[Federal Register Volume 66, Number 91 (Thursday, May 10, 2001)]
[Notices]
[Pages 23955-23956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11801]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44256; File No. SR-Amex-2001-24]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the American Stock Exchange 
LLC Relating to Independent Director and Audit Committee Requirements

May 3, 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 April 18, 2001, the American Stock Exchange LLC (``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 Amex. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to amend Section 121 of the Amex Company Guide to 
clarify that domestic listed companies are required to have a 
sufficient number of independent directors on their board of directors 
to satisfy the Exchange's audit committee. The text of the proposed 
rule change is set forth below. New text is in italics.

* * * * *

Section 121. INDEPENDENT DIRECTORS AND AUDIT COMMITTEE

A. Independent Directors

    The Exchange requires that domestic listed companies have a 
sufficient number of independent directors on the company's board of 
directors to satisfy the audit committee requirements set forth 
below. Independent directors are not officers of the company and 
are, in the view of the company's board of directors, free of any 
relationship that would interfere with the exercise of independent 
judgment. The following persons shall not be considered independent:
    (a)-(e) No change
* * * * *

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 Amex 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 Amex 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
    The Exchange is proposing to amend Section 121A of the Amex Company 
Guide to clarify that each domestic listed company is required to have 
a sufficient number of independent directors on its board of directors 
to satisfy the audit committee requirements specified in part B of 
Section 121. Section 121 was amended in December 1999 to implement the 
recommendations contained in the February 1999 report of the Blue 
Ribbon Committee on Improving the Effectiveness of Corporate Audit 
Committees \3\ which were aimed at strengthening the independence of 
the audit committee, making the audit committee more effective, and 
addressing mechanisms for accountability among the audit committee, the 
outside auditors, and management.\4\ Section 121, particularly when 
analyzed in conjunction with Section 120 of the Amex Company Guide, 
currently requires the independent directors referenced therein to be 
members of the company's board of directors.\5\ However, inquiries from 
several listed companies have led the Exchange to conclude that there 
may be some confusion among the listed company community with respect 
to the requirement. Accordingly, to avoid further confusion, the 
Exchange is proposing to amend Section 121 to clarify that the 
independent directors must be members of the company's board of 
directors.
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    \3\ The Committee's Report is available online at www.amex.com.
    \4\ The audit committee requirements are being phased-in over an 
18 month period for issuers that were listed on the Amex at the time 
the changes were adopted.
    \5\ Section 120 of the Amex Company Guide specifies that ``each 
company shall utilize [its] Audit Committee or a comparable body of 
the Board of Directors for the review of potential conflict of 
interest situations where appropriate'' (emphasis added).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 23956]]

Section 6(b)(5) \6\ of the Act, which requires, among other things, the 
Exchange's rules to 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.
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    \6\ 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 
result in 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 did not solicit or receive written comments on the 
proposed rule change.

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \7\ and subparagraph (f)(1) of Rule 19b-4 
thereunder \8\ because it constitutes as a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of the Exchange. At any time within 60 
days of the filing of such 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 the furtherance of the 
Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(f)(1).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is 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 in the 
Commission's Public Reference Room. Copies of the filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to the File No. SR-Amex-2001-24 and 
should be submitted by May 31, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated athority.\9\
Margaret H. McFarland,
Deputy Secretary.
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    \9\ 17 CFR 200.30-3(a)(12)
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[FR Doc. 01-11801 Filed 5-9-01; 8:45 am]
BILLING CODE 8010-01-M