[Federal Register Volume 65, Number 63 (Friday, March 31, 2000)]
[Notices]
[Pages 17326-17328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7975]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42574; File No. SR-NYSE-99-14]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Thereto 
Relating to Amendments to the Listed Company Manual

March 24, 2000.

I. Introduction

    On April 12, 1999, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with 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 relating to amendments to the 
NYSE's Listed Company Manual (``Manual'') regarding the Exchange's 
procedures and oversight of listed companies. On October 25, 1999, the 
Exchange submitted Amendment No. 1 to the proposed rule change.\3\ On 
December 16, 1999, the Exchange submitted Amendment No. 2.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the NYSE made several clarifications to 
the proposed rule change, incorporated appropriate provisions for 
Non-U.S. issuers, and revised the procedures for the annual report 
requirement. See Letter to Richard Strasser, Assistant Director, 
Division of Market Regulation (``Division''), SEC, from James E. 
Buck, Senior Vice President and Secretary, NYSE, dated October 22, 
1999 (``Amendment No. 1'').
    \4\ In Amendment No. 2, the NYSE made several technical changes 
to the text of the proposed rule change and clarified that the 
supplemental listing application (``SLAP'') provision applies to 
Non-U.S. issuers. See Letter to Richard Strasser, Assistant 
Director, Division, SEC, from James E. Buck, Senior Vice President 
and Secretary, NYSE, dated December 14, 1999 (``Amendment No. 2''). 
In Amendment No. 2, the Exchange also requested accelerated approval 
of the proposed rule change. The Exchange withdrew this request as 
per telephone conversation between Amy Bilbija, Counsel, NYSE, and 
Terri Evans, Special Counsel, and Heather Traeger, Attorney, 
Division, SEC, on January 4, 2000.
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    The proposed rule change, as amended, as published for comment in 
the Federal Register on February 9, 2000.\5\ No comments were received 
on

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the proposal. This order approves the NYSE proposal, as amended.
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    \5\ Securities Exchange Act Release No. 42364 (January 28, 
2000), 65 FR 6432.
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II. Description of the Proposal

    The proposal would make several changes to the Exchange's 
procedures and oversight of listed companies. First, the proposal would 
institute a regularly review procedure for listing applicants whereby 
Exchange staff would access media outlets, run Central Registration 
Depository checks, and consult with staff in the SEC's Division of 
Enforcement to identify any potential issues of concern regarding the 
applicant company's board members, officers (as the term ``Officer'' is 
defined in Section 16 of the Act),\6\ and non-institutional 
shareholders with an interest in excess of 10 percent. The proposal 
also would require each applicant company to submit a letter from 
inside or outside counsel representing that, to the company's 
knowledge, no officer, board member, or non-institutional shareholder 
with more than 10 percent ownership in the company has been convicted 
of a felony or misdemeanor relating to financial issues (e.g., 
embezzlement, fraud, or theft) in the past 10 years.
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    \6\ 15 U.S.C. 80a-16.
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    In addition, the proposal would amend the Exchange's procedures for 
processing SLAPs submitted for consideration by companies that have 
been identified as being below the Exchange's continued listing 
criteria.\7\ Upon receipt of a SLAP from such a company, Exchange staff 
would first determine whether or not the SLAP is for an issuance to 
current shareholders (e.g., a stock split). If so, the application 
would be authorized. If, however, the SLAP is for an issuance to new 
shareholders, the application will be reviewed against the Exchange-
approved plan pursuant to which the company is operating to return to 
financial compliance with the Exchange's listing standards. If the 
proposed issuance is within the scope of the plan, or furthers the 
goals of the plan, it will be approved. Conversely, the Exchange will 
deny authorization if the proposed issuance is outside the scope of the 
plan or contradicts its goals.\8\
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    \7\ This provision will apply to both U.S. and Non-U.S. issuers. 
See supra note 4.
    \8\ In this context, the Exchange would recognize that employee 
stock option plans, although rarely a specific element of a 
financial plan, are customarily in furtherance of the company's 
objectives and are thereby consistent with any approved plan.
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    Third, the proposal would amend the Exchange's annual report 
requirements. The proposal would require that a company mail to 
shareholders by the specified date either an annual report or a Form 
10-K (Form 20-F for Non-U.S. issuers) with an indication that it is in 
lieu of the annual report.\9\ Due to longer mailing and processing 
time, international companies will have a maximum period following the 
SEC filing deadlines of 45 days to mail either the annual report or 
Form 20-F (with an indication that it is in lieu of the annual report), 
where domestic issuers would have 30 days.\10\
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    \9\ See Amendment No. 1, supra, note 3. Domestic companies are 
required to submit their annual filings on Form 10-K to the SEC 
within 90 days of the fiscal year end. International companies are 
required to submit their annual filings on Form 20-F within 180 days 
of the fiscal year end.
    \10\ Id.
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    Furthermore, for companies that are unable to timely file a Form 
10-K (or Form 20-F), the proposal would allow the Exchange to consider 
why the filing cannot be made, evaluate the continued listing status of 
the company in light of the specific facts presented, and require that 
the company issue a press release. Once the Form 10-K (or Form 20-F) is 
filed, the proposal would require a mailing of the Form 10-K (or Form 
20-F) or an annual report to shareholders within 15 days (30 days for a 
Non-U.S. issuer).\11\
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    \11\ Id.
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    Finally, the proposal would permit companies to distribute annual 
reports or SEC forms electronically to beneficial holders who give 
prior written consent. Such consent must be in writing, which may be in 
the form of electronic mail.\12\
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    \12\ Id.
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    The proposal would also provide that failure to comply with these 
requirements will result in presentation of the company's situation to 
Exchange staff for appropriate action, which could include the 
determination to proceed with suspension of trading and application to 
the SEC to delist the security.

