[Federal Register Volume 64, Number 112 (Friday, June 11, 1999)]
[Notices]
[Pages 31667-31673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14871]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41479; File No. SR-NYSE-98-32]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Approving Proposed Rule Change and Notice of Filing and Order 
Granting Accelerated Approval of Amendment Nos. 1 and 2 Thereto 
Relating to Shareholder Approval of Stock Option Plans

June 4, 1999.

I. Introduction

    On October 13, 1998, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend the Exchange's 
shareholder approval policy (``Policy'') with respect to stock option 
and similar plans. The proposed rule change was published for comment 
in the Federal Register on November 19, 1998.\3\ The Exchange submitted 
an amendment to the filing on November 17, 1998.\4\ On December 26, 
1998, the Commission extended the comment period until January 25, 
1999.\5\ The Commission received 19 comments on the proposal in 
response to both the regular and extended comment periods.\6\ On March 
12, 1999, the Exchange submitted Amendment No. 2.\7\ This order 
approved the proposal, as amended, on a pilot basis until September 30, 
2000.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ /Securities Exchange Act Release No. 40679 (November 13, 
1998), 63 FR 64304.
    \4\ Letter from James E. Buck, Senior Vice President and 
Secretary, NYSE to Richard C. Strasser, Assistant Director, Division 
of Market Regulation, SEC, dated November 25, 1998 (``Amendment No. 
1''). In Amendment No. 1, the Exchange clarified the reason why its 
proposed ``broadly-based'' definition is limited to ``exempt 
employees'' under the Fair Labor Standards Act of 1938 in the 
eligibility part of the definition but not in the participation 
part.
    \5\ In response to the solicitation of comments, the Commission 
received a request to extend the comment period. Letter from Sarah 
Teslik, Council of Institutional Investors, to Jonathan G. Katz, 
Secretary, SEC, dated November 20, 1998 (``CII Comment Period 
Extension Request''). As originally noticed, the comment period 
expired on December 10, 1998.
    \6\ Letters from Aldo Del Nou to Commissioner (sic) Arthur 
Levitt, SEC, dated October 17, 1998; CII Comment Period Extension 
Request; Kurt N. Schacht, Chief Legal Officer, State of Wisconsin 
Investment Board to Jonathan G. Katz, Secretary, SEC, dated November 
30, 1998; Nell Minow, Lens Investment Management, LLC, to Jonathan 
G. Katz, Secretary, SEC, dated December 1, 1998; Sarah Teslik, 
Council of Institutional Investors, to Jonathan G. Katz, Secretary, 
SEC, dated November 30, 1998 (``CII-I''); Howard D. Sherman, 
President, Institutional Shareholder Services, to Jonathan G. Katz, 
Secretary, SEC, dated December 2, 1998; James E. Heard, Chairman and 
Chief Executive Officer, Proxy Monitor, to Jonathan G. Katz, 
Secretary, SEC, dated December 4, 1998; Richard Ferlauto, Managing 
Director, Proxy Voter Services, to Jonathan G. Katz, Secretary, SEC, 
dated December 8, 1998; Linda S. Selbach, Barclays Gloval Investors, 
to Jonathan G. Katz, Secretary, SEC, dated December 7, 1998; Lewis 
A. Sanders, Sanford C. Bernstein & Co., Inc. to Jonathan G. Katz, 
Secretary, SEC, dated December 9, 1998; Kay R.H. Evans, Executive 
Director, Maine State Retirement System, to Jonathan G. Katz, 
Secretary, SEC, dated December 10, 1998; Jack M. Marco, The Marco 
Consulting Group, to Jonathan G. Katz, Secretary, SEC, dated 
December 9, 1998; George M. Philip, Executive Director, New York 
State Teachers' Retirement System, to Jonathan G. Katz, Secretary, 
SEC, dated December 9, 1998; Kayla J. Gillan, General Counsel, 
California Public Employees' Retirement System, to Jonathan G. Katz, 
Secretary, SEC, dated December 9, 1998 (``Cal PERS''); John J. 
Sweeney, President, American Federation of Labor and Congress of 
Industrial Organizations, to Jonathan G. Katz, Secretary, SEC, dated 
December 10, 1998 (``AFL-CIO''); Bart Naylor, Director, Corporate 
Affairs, International Brotherhood of Teamsters, to Jonathan G. 
Katz, Secretary, SEC, dated December 10, 1998; Amy B.R. Lancellotta, 
Senior Counsel, Investment Company Institute, to Jonathan G. Katz, 
Secretary, SEC, dated December 10, 1998; Michelle Edkins, Corporate 
Governance Executive, Hermes Investment Management Limited, to 
Jonathan G. Katz, Secretary, SEC, dated January 18, 1999; Sarah 
Teslik, Council of Institutional Investors, to Jonathan G. Katz, 
Secretary, SEC, dated April 14, 1999 (``CII-II'').
    \7\ Letter from James E. Buck, Senior Vice President and 
Secretary, NYSE to Jonathan G. Katz, Secretary, SEC, dated March 11, 
1999 (``Amendment No. 2''). In Amendment No. 2, the Exchange 
submitted a sunset provision pursuant to which the proposed rule 
change will expire on September 30, 2000. Amendment No. 2 also 
contained the Exchange's response to the comment letters.
---------------------------------------------------------------------------

II. Background

    The Exchange proposes to amend paragraphs 312.01, 312.03, and 
312.04 of the Listed Company Manual (``Manual''). The proposal amends 
the Exchange's Policy with respect to stock option and similar plans 
(``Plans'').
    The Policy requires, as a prerequisite to listing, shareholder 
approval of Plans or any other arrangement pursuant to which either 
officers or directors acquire stock. There are, however, four 
exemptions from this requirement, one of which is an exemption for 
Plans that are ``broadly-based.'' Historically, the Exchange had not 
provided a definition of what constituted a ``broadly-based'' Plan 
other than to state that such a Plan must include employees other than 
officers and directors. The only example in the Policy of such a Plan 
was an employee stock option plan, or ``ESOP.''
    In December 1997, the Exchange filed a proposed rule change 
amending the Policy. The proposal was amended on January 28, 1998 and 
was then published for public comment by the Commission (``Original 
Proposal'').\8\ The Original Proposal codified, among other things, 
existing Exchange interpretations regarding ``broadly-based'' Plans. 
Specifically, the Original Proposal stated that the determination of 
whether a Plan was ``broadly-based'' required the review of a number of 
factors, including the number of persons included in the Plan, and the 
nature of the company's employees, such as whether there were separate 
compensation arrangements for salaried and hourly employees. The 
proposal also codified a non-exclusive safe harbor for Plans in which 
at least 20 percent of a company's employees were eligible, provided 
that the majority of those eligible were neither officers nor 
directors.\9\ The Commission did not receive any comments on the 
proposal, and subsequently approved it, as amended, on April 8, 
1998.\10\
---------------------------------------------------------------------------

