of any Material Associated Person (as used in Rule 17h-1T of the Securities Exchange Act of 1934, as amended) of the member organization,* no member [corporation] *organization* [which has any publicly held security outstanding] shall effect any transaction (except on an unsolicited basis) for the account of any customer in, or make any recommendation with respect to, any such security [issued by such member corporation] *.* [or] *(2) Any member organization that* make *s* any recommendation of any [such] *equity or non-investment grade debt* security issued by any [corporation controlling] *person* controlled by or under common control with such member [corporation] *organization (other than a Material Associated Person)* [.] *, shall promptly disclose to such customer the existence and nature of such control at the time of recommendation and, if this disclosure is not made in writing, shall provide this disclosure in writing prior to the completion of the transaction.* ( *3* ) No corporation which has any publicly held security outstanding shall, without the prior written approval of the Exchange, dispose of any such security for its own account and no member corporation shall acquire any such security for its own account or for the account of any corporation controlling, controlled by or under common control with such member corporation except with the prior written approval of the Exchange or pursuant to the terms and provisions of such security or of any agreement between the member corporation and the holder of such security, which agreement has previously been filed with and approved by the Exchange. The Exchange will approve such a disposition or acquisition of securities unless it determines that such action will impair the financial responsibility or operational capability of the member corporation. Remainder of Rule 312 unchanged. A. Self-Regulatory Organization's Statement of Purpose of, and Statutory Basis for, the Proposed Rule Change
(1)Purpose a. *Background.* Rule 312(f) (the “Rule”) was adopted in 1970 when public ownership of member corporations was first permitted in order to address what were perceived to be potential conflicts in such transactions. Experience during the intervening 35 years 5 has indicated that certain potential conflicts can be effectively addressed by way of disclosure, rather than prohibition. Further, fundamental and wide-ranging changes in the securities industry since the Rule's introduction also contributed to rendering aspects of the Rule unnecessary, outdated and unnecessarily burdensome to member organizations. 5 NYSE previously proposed the amendment of Rule 312(f) (which, at the time was Rule 312(g)) in 1982 ( *See* File No. SR-NYSE-83-3). Exchange Act Release No. 19462 (January 28, 1983) (notice of filing of SR-NYSE-83-3). In the filing, NYSE stated that the rule created a “burden on competition” by placing “NYSE members and their customers at a competitive disadvantage” to similar organizations subject only to the SEC disclosure requirements. NYSE withdrew the proposal in 1994. That proposal differed from the present proposal in allowing the recommendation of the member organization's own publicly traded securities and those of its parent corporation, subject to appropriate disclosure of the relationship. The present proposal does not permit the recommendation of (or the solicited execution of trades in the shares of) a member organization or its parent following their initial distribution. In the course of responding to Rule 312(f) interpretive requests over time, the Exchange has noted changes in the business and regulatory environment that warrant reconsideration of the scope of Rule 312(f)'s application. These changes include:
(i)The wide diversification of business conducted by member organizations and other entities in the same control family; and
(ii)The nature of new products that are created for investors. The Exchange's regulatory experience relative to Rule 312(f) has generally involved determinations as to the existence, or not, of a control relationship involving a member organization among the complicated interrelationships of, and equity investments by, financial organizations. The sole purpose of determining whether such a control relationship exists is to establish whether Rule 312(f) restrictions on the recommendation of stock issued by entities in the member organization's corporate family apply to the member organization. The term “recommendation” in this context has been interpreted by NYSE to include solicited transactions, the issuance of research or market letters, and the use of “active” market making tactics ( *i.e.* , actively buying and selling a stock from a proprietary account as opposed to “passively” standing ready to buy or sell). Typical member organization Rule 312(f) interpretive requests involve submission to the Exchange of intricate factual representations regarding board representation, equity ownership, and/or profit participation and will request concurrence with the opinion that no control relationship exists. 6 Often, the request will involve one or more investment partnerships, affiliated with a member organization, that hold an interest in a subject security. An officer of the member organization may be a general partner or on the board of directors of the subject security's issuing company. The analysis to determine control of the subject security involves objective factors as well as consideration of the percentage of member organization personnel represented on the issuing company's board of directors and/or their ability to influence the issuing company. Such directors, while not participants in day-to-day management of the issuing company, may exercise a degree of control over it resulting either from their voting power, from specially granted powers, or from participation in committees. Ultimately, the determination of control is often, in good measure, a subjective one. 6 NYSE Rule 2 creates a presumption of control, in this context, where a person possesses the right to vote 25% or more of the voting securities, receives 25% or more of the net profits or is a director of the other person. Rule 2 defines a “person” as “a natural person, corporation, partnership, association, joint stock company, trust, fund or any organized group of persons whether incorporated or not.” b. *Proposed Amendments.* The Rule, in pertinent part, currently prohibits a member organization from soliciting transactions in its own publicly traded securities and from making any recommendations with respect to its publicly traded securities or the securities issued by any corporation controlling, controlled by or under common control with such member corporation ( *i.e.* , the securities of any parent, sister, or subsidiary corporation relative to the member organization). The intent of the Rule is to mitigate conflicts of interest that may arise when recommending the public securities of companies in which the member organization may have an interest. i. *Proposed Codification to Exclude Investment Grade Debt from Rule 312(f).* NYSE has interpreted Rule 312(f) to apply only to non-investment grade debt and equity securities. 7 This proposal would codify that interpretation. 7 Another common interpretive inquiry with respect to Rule 312(f) involves, and NYSE anticipates would continue to involve, a determination as to whether the security in question has “debt-like characteristics.” The Exchange has generally interpreted Rule 312(f) restrictions to not apply to investment grade debt and securities that function as investment grade debt. The interpretation as to whether a security functions as investment grade debt is based on the totality of the circumstances, *e.g.* ,
(1)whether the shares of stock have fixed dividends;
(2)whether the shares of stock are non-participatory in common dividends;
(3)whether the shares of stock have limited voting rights; and
