
[Federal Register: September 30, 2008 (Volume 73, Number 190)]
[Notices]               
[Page 56869-56872]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30se08-103]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58625; File No. SR-Amex-2008-51]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change as Modified by Amendment Nos. 
1 and 2 Thereto Related to Amendments to Rule 991 (Communications to 
Customers) and Rule 921 (Opening of Accounts)

September 23, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 56870]]

``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on June 25, 2008, the American Stock Exchange LLC (the 
``Amex'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. Amex filed Amendment Nos. 1 and 2 to the proposed rule change 
on August 22, 2008, and September 5, 2008, respectively.\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\ Amendment Nos. 1 and 2 modified certain definitions in and 
made non-substantive corrections to proposed Rule 991.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Amex Rule 991 (``Communications to 
Customers'') to delete references to certain provisions of the 
Securities Act of 1933 (the ``Securities Act'') that no longer apply to 
standardized options \4\ issued by registered clearing agencies and 
update and reorganize the rule for greater clarity. In addition, the 
proposal seeks to amend Amex Rule 921 (``Opening of Account'') in 
connection with the information member organizations must obtain from 
customers. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room and http://
www.amex.com.
---------------------------------------------------------------------------

    \4\ ``Standardized Option'' is defined in Rule 19b-1 under the 
Exchange Act to mean options contracts trading on a registered 
national securities exchange, an automated quotation system of a 
registered national securities association, or a foreign exchange 
which relate to options classes the terms of which are limited to 
specific expiration dates and exercise prices, or such other 
securities as the Commission man, by order, designate.
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections (A), (B), and (C) below, of the most significant aspects of 
such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
a. Rule 991 (Communications to Customers)
    On December 23, 2002, the Commission published final rules that 
exempt standardized options issued by registered clearing agencies and 
traded on a registered national securities exchange or registered 
national securities association from the Securities Act (other than the 
anti-fraud provisions) and the registration requirements of the 
Exchange Act.\5\ Since the Securities Act and the rules thereunder 
(other than the anti-fraud provisions) are no longer applicable to such 
standardized options, the Amex proposes to remove elements of the 
Securities Act that are embedded in Amex Rule 991. In particular, the 
Exchange proposes to remove all references to a ``prospectus'' from 
Rule 991. Prospectuses are no longer required for standardized options, 
and The Options Clearing Corporation (``OCC'') has, in fact, ceased 
publication of a prospectus.\6\ In addition, the proposed amendments 
would update and reorganize Rule 991. For uniformity, the Financial 
Industry Regulatory Authority, Inc. and the Chicago Board Options 
Exchange, Inc. have filed proposed rule amendments with the Commission 
to implement similar rule language and format changes.\7\
---------------------------------------------------------------------------

    \5\ See ``Exemption for Standardized Options From Provisions of 
the Securities Act of 1933 and From the Registration Requirements of 
the Securities Exchange Act of 1934; Final Rule,'' Securities Act 
Release No. 8171 and Securities Exchange Act Release No. 47082 (Dec. 
23, 2002), 68 FR 188 (Jan. 2, 2003).
    \6\ The options disclosure document (the ``ODD'') prepared in 
accordance with Rule 9b-1 under the Exchange Act is not deemed to be 
a prospectus. 17 CFR Sec.  230.135b. See, e.g., Securities Act 
Release No. 8049 (Dec. 21, 2001), 67 FR 228 (Jan. 2, 2002).
    \7\ See Exchange Act Release No. 57720 (Apr. 25, 2008) 73 FR 
24332 (May 2, 2008) (SR-FINRA-2008-13) and Exchange Act Release No. 
58138 (Jul. 10, 2008), 73 FR 20886 (Jul. 16, 2008) (SR-CBOE-2007-
30).
---------------------------------------------------------------------------

i. Deletion of Certain Provisions of Rule 991
    Amex Rule 991 contains a number of references to a prospectus and 
other Securities Act requirements. The Exchange proposes to delete the 
following from Rule 991:
     Rule 991(a)(iv), which references the Securities Act 
prospectus definition;
     Rule 991(d), which incorporates Securities Act principles 
in that it prohibits written material concerning options (i.e., an 
offering) from being furnished to any person who has not previously or 
contemporaneously received the current ODD;
     Rule 991(e)(ii), which defines the term ``Educational 
Material;'' \8\
---------------------------------------------------------------------------

    \8\ This paragraph essentially incorporates language of Rule 
134a under the Securities Act. While this amendment would eliminate 
the separate educational material category, as discussed below, the 
Exchange also proposes to revise the definition of Sales Literature 
to include educational material.
---------------------------------------------------------------------------

     Commentary.02A to Rule 991, which outlines what is 
permitted in an ``Advertisement;'' \9\ and
---------------------------------------------------------------------------