    \8\ Securities Exchange Act Release No. 39659 (February 12, 
1998), 63 FR 9036 (February 23, 1998).
    \9\ According to the NYSE, the 20% test was based upon the 
``rule of thumb'' the Exchange had historically used in determining 
whether a Plan was ``broadly-based.'' See Request for Comment on 
NYSE Shareholder Approval Requirement for Broadly-Based Stock Option 
Plans at 2 (``Request for Comment'').
    \10\ Securities Exchange Act Release No. 39839, 63 FR 18481 
(April 15, 1998).
---------------------------------------------------------------------------

    Following the Commission's approval of the Original Proposal, the 
Exchange and the Commission received a significant number of inquiries 
and comments regarding the Original Proposal. Many of these inquiries 
and comments originated from the institutional investor community and 
focused on the definition of ``broadly-based.'' Commenters expressed 
general concern that, without shareholder approval, companies could 
dilute the value of existing shares by creating new Plans.

[[Page 31668]]

    In response, the Exchange issued the Request for Comment regarding 
the definition of ``broadly-based'' Plans. The Exchange received 166 
comments in response to that request.\11\ According to the NYSE, the 
listed company community favored retaining the new Policy, while the 
institutional investor community favored a narrower definition of what 
constituted a ``broadly-based'' Plan, and suggested that such 
definition be an exclusive test instead of a non-exclusive safe harbor.
---------------------------------------------------------------------------

    \11\ Interested persons are directed to the public file located 
at the Commission's Public Reference Room, 450 Fifth Street, N.W. 
Washington, D.C. 20549 to review the comments received by the NYSE. 
The public file contains: (1) a Summary of Comment Letters (Exhibit 
B); (2) the NYSE Request for Comment (Exhibit 2A); (3) the Comment 
Letters in Response to the Request for Comment (Exhibit 2B); and (4) 
the Report of the NYSE Task Force (Exhibit 2C). The public file may 
also be inspected at the principal office of the NYSE.
---------------------------------------------------------------------------

    A Stockholder Approval Policy Task Force (``Task Force'') was 
subsequently established to review the comments and to make 
recommendations concerning possible changes to the Policy. The Task 
Force was composed of representatives of the Exchange's Legal Advisory 
Committee, Individual Investor Committee, Pension Manager Advisory 
Committee, and Listed Company Advisory Committee. In addition, member 
of other Exchange constituencies, including the Council of 
Institutional Investors, were represented on the Task Force.
    Following its deliberations, the Task Force recommended that 
certain changes be made to the definition of a ``broadly-based'' 
Plan.\12\ In addition, the Task Force recommended that the Exchange 
actively consider setting an overall dilution maximum for all non-tax 
qualified Plans that otherwise would be exempt from shareholder 
approval requirements. The Task Force recommended that the Exchange 
direct it or another appropriate group to immediately consider this 
issue with a target date of the NYSE's September 1999 Board meeting. 
The Task Force further stated that the goal should be to complete this 
study in time for Exchange review prior to the year 2000 proxy 
statement season.
---------------------------------------------------------------------------

    \12\ See Report of the Special Task Force on Stockholder 
Approval Policy.
---------------------------------------------------------------------------

    This proposed rule change implements the first three Task Force 
recommendations to change the existing rule.\13\ The proposed rule 
change amends the definition of what constitutes a ``broadly-based'' 
Plan and adds some general language concerning approval of Plans under 
the Policy. In addition, in its filing, the Exchange stated that it had 
adopted the Task Force's final recommendation and had convened a new 
task force (``Dilution Task Force'') to consider a possible listing 
standard that would include a dilution test.
---------------------------------------------------------------------------

    \13\ Id.
---------------------------------------------------------------------------

III. Description of Proposal

    The proposed rule change amends the definition of ``broadly-based'' 
which is used to determine whether a Plan is exempt from shareholder 
approval. The new definition would classify a Plan as ``broadly-based'' 
if, pursuant to the terms of the Plan: (a) at least a majority of the 
issuer's full time, exempt U.S. employees \14\ are eligible to 
participate under the Plan; and (b) at least a majority of the shares 
awarded under the Plan (or shares of stock underlying options awarded 
under the Plan) during the shorter of the three-year period commencing 
on the date the Plan is adopted by the issuer, or the term of the Plan 
itself, are made to employees \15\ who are not officers or directors of 
the issuer.\16\ The new definition is an exclusive test, not a safe 
harbor as in the current rule.
---------------------------------------------------------------------------

    \14\ See 29 U.S.C. 213(a) for the definition of ``exempt'' 
employees.
    \15\ In Amendment No. 1, the Exchange explained that the 
proposed definition of ``broadly-based'' would be a two-part test. 
In the first prong, a majority of the company's full-time employees 
who are ``exempt'' employees must be eligible to receive stock. As a 
general matter, ``exempt'' employees are salaried employees in an 
executive, administrative, or professional capacity. According to 
the NYSE, the Task Force recommended limiting this prong of the 
definition to ``exempt employees'' because non-exempt employees are 
often covered by compensation arrangements that do not include stock 
options.
    The second part of the test requires that at least a majority of 
the shares awarded under the Plan be awarded to employees who are 
not officers or directors. This part of the test is not limited to 
``exempt'' employees, allowing the calculation of the ``majority of 
shares awarded'' to include both ``exempt'' and non-exempt employees 
who are not officers or directors. According to the NYSE, the focus 
of this requirement is to ensure that a company actually implements 
a Plan in a ``broadly-based'' fashion. In this regard, it does not 
matter whether the awards to persons other than officers or 
directors are to ``exempt'' or non-exempt employees.
    \16\ In this regard, the Exchange proposes to use the definition 
of ``officer'' contained in Commission Rule 16a-1(f) under the Act, 
17 CFR 240.16a-1(f).
---------------------------------------------------------------------------

