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SECURITIES AND EXCHANGE COMMISSION

17 CFR PART 200

Release No. 34-35548

Establishment of Commission Quorum Requirement.

ACTION:  Final rule.

SUMMARY:  The Securities and Exchange Commission ("Commission")
is amending its rules to specify the number of Commission members
that constitute a quorum.  The amendments are designed to promote
flexibility, finality, and collegiality of agency decisionmaking.

EFFECTIVE DATE:  [Thirty days after publication in the FEDERAL
REGISTER].

FOR FURTHER INFORMATION CONTACT:  Walter B. Stahr, Assistant
General Counsel, or C. Hunter Jones, Special Counsel, Office of
the General Counsel, at (202) 942-0888.

SUPPLEMENTARY INFORMATION:
     The Commission is modifying 17 CFR 200.40 - 42 to provide
that three members constitute a quorum of the Commission, with
two important exceptions.  First, if the number of members in
office is two or one, that number is sufficient for a quorum. 
Second, if the number of members in office minus the number
disqualified with respect to a matter is two, two constitute a
quorum for purposes of that matter.
     The Securities Exchange Act of 1934 ("Exchange Act"), unlike
many statutes that establish federal agencies, does not establish
a quorum requirement for the Commission.  In the past, the
practice of the Commission has generally been that three members
constitute a quorum.  See In re International Paper & Power Co.,
2 SEC 792, 793 n.1 (1937), rev'd on other grounds sub nom.
Lawless v. SEC, 105 F.2d 574 (1st Cir. 1939).  This practice,
however, has never been formally adopted as a policy or rule.
     The Commission, which currently has only three members, has
reconsidered its quorum practice.  It has decided to adopt a
general rule, with the exceptions discussed below, that three
commissioners are required for a quorum.  Although this rule may
create difficulties when only three commissioners are in office,
these difficulties are outweighed by the benefits of having all
three commissioners deliberate and vote on matters.
     Situations arise, however, in which only two members are
able to participate in a matter.  When three members are in
office, for example, one member may recuse himself or herself
from considering a matter.  See 17 CFR 200.60.  Similarly, it is
possible that, at some point, there would be only two
commissioners in office.  In the past, the Commission has
resorted to the duty officer procedure to deal with urgent
matters as to which only two commissioners are available.  See 17
CFR 200.42.  The duty officer procedure, however, because it is a
form of delegation, is not available for rulemaking.  See
Exchange Act Section 4A(a).  Moreover, although a duty officer's
action is Commission action unless and until the Commission
directs otherwise, see 17 CFR 200.42(c)(3), the Commission cannot
affirm the duty officer's action when only one other Commission
member is available to consider the matter.  Finally, and perhaps
most importantly, it is more consistent with the collegial nature
of the Commission to allow the two qualified members to address
such matters as a Commission.
     The Commission also believes that it would be appropriate to
preserve the flexibility necessary to take effective action in
the event, however unlikely, that there would be a period with
only one commissioner in office.  To provide adequate flexibility
in this unlikely situation, the Commission is providing that one
commissioner would constitute a quorum if no other commissioners
are in office.  The Commission does not believe it is necessary,
at this time, to provide that one commissioner may constitute a
 
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quorum when disqualifications result in only one commissioner
being available to deal with a particular matter.
     Accordingly, the Commission is adopting a new rule, at 17
CFR 200.41, providing that three members constitute a quorum
unless only two members or one member are in office, or unless,
because of disqualifications, only two members are available to
deal with a particular matter.  The Commission is also amending
17 CFR 200.40 to clarify that it applies only to meetings that
are subject to the Government in the Sunshine Act.
     The Commission has determined that these amendments and
additions to its procedural rules relate solely to the agency's
organization, procedure or practice.  Therefore, the provisions
of the Administrative Procedure Act ("APA") regarding notice and
comment are not applicable.  See 5 U.S.C. 553.  Similarly, the
provisions of the Regulatory Flexibility Act, which apply only
when notice and comment are required by the APA or other laws,
are not applicable.  See 5 U.S.C. 601 - 612.
Effects On Competition
     Section 23(a)(2) of the Exchange Act requires the
Commission, in adopting rules under the Exchange Act, to consider
the anti-competitive effects of such rules, if any, and to
balance any impact against the regulatory benefits gained in
furthering the purposes of the Exchange Act.  See 15 U.S.C.
78w(a)(2).  The Commission has considered the changes adopted in
this release in light of the standards cited in section 23(a)(2)
and believes that their adoption would not impose any burden on
competition not necessary or appropriate in furtherance of the
Exchange Act.
Statutory Basis of Rule
     The amendments to the Commission's rules are adopted
pursuant to the authorities set forth therein.
List of Subjects
17 CFR Part 200
     Administrative practice and procedure, Authority delegations
(Government agencies).
Text of Amendments
      For the reasons set out in the preamble, Title 17, Chapter
II, Part 200 of the Code of Federal Regulations is amended as
follows:
PART 200 -- ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION
AND
REQUESTS
     1.  The authority citation for Part 200, Subpart B, is
revised to read as follows:
     AUTHORITY:  5 U.S.C. 552b; 15 U.S.C. 78d-1 and 78w.

     2.  Section 200.40 is revised to read as follows:
 200.40  Joint disposition of business by Commission meeting.
     Any meeting of the Commission that is subject to the
provisions of the Government in the Sunshine Act, 5 U.S.C. 552b,
shall be held in accordance with Subpart I of this part.  The
Commission's Secretary shall prepare and maintain a Minute Record
reflecting the official action taken at such meetings.

     3.  Sections 200.41 and 200.42 are redesignated as    200.42
and 200.43, and   200.41 is added to read as follows:
 200.41  Quorum of the Commission.
     A quorum of the Commission shall consist of three members;
provided, however, that if the number of Commissioners in office
is less than three, a quorum shall consist of the number of
members in office; and provided further that on any matter of
business as to which the number of members in office, minus the
number of members who either have disqualified themselves from

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consideration of such matter pursuant to   200.60 or are
otherwise disqualified from such consideration, is two, two
members shall constitute a quorum for purposes of such matter.


     4.  In newly redesignated   200.42, in paragraph (a) the
reference to "  200.42" is revised to read "  200.43" and in
paragraph (b) the reference to "  200.41(a)" is revised to read
"  200.42(a)".

     5.  In newly redesignated   200.43(c)(1), the reference to
"  200.42(a)" is revised to read "  200.43(a)" and the reference
to "  200.41" is revised to read "  200.42".

     6.  In   200.401(a), the reference to "  200.41 or   200.42"
is revised to read "  200.42 or   200.43".

By the Commission.

                                   Jonathan G. Katz
                                   Secretary


Dated:  March 30, 1995