    \9\ This paragraph essentially incorporates language of Rule 134 
under the Securities Act.
---------------------------------------------------------------------------

     Commentary.03 to Rule 991, which concerns educational 
material.\10\
---------------------------------------------------------------------------

    \10\ See note 7, supra.
---------------------------------------------------------------------------

ii. Re-designation of Rule 991(a) to Proposed Rule 991(d) and Related 
Amendments
    Amex Rule 991(a) currently provides an outline of the ``General 
Rule'' for options communications. The Exchange proposes to re-
designate paragraph (a) as paragraph (d), and to incorporate 
limitations on the use of options communications contained in current 
Commentary.01 to Rule 991 into proposed Rule 991(d). In addition, 
proposed Rule 991(d)(iii) would amend Rule 991(a)(iii) by clarifying 
the types of cautionary statements and caveats that are prohibited. As 
previously noted, the Amex proposed to delete Rule 991(a)(iv).
iii. Proposed Amendments to Rule 991(b)
    Amex proposes to amend Rule 991(b) to include the types of 
communications proposed to be added to the definition of ``Options 
Communications'' in proposed Rule 991(a). Proposed Rule 991(b)(ii) and 
(b)(iii) would also amend the current requirement to obtain advanced 
approval by a Registered Options Principal (``ROP'') for most options 
communications by exempting certain options communications, defined as 
``Correspondence'' and ``Institutional Sales Material.'' Specifically, 
proposed Rule 991(b)(ii) would exempt Correspondence from the pre-
approval requirement unless the Correspondence is distributed to 25 or 
more existing retail customers within any 30 calendar day period, and 
make any financial or investment recommendation or otherwise promotes a 
product or service of the member. All correspondence would be subject 
to the supervision and review requirements of Rule 922. Proposed Rule 
991(b)(iii) would exempt Institutional Sales Material from the pre-
approval requirement if the material is

[[Page 56871]]

distributed to ``qualified investors'' as defined in Section 3(a)(54) 
of the Exchange Act.\11\
---------------------------------------------------------------------------

    \11\ See 15 U.S.C. Sec.  78c(a)(54).
---------------------------------------------------------------------------

    Pre-approval by a ROP would, however, be required with respect to 
independently prepared reprints. In addition, proposed Rule 991(b)(iv) 
would require that firms retain options communications in accordance 
with the recordkeeping requirements of Rule 17a-4 under the Exchange 
Act.\12\ The proposed rule would also require that firms retain other 
related documents in the form and for the time periods required for 
options communications by Rule 17a-4.
---------------------------------------------------------------------------

    \12\ 17 CFR Sec.  240.17a-4. More specifically, Rule 17a-4(b)(4) 
requires that a broker-dealer retain ``originals of all 
communications received and copies of all communications sent * * * 
including all communications which are subject to rules of a self-
regulatory organization of which the member, broker or dealer is a 
member regarding communications with the public.''
---------------------------------------------------------------------------