    The proposed rule change also expresses the Exchange's general 
policy towards Plans. The Exchange recognized the increased use of 
Plans by companies and expressed its view that companies should 
consider submitting Plans to shareholders, whether or not required 
under the Exchange's Policy.
    In its filing, the Exchange stated that the proposed changed blend 
tests based both on Plan eligibility and awards. Furthermore, the 
Exchange expects that the proposed rule change will provide certainty 
because it is an exclusive test applicable to all Plans and because it 
adopts the Commission's definition of ``officer.'' \17\
---------------------------------------------------------------------------

    \17\ See supra note 16.
---------------------------------------------------------------------------

IV. Summary of Comments

    The Commission received 19 comments on the proposed rule 
change.\18\ Of the 19 comment letters, 13 letters opposed the proposed 
rule change,\19\ three comment letters offered qualified support for 
the proposal,\20\ one comment letter supported the proposed rule 
change,\21\ and one comment requested an extension of the comment 
period.\22\ One letter did not address the issues raised in the 
proposed rule change.\23\
---------------------------------------------------------------------------

    \18\ See supra note 6.
    \19\ See letters from State of Wisconsin Investment Board; Lens 
Investment Management; CII-I; Institutional Shareholder Services; 
Proxy Monitor; Proxy Voter Services; Barclays Global Investors; 
Maine State Retirement System; Marco Consulting Group; AFL-CIO; 
Teamsters; Hermes Investment Management; and CII-II.
    \20\ See letters from Sanford C. Bernstein; NY State Teachers' 
Retirement System; and Cal PERS. Cal PERS, while not specifically 
addressing the substance of the proposed amendments, suggested that 
they should only be approved for one year while a dilution test is 
developed. As discussed below, Cal PERS also supported disclosure.
    \21\ See letter from Investment Company Institute urging 
adoption of the proposed rule change and stating that the proposed 
definition addresses many of their previouis concerns with the 
existing rule.
    \22\ See CII Comment Period Extension Request letter. This 
letter did not address the proposed rule change's substantive 
issues.
    \23\ See letter from Mr. Del Nou. Mr. Del Nou's letter requested 
that shareholders be offered stock options and raised purported 
constitutional issues regarding shareholder voting rights.
---------------------------------------------------------------------------

    These comment letters raised a number of concerns regarding the 
amendment to the Policy. The Exchange submitted a written response to 
the issues raised in the comment letters in Amendment No. 2.\24\ The 
following discussion summarizes the issues raised by the commenters and 
the Exchange's response.
---------------------------------------------------------------------------

    \24\ See supra note 7.
---------------------------------------------------------------------------

A. Dilution

    A majority of the comment letters expressed concern over the lack 
of a dilution test.\25\ Dilution refers to the diminished value of a 
shareholder's investment that can occur when stock options are granted. 
These commenters believe that the expanded definition of ``broadly-
based'' Plans will essentially permit unlimited dilution to occur and

[[Page 31669]]

allow unlimited amounts of equity to be given to Plan participants 
without share holder approval.\26\ Many of these commenters questioned 
why any Plan that has a dilutive effect on a shareholder's investment 
should be exempt from a shareholder vote. For example, one commenter 
observed that shareholders are concerned with the cost of equity-based 
Plans and not the business decision of who can (or does) receive 
equity-based compensation.\27\ Another commenter suggested that the 
grant of stock options may also have the effect of a stealth hostile 
takeover from within the company be diluting shareholders' voting 
power.\28\ Several commenters stated that the definition of ``broadly-
based'' Plans should only be adopted in conjunction with adoption of a 
dilution test and were opposed to the NYSE's decision to consider a 
dilution test at a later date.\29\ Other commenters believe there 
should be no exemption for ``boardly-based'' Plans and that a dilution 
commenters believe there should be no exemption for ``broadly-based'' 
Plans and that a dilution test should be the sole standard.\30\
---------------------------------------------------------------------------

    \25\ See letters from State of Wisconsin Investment Board; Lens 
Investment Management; CII-I; Institutional Shareholder Services; 
Proxy Monitor; Barclays Global Investors; Sanford C. Bernstein; 
Maine State Retirement System; NY State Teachers' Retirement System; 
Cal PERS; AFL-CIO; Investment Company Institute Hermes Investment 
Investment Management; and CII-II.
    \26\ See letters from State of Wisconsin Investment Board; Lens 
Investment Management; Institutional Shareholder Services; Proxy 
Monitor; Cal PERS; Hermes Investment Investment Management; and CII-
II.
    \27\ See letter from Institutional Shareholder Services.
    \28\ See letter from Lens Investment Management.
    \29\ See, e.g., letters from Lens Investment Management stating 
that ``under no circumstances should the Exchange be permitted to 
bifurcate the rulemaking in this way'' and letter from Institutional 
Shareholder Services stating that ``the proposed listing standard, 
absent a meaningful ``dilution'' test, is fundamently flawed.'' See 
also letter from State of Wisconsin Investment Board; and CII-II.
    \30\ See letters from State of Wisconsin Investment Board; 
Barclays Global Investors; Sanford C. Bernstein; Maine State 
Retirement System; Marco Consulting Group; and Hermes Investment 
Management.
---------------------------------------------------------------------------

    In Amendment No. 2, the Exchange responded to the comments on 
dilution. The Exchange stated that while it agrees that it is 
appropriate to consider a dilution test and is committed to doing so, a 
dilution test raises numerous policy issues that it was unable to 
consider in time for the 1999 proxy season. Moreover, the Exchange did 
not originally seek comment on this issue in the Request for Comment. 
The Exchange further expressed its commitment to review this issue by 
amending its proposal to be effective only until September 30, 2000. 
The Exchange stated that while it expects to propose a dilution test to 
replace the revised stockholder approval test in advance of the year 
2000 proxy season, it proposes to make the current changes to the 
``broadly-based'' test effective through the 2000 proxy season in the 
event there is any unforseen delay in this schedule.

