[Federal Register Volume 62, Number 241 (Tuesday, December 16, 1997)]
[Notices]
[Pages 65836-65838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32750]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39412; File No. SR-Amex-97-42]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the American Stock Exchange, Inc. Providing for the Waiver of 
Shareholder Approval as a Prerequisite to Certain Issuances of 
Securities and the Removal of the Term ``Backdoor Listing'' From the 
Exchange's Company Guide

December 8, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 3, 1997, the 
American Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. On December 5, 1997, the Exchange filed 
with the Commission Amendment No. 1 to the proposed rule change.\2\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ Amendment No. 1 corrected a drafting error that 
inadvertently omitted Section 142 of the Exchange's Company Guide 
from the proposed rule change provision that would eliminate the 
term ``backdoor listing.'' See Letter from Claudia Crowley, Special 
Counsel, Legal & Regulatory Policy, Exchange, to Michael L. Loftus, 
Attorney, Division of Market Regulation, Commission, dated December 
3, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange seeks to amend Section 710 of its Company Guide to 
provide for the waiver of shareholder approval as a prerequisite to 
certain issuances of securities, when obtaining such approval would 
seriously jeopardize the financial viability of the issuer. The 
Exchange also seeks to revise Sections 142, 341, 713, and 1003 of its 
Company Guide to eliminate the term ``backdoor listing.''

[[Page 65837]]

    The text of the proposed rule change is available at the Office of 
the Secretary, the Exchange, and at the Commission.

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
    The Exchange, along with the New York Stock Exchange (``NYSE'') and 
The Nasdaq Stock Market, Inc. (``Nasdaq''), maintains guidelines 
requiring shareholder approval for certain issuances of securities. The 
Exchange's guidelines are set forth in Sections 711-713 of the 
Exchange's Company Guide. These requirements typically apply to the 
issuance of securities in connection with management stock option 
plans, large acquisitions, or discounted private placements involving 
the issuance of 20% or more of the issuer's shares. Because the process 
of obtaining shareholder approval may be time-consuming, the Exchange 
has long observed an unwritten policy allowing the waiver of the 
shareholder approval requirement in circumstances where the very 
process of obtaining shareholder approval would seriously jeopardize 
the issuer's ability to survive. The Exchange notes that the rules of 
the NYSE and Nasdaq specifically provide for such an exception.
    To conform its rules to those of the other marketplaces, the 
Exchange proposes to amend Section 710 of the Company Guide to provide 
that waivers of the shareholder approval required for certain issuances 
of securities may be granted, upon written application to the Exchange 
when: (i) The delay in securing shareholder approval would seriously 
jeopardize the financial viability of the issuer; (ii) reliance by the 
issuer on this exception is expressly approved by the audit committee 
of the issuer's board of directors or a comparable body; and (iii) the 
issuer mails a letter to all shareholders, at least ten days before the 
shares are to be issued, describing the transaction, alerting the 
shareholders to its omission to seek the shareholder approval that 
would otherwise be required, and indicating that the audit committee of 
the issuer's board of directors or a comparable body has expressly 
approved the exception.
    In addition, the Exchange proposes to eliminate the term ``backdoor 
listing'' from Section 341 of the Company Guide and certain related 
provisions.\3\ The Exchange currently uses the term to describe a 
merger between a listed and unlisted company, the net effect of which 
is so substantial that the Exchange considers it appropriate to 
evaluate the listing eligibility of the surviving entity under the 
Exchange's original listing guidelines. The Exchange will retain the 
substance of the affected Sections, but eliminate the term ``backdoor 
listing'' because the Exchange believes the phrase creates an 
undesirable image. The Exchange contends that Section 341 actually 
enhances regulation by requiring a substantially changed company to 
meet original listing guidelines in order to remain listed.
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    \3\ Conforming changes are also proposed to be made to Sections 
142, 713 and 1003 of the Company Guide.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Section 6(b)(5),\5\ 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 
a national market system, and to protect investors and the public 
interest.
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    \4\ 15 U.S.C. Sec. 78f(b).
    \5\ 15 U.S.C. Sec. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe 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

    The Exchange did not solicit or receive written comments with 
respect to the proposed rule change.

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

    Because the foregoing proposed rule change: (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 for 30 days from December 5, 1997, 
the date on which it was filed,\6\ and the Exchange provided the 
Commission with written notice of its intent to file the proposed rule 
change at least five business days prior to the filing date, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \7\ and 
Rule 19b-4(e)(6) \8\ thereunder.
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    \6\ The proposed rule change filing is deemed filed as of the 
date Amendment No. 1 was received by the Commission.
    \7\ 15 U.S.C. Sec. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(e)(6).
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    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. 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 persons, 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 Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-Amex-97-42 and should be 
submitted by January 6, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

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[[Page 65838]]

Jonathan G. Katz,
Secretary.
[FR Doc. 97-32750 Filed 12-15-97; 8:45 am]
BILLING CODE 8010-01-M