(4)whether the shares of stock are non-convertible into common stock. ii. *Proposed Expansion to Include All NNon-Investment Grade Debt and Equity Securities.* The proposed rule change would also broaden the application of the Rule to all non-investment grade debt and equity securities, including privately placed issues. The current Rule's prohibition applies only to publicly traded securities. The Rule currently prohibits effecting solicited transactions only as to the securities of member organizations. The proposed rule change would extend that prohibition to the non-investment grade debt and equity securities of companies controlling member organizations ( *e.g.* , parent companies) and MAPs. By their nature, MAPs can substantially influence a registered broker-dealer, and the inclusion of such entities along with controlling organizations 8 acts to limit inevitable conflicts of interest. 8 *See* NYSE Rule 2. iii. *Proposed Amendment to Permit Certain Recommendations If Disclosed.* The Exchange also proposes to amend the Rule to permit the recommendation of purchases and sales of shares of companies controlled by and under common control with member organizations (other than MAPs), subject to appropriate customer disclosure of the relationship. 9 Given the varied and numerous sister corporations that a member organization owned by a diversified holding company may have, the Rule 312(f) restrictions on recommendations of securities issued by all such corporations can sometimes be an unnecessary burden to legitimate business activity. The rule has had the unintended impact of affecting the way merger and acquisition deals are structured, in that unnecessarily complex and unwieldy ownership models are developed primarily to avoid the 25% voting or profit presumption of control established by NYSE Rule 2. 9 * See* proposed Rule 312(f)(2). To alleviate these unintended burdens, the Exchange proposes amendments to Rule 312(f) that would permit member organizations to recommend equity or non-investment grade debt securities 10 issued by any person controlled by, or under common control with, a member organization (other than a MAP); however, any such recommendation would be subject to a requirement to disclose to the customer the existence and nature of such control at the time of recommendation. If the disclosure at the time of the recommendation is not made in writing, then the member must also provide this disclosure in writing prior to the completion of the transaction. 11 This proposal is consistent with and similar to other Exchange regulations such as Rule 472, which addresses the issue of research analysts' conflicts, in part, through disclosure of potential conflicts involving ownership of equity that is the subject of research and market making activity involving the subject equity. 10 As previously noted, the proposed change would broaden the application of the Rule to all securities including privately placed issues. The current Rule applies only to publicly traded securities. 11 *See* proposed Rule 312(f)(2). While the Exchange believes that disclosure is adequate to address certain conflicts of interest that could arise with respect to a member's recommendation to buy or sell securities of many affiliated entities, the Exchange believes that it is warranted to retain the prohibition on the solicitation of purchases in the securities of the member organization, any controlling organization or a MAP, given the greater potential for a conflict of interest inherent in such relationships. For instance, an employee of a member organization could act on material non-public information in connection with either the member organization or its parent. Of special concern is stock issued by the member organization itself, as a registered representative/employee may attempt to drive up the price to increase the value of his or her company stock plan portfolio. To address these potential abuses, the Exchange is proposing to preserve the prohibition on making a recommendation or otherwise acting on such information in these contexts.
(2)Statutory Basis The proposed rule change is consistent with the requirements of the Exchange Act, and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with the requirements of section 6(b)(5) 12 of the Exchange Act. Section 6(b)(5) requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and national market system, and in general, to protect investors and the public interest. In addition section 3(f) of the Exchange Act requires, among other things, whenever there is a requirement to consider or determine whether an action is necessary or appropriate in the public interest, to also consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. The proposed change in Rule 312(f) will act to assure adequate and continuing protection for investors while promoting efficiency, competition, and capital formation by permitting the recommendation of purchases and sales of shares of companies controlled and under common control with member organizations (other than MAPs), subject to appropriate customer disclosure of the relationship, by expanding certain restrictions on effecting solicited transactions, and by codifying NYSE interpretations. 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposal does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments 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 Exchange consents, the Commission will:
(A)By order approve such proposed rule change, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2005-58 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 20549-9303. All submissions should refer to File Number SR-NYSE-2005-58. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro/shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. 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 the File Number SR-NYSE-2005-58 and should be submitted on or before June 16, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-8096 Filed 5-25-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53841, File No. SR-Phlx-2006-33] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to its Payment for Order Flow Pilot Program May 19, 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 May 12, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Phlx. The Phlx has designated this proposal as one changing a fee imposed by the Phlx under 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 Phlx proposes to extend its payment for order flow pilot program, which is currently in effect until May 27, 2006, 5 for an additional one-year period until May 27, 2007. This proposal is scheduled to expire on the same date as the one-year pilot program in effect in connection with the provisions of Exchange Rule 1080(l) relating to directed orders. 6 5 *See, e.g.* , Securities Exchange Act Release Nos. 53754 (May 3, 2006), 71 FR 27301 (May 10, 2006) (SR-Phlx-2006-25); 53078 (January 9, 2006), 71 FR 2289 (January 13, 2006) (SR-Phlx-2005-88); 52568 (October 6, 2005), 70 FR 60120 (October 14, 2005) (SR-Phlx-2005-58); and 51759 (May 27, 2005), 70 FR 32860 (June 6, 2005) (SR-Phlx-2004-91). 6 The provisions of Rule 1080(l) are in effect for a one-year pilot period currently scheduled to expire on May 27, 2006. The Exchange has filed a proposed rule change to extend the one-year pilot program for an additional year until May 27, 2007. *See* SR-Phlx-2006-27. The text of the applicable section of the Exchange's Summary of Equity Option Charges is available at the Commission's Public Reference Room, at the Phlx, and on the Exchange's Web site at *http://www.phlx.com* . 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 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 Phlx 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 Currently, the following payment for order flow rates are in effect at the Exchange:
