[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Notices]
[Pages 42667-42669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20882]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-37550; File No. SR-Amex-96-23]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Partial Approval of Proposed Rule Change by the 
American Stock Exchange, Inc. Relating to Various Changes to the 
Exchange's Company Guide

August 9, 1996.
    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 June 27, 1996, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. On July 11, 1996, the Exchange submitted to 
the Commission 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. As discussed below, the 
Commission is also granting accelerated approval to a portion of the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Claudia Crowley, Special Counsel, Amex, to 
Jennifer Choi, Attorney, Office of Market Supervision, Division of 
Market Regulation, Commission, dated July 11, 1996 (``Amendment No. 
1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend various sections of the Exchange's 
Company Guide to simplify the additional listing process, add a new 
shareholder distribution guideline applicable to banks, and make 
several minor ``housekeeping'' changes.

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 self-regulatory organization 
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 self-regulatory organization 
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

Additional Listings

    The Exchange proposes to simplify its additional listing process. 
The additional listing process is an essential part of the Exchange's 
program to oversee its market generally and monitor the compliance of 
listed companies with Sections 711-713 of the Company Guide, which 
require prior shareholder approval of certain transactions involving 
the issuance of stock, e.g., issuances of 20% or more of the 
outstanding shares at a discounted price or to effect an acquisition. 
Before a listed company issues additional securities of an already 
listed class, it is required to submit an additional listing 
application and obtain the Exchange's prior approval; similarly, 
transfer agents for listed companies are required to contact the 
Exchange to make sure that a company's request for new share issuances 
has been so approved. The Exchange typically receives in excess of 300 
additional listing applications per year.
    The Exchange has determined that it can substantially simplify the 
additional listing process for listed companies and transfer agents 
alike without undercutting its ability to regulate its market. To 
facilitate this, the Exchange has for the first time prepared a 
simplified, standardized application form, which can be used for all 
additional listings.\4\ This form will allow companies to incorporate 
by reference any transactional information that is set forth in a proxy 
statement, prospectus or certain other descriptive documents, thus 
eliminating the need to provide duplicative summary information on the 
application itself. This will also enable the Exchange to significantly 
revise the applicable Company Guide provisions by eliminating confusing 
and unnecessary instructions.\5\
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    \4\ The Commission notes that the new form being adopted will 
require listed companies to provide substantially the same 
information as is required under the existing procedures. The form 
provides for (where applicable): Information for Stock Options, 
Plans and Grants; Information for a Private Placement; Information 
for an Acquisition; Information for Substitution Listing; 
Information for a Forward Stock Split or Stock Dividend; and a 
Reconciliation Sheet. Companies wanting to list additional shares 
must now complete this form, whereas previously, companies had the 
option of doing a ``short form'' or a ``standard form'' application.
    \5\ The Commission notes that in simplifying its listings 
process, the Amex proposes the following changes to its Company 
Guide: Sec. 310 is renumbered as Sec. 303; Secs. 311-313 is deleted; 
Sec. 320 is deleted; Sec. 321 is renumbered as Sec. 304 with 
modification made to text; new Sec. 305 is added (Listing of Shares 
Pursuant to a Reverse Split/Substitution Listing); and Sec. 330 is 
renumbered as Sec. 306.
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    The Exchange is also proposing to eliminate the requirement that 
each application contain a reconciliation of all of the company's 
previously listed share reserves, retaining the reconciliation 
requirement only in the case of stock dividends, splits, or 
substitution listings. Rather than require issuers and transfer agents 
to engage in this extremely time-consuming exercise, which in most 
circumstances provides little practical information and delays the 
approval of pending corporate transactions, the Exchange has determined 
to generally allow transfer agents to reconcile their records of shares 
outstanding with the Exchange's on a quarterly basis. A similar 
procedure is followed at the New York Stock Exchange and in a series of 
informal discussions, all of the Exchange's major transfer agents 
indicated that they would prefer that the Exchange adopt it as well.
    Together, these new procedures should provide substantial benefits 
to listed companies and the Exchange alike.

[[Page 42668]]

Distribution Guidelines for Banks

    In recent years, the Exchange has listed a number of local banks, 
some immediately following their conversion from mutual association to 
stock ownership (``demutualizing'').\6\ Such banks often have small, 
but because of their local concentration, stable ranks of shareholders. 
Even small banks are generally well above the financial criteria for 
original listing and due to the highly regulated nature of the banking 
industry there is usually little ``business risk'' associated with such 
listings.
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    \6\ These transactions are typically conducted, in effect, as 
``best efforts'' underwritings in the sense that it is impossible to 
predict how many deposit-holders will elect to become shareholders 
and the conversion itself is not contingent upon the 
``accumulation'' of a specific number of shareholders.
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    The Exchange's public distribution guidelines call for 500,000 
shares and 800 holders, or 1,000,000 shares and 400 holders. The 
Exchange has occasionally found that otherwise attractive local banks 
have less than one million shares in their public float, and fewer than 
800 shareholders. Although the mix of shareholder and public float 
requirements is intended to accommodate a specialist's needs in 
maintaining a fair and orderly market, the Exchange has observed that 
local banks are generally steady traders with relatively stable prices, 
and that specialists have not encountered difficulties in trading them.
    The Exchange is therefore proposing to adopt a specific 
distribution guideline applicable to banks, which would require only 
400 public holders of a least 500,000 shares.\7\ It should be noted 
that presently there are two other circumstances where the Exchange 
lists issues with a float of less than one million shares and only 400 
holders: those are stocks which trade 2,000 shares a day or more, and 
warrants sold as part of a unit offering. The Exchange has not 
experienced any difficulties in providing an appropriate marketplace 
for these listings, and, as noted above, given the stability of the 
banks' shareholder bases and the regulated nature of the banking 
industry, the Exchange does not anticipate any difficulties with 
banking stocks.
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    \7\ The new distribution provision for banks will be included in 
Section 102 of the Amex's Company Guide.
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Miscellaneous