III. Discussion

    The Commission finds that the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\13\ Specifically, the 
Commission believes that the proposal is consistent with the 
requirements of Section 6(b)(5) of the Act \14\ because 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, in general, to protect investors and the public interest. The 
Commission believes that the proposal, by codifying and expanding the 
Exchange's procedures and oversight of listed companies, strikes a 
reasonable balance between the Exchange's obligation to protect 
investors and investor confidence in the market, and its parallel 
obligation to perfect the mechanism of a free and open market.
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    \13\ In approving this rule, the Commission has considered the 
proposed rule change's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    The NYSE proposes several amendments to the Manual. First, the 
Exchange proposes to implement regulatory reviews of key personnel 
associated with listing applicants. Specifically, the proposal provides 
for a procedure where Exchange staff would attempt to identify, through 
a variety of sources, any possible issues of concern regarding an 
applicant's board members, officers, and certain non-institutional 
shareholders. The Commission believes that such reviews should 
strengthen and improve the effectiveness of the procedures for 
reviewing listing applicants, and enhance investor protection by 
screening out those companies that the Exchange believes are unsuitable 
for listing.
    The proposal also codifies the Exchange's procedures regarding 
SLAPs for companies identified as being below continued listing 
standards. Specifically, the proposal requires that SLAPs concerning an 
issuance to new shareholders must not conflict with the company's 
Exchange-approved plan under which it is operating to return to 
compliance with the Exchange's financial listing standards. The 
Commission believes that codifying the procedures applicable to the 
SLAPs of such companies should enhance investor protection by ensuring 
that SLAPs which fail to satisfy the procedures are denied 
authorization.
    The proposal further amends the Exchange's disclosure requirements 
for listed companies late in filing Form 10-Ks or annual reports. A 
company that is unable to make a timely filing will be required to 
explain its reasons for such lateness and will be required to issue a 
press release. Furthermore, the continued listing status of the company 
will be evaluated with regard to the specific facts presented. The 
proposal also allows companies to electronically distribute annual 
reports or SEC forms to beneficial shareholders who give prior written 
consent. Finally, the proposal provides that failure to comply with 
these requirements could result in the NYSE's determination to suspend 
trading and apply to the Commission to delist the security. The 
Commission believes that this proposed change should ensure that 
companies distribute

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their annual reports to investors in a timely manner or provide 
investors with an explanation for any delay, and provide issuers with 
explicit notice that a failure to comply with these requirements could 
result in suspension and delisting from the NYSE. The proposal also 
should provide investors with faster access to a company's forms or 
annual reports by allowing electronic distribution to those investors 
who give express consent to such distribution.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-NYSE-99-14), as amended, is 
approved.
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    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
Margaret H. McFarland,
Deputy Secretary.
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    \16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 00-7975 Filed 3-30-00; 8:45 am]
BILLING CODE 8010-01-M