[Federal Register Volume 67, Number 135 (Monday, July 15, 2002)]
[Notices]
[Pages 46559-46561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-17681]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46163; File No. SR-NYSE-2001-45]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Granting Permanent Approval of Proposed Rule Change and Amendment 
Nos. 1 and 2 Thereto, and Notice of Filing of and Order Granting 
Accelerated Approval to Amendment No. 3 Relating to Initial Listing 
Standards and Allocation Policy for Closed-End Management Investment 
Companies Registered Under the Investment Company Act of 1940

July 3, 2002.

I. Introduction

    On October 29, 2001, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``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 initial listing 
standards and allocation policy for closed-end management investment 
companies registered under the Investment Company Act of 1940 
(hereinafter referred to as ``funds'' or ``closed-end funds''). On 
March 14, 2002, the NYSE filed Amendment No. 1 to the proposed rule 
change with the Commission.\3\ On April 1, 2002, the NYSE filed 
Amendment No. 2 to the proposed rule change with the Commission.\4\ On 
April 2, 2002, the Commission issued notice of, and granted partial 
accelerated approval to, the proposed rule change and Amendment Nos. 1 
and 2 thereto, on a three-month pilot basis.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Nancy J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated March 12, 2002 (``Amendment No. 
1'').
    \4\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Nancy J. Sanow, Assistant Director, Division, Commission, dated 
April 1, 2002 (``Amendment No. 2'') (replacing Form 19b-4 in its 
entirety).
    \5\ See Securities Exchange Act Release No. 45684 (April 2, 
2002), 67 FR 17092 (April 9, 2002).
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    The Commission received one comment letter on the proposed rule 
change, as amended.\6\ On June 27, 2002, the NYSE file Amendment No. 3 
to the proposed rule change with the Commission.\7\ This order approves 
the proposed rule change, as amended, on a permanent basis and grants 
accelerated approval to Amendment No. 3. The Commission is also 
soliciting comments on Amendment No. 3 from interested persons.
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    \6\ See letter from Ari Burstein, Associate Counsel, Investment 
Company Institute, to Jonathan G. Katz, Secretary, Commission, dated 
April 30, 2002 (``ICI Letter'').
    \7\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Nancy J. Sanow, Assistant Director, Division, Commission, dated 
June 25, 2002 (``Amendment No. 3''). In Amendment No. 3, the NYSE 
made a technical correction to the rule text and a conforming change 
to the purpose section to clarify the definition of affiliated 
persons in Section 102.04 of the NYSE Listed Company Manual 
(``Manual'') and Section V of the NYSE's Allocation Policy and 
Procedures (``Allocation Policy'').
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II. Description of Proposal

    The NYSE proposes to permanently amend Section 102.04 of the 
Exchange's Manual regarding listing standards for closed-end funds. The 
Exchange is proposing to apply to all individual closed-end funds that 
desire to list on the Exchange the $60 million public market value test 
currently used for funds applying in connection with their initial 
public offering. In addition, the Exchange is proposing a standard 
under which a group of funds meeting certain specified requirements can 
be listed concurrently by a single ``fund family,'' \8\ even if the 
group includes one or more funds with less than $60 million in public 
market value. Specifically, the Exchange would generally authorize the 
listing of a fund family \9\ if: (1) The total group market value of 
publicly held shares (offering proceeds, in the case of newly formed 
funds) equals in the aggregate at least $200 million; (2) each group 
averages at least $45 million in market value of

[[Page 46560]]

publicly held shares (proceeds) per fund; and (3) no one fund in the 
group has a market value of publicly held shares (proceeds) of less 
than $30 million. This group standard would apply regardless of whether 
the group consists of newly formed or existing funds, or a combination 
thereof.
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    \8\ A ``fund family'' (as the term is used herein) consists of 
funds with a common investment adviser or having investment 
advisers, which are ``affiliated persons,'' as defined in Section 
2(3) of the Investment Company Act of 1940, as amended. See 
Amendment No. 3, supra note 7. The Exchange represents that it will 
not have discretion to list a group of closed-end funds that desire 
to list concurrently by a fund family if the group does not satisfy 
the listing requirements for a fund family set forth in this 
proposal. However, the Exchange will retain the discretion to 
exclude a fund family that otherwise satisfies the requirements. 
Telephone conversation between Janet Kissane, Office of the General 
Counsel, NYSE, and Terri Evans, Assistant Director, and Frank N. 
Genco, Attorney, Division, Commission, on July 3, 2002.
    \9\ The Exchange has represented that the composition of the 
group will be determined in each case by the investment adviser 
bringing the group listing to the Exchange.
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    Finally, the Exchange is proposing to amend its Allocation Policy 
to permit a fund family to be allocated to one specialist unit, unless 
the Allocation Committee believes it appropriate to allocate the group 
to more than one specialist unit. In certain situations, the Allocation 
Committee would be permitted to allocate funds within a group to more 
than one unit. Such situations could include, for example, instances 
where the number of funds in the group, the types of funds, or the 
relative values of the funds suggest to the Allocation Committee that 
allocation to more than one specialist unit would be appropriate.\10\
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    \10\ The Exchange has represented that the normal Allocation 
Policy would apply to closed-end funds being listed on the Exchange 
just as they apply to any other business corporation being listed. 
Therefore, the amendment being proposed hereby is altering the 
Allocation Policy in only the discreet manner specified. The 
Exchange also represented that all the other aspects of the 
Allocation Policy, including the method by which the listed company 
is permitted to pick from a panel of specialists put together by the 
Allocation Committee, would apply.
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III. Summary of Comments