iv. Proposed Amendments to Rule 991(c)
    Amex Rule 991(c) currently requires members and member 
organizations to obtain approval for every advertisement and all 
educational material from the Exchange. This requirement applies 
regardless of whether the options communications are used before or 
after delivery of a current ODD. The Exchange proposes to amend this 
provision to require approval by the Exchange only with respect to 
communications used prior to the delivery of a current ODD. The 
Exchange's pre-approval requirement for options communications used 
subsequent to the delivery of the ODD would be eliminated because the 
ODD should help alert the customer to the characteristics and risks 
associated with trading in options and because Rule 991(b) requires the 
ROP of a member organization to pre-approve options communications, 
subject to exceptions for ``Correspondence'' and ``Institutional Sales 
Material.'' Rule 991(c) would also be amended to include the types of 
communications added to the definition of ``Options Communications'' in 
proposed Rule 991(a).
v. Re-designation of Rule 991(e) as Proposed Rule 991(a) and Related 
Amendments
    Rule 991(e) currently defines the terms used in Rule 991. The Amex 
proposes to re-designate paragraph (e) as paragraph (a). The Exchange 
also proposes to amend the definition of ``Options Communications'' in 
proposed Rule 991(a) to expand the types of communications governed by 
Rule 991 to include independently prepared reprints and other 
communications between a member or member organization and a customer. 
The Exchange proposes to amend the definitions of ``Advertisement'' and 
``Sales Literature''; and define ``Correspondence,'' ``Institutional 
Sales Material,'' ``Public Appearances'' and ``Independently Prepared 
Reprints'' to clarify the rule. In addition, as previously noted, Amex 
proposes to delete the definition of ``Educational Material.''
vi. Proposed Rule 991(e)
    Proposed Rule 991(e) would set forth (i) standards for options 
communications that are not preceded or accompanied by an ODD and (ii) 
standards for options communications used prior to delivery of an ODD. 
These requirements generally clarify and restate the requirements 
contained in current Commentary .02 to Rule 991.
vii. Related Commentaries
    Proposed Rule 991(e)(i)(B) would require options communications to 
contain contact information for obtaining a copy of the ODD. Proposed 
Commentary .01 to Rule 991 would include the provisions found in 
current Commentary .02A to Rule 991 regarding how this requirement may 
be satisfied. In addition, as noted above, the provisions of current 
Commentary .01 to Rule 991 regarding limitations on the use of options 
communications would be incorporated into proposed Rule 991(d).
    As previously noted, the provisions of current Commentary .02 to 
Rule 991 that outline what is permitted in an advertisement would be 
deleted, and the provisions relating to standards for options 
communications used prior to delivery of the ODD would be incorporated 
into proposed Rule 991(e)(ii).
    Current Commentary .03 to Rule 991 regarding educational materials 
also would be deleted, as noted above.
    Current Commentary .04 to Rule 991 sets forth the standards 
applicable to Sales Literature. Current Commentary .04A sets forth the 
requirement that Sales Literature shall state that supporting 
documentation for any claims, comparisons, recommendations, statistics 
or other technical data will be supplied upon request. The Exchange 
proposes to re-designate current Commentary .04A as proposed Rule 
991(d)(vii).
    Current Commentary .04B to Rule 991 relates to standards for Sales 
Literature that contain projected performance figures. Current 
Commentary .04C relates to standards for Sales Literature that contains 
historical performance figures. The Exchange proposes to re-designate 
current Commentary .04B as proposed Commentary .02 to Rule 991 and 
current Commentary .04C as proposed Commentary .03 to Rule 991.
    Rule 991 currently requires that a copy of the ODD precede or 
accompany options related sales literature. The Exchange proposes to 
modify the ODD delivery requirement applicable to sales literature to 
provide that an ODD must precede or accompany any communication that 
conveys past or projected performance figures involving options or 
constitutes a recommendation pertaining to options.\13\
---------------------------------------------------------------------------

    \13\ See proposed Rule 991(e)(i)(C) and proposed Commentaries 
.02 and .03 to Rule 991.
---------------------------------------------------------------------------

    A notice providing the name and address of a person from whom the 
ODD may be obtained would be required in sales literature that does not 
contain a recommendation of past or projected performance figures. 
Because Amex is proposing to merge educational material into the sales 
literature category,\14\ this amendment would continue to allow 
communications that are educational in nature to be disseminated 
without being preceded or accompanied by a copy of the ODD.
---------------------------------------------------------------------------

    \14\ See proposed Rule 991(a)(ii).
---------------------------------------------------------------------------

    The Exchange proposes to re-designate current Commentary .04D to 
Rule 991 as proposed Commentary .04 to Rule 991. The Exchange proposes 
to delete current Commentaries .04E, F and G to Rule 991. The Exchange 
believes Commentaries .04E and F are unnecessary because worksheets are 
included in the definition of Sales Literature. In addition, the 
Exchange believes Commentary .04G is no longer necessary because the 
Exchange is proposing to clarify the recordkeeping requirements 
applicable to options communications in proposed Rule 991(b)(iv).
b. Rule 921 (Opening of Accounts)
    The proposal would also amend Rule 921 in connection with the 
opening of options accounts. Currently, Commentary .01 to Rule 921 
requires a member organization to obtain certain information about its 
options customers in order to comply with the due diligence requirement 
in opening a new account under Rule 921(c). In order to conform to the 
requirements of Rule 17a-3(a)(17) under the Exchange Act, the proposed 
amendments would require that in addition to all the essential 
information to determine suitability, a member organization must

[[Page 56872]]

also obtain the customer's name, Tax Identification Number, address, 
and telephone number.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6 of the Act,\15\ in general, and further the objectives 
of Section 6(b)(5),\16\ in particular, in that they are designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, by providing the investing 
public with options communications rules that are designed to provide 
appropriate safeguards and greater clarity by promoting harmonization 
between the Amex and other SRO options communications rules and 
conforming Rule 921 to the requirements of Rule 17a-3(a)(17) under the 
Exchange Act. The Exchange also believes that the proposal is 
consistent with Section 6(b)(5) of the Exchange Act because the 
proposed amendments to Amex Rule 991 reflect amendments to the 
Securities Act that generally exempt standardized options, and will 
update and reorganize the Rule.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change 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

    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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will (A) by order approve 
such proposed rule change, or (B) institute proceedings to determine 
whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Amex-2008-51 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2008-51. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the Amex. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Amex-2008-51 and should be 
submitted on or before October 21, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22962 Filed 9-29-08; 8:45 am]

BILLING CODE 8010-01-P