(1)Equity options other than QQQQ 7 and FXI Options are assessed $0.60 per contract;
(2)options on QQQQ are assessed $0.75 per contract; and
(3)no payment for order flow fees are assessed on FXI Options. 8 Trades resulting from either Directed or non-Directed Orders that are delivered electronically over AUTOM 9 and executed on the Exchange are assessed a payment for order flow fee, while non-electronically-delivered orders ( *i.e.* , represented by a floor broker) are not assessed a payment for order flow fee. 10 7 The Nasdaq-100®, Nasdaq-100 Index®, Nasdaq®, The Nasdaq Stock Market®, Nasdaq-100 Shares SM , Nasdaq-100 Trust SM , Nasdaq-100 Index Tracking Stock SM , and QQQ SM are trademarks or service marks of The Nasdaq Stock Market, Inc. (“Nasdaq”) and have been licensed for use for certain purposes by the Philadelphia Stock Exchange pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index® (“Index”) is determined, composed, and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 Trust SM , or the beneficial owners of Nasdaq-100 Shares SM . The Exchange states that Nasdaq has complete control and sole discretion in determining, comprising, or calculating the Index or in modifying in any way its method for determining, comprising, or calculating the Index in the future. 8 The Exchange states that specialists and Directed Registered Options Traders (“Directed ROTs”) who participate in the Exchange's payment for order flow program are assessed a payment for order flow fee, in addition to ROTs. Therefore, the payment for order flow fee is assessed, in effect, on equity option transactions between a customer and a ROT, a customer and a Directed ROT, or a customer and a specialist when a customer order is directed to a specialist or Directed ROT who participates in the Exchange's payment for order flow program. 9 AUTOM is the Exchange's electronic order delivery, routing, execution and reporting system, which provides for the automatic entry and routing of equity option and index option orders to the Exchange trading floor. *See* Exchange Rules 1014(b)(ii) and 1080. 10 Electronically-delivered orders do not include orders delivered through the Floor Broker Management System pursuant to Exchange Rule 1063. The Exchange recently amended its equity options payment for order flow program to rebate, on a quarterly basis, any excess payment for order flow funds that were collected but not requested for rebate by a specialist or Directed ROT. 11 11 *See* Securities Exchange Act Release No. 53754 (May 3, 2006), 71 FR 27301 (May 10, 2006) (SR-Phlx-2006-25). The Exchange states that, other than extending the date of the pilot program for an additional year until May 27, 2007, no other changes to its current payment for order flow program are being proposed at this time. The Exchange states that the purpose of extending the Exchange's payment for order flow program for an additional year is to remain competitive with other options exchanges that administer payment for order flow programs. The proposal, consistent with the Exchange's current payment for order flow program, will remain in effect as a pilot program that is scheduled to expire on May 27, 2007, the same date as the one-year pilot program in effect in connection with the provisions of Exchange Rule 1080(l) relating to Directed Orders. 12 12 *See supra* note 6. 2. Statutory Basis The Exchange believes that its proposal to amend its schedule of fees is consistent with section 6(b) of the Act 13 in general, and furthers the objectives of section 6(b)(4) of the Act 14 in particular, in that it is an equitable allocation of reasonable, dues, fees and other charges among Exchange members. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has been designated as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act 15 and Rule 19b-4(f)(2) 16 thereunder, because it establishes or changes a due, fee, or other charge imposed by the Exchange. Accordingly, the proposal will take effect upon filing with the Commission. 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. 15 15 U.S.C. 78s(b)(3)(A)(ii). 16 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-Phlx-2006-33 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-2006-33. 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 the 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-2006-33 and should be submitted on or before June 16, 2006. 17 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 Nancy M. Morris, Secretary. [FR Doc. E6-8097 Filed 5-25-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53846; File No. SR-Phlx-2005-65] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Exchange's Business Conduct Committee and Disciplinary Rules May 19, 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 November 2, 2005, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Phlx. On May 16, 2006, the Phlx filed 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. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 See Amendment No. 1. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Exchange By-Law Article X, Section 10-11, Business Conduct Committee and Exchange Rules 960 and 970 to:
(1)Establish a Hearing Officer position;
(2)amend certain provisions relating to the retention and compensation of Hearing Panelists;
(3)amend the hearing process as it relates to decisions issued by the Hearing Panel; and
(4)make other minor, non-substantive changes to Exchange By-Law Article X, Section 10-11, Business Conduct Committee and Rules 960 and 970. Specifically, the proposal discussed below would create the new staff position of a “Hearing Officer,” who, along with two other Hearing Panelists, would hear contested disciplinary matters that previously were heard by the Business Conduct Committee (“BCC” or “Committee”). The text of the proposed rule change is available on the Phlx's Web site ( *http://www.phlx.com* ), at the Phlx's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx 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 *Background:* Currently, pursuant to Exchange Rule 960.5(a), a hearing on a Statement of Charges is held before a Hearing Panel composed of three persons appointed by the Chairman of the BCC or the Chairman's designee. The presiding person of each Hearing Panel is a member of the Committee. The other two persons on the Hearing Panel are members of the Exchange, or general partners or officers of member organizations, or such other persons whom the Chairman of the BCC or the Chairman's designee considers to be qualified. Currently, pursuant to Exchange Rule 960.5(d), after the conclusion of the hearing, the Hearing Panel reviews the entire record of the proceeding and submits a written hearing report to the Committee containing proposed findings of fact, conclusions of violations and a recommendation as to appropriate sanctions, to be considered by the Committee at the next Committee meeting after the report is completed. After reviewing the entire record of the disciplinary proceeding, the BCC, by a majority of the members voting, determines whether the Respondent has committed violations and the appropriate sanctions, if any. 4 The BCC then issues a written decision, including in its decision a statement of findings and conclusions, with the reasons therefor, upon all material issues presented in the record, and whether each violation within the disciplinary jurisdiction of the Exchange alleged in the statement of charges has occurred. 4 *See* Exchange Rule 960.8. Hearing Officer The Exchange proposes to establish a new permanent professional position of Hearing Officer. The responsibilities of the Hearing Officer would include, but are not limited to: presiding over hearings in contested disciplinary cases authorized by the Exchange's BCC, conducting pre-hearing conferences, ruling on procedural or discovery matters, scheduling hearing sessions, making all necessary evidentiary or other rulings (in consultation with the Hearing Panelists), regulating the conduct of the hearing, imposing appropriate sanctions for improper conduct by a party or a party's representative, drafting and issuing decisions on behalf of the Hearing Panel and rendering decisions in connection with Summary Disposition Proceedings. 