B. Conflict of Interest

    Another area of concern for commenters was the apparent conflict of 
interest of officers and directors.\31\ The commenters remarked on the 
inherent conflict of interest that arises because officers and 
directors themselves benefit from the Plans they cause a company to 
establish without shareholder approval and oversight. The comment 
letters expressed concern over the removal of shareholder oversight and 
suggested that where officers and directors are allowed to participate 
in a Plan, the Plan should not be allowed to be considered ``broadly-
based.'' \32\
---------------------------------------------------------------------------

    \31\ See letters from Lens Investment Management; CII-I; Proxy 
Voter Services; Sanford C. Bernstein; NY State Teachers' Retirement 
System; Cal PERS; Teamsters; and Hermes Investment Management. See 
also letter from AFL-CIO, which was concerned about Plans that allow 
board member participation.
    \32\ See letter from Proxy Voter Services. See also letter from 
Cal PERS stating that ``to the extent those who participate in the 
decision to approve a plan also may personally benefit from it, and 
obvious conflict of interest exists.''
---------------------------------------------------------------------------

    The Exchange contends that ``broadly-based'' Plans have long been 
exempt from shareholder approval requirements. The Exchange explained 
that the ``broadly-based'' exemption originally was adopted 
requirements. The Exchange explained that the ``broadly-based'' 
exemption originally was adopted because the NYSE believed that any 
potential concerns regarding preferential treatment of officers or 
directors would be mitigated if a Plan was boardly available to a 
company's employees. The Exchange, however, did reiterate its plan to 
examine whether to continue to rely on the concept of ``broadly-based'' 
Plans as a basis for exemption from the shareholder approval 
requirement or whether to abandon that standard in a favor of a 
dilution test.

C. The Use of an ``Exempt'' Employee Test

    Several commenters expressed concerns about the proposed 
eligibility standard in the proposed rule.\33\ As discussed above, the 
eligibility standard provides that in determining if a Plan is 
``broadly-based,'' the Exchange will look at the number of ``exempt'' 
employees eligible to participate in the Plan. The term ``exempt'' 
employee is based upon the definition found in the Fair Labor Standards 
Act of 1934.\34\ The commenters believe that limiting the eligibility 
requirement to require only a majority of a company's full-time 
``exempt'' employees could potentially exclude a majority of a 
company's workforce. Many of the commenters quoted Department of Labor 
statistics showing that only about 25 percent of the overall U.S. 
workforce is classified as ``exempt.'' \35\ According to these figures, 
on average, only 12.5 percent of a company's workforce would need to be 
eligible to participate for a Plan to be considered ``broadly-based'' 
under the NYSE proposed rule--and thus avoid a shareholder vote.\36\ 
Several of these commenters also expressed concern over excluding low 
level workers from eligibility because they believed the proposed rule 
change could be interpreted as a disincentive to grant non-exempt 
employees stock options, or conversely as an incentive to make stock 
options available only to a privileged few.\37\ Finally, commenters 
asserted that the NYSE's rationale for excluding non-exempt employees 
because they are covered by other compensation arrangements is not 
correct.\38\
---------------------------------------------------------------------------

    \33\ See letters from Lens Investment Management; CII-I; 
Institutional Shareholder Services; Proxy Voter Services; AFL-CIO; 
Marco Consulting Group; and Teamsters.
    \34\ See supra note 14.
    \35\ See letter from CII-I; Institutional Shareholder Services; 
Proxy Voter Services; AFL-CIO; and Marco Consulting Group.
    \36\ For example, the AFL-CIO stated that the ``definition 
effectively assures that ``broadly-based' plans will not be truly 
`broadly-based.' ''
    \37\ See letters from Proxy Voter Services; AFL-CIO; and 
Teamsters.
    \38\ See letters from Proxy Voter Services; and AFL-CIO. In 
their letter, Proxy Voter Services stated that ``a growing number of 
companies include grant options and other types of stock awards to 
`non-exempt' employees as part of their total compensation 
packages.''
---------------------------------------------------------------------------

    In response, the Exchange states that it continues to believe that 
limiting the proposal to ``exempt'' employees is appropriate. NYSE 
states that the Task Force, which included representatives of listed 
companies, leading investor groups, and institutional investors, 
unanimously proposed the ``exempt'' employee distinction. The Task 
Force believed that stock options are primarily used to compensate 
``exempt'' employees. Moreover, the Task Force expressed its belief 
that non-exempt employees generally seek other forms of compensation or 
benefits, such as cash, medical benefits, or retirement packages. The 
NYSE notes that the Task Force was aware that some parties thought that 
limiting this prong of the test to ``exempt'' employees was too narrow. 
Despite these contentions, the Task Force unanimously accepted the 
``exempt'' employee distinction.
    The Task Force's recommendations were further reviewed and 
considered by the Exchange's Board. In approving the proposal, the 
Board accepted the Task Force's recommendation and also

[[Page 31670]]

endorsed limiting the test to ``exempt'' employees. According to the 
NYSE, the Board expressed its concern that not limiting the test to 
``exempt'' employees could result in companies structuring their 
compensation programs to offer non-exempt employees stock options 
instead of other benefits that may be preferred by those employees 
simply to comply with the Exchange's shareholder approval policy, and 
not because it was an appropriate compensation policy. The Board 
believed that management should establish compensation policies based 
on what management believes is best for its company.