    There are several changes necessary to conform particular sections 
of the Company Guide to changes previously made to other sections:
    Section 1003 of the Company Guide should be amended to provide that 
for continued listing purposes a company needs to have 300 public 
holders, and not 300 round lot holders. Similar changes were previously 
made to the Exchange's other public distribution guidelines.\8\
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    \8\ See Section 102(a)--Distribution--of the Company Guide which 
describes the minimum number of shareholders as ``public 
shareholder.'' The Company Guide notes that the term ``public 
shareholders,'' as used therein, includes both shareholders of 
record and beneficial holders, but is exclusive of the holdings of 
officers, directors, controlling shareholders and other concentrated 
(i.e., 5% or greater) affiliated or family holdings.
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    Section 505, which provides that the Exchange would not look 
favorably upon a stock split that would result in a price below $5, 
should be amended to refer to a $3 minimum price, to be consistent with 
the $3 stock price original listing guideline set forth in Section 
102(b).\9\
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    \9\ The Commission notes that the $3 minimum price was approved 
in Securities Exchange Act Release No. 24043 (January 30, 1987), 52 
FR 4071.
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    Additionally, Section 220(b) of the Company Guide should be amended 
to conform to changes that were previously made to Section 140 of the 
Company Guide with respect to the maximum listing fee applicable to 
foreign issuers.\10\
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    \10\ The Commission notes that the maximum $25,000 fee for non-
U.S. issuers already listed on a foreign exchange was approved in 
Securities Exchange Act Release No. 34272 (June 28, 1994), 59 FR 
34701.
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    Finally, Sections 510 and 512 of the Company Guide should be 
amended to conform to the three-day settlement time frame (``T+3'').
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that 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 regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to protect and 
perfect the mechanism of a free and open market and a national market 
system, and in general, to protect investors and public interest.

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

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange, however, has requested that the Commission find good 
cause pursuant to Section 19(b)(2) of the Act for approving the 
proposed changes to Sections 510 and 512, which conforms Amex rules to 
T+3 settlement, of the Company Guide on an accelerated basis prior to 
the 30th day after publication in the Federal Register.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. 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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Room in Washington, DC. Copies of 
such filing will also be available for inspection and copying at the 
principal office of the Amex. All submissions should refer to the File 
No. SR-Amex-96-23 and should be submitted by [insert date 21 days from 
date of publication].

V. Commission Findings and Order Granting Partial Accelerated Approval 
of the Proposed Rule Change

    After careful consideration, the Commission has concluded, for the 
reasons set forth below, that the amendments to sections 510 and 512 of 
the Amex's Company Guide are consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange and, in particular the requirement of Section 
6(b)(5)\11\ of the Act, which states in part, that the rules of an 
exchange must be designed to foster cooperation and coordination

[[Page 42669]]

with persons engaged in regulating, clearing, settling, and processing 
information.
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    \11\ 15 U.S.C. 78f(b)(5).
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    On October 6, 1993, the Commission adopted Rule 15c6-1 under the 
Act,\12\ which establishes three business days after the trade date 
(``T+3''), instead of five business days (``T+5''), as the standard 
settlement cycle for most securities transactions.\13\ The rule became 
effective on June 7, 1995.\14\ Although the Commission previously 
approved a number of changes to the Amex's rules to conform them to the 
T+3 requirement of Commission Rule 15c6-1,\15\ Sections 510 and 512 
were not amended to reflect the change in the settlement cycle.
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    \12\ 17 CFR 240.15c6-1.
    \13\ See Securities Exchange Act Release No. 33023 (October 6, 
1993), 58 FR 52891.
    \14\ Securities Exchange Act Release No. 34952 (November 9, 
1994), 59 FR 59137.
    \15\ See Securities Exchange Act Release No. 35553 (March 31, 
1995), 60 FR 18161.
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    It has been more than a year since the T+3 settlement cycle has 
been in operation. The current Sections 510 and 512 of the Amex's 
Company Guide, which provide for a T+5 settlement cycle, is 
inconsistent and incompatible with Commission's T+3 rules. Amex's 
current proposal will amend these sections to bring them in conformity 
with the mandated T+3 settlement cycle. Accordingly, the Commission 
believes that, because the Exchange has proposed the amendments to 
Sections 510 and 512 merely to reflect the T+3 cycle, the proposed rule 
change is consistent with the purposes of the Act.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after publication of the proposed 
rule change in the Federal Register. The Commission believes that 
accelerated approval of this portion of the proposal will benefit 
investors by eliminating the obsolete references to five-day 
settlement. Deleting the outdated references to T+5 settlement cycle as 
soon as possible will be beneficial because this amendment will 
eliminate any opportunities for confusion.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the portion of the proposed rule change (File No. SR-Amex-96-23) 
containing the amendments to Sections 510 and 512 of the Amex's Company 
Guide be and is hereby approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-20882 Filed 8-15-96; 8:45 am]
BILLING CODE 8010-01-M