5 The Hearing Officer would not be permitted to be involved in any manner in the investigation of possible misconduct, to participate in the consideration by the BCC of whether to institute a disciplinary action, to render a decision following a hearing without the concurrence of a majority of the Hearing Panel, to rule upon requests to disqualify the Hearing Officer or any member of the Hearing Panel, or to issue citations for violations of Exchange rules or floor procedure advices. 6 5 *See* proposed Exchange Rule 960.6. 6 In addition, in accordance with By-Law Article X, Section 10-11, the jurisdiction of the Hearing Officer and Hearing Panel shall not extend to the enforcement of rules and regulations of the Floor Procedure Committee or the Options Committee relating to order, decorum, health, safety and welfare on the trading floors, or to hearings held by and sanctions imposed by such committees relating to such matters, except as permitted by the rules of the Exchange or any interpretation thereof, and any regulations promulgated thereunder. The Hearing Officer would report to the Audit Committee for all performance and compensation purposes to help ensure that the Hearing Officer is completely neutral and accountable to the Audit Committee alone. The Hearing Officer would merely report to the General Counsel or his or her designee to comply with policies and procedures applicable to all employees of the Exchange, such as reporting vacation time or sick leave. Hearing Panelists Consistent with current practice, the Hearing Panelists would be selected based on their background, experience and training, which should qualify them to consider and make determinations regarding the subject matter to be presented to the Hearing Panel. Other factors to consider include the availability of the individual Hearing Panelists, the extent of their prior service on Hearing Panels and any relationship between such persons and the Respondent, which might make it inappropriate for such persons to serve on the Hearing Panel. The BCC Chair, or the Chair's designee, would select the Hearing Panelists for each matter from a pool of qualified panelists. 7 7 The Exchange intends to form a “pool” of pre-qualified Hearing Panelists for contested disciplinary cases. In order to form this pool, the staff intends to develop a questionnaire, using as a model the questionnaire currently used by the NASD for potential members of arbitration panels. Members of the BCC would not be eligible to serve as Hearing Panelists. However, as discussed in proposed Rule 960.5(a)(7), if the Hearing Officer is unable to preside over the hearing for any reason, the Chair of the BCC shall appoint a qualified replacement Hearing Officer for that hearing, which could possibly include a member of the BCC. After being designated as a qualified panelist, the Exchange intends to have each prospective panelist complete a mandatory training session to be conducted by the Hearing Officer. Qualified panelists would serve for three-year terms. After that time, if a panelist wished to continue serving, the panelist would be required to submit an updated application, which would be reviewed by the BCC. Currently, pursuant to Exchange Rule 960.5(a)(4), Hearing Panelists may be compensated in extraordinary cases, as determined by the Chair of the BCC, in consultation with the Chairman of the Board of Governors. 8 The Exchange proposes that Hearing Panelists be compensated for all hearing sessions and for one deliberation session per disciplinary proceeding. A hearing session would be defined as any meeting between the parties and Hearing Panelists, including pre-hearing conferences. Hearing Panelists would be compensated at a fixed rate for each session that lasts four hours or less. 9 For example, if a hearing on a given day lasted a total of six hours, Hearing Panelists would be compensated for two hearing sessions. This fixed and non-negotiable rate would be the same for each hearing session, and for one deliberation session for which a Hearing Panel renders a decision, but no compensation would be paid for “study time” ( *i.e.* , reviewing materials in preparation for a pre-hearing conference or hearing). If a case settled prior to a hearing, panelists would not receive any compensation, unless a pre-hearing conference (which is included in the definition of a hearing session and for which compensation would be given) was held. If a hearing were cancelled, the panelists would not be entitled to compensation, but would be reimbursed for any travel-related expenses incurred, if applicable. If a Hearing Panelist is also a member of the Board, any Board or Standing Committee meetings that are held on the same day as the hearing would be considered a single meeting for the purposes of compensation. 8 Factors to be considered when determining whether a case is extraordinary include, but are not limited to, the anticipated length of time of the hearing; the complexity and serious nature of the matter; and the magnitude of the potential penalty. 9 Compensation for Hearing Panelists would be subject to a cap amount per day, regardless of the number of hearing sessions (or Board or Committee meetings attended). Issuance of Decisions If an Offer of Settlement (“Offer”) is submitted to the BCC before a hearing commences, even if the Hearing Panelists are selected, the Committee would still consider the Offer and, if accepted, issue a decision. If an Offer is submitted after a hearing commences, however, the Exchange staff would promptly submit its position with respect to such Offer. The Hearing Panelists would then determine whether to consider the Offer and, if considered, whether to accept or reject the Offer. 10 10 The BCC will continue to hear any current matters through their completion if a hearing has already commenced. Thus, if the proposed rule change is approved by the Commission and implemented in the middle of an ongoing hearing, the BCC will hear that matter through its completion and will issue the decision accordingly. A decision issued by the Hearing Panel would be considered final. Any appeal of the decision would be taken directly to the Exchange's Board of Governors. The purpose of the proposal is to replace the current BCC hearing process described above to make it more efficient. By having a permanent and independent Hearing Officer and pre-screened, qualified Hearing Panelists, the formal hearing process should be expedited and the sanctioning process reconciled so that sanctions for similar misconduct are imposed more uniformly given that the same Hearing Officer would preside over all hearings. Pre-screening Hearing Panelists and compensating them should also help to ensure that qualified panelists are selected to serve on Exchange Hearing Panels. In addition, the Exchange believes that having the Hearing Panel issue a final decision directly, without having to go to the BCC for review and approval, should help expedite the issuance of decisions. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act 11 in general, and furthers the objectives of sections 6(b)(5), 6(b)(6) and 6(b)(7) of the Act 12 in particular, in that this proposal should help to:
(i)Protect investors and the public interest;
(ii)appropriately discipline members, member organizations and persons associated with members or member organizations; and
(iii)provide a fair procedure for the disciplining of members, member organizations and persons associated with members or member organizations. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5),