D. Participation Test

    One commenter supported the participation prong of the proposed 
rule change.\39\ The commenter stated that, by requiring review of 
awards granted during the first three years of a Plan, the Exchange 
recognized the importance of implementing a Plan in a truly ``broadly-
based'' fashion.
---------------------------------------------------------------------------

    \39\ See letter from Investment Company Institute.
---------------------------------------------------------------------------

    Three commenters argued that the participation prong of the 
``broadly-based'' test does not sufficiently prevent companies from 
granting a majority of options awarded under a Plan to executives after 
the three-year time period.\40\ These commenters pointed out that a 
company could reserve a majority of shares to be awarded under a Plan 
and grant them to officers and directors after the three-year time 
period had elapsed.\41\ Moreover, a company could either grant no 
awards during the initial time period or only a nominal amount and then 
make the remaining grants to executives after the three-year time 
period expires. In either of these scenarios, the commenters noted, the 
company would be in compliance with the proposed rule although 
shareholders would not have been provided the opportunity to approve 
the awards to executives. To resolve this, one commenter recommended 
limiting Plans to three years.\42\ Another commenter suggested changing 
the test so that a majority of the shares must be awarded to 
nonofficers and directors over the entire life of the Plan or over a 
rolling three-year period.\43\
---------------------------------------------------------------------------

    \40\ See letters from Institutional Shareholder Services; Marco 
Consulting Group; and NY State Teachers' Retirement System.
    \41\ See, e.g., letter from Marco Consulting Group, which stated 
that most stock option Plans last for 10 years.
    \42\ See letter from NY State Teachers' Retirement System.
    \43\ See letter from Institutional Shareholder Services.
---------------------------------------------------------------------------

    The Exchange recognizes that the three-year test could, in theory, 
allow a company to administer a Plan in a non-broadly-based manner 
after the initial three years. The Exchange stated, however, that it 
anticipates that companies will act in good faith, and it has no reason 
to believe that companies will drastically change their compensation 
policies in the later years of a Plan.
    According to the Exchange, the Task Force specifically considered 
this issue and determined that if a Plan is to be exempt from 
shareholder approval, it is critical not only to require a broad group 
of employee eligibility, but also to require that a company administer 
a Plan in a ``broadly-based'' manner. However, when considering how to 
best measure a company's administration of a Plan, the Task Force 
decided that a three-year period was realistic. The Exchange expressed 
the Task Force's concern that imposing a one-year test could result in 
companies structuring their Plans to comply with Exchange rules instead 
of promoting sound compensation policies. For these reasons, the NYSE 
determined that the Task Force recommendation was reasonable, 
recognizing that is was a package of compromises, and that the Exchange 
needed to consider this recommendation in the context of the full Task 
Force report. Moreover, the Exchange noted that this issue may well be 
moot if the Exchange later implements a dilution test.\44\
---------------------------------------------------------------------------

    \44\ Plans approved under the rules approved today, however, 
will continue to be subject to the participation test. If a Plan is 
not administered in a ``broadly-based'' fashion during the first 
three years, shareholder approval will be required for any shares 
that the company later seeks to add to the Plan. The Exchange will 
review all listing applications seeking to add additional shares to 
any Plan approved under the rules approved today. Telephone call 
between Steven Walsh, NYSE, Michael Simon, Milbank, Tweed, Hadley & 
McCloy, and Kelly McCormick, SEC, on March 30, 1999.
---------------------------------------------------------------------------

E. Disclosure

    Seven commenters requested that the Commission require full 
disclosure to shareholders of all Plans implemented without shareholder 
approval.\45\ One commenter observed that shareholders have diminished 
access to important information regarding issues that are not approved 
by shareholder votes.\46\
---------------------------------------------------------------------------

    \45\ See letters from State of Wisconsin Investment Board; Lens 
Investment Management; CII-I; NY State Teachers' Retirement System; 
Cal PERS; Teamsters; and Hermes Investment Management; and CII-II.
    \46\ See letter from Teamsters.
---------------------------------------------------------------------------

F. Other Issues \47\

    Three commenters suggested that the Commission should decide the 
issues on which shareholders can vote because of the competition 
between exchanges is gaining listed companies.\48\ One commenter 
suggested that a uniform standard be applied to all exchanges to 
safeguard shareholder interests in this area.\49\ Finally, several 
commenters argued that all Plans should be subject to shareholder 
approval.\50\
---------------------------------------------------------------------------

    \47\ One comment letter, Sanford C. Bernstein, addressed 
concerns regarding key employee Plans (i.e., non-broadly-based Plans 
that (a) provide that no single officer or director may acquire more 
than 1 percent of the issuer's common stock and (b) together with 
all non-broadly-based Plans of the issuer, do not authorize the 
issuance of more than 5 percent of the issuer's common stock at the 
time the Plan is adopted. The key employee exemptions were at issue 
in the Original Proposal and were not considered or amended in the 
current proposed rule change.
    \48\ See letters from CII-I; AFL-CIO and Cal PERS.
    \49\ See letter from Cal PERS, which argues that shareholder 
voting is a national issue and ``urges the Commission to take steps 
necessary to ensure that a uniform standard is applied to safeguard 
shareholders' interests in this area.'' See also letter from CII-II.
    \50\ See letters from State of Wisconsin Investment Board; 
Barclays Global Investors; Sanford C. Bernstein; Maine State 
Retirement System; Marco Consulting Group; and Hermes Investment 
Management. In addition, Lens Investment Management asserted that 
the Exchange had not adequately justified the exemption for 
``broadly-based'' Plans.
---------------------------------------------------------------------------

    One commenter supported the proposed rule change as an exclusive 
test, rather than a non-exclusive safe harbor as under the existing 
rule.\51\ This commenter believed it should ensure shareholder 
protection and provide greater certainty to the process.
---------------------------------------------------------------------------

    \51\ See letter from investment Company Institute.
---------------------------------------------------------------------------

V. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\52\ In particular, the Commission believes the proposal is 
consistent with the requirement of section 6(b)(5) of the Act.\53\ 
Section 6(b)(5) requires, among other things, that the rules of an 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest, and not be 
designed to permit unfair discrimination between issuers.
---------------------------------------------------------------------------

    \52\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \53\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission has carefully considered the proposed rule change 
and believes the amended proposed rule change to be consistent with the 
requirements of the Act. In approving the proposal, the Commission 
recognizes that the majority of the

