[Federal Register Volume 66, Number 23 (Friday, February 2, 2001)]
[Notices]
[Pages 8827-8828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2815]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43879; File No. SR-NYSE-00-32]


Self-Regulatory Organizations; Notice of Filing of Amendment No. 
1 to a Proposed Rule Change by the New York Stock Exchange, Inc. 
Relating to Shareholder Approval of Stock Option Plans

January 24, 2001.
    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 January 19, 2001, the New York Stock Exchange, Inc. (``Exchange'' or 
``NYSE'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') an amendment to the proposed rule change \3\ as 
described in Items I, II, and II below, which Items have been prepared 
by the Exchange. 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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange submitted the proposed rule change on July 13, 
2000, which was published in the Federal Register on August 10, 
2000. See Securities Exchange Act Release No. 43111 (August 2, 
2000), 65 FR 49046 (``Notice'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    In this amendment, the Exchange proposes two modifications to the 
Notice. First, the Exchange proposes to extend the effectiveness of the 
amendments to Sections 312.01, 312.03 and 312.04 of the Exchange's 
Listed Company Manual with respect to the definition of a ``broadly-
based'' stock option plan, which amendments were approved by the 
Commission on a pilot basis (``Pilot'') on June 4, 1999,\4\ until 
September 30, 2001.\5\ Second, the Exchange proposes to amend Section 
312.04, which defines the term ``broadly based.'' Specifically, the 
Exchange proposes to amend the requirements regarding awards granted 
under broadly based plans. The text of the proposed rule change 
follows. Additions are italicized; deletions are [bracketed].
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    \4\ Securities Exchange Act Release No. 41479, 64 FR 31667 (June 
11, 1999). The Pilot was originally scheduled to expire on September 
30, 2000. On September 22, 2000, the Pilot was extended through 
November 30, 2000 to accommodate an extended comment period for the 
Notice. See Securities Exchange Act Release No. 43329, 65 FR 58833 
(October 2, 2000). On November 30, 2000, the Pilot was further 
extended until February 28, 2000. See Securities Exchange Act 
Release No. 43647 (November 30, 2000), 65 FR 77407 (December 11, 
2000).
    \5\ The Exchange originally proposed a three-year extension. See 
Notice, note 3 supra.
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312.00  Shareholder Approval Policy
312.04  For the purpose of Para. 312.03:
* * * * *
    (h) A Plan is ``broadly-based'' if, pursuant to the terms of the 
Plan:
    at least a majority of the company's full-time employees in the 
United States, who are ``exempt employees,'' as defined under Fair 
Labor Standards Act of 1938, are eligible to receive stock or options 
under the Plan; and
    at least a majority of the shares of stock or shares of stock 
underlying options awarded under the Plan[,] during any three year 
period [the shorter of the three-year period commencing on the date the 
Plan is adopted by the company or the term of the Plan,] must be 
awarded to employees who are not officers or directors of the company.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In the Notice, the Exchange requested a three-year extension of the 
Pilot to permit additional industry discussion of the issues, while at 
the same time enabling the Exchange to continue to study the experience 
of NYSE listed companies and their investors under the broadly-based 
plan rules contained in the Pilot. Following receipt of comments from 
interested persons and discussion with the SEC staff, the Exchange is 
amending its proposed to shorten the extension request so that the 
Pilot will expire on September 30, 2001.
    Several commenters on the Pilot also expressed concern that the 
second part of the broadly definition, which focuses on actual grants 
made under a plan during either the first three years of a plan or the 
life of a plan if shorter than three years, does not protect against 
actions the company may take after the first three years. The 
Commission staff also noted this issue in its order approving the 
Pilot.\6\
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    \6\ See note 4 supra.
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    In a letter to the Commission dated March 11, 1999,\7\ the Exchange 
explained that the three-year formulation was primarily intended to 
avoid imposing a one-year test. The Exchange further stated that it 
anticipated that companies would not change their policies after the 
first three years of a plan. While the Exchange maintains this opinion, 
it also is willing to remove any lingering concern over this issue by 
amending the rule to specify that, in order to be ``broadly

[[Page 8828]]

based,'' at least a majority of the shares of stock or shares of stock 
underlying options awarded under a plan during any three year period 
must be awarded to employees who are not officers or directors of the 
company. Naturally, this refers to periods of three consecutive years, 
and is a continuing requirement that should be applied on a rolling 
three-year basis by plans with terms longer than three years. In the 
event that a plan is implemented with a stated term shorter than three 
years, awards should be made in a way that would meet the rule criteria 
during such shorter period.
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    \7\ See letter from James E. Buck, Senior Vice President and 
Secretary, NYSE, to Jonathan G. Katz, Secretary, SEC, dated March 
11, 1999 (Amendment No. 2 to File No. SR-NYSE-98-32, in which the 
NYSE proposed the pilot period for the proposed rule change and 
responded to the comment letters received from interested persons).
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2. Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\8\ which requires, among other thins, 
that an exchange's rules be 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, in general, 
to protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposal.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designated up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (a) by order approve such proposed rule change, or
    (b) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    In this regard, the Exchange consents to an extension of the time 
period for Commission action to February 28, 2001.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amendment is 
consistent with the requirements of the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-06009. 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 in the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the NYSE. All submissions should refer to File No. 
SR-NYSE-00-32 and should be submitted by February 23, 2001.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-2815 Filed 2-1-01; 8:45 am]
BILLING CODE 8010-01-M