(6)and (7). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or 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 Phlx 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 Commission is considering granting accelerated approval of the proposed rule change at the end of a 15-day comment period. 13 13 The Phlx has requested accelerated approval of this proposed rule change prior to the 30th day after the date of publication of the notice of the filing thereof. 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-Phlx-2005-65 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-2005-65. 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 the 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-2005-65 and should be submitted on or before June 12, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-8133 Filed 5-25-06; 8:45 am] BILLING CODE 8010-01-P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration
(SSA)publishes a list of information collection packages that will require clearance by the Office of Management and Budget
(OMB)in compliance with Public Law 104-13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for new information collections, approval of existing information collections, revisions to OMB-approved information collections, and extensions (no change) of OMB-approved information collections. SSA is soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations regarding the information collection(s) should be submitted to the OMB Desk Officer and the SSA Reports Clearance Officer. The information can be mailed and/or faxed to the individuals at the addresses and fax numbers listed below: (OMB), Office of Management and Budget, Attn: Desk Officer for SSA, Fax: 202-395-6974. (SSA), Social Security Administration, DCFAM, Attn: Reports Clearance Officer, 1333 Annex Building, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410-965-6400. I. The information collections listed below are pending at SSA and will be submitted to OMB within 60 days from the date of this notice. Therefore, your comments should be submitted to SSA within 60 days from the date of this publication. You can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at 410-965-0454 or by writing to the address listed above. 1. *Function Report—Adult—Third Party—20 CFR 404.1512, 416.912—0960-0635.* The information collected on the SSA-3380-BK is needed to make determinations on SSI and SSDI disability claims. This information is necessary for case development and adjudication, and is used by State Disability Determination Services evaluators as an evidentiary source used in the disability evaluation process. The respondents are third parties familiar with the functional limitations (or lack thereof) of claimants who apply for Social Security benefits and Supplemental Security Income disability payments. *Type of Request:* Revision of an OMB-approved information collection. *Number of Respondents:* 1,000,000. *Frequency of Response:* 1. *Average Burden per Response:* 60 minutes. *Estimated Annual Burden:* 1,000,000 hours. 2. *Request for Internet Services—Password Authentication—20 CFR 401.45—0960-0632.* SSA has established a Password infrastructure for using its Internet and Automated Telephone Response services to access SSA records. These services are password protected due to the nature of the information being transmitted or because the requested information requires a higher level of protection to ensure the security and confidentiality of records. Password Authentication is used to establish a password process for verifying the identity of individuals who choose to use these services for conducting business with SSA. Individuals are required to provide identifying information to SSA, such as their name, social security number, date of birth, and a shared secret between themselves and SSA before they can create a password. After this information is stored and verified, SSA sends the individual their new personal identification number
(PIN)and password to be used to access SSA's password protected services. The password process allows requestors to establish their identities with SSA and create a password which they can then use to access their own personal information. The respondents are persons electing to do business with SSA through an electronic medium. *Type of Request:* Revision of an OMB-approved information collection. *Number of Respondents:* 1,630,771. *Frequency of Response:* 1. *Average Burden per Response:* 10 minutes. *Estimated Annual Burden:* 271,795 hours. 3. *Statement of Reclamation Action—31 CFR 210—0960-NEW.* Form SSA-1713 collects information regarding whether, how and when a Canadian bank was able to return erroneous payments made after the death of a beneficiary who elected to have payments sent to Canada. The SSA-1713 is sent with the SSA-1712, an SSA-generated cover sheet which provides the Canadian bank with information regarding the deceased beneficiary. In this way, SSA can reclaim funds which were erroneously paid. The respondents are Canadian financial institutions to which Social Security payments have been made. *Type of Request:* Existing Information Collection in Use Without an OMB Number. *Number of Respondents:* 15. *Frequency of Response:* 1. *Average Burden per Response:* 5 minutes. *Estimated Annual Burden:* 1 hour. 4. *Request for Reconsideration—Disability Cessation—20 CFR 404.909, 416.1409—0960-0349.* Form SSA-789-U4 is used by claimants to request reconsideration of a determination and to indicate whether or not they wish to appear at a disability hearing. This form can also be used to submit any additional information/evidence for use in the reconsidered determination and to indicate if an interpreter is needed for the hearing. SSA will use this information to either arrange for a hearing or to prepare a decision based on the evidence of record. The respondents are applicants or claimants for Social Security benefits or SSI payments. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 49,000. *Frequency of Response:* 1. *Average Burden per Response:* 13 minutes. *Estimated Annual Burden:* 10,617 hours 5. *Representative Payment Policies Regulation—20 CFR 404.2011, 404.2025, 416.611, 416.625—0960-0679.* In cases where SSA determines that it is not in a beneficiary's best interest to receive payments directly as it may cause substantial harm, the beneficiaries may dispute this decision. If they do, they provide SSA with information which SSA will take into consideration when reevaluating the decision. Representative payees must also provide SSA with information regarding their relationship, responsibility, and how payments were used for the beneficiary. Respondents are beneficiaries and representative payees. *Type of Request:* Revision of an OMB-approved information collection. CFR Section Number of respondents Frequency of response Average burden per response (minutes) Estimated annual burden hours 404.2011(a)(1) 416.611(a)(1) 250 1 15 63 404.2025 416.625 3,000 1 6 300 Totals 3,250 363 *Estimated Annual Burden:* 363 hours. 6. *Psychiatric Review Technique—20 CFR 404.1520(a), 416.920(a)—0960-0413.* The SSA-2506-BK assists the DDSs in evaluating mental impairments by helping to: organize and present the mental findings in a clear, concise and consistent manner; consider and evaluate all aspects of the mental impairment relevant to the individual's ability to perform work-related mental functions; and identify additional evidence needed to determine impairment severity. The respondents are the 52 State DDSs administering the Title II and Title XVI programs. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 52. *Frequency of Response:* 20,595. *Total Annual Responses:* 1,070,940. *Average Burden per Response:* 15 minutes. *Estimated Annual Burden:* 267,735 hours. 7. *Disability Hearing Officer's Decision—Title XVI Disabled Child