[[Page 31671]]

commenters opposed the proposal and believed a dilution standard would 
be more appropriate. Nevertheless, the Commission believes that, by 
including a specific test to ensure that Plans are actually implemented 
in a ``broadly-based'' fashion, the proposed rule change is an 
improvement over the existing rule. Moreover, the proposed rule change 
amends the definition of ``broadly-based'' by making it an exclusive 
test instead of the current non-exclusive safe harbor. By providing 
issuers with an exclusive rule, all Plans reviewed by the Exchange will 
be subject to the same standards. This standardization of review should 
enable issuers to more easily comply with the Exchange's listing 
standards and prevent uneven application of the rule. Accordingly, this 
aspect of the proposed rule will help to ensure that, consistent with 
the Act, the rule is not designed to permit unfair discrimination among 
issuers.
    The Commission is approving the rule change on a pilot basis until 
September 30, 2000 in order to give the NYSE time to develop a dilution 
test. Based on the task force's recommendations, the Exchange has 
established the Dilution Task Force to study the dilution issue and has 
stated that it currently expects to propose a dilution test to replace 
the revised ``broadly-based'' test by the year 2000 proxy season.\54\ 
Accordingly, the Commission is satisfied, for the reasons discussed 
more fully below, that the proposed rule change should address concerns 
raised by commenters to the Original Proposal, while also satisfying 
the requirements of section 6(b)(5) of the Act.\55\
---------------------------------------------------------------------------

    \54\ Because there may be slippage in its schedule, the Exchange 
is proposing to extend the pilot through the year 2000 proxy season.
    \55\ The Commission notes that under Section 19(b)(2) of the 
Act, the Commission must approve a proposed rule change of a self-
regulatory organization if it finds that such proposed rule change 
is consistent with the requirements of the Act and the rules 
thereunder. The Commission must disapprove a proposed rule change 
only if it does not make such a finding. The Commission's standard 
of review for the proposed rule changes of self-regulatory 
organizations is determined by, among other things, Section 6(b) of 
the Act.
---------------------------------------------------------------------------

A. Conflict of Interest

    A number of the commenters raised concerns about exempting from 
shareholder approval any Plan in which officers and directors can 
participate, because of the apparent conflict of interest. Upon careful 
review, however, the Commission is satisfied that this aspect of the 
proposed rule change is consistent with the requirements of section 
6(b)(5) of the Act for the reasons discussed below.
    NYSE current rules and proposed rules will continue to require 
shareholders to vote on Plans pursuant to which officers and directors 
may acquire stock unless a Plan meets one of four exemptions set forth 
in the NYSE Manual.\56\ As noted by the Exchange, one of these 
exemptions, the ``broadly-based'' exemption, has been recognized by the 
Exchange for many years and was implemented because of the belief that 
Plans available to a broad group of employees would alleviate concerns 
that the Plan could give preferential treatment to officers and 
directors. The Commission believes that it is reasonable for the NYSE 
to determine that Plans that are ``broad-based'' should be eligible for 
the exemption even though officers and directors may participate in the 
Plan because Plans that are truly ``broadly-based'' should provide 
sufficient protection to shareholders from officer and director 
conflicts of interest and self-dealing.
---------------------------------------------------------------------------

    \56\ See NYSE Manual Paragraph 312.03.
---------------------------------------------------------------------------

    While the NYSE could decide to eliminate the ``broadly-based'' 
exemption, the Act does not dictate how a self-regulatory organization 
should regulate in this area. Rather, the Commission must find that a 
self-regulatory organization's proposed rules are consistent with the 
Act before they can be adopted.\57\ The Commission believes that the 
rationale behind the ``broadly-based'' exemption is sound and will 
protect investors from self-dealing by officers and directors, 
consistent with the requirements of section 6(b)(5) of the Act.
---------------------------------------------------------------------------

    \57\ See supra note 55.
---------------------------------------------------------------------------

B. Definition of ``Broadly-Based''

    The proposal defines a ``broadly-based'' Plan as one in which at 
least a majority of the issuer's full-time ``exempt'' employees are 
eligible to participate.\58\ In contrast, the current definition 
provides that a Plan would be considered ``broadly-based'' if at least 
20 percent of all of a company's employees are eligible to receive 
stock or options under a Plan and at least half of those eligible are 
neither officers nor directors. In other words, the proposal limits the 
eligibility prong of the test to ``exempt'' employees while the current 
rule does not. Some comment letters suggested that the proposal 
unfairly limits the number and classification of employees eligible to 
participate in a Plan. Several commenters also were critical of 
limiting the eligibility prong to ``exempt'' employees because this 
excludes a large part of the workforce and could result in companies 
not offering such Plans to low level workers.
---------------------------------------------------------------------------

    \58\ See supra notes 14 and 15.
---------------------------------------------------------------------------

    Upon review, however, the Commission notes that the proposal is not 
a significant change from the current approved standards. The current 
rule requires that 20 percent of a company's workforce be eligible, but 
only requires that 10 percent of those eligible be non-officers and 
directors. The proposed rule change requires that at least half of an 
issuer's full-time ``exempt'' workforce be eligible to participate. A 
number of comment letters cited to Department of Labor statistics, 
which state that 25 percent of the U.S. workforce is exempt. If this 
number is correct, the majority of employees eligible to participate 
should be approximately 12.5 percent, on average, which could result in 
a slight increase in required eligibility over the current rule. 
Although it is difficult to precisely compare these two measures, on 
the whole, the number of eligible employees measured to determine if a 
Plan is ``broadly-based'' under the proposed rule change is not 
significantly different from the existing approved rule. Accordingly, 
limiting eligibility to ``exempt'' employees does not appear to 
significantly alter the number of employees currently being offered 
participation in a Plan.
    Several factors also minimize concerns about the eligibility prong 
of the proposed test. First, the Commission notes that nothing in the 
NYSE rules prevents companies from offering a Plan to more than 
``exempt'' employees. The eligibility prong is the minimum required for 
a Plan to be eligible for the ``broadly-based'' exemption. Second, 
companies currently offering Plans to all employees except officers and 
directors already are not required to submit these Plans to a 
shareholder vote. The Commission believes it is unlikely that companies 
will change these Plans to comply with the minimum requirements of the 
rules approved today. Finally, the Commission notes that certain 
companies may need to expand the base of employees eligible for a Plan 
in order to meet the participation prong of the ``broadly-based'' 
definition. Thus, the proposed change to the eligibility prong appears 
to include a reasonable number of employees eligible to participate in 
Plans which should help to protect investors, pursuant to section 
6(b)(5) of the Act.
    The participation prong of the ``broadly-based'' definition 
requires that at least a majority of the shares awarded under a Plan 
during the shorter of the three-year period commencing on the Plan 
adoption date or the term of the