    As noted above, the Commission received one comment letter 
regarding the proposal.\11\ ICI supported the proposed rule change, as 
amended by Amendment Nos. 1 and 2, and believed that the proposal would 
facilitate the listing of closed-end funds on the Exchange, 
particularly for listings of closed-end funds from a single fund 
family. ICI noted that the proposal would eliminate the existing 
distinction between newly formed and existing funds for listing 
purposes that currently requires existing funds to meet the same 
financial standards applicable to regular operating companies. ICI 
emphasized that the adoption of listing eligibility criteria for 
closed-end funds should take into account that such funds are 
structured and regulated differently than regular operating companies 
and, therefore, different financial standards should be applied to 
closed-end funds as compared to regular operating companies. Finally, 
ICI noted that the allocation to one specialist unit of all of the 
closed-end funds in a fund family group may result in a more effective 
utilization of the resources of the Exchange.
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    \11\ See ICI Letter.
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IV. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange. 
Specifically, the Commission believes the proposal is consistent with 
the requirements under Section 6(b)(5) of the Act \12\ that the rules 
of an exchange 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.\13\
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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ In approving this proposal, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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    The Commission believes that the proposed rule change strikes a 
reasonable balance between the Exchange's obligation to protect 
investors and their confidence in the market and the Exchange's 
obligation to perfect the mechanism of a free and open market by 
listing funds, including fund families, on the Exchange. The Commission 
also believes that providing an alternative method to list closed-end 
funds on the Exchange should accommodate the desire of fund families to 
list groups of closed-end funds on one marketplace.
    Furthermore, the Commission believes that it is reasonable to 
permit the Allocation Committee under normal circumstances to allocate 
to one specialist unit all the closed-end funds in a family group 
listed under the group criteria. According to the Exchange, economies 
of scale and more effective utilization of resources may be realized by 
the allocation of a group of what are likely to be less actively traded 
securities to one specialist unit, rather than to have the individual 
funds within the group allocated to a number of units. The Commission 
notes, however, that the Allocation Committee would not be required to 
allocate the entire group to one specialist unit. The Committee retains 
the flexibility to allocate to more than one unit if there are factors 
present that make the Committee believe that allocation to more than 
one unit is appropriate.
    Finally, the Commission notes that it has no knowledge of any 
problems or regulatory concerns that have developed since the approval 
of the three-month pilot program.\14\ The Commission also notes that 
during the three-month pilot it received only one comment letter, which 
supported the proposed rule change. Accordingly, the Commission finds 
it appropriate and consistent with sections 6(b)(5) and 19(b)(2) of the 
Act \15\ to approve the proposed rule change, as amended, on a 
permanent basis.
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    \14\ Telephone conversation between Janet Kissane, Office of the 
General Counsel, NYSE, and Frank N. Genco, Attorney, Division, 
Commission, on July 2, 2002.
    \15\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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    The Commission also finds good cause for accelerating approval of 
Amendment No. 3, because it merely clarifies the meaning of fund family 
to include those funds with a common investment adviser or having 
investment advisers which are affiliated persons, as defined by the 
Investment Company Act. Accordingly, the Commission finds that good 
cause exists, consistent with sections 6(b)(5) of the Act,\16\ and 
section 19(b)(2) of the Act \17\ to accelerate approval of Amendment 
No. 3 to the proposed rule change prior to the thirtieth day after 
publication in the Federal Register.
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    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78s(b)(2).
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V. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 3, including whether the Amendment 
No. 3 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 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-2001-45 and 
should be submitted by August 5, 2002.

VI. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\18\ that the proposed rule change, as amended, (File No. SR-NYSE-
2001-45) is approved on a permanent basis.
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    \18\ 15 U.S.C. 78s(b)(2).


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-17681 Filed 7-12-02; 8:45 am]
BILLING CODE 8010-01-P