(DC)Continuing Disability Review—20 CFR 404.913-.914, 404.917, 416.994a, 416.1413-.1414, 416.1417—0960-0657.* Form SSA-1209-BK is used by the disability hearing officer conducting the disability hearing to prepare and issue a written reconsidered determination—specifically for evaluating Title XVI childhood disability cases. The form provides the framework for addressing the crucial elements of the case in a sequential and logical fashion, and the completed form is the official document of the decision. Respondents are disability hearing officers in State Disability Determination Services (DDSs). *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 35,000. *Frequency of Response:* 1. *Average Burden per Response:* 75 minutes. *Estimated Annual Burden:* 43,750 hours. 8. *Certificate of Incapacity—5 CFR 890.302(d)—0960-NEW.* Rules governing the Federal Employee Health Benefits
(FEHB)plan state that for federal employees' children ages 22 or over to retain health benefits, they must be incapable of self-support due to a disability that
(1)pre-dated the child's 22nd birthday,
(2)is very serious, and
(3)can be expected to last at least one year. Form SSA-604, the Certificate of Incapacity, is used by physicians to document and certify such a disability for their patients who are children of Federal employees. The respondents are physicians of federal employees' children ages 22 or over who are seeking to retain health benefits under their parent's FEHB coverage. *Type of Request:* New information collection. *Number of Respondents:* 38. *Frequency of Response:* 1. *Average Burden per Response:* 45 minutes. *Estimated Annual Burden:* 29 hours. 9. *Function Report—Adult—20 CFR 404.1512 and 419.912—0960-0681.* Form SSA-3373 is used to collect information about a disability applicant's impairment-related limitations and ability to function. It documents the types of information specified in SSA regulations and provides disability interviewers with a convenient means to record information about how the claimant's condition affects his or her ability to function. This information, together with medical evidence, forms the evidentiary basis upon which the initial disability process is founded. The respondents are Title II and Title XVI benefits applicants. *Type of Request:* Revision to an OMB-approved information collection. *Number of Respondents:* 4,005,367. *Frequency of Response:* 1. *Average Burden per Response:* 60 minutes. *Estimated Annual Burden:* 4,005,367. II. The information collections listed below have been submitted to OMB for clearance. Your comments on the information collections would be most useful if received by OMB and SSA within 30 days from the date of this publication. You can obtain a copy of the OMB clearance packages by calling the SSA Reports Clearance Officer at 410-965-0454, or by writing to the address listed above. 1. *Statement of Employer—20 CFR 404.801-803—0960-0030.* The information collected on Form SSA-7011—F4 is needed to substantiate allegations of wages paid to workers when wages do not appear in SSA's records of earnings and the worker has no proof of said earnings. SSA can use the information to process claims for benefits and resolve discrepancies in the worker's earnings record. The respondents are certain employers who can verify wage allegations made by the wage earner. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 925,000. *Frequency of Response:* 1. *Average Burden per Response:* 20 minutes. *Estimated Annual Burden:* 308,333 hours. 2. *Request for Workers' Compensation/Public Disability Benefit Information—20 CFR 404.408(e)—0960-0098.* Section 224 of the Social Security Act provides for an offset of disability insurance benefits when workers' compensation
(WC)or public disability benefits
(PDB)is also being received. The SSA-1709 is used to request and/or verify information regarding WC/PDB given to Social Security disability recipients so that the proper adjustment is made to their monthly benefits. The respondents are Federal, State, and local agencies administering WC/PDB, insurance carriers, and public or private self-insured companies. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 120,000. *Frequency of Response:* 1. *Average Burden per Response:* 15 minutes. *Estimated Annual Burden:* 30,000 hours. 3. *Disability Report-Appeal—20 CFR 404.1512, 416.912, 404.916(c), 416.1416(c)—0960-0144.* The SSA-3441-BK is used to secure updated resource and condition information from claimants seeking reconsideration of denied disability benefits. The claimant also has the option of providing the information during a personal interview or through SSA's Internet application. This information assists the State Disability Determination Services and administrative law judges in preparing for appeals and hearings and in issuing a decision. Respondents are individuals who appeal denial of Social Security disability income and Supplemental Security Income
(SSI)benefits, cessation of benefits, or who are requesting a hearing. *Type of Request:* Revision of an OMB-approved information collection. Collection method Number of respondents Frequency of response Average burden per response: (minutes) Estimated annual burden SSA-3441 (Paper Form) 404,506 1 45 303,380 Electronic Disability Collection System
(EDCS)635,873 1 45 476,905 I3441 (Internet Form) 72,341 1 120 144,682 Totals 1,112,720 924,967 *Estimated Annual Burden:* 924,967 hours. 4. *Third Party Liability Information Statement—42 CFR 433.136-433.139—0960-0323.* Identification of sources of third party insurance liable for medical care or services for Medicaid beneficiaries, which could be used to reduce Medicaid costs, is required under 42 U.S.C. 1396a(a)(25). Medicaid State agencies are mandated under 42 CFR 433.136-.139 to obtain this information on Medicaid applications and redeterminations as a condition of Medicaid eligibility. States are permitted to enter into agreements with the Commissioner of Social Security to make Medicaid eligibility determinations for aged, blind and disabled beneficiaries in those States. Applications for and redeterminations of SSI eligibility in jurisdictions with such agreements are also applications and redeterminations of Medicaid eligibility. Under these agreements, SSA obtains third party liability information using form SSA-8019 and provides that information to the State agencies which provide Medicaid under the terms of an approved plan in Title XIX of the Social Security Act. The Medicaid State agencies then use the information provided to attempt to bill any third parties liable for medical care, support or services for a beneficiary to guarantee that Medicaid remains the payer of last resort. The respondents are SSI applicants and beneficiaries. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 73,540. *Frequency of Response:* 1. *Average Burden per Response:* 5 minutes. *Estimated Annual Burden:* 6,128 hours. 5. *Claimant Statement About Loan of Food or Shelter; Statement About Food or Shelter Provided to Another—20 CFR 416.1130-416.1148—0960-0529.