[[Page 31672]]

Plan be made to employees who are not officers or directors of the 
issuer. In contrast, the current rule does not have any requirements 
regarding actual awards or grants under a Plan. The Commission believes 
that this portion of the proposal should help to ensure that Plans are 
``broadly-based.'' To comply with the participation prong of the test, 
companies will need to monitor the awards granted to officers and 
directors under ``broadly-based'' Plans to ensure that officers and 
directors are not the primary recipients of such awards. Participation 
under ``broadly-based'' Plans also will be monitored by the Exchange to 
ensure compliance with the Exchange rules.\59\ This should provide 
protection to investors, consistent with section 6(b)(5) of the Act, by 
ensuring that companies do not take advantage of the exemption by 
merely allowing non-executives to be eligible for awards under Plans 
without actually granting them awards.
---------------------------------------------------------------------------

    \59\ See supra note 44.
---------------------------------------------------------------------------

    While the participation prong is an improvement over the current 
rule in that it requires that Plans actually be administered in a 
``broadly-based'' manner, the Commission recognizes that, as proposed, 
the participation requirement will only apply for the first three years 
of a Plan (or the term of the Plan if it is shorter than three years). 
Accordingly, as some commenters argued, for Plans that are longer than 
three years, companies could nominally comply with the participation 
requirement by granting no, or a small amount of, awards during the 
first three years of the Plan to non-executives and reserve the 
majority of shares to be awarded to officers and directors after the 
three years have elapsed.
    In response to these concerns, the NYSE stated that it recognized 
that ``in theory a company could administer a Plan in a non-broadly 
based manner.'' \60\ Nevertheless, the NYSE stated that it expects 
companies to act in good faith and has no reason to believe that a 
company will drastically change its compensation policy in later years 
of a Plan. The Commission agrees with the NYSE but expects the NYSE to 
monitor whether companies are continuing to administer Plans in a 
``broadly-based'' manner after the initial three-year period to 
determine if changes need to be made to the participation prong of the 
test. While the Commission recognizes that the NYSE is working on a 
dilution standard that may replace the ``broadly-based'' standard by 
the next proxy season, the NYSE should monitor and notify those 
companies that are subject to this rule if it believes that they are 
not complying with the spirit of the rule by delaying actual awards 
under a Plan until the three-year period has expired.
---------------------------------------------------------------------------

    \60\ See Amendment No. 2, supra note 7.
---------------------------------------------------------------------------

    If the NYSE proposes to retain the participation prong of the 
``broadly-based'' test long with a dilution standard, the Commission 
requests further information on actual awards made by issuers to comply 
with the participation prong. The NYSE also should address whether the 
development of a rolling three-year period would give companies the 
flexibility they need to make awards under Plans while at the same time 
ensuring that Plans are administered in a ``broadly-based'' manner or 
some other alternative to address the concerns discussed above. In 
approving the participation prong with the three-year limit, the 
Commission has considered the need to provide companies with 
flexibility in administering awards under the Plan. The Commission 
believes that the sixteenth-month pilot period, along with the NYSE's 
monitoring of Plans complying with the ``broadly-based'' exemption, 
should help to ensure that any necessary changes will be made to the 
rule if companies violate the spirit of the rule by offering a majority 
of shares to offices and directors after the three-year period has 
lapsed.

C. Dilution Standard and Pilot

    The Exchange has committed to study a dilution standard for 
determining when shareholder approval is necessary for Plans. As noted 
above, a substantial majority of comments expressed concern about the 
potential dilution of shareholder's equity upon the grant of stock 
options under a Plan. These commenters were generally critical of the 
NYSE's decision to consider dilution at a later date. While some of 
these commenters believed that a dilution test should replace the 
``broadly-based'' exemption immediately, other believed the definition 
of ``broadly-based'' Plans should only be adopted along with a dilution 
test.
    While the majority of commenters believe that dilution is a 
preferable standard over the current proposal, the Commission's 
standards for reviewing the NYSE's proposal is whether it is consistent 
with the Act. For the reasons discussed above, the Commission believes 
that, until such time as a dilution standard is developed, the proposal 
is a reasonable effort to clarify which Plans are ``broadly-based'' and 
therefore except from shareholder approval. Accordingly, the adoption 
of he proposed rule for the pilot period should protect investors in 
accordance with section 6(b)(5) of the Act by helping to ensure that 
only ``broadly-based'' Plans will be exempted from shareholder 
approval. In making this finding, as noted above, the Commission does 
have some questions about how certain portions of the two prong test 
will be implemented. The pilot period should provide the NYSE with 
necessary time to monitor the changes approved today and to address 
these questions if the NYSE determines that the ``broadly-based'' test 
should continue to be applied together with a dilution standard.\61\
---------------------------------------------------------------------------

    \61\ We note that nay extension of the current proposal would 
have to be approved by the Commission pursuant to Section 19(b)(2) 
of the Act. Of course, as detailed above, NYSE has indicated its 
intention to submit a proposal, pursuant to Section 19(b)(2) of the 
Act, to replace or supplement the pilot with a dilution standard. 
See infra note 62.
---------------------------------------------------------------------------