* Forms SSA-5062 and SSA-L5063 are used to obtain statements about food and/or shelter provided to an SSI claimant or recipient. SSA uses this information to determine whether food and/or shelter are bona fide loans or should be counted as income for SSI purposes. This determination can affect eligibility for SSI and the amount of SSI benefits payable. The respondents are claimants/recipients for SSI benefits and individuals that provide loans of food and/or shelter to SSI claimants/recipients. *Type of Request:* Extension of an OMB-approved information collection. Form number Number of respondents Frequency of response Average burden per response: (minutes) Estimated annual burden SSA-5062 65,540 1 10 10,923 SSA-L5063 65,540 1 10 10,923 Totals 131,080 21,846 *Estimated Annual Burden:* 21,846 hours. Dated: May 18, 2006. Elizabeth A. Davidson, Social Security Administration, Reports Clearance Officer. [FR Doc. E6-7995 Filed 5-25-06; 8:45 am] BILLING CODE 4191-02-P SOCIAL SECURITY ADMINISTRATION [Social Security Ruling, SSR 06-01p] Titles II and XVI: Evaluating Cases Involving Tremolite Asbestos-Related Impairments AGENCY: Social Security Administration. ACTION: Notice of Social Security ruling. SUMMARY: In accordance with 20 CFR 402.35(b)(1), the Commissioner of Social Security gives notice of Social Security Ruling, SSR 06-01p. This Ruling provides guidance on the types of impairments that may result from tremolite asbestos and how to evaluate disability claims under titles II and XVI of the Social Security Act based on these impairments. DATES: *Effective Date:* May 25, 2006. FOR FURTHER INFORMATION CONTACT: Michelle Hungerman, Office of Medical Policy, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235-6401, 1-410-965-2289 or TTY 1-800-966-5609, for information about this notice. SUPPLEMENTARY INFORMATION: Although we are not required to do so pursuant to 5 U.S.C. 552(a)(1) and (a)(2), we are publishing this Social Security Ruling in accordance with 20 CFR 402.35(b)(1). Social Security Rulings make available to the public precedential decisions relating to this Federal old-age, survivors, disability, supplemental security income, and special veterans benefits programs. Social Security Rulings may be based on determinations or decisions made at all administrative levels of adjudication, Federal court decisions, Commissioner's decisions, opinions of the Office of the General Counsel, and policy interpretations of the law and regulations. Although Social Security Rulings do not have the same force and effect as the statute or regulations, they are binding on all components of the Social Security Administration, in accordance with 20 CFR 402.35(b)(1), and are binding as precedents in adjudicating cases. If this Social Security Ruling is later superseded, modified, or rescinded, we will publish a notice in the **Federal Register** to that effect. (Catalog of Federal Domestic Assistance Programs 96.001 Social Security Disability Insurance; 96.006 Supplemental Security Income) Dated: May 19, 2006. Martin Gerry, Deputy Commissioner, Disability and Income Security Programs. Policy Interpretation Ruling Titles II and XVI: Evaluating Cases Involving Tremolite Asbestos-Related Impairments *Purpose:* To provide guidance on the types of impairments that may result from tremolite asbestos exposure and how to evaluate disability claims under titles II and XVI of the Social Security Act (the Act) based on these impairments. 1 1 For simplicity, we refer in this Ruling only to initial adult claims for disability benefits under titles II and XVI of the Act, and the steps of the sequential evaluation process we use to determine disability in those claims, 20 CFR 401.1520 and 416.920. We use a different sequential evaluation process for children who apply for benefits based on disability under title XVI of the Act. We describe that sequential evaluation process in 20 CFR 416.924. We also use separate sequential evaluation processes to determine whether an individual's disability has ended when we conduct continuing disability reviews and when we determine that an individual was disabled only for a specific period. These rules are set out in 20 CFR 401.1594, 416.994, and 416.994a. The guidance in this Ruling applies to all of the appropriate steps in those regulations as well. *Citations (Authority):* Sections 216(i), 223(d), 223(f), 1614(a)(3), and 1614(a)(4) of the Social Security Act, as amended; Regulations No. 4, subpart P, sections 404.1502, 404.1505, 404.1508-404.1513, 404.1519-1523, 404.1525-404.1529, 404.1545, 404.1560-404/1569a, 404.1593-404.1594, and appendix; 1; and Regulations No. 16, subpart I, sections 416.902, 416.905, 416.906, 416.908-416.913, 416.919, 416.920, 416.921-416.929, 416.945, 416.960-416.969a, 416.993-416.994a. Pertinent History Tremolite is a type of asbestos sometimes found in the mineral vermiculite. People may be exposed to tremolite from vermiculite in mining and in work-related activities involving the production of horticultural items, construction and insulation materials, brake pads, and other items. People may also be exposed to tremolite from living in an area where such mining or activities occur or from products made from vermiculite. exposure to tremolite asbestos has occurred in the Libby, Montana area and may have occurred in other areas as well. This ruling explains how we determine if impairments that may be caused by exposure to tremolite asbestos meet our definition of disability. 2 Sections 216(i) and 1614(a)(3) of the Act define “disability” 3 as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment (or combination of impairments) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. 4 2 The term “we” in this Social Security Ruling has the same meaning as in 20 CFR 404.1502 and 416.902. “We” refers to either the Social Security Administration or the State agency making the disability determination; that is, our adjudicators at all levels of the administrative review process and our quality reviewers. 3 Except for statutory blindness. 4 For individuals under age 18 claiming benefits under title XVI, disability will be established if the individual has a medically determinable physical or mental impairment (or combination of impairments) that results in “marked and severe functional limitations.” See section 1614(a)(3)(C) of the Act and 20 CFR 416.906. However, for simplicity, the following discussions refer only to claims of individuals claiming disability benefits under title II and individuals age 18 or older claiming disability benefits under title XVI. Policy Interpretation 1. *What Types of Impairments May Result from Exposure to Tremolite Asbestos?* When tremolite asbestos is inhaled, it penetrates the lung tissue by piercing the walls of the alveolar sacs and permanently lodges in the pleural lining. The tremolite accumulates in the pleural lining, and the affected lung and pleural areas become inflamed and scarred. This process may eventually result in chronic pulmonary insufficiency, such as asbestosis, disorders of pulmonary circulation, pleural plaques, pleural thickening, or pleural effusions. These impairments can interfere with the lungs' ability to exchange oxygen and carbon dioxide and can cause difficulty breathing by interfering with the lungs' ability to expand and contract normally. Decrease in blood flow to the lungs can result in prolonged right pulmonary artery hypertension, enlargement of the heart, and failure of the right ventricle (cor pulmonale). Inhalation of tremolite asbestos can also cause several types of cancers, primarily malignant mesothelioma of the pleura and bronchogenic carcinoma of the lung. Some factors that increase the chances of developing these impairments include increased length of exposure to tremolite asbestos, multiple routes of exposure to tremolite asbestos (for example occupational contact and household contact), and smoking. 5 5 With continuing scientific research, new medical information may emerge to further clarify the causes and nature of impairments related to tremolite asbestos exposure and to provide greater specificity for clinical and laboratory diagnostic techniques to document them. 2. *How Do We Consider Impairments Related to Tremolite Asbestos Exposure in the Sequential Evaluation Process?* As with all impairments, we follow the five-step sequential evaluation process in 20 CFR 404.1520 and 416.920 when we determine whether an individual is disabled. *Step 1.* We first determine whether the individual is working and whether the work is substantial gainful activity (SGA). If the individual is working and the work is SGA, we will find that the individual is not disabled, regardless of the individual's medical condition, age, education, and work experience. If the individual is not engaging in SGA, we go on to the next step. *Step 2.* If the individual is not working or the work is not SGA, we then establish whether the individual has a medically determinable impairment that is “severe.” The presence of chronic pulmonary insufficiency is established based on the individual's medical history, findings from a physical examination(s), and spirometric pulmonary function tests. Chest x-rays or other appropriate radiographic imaging techniques (for example, a computerized axial tomography
(CAT)scan) are often performed to support the presence of the impairment. Measurement of diffusing capacity of the lungs for carbon monoxide (DLCO), pulse oximetry, or resting or exercise arterial blood gas studies
(ABGS)may be performed to determine if the impairment has resulted in gas exchange abnormalities. In disorders of pulmonary circulation, a direct measurement of pulmonary artery pressure may have been obtained with right heart catheterization. Malignant mesothelioma and bronchogenic carcinoma are demonstrated by tissue biopsy. When a biopsy is performed, we generally need a copy of both the operative note and pathology report. If we cannot get these documents, we will accept the summary of hospitalization(s) or other medical reports. This evidence should include details of the findings at surgery and, whenever appropriate, the pathological findings. Once we determine that an impairment(s) exists, we evaluate its severity. As with any other medical condition, we will find that an impairment(s) caused by exposure to tremolite is a “severe” impairment(s) when, alone or in combination with another medically determinable physical or mental impairment(s), it significantly limits an individual's physical or mental ability to do basic work activities. When making a determination about whether an impairment(s) is severe, we will consider the effects of any symptoms (such as chest pain or complaints of shortness of breath on exertion) that could limit functioning. 6 We also recognize that limitations from impairments caused by exposure to tremolite may be more significant than would be expected based on objective findings alone. We will find that an impairment(s) is “not severe” only if it is a slight abnormality (or a combination of slight abnormalities) that has no more than a minimal effect on the individual's ability to do basic work activities. 6 See SSR 85-28, “Titles II and XVI: Medical Impairments That Are Not Severe” and SSR 96-3p, “Titles II and XVI: Considering Allegations of Pain and Other Symptoms In Determining Whether a Medically Determinable Impairment Is Severe.” If the individual does not have a medically determinable impairment that is “severe,” we will find that the individual is not disabled. If the individual does have a “severe” impairment, we will go on to the next step. *Step 3.* If an individual has a severe impairment(s), we next consider whether the impairment meets or medically equals a listing in the Listing of Impairments contained in appendix 1, subpart P of 20 CFR part 404. *Chronic Pulmonary Insufficiency:* We evaluate chronic pulmonary insufficiency under listing 3.02. The listing contains criteria based on spirometry, single breath DLCO, or ABGS. Chronic pulmonary insufficiency caused by exposure to tremolite asbestos may not have findings at rest that satisfy these criteria. If exercise ABGS cannot be obtained in these situations, we evaluate the impairment(s) at step 4, and if necessary, step 5 of the sequential evaluation process. *Cancer:* Malignant mesothelioma of the pleura meets listing 13.15A. Bronchogenic carcinoma meets listing 13.14A if it is inoperable, unresectable, recurrent, or has metastasized to or beyond the hilar nodes. If the individual has an impairment(s) that meets or medically equals the criteria of one of the foregoing listings or any other listing and meets the duration requirement, we will find that the individual is disabled. If not, we will continue with the sequential evaluation process. *Residual Functional Capacity.* If we find that the impairment(s) does not meet or medically equal a listing, or if we do not have enough information for a determination or decision at Step 3, we will assess the individual's residual functional capacity (RFC). 7 We must consider all symptoms that result from the individual's impairments, including those symptoms that result from impairments that are not severe, when we evaluate how these symptoms affect the individual's functional capacity. 8 7 See 20 CFR 404.1520(e) and 416.920(e). 8 See SSR 96-7p, “Titles II and XVI: Evaluation of Symptoms in Disability Claims: Assessing the Credibility of an Individual's Statements” and SSR 96-8p, “Titles II and XVI: Assessing Residual Functional Capacity in Initial Claims.” In addition, if the individual's treating source 9 has provided an opinion about what the individual can still do despite his or her impairment, we will give this opinion controlling weight in determining the individual's RFC when the opinion is well-supported by objective medical evidence and is not inconsistent with the other substantial evidence in the case record. 10 Even if the treating source's opinion is not given “controlling weight” (for example it is not well-supported by objective medical evidence), the opinion is still entitled to deference and must be weighed using all of the factors in 20 CFR 404.1527 and 416.927. In many cases, a treating source's medical opinion will be entitled to the greatest weight and should be adopted even if it does not meet the test for “controlling weight.” 9 See 20 CFR 404.1502 and 416.902. 10 See 20 CFR 404.1527 and 416.927; SSR 96-2p, “Titles II and XVI: Giving Controlling Weight To Treating Source Medical Opinions.” *Steps 4 and 5.* After we determine the individual's RFC, we then proceed to the fourth and, if necessary, the fifth step of the sequential evaluation process. 11 If the individual can do past relevant work, we will determine that the individual is not disabled (step 4). If we determine that the individual's impairment(s) precludes the performance of past relevant work or if there was no past relevant work, a finding must be made about the individual's ability to adjust to other work (step 5). The usual vocational considerations must be applied in determining the individual's ability to adjust to other work. 12 11 See 404.1545 and 416.945. 12 See 20 CFR 404.1560-404.1569a and 416.960-416.969a. *Effective Date:* This Ruling is effective on the date of its publication in the **Federal Register** . Cross-References: SSR 85-28, “Titles II and XVI: Medical Impairments That Are Not Severe,” SSR 96-2p, “Titles II and XVI: Giving Controlling Weight To Treating Source Medical Opinions,” SSR 96-3p, “Titles II and XVI: Considering Allegations of Pain and Other Symptoms in Determining Whether a Medically Determinable Impairment is Severe,” SSR 96-7p, “Titles II and XVI: Evaluation of Symptoms in Disability Claims: Assessing the Credibility of an Individual's Statements,” and SSR 96-8p, “Titles II and XVI: Assessing Residual Functional Capacity in Initial Claims.” [FR Doc. 06-4855 Filed 5-25-06; 8:45 am]
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Traces to 18 documents
CFR
13 references not yet in our index
  • 5 USC 78s(b)(1)
  • 17 CFR 240.19
  • Pub. L. 104-13
  • 31 CFR 210
  • 5 CFR 890.302(d)
  • 20 CFR 404.801-803
  • 42 CFR 433.136-433
  • 42 CFR 433.136
  • 20 CFR 416.1130-416
  • 20 CFR 401.1520
  • 20 CFR 401.1594
  • 20 CFR 404
  • 20 CFR 404.1560-404
Citation graph
cites case law
Notices
Notice of Social Security ruling
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 78c
U.S.C.§ 552
C.F.R.§ 200.30-3
C.F.R.§ 404.1512
C.F.R.§ 401.45
C.F.R.§ 404.909
C.F.R.§ 404.2011
Cite5 USC 78s(b)(1)
Cite17 CFR 240.19
Pub. L.Pub. L. 104-13
Cites 31 · showing 12Cited by 0 across 0 sources
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