    The pilot period also should provide the NYSE with the necessary 
time to formulate a dilution standard. We note that one commenter 
suggested a one-year pilot and another commenter was critical of the 
proposed sixth-month sunset provisions, suggesting that it would unduly 
delay the adoption of a dilution standard.
    The Commission believes, however, that it is appropriate to approve 
the proposed rule so that it is effective until September 30, 2000. The 
NYSE has shown its commitment to be responsive to the comments on 
dilution by immediately establishing the Dilution Task Force to 
consider this issue. The NYSE represents that it intends to consider 
adopting a dilution standard to be place prior to he next proxy season 
in the year 2000. Because the Commission recognizes that matters 
involving shareholder voting rights are extremely important and involve 
a wide variety of interested parties, the Commission believes that 
adoption of the proposed rule change until September 30, 2000 will 
ensure that the NYSE is given adequate time to consider and implement 
and alternative to the proposal. Further this schedule would not 
prevent the NYSE from replacing the proposal being approved today with 
a dilution standard prior to the pilot's expiration, assuming 
Commission approval pursuant to section 19(b) of the Act.\62\
---------------------------------------------------------------------------

    \62\ We note that the Commission would expeditiously publish for 
comment and review any proposal submitted by the NYSE to adopt a 
dilution standard so that such a standard could be put in place as 
soon as possible.
---------------------------------------------------------------------------

    Finally, we note that several commenters stated that disclosure of 
Plans adopted without shareholder

[[Page 31673]]

approval should be required. The Division of Corporation Finance is 
presently reviewing Commission rules requiring disclosure of executive 
and director compensation (Item 402 of Regulations S-K; Item 10 of 
Schedule 14A) and director and director nominee qualifications and 
relationships (Items 401 and 404 of Regulation S-K), with a view toward 
determining whether to recommend changes to the Commission. One of the 
issues to be examined is the extent to which additional disclosure 
should be provided in registrant filings about non-shareholder approved 
Plans.

D. Conclusion

    In summary, the Commission believes that the current proposal helps 
to address some of the earlier concerns raised by the NYSE's Original 
Proposal for determining when a Plan including officers and directors 
is ``broadly-based'' enough to be exempt from the shareholder approval 
requirements. The Original Proposal merely intended to codify the 
NYSE's existing policy interpreting the ``broadly-based'' exemption, 
which it had used for many years. While the Original Proposal was 
submitted to a full notice and comment period, no comments were 
received on the rule prior to its approval. Nevertheless, after 
Commission approval of the NYSE's rule, several commenters, 
particularly those representing institutional investors, raised 
concerns over the Commission's approval process as well as the NYSE's 
role in developing its definition of a ``broadly-based'' Plan.
    Both the NYSE and the Commission have taken these concerns 
seriously. While the Original Proposal provided the NYSE with more 
flexibility in determining when a Plan was ``broadly-based'' and 
entitled to the exemption, the current proposal has the benefit of 
providing a clear bright line test. This should provide benefits to 
both investors and issuers consistent with section 6(b)(5) of the Act.
    The NYSE has indicated its strong commitment to develop a dilution 
standard that potentially could replace the current proposal by the 
next proxy season. The Commission requests that any proposal by the 
NYSE to adopt a dilution standard be submitted to the Commission by 
October 15, 1999. This should provide the Commission with sufficient 
time to review and solicit comment on the proposal prior to the 
beginning of the proxy season in 2000. If the NYSE is unable to submit 
a proposal by this date, the Exchange must submit a status report by 
October 15, 1999 on the NYSE's progress in developing a dilution 
standard.\63\
---------------------------------------------------------------------------

    \63\ The Commission recognizes that the NYSE could decide, as 
some commenters suggested, to keep the ``broadly-based'' exemption 
in its rules and adopt a dilution standard as part of the test. Any 
request by the NYSE to change or extend the standard being adopted 
in this order must be submitted to the Commission no later than May 
18, 2000 along with a monitoring report about the Plans utilizing 
the revised ``broadly-based'' exemption. Any new proposal containing 
the new definition approved today should also address the questions 
noted above about the three-year limit in the participation prong. 
Further, the monitoring report should include, at a minimum, 
information on the types and number of employees who are eligible to 
participate under a Plan, as well as information concerning actual 
awards being made under the Plans.
---------------------------------------------------------------------------

    The Commission finds good cause to approve Amendment No. 1 to the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice thereof in the Federal Register. The Exchange 
submitted Amendment No. 1 to clarify the use of the ``exempt'' employee 
definition in the eligibility prong of the test and not in the 
participation prong of the test. As discussed earlier, the Commission 
is satisfied that the use of ``exempt'' employees in determining the 
level of eligibility does not unfairly exclude a large number of 
employees. Because the amendment only serves to clarify and does not 
change the meaning or intent of the proposed rule, it does not raise 
any new regulatory issues. Therefore, the Commission believes good 
cause exists, consistent with section 6(b)(5) \64\ and section 19(b) 
\65\ of the Act, to approve Amendment No. 1 to the proposed rule change 
on an accelerated basis.
---------------------------------------------------------------------------

    \64\ 15 U.S.C. 78f(b)(5).
    \65\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    The Commission also finds good cause for approving Amendment No. 2 
to the proposed rule change prior to the thirtieth day after the date 
of publication of notice thereof in the Federal Register. Amendment No. 
2 amends the proposal so that it would be effective for a pilot period 
until September 30, 2000. As discussed above, this pilot period seems 
reasonable and should provide the NYSE with adequate time to monitor 
the rule as well as provide the NYSE with time to develop a dilution 
test. Amendment No. 2 does not substantially change the meaning or 
intent of the proposed rule change. Because Amendment No. 2 further 
explains the Exchange's commitment regarding the development of a 
dilution test and raises no new issues or regulatory concern regarding 
the proposed rule change, the Commission believes that good cause 
exists, consistent with section 6(b)(5) \66\ and section 19(b) \67\ of 
the Act, to approve the amendment on an accelerated basis.
---------------------------------------------------------------------------

    \66\ 15 U.S.C. 78f(b)(5).
    \67\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment Nos. 1 and 2, including whether they are 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 at the Commission's 
Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of such filings also will be available for inspection and 
copying at the principal office of the NYSE. All submissions should 
refer to File No. SR-NYSE-98-32 and should be submitted by July 2, 
1999.

VII. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\68\ that the amended proposed rule change (SR-NYSE-98-32) is 
approved on a pilot basis until September 30, 2000.
---------------------------------------------------------------------------

    \68\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\69\
---------------------------------------------------------------------------

    \69\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-14871 Filed 6-10-99; 8:45 am]
BILLING CODE 8010-01-M