[Federal Register Volume 67, Number 174 (Monday, September 9, 2002)]
[Notices]
[Pages 57262-57264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22769]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46437; File No. SR-NYSE-2002-42]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Extending the Pilot Regarding Shareholder Approval of Stock Option 
Plans through October 30, 2002

August 29, 2002.
    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 August 29, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend, until October 30, 2002, 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 were approved by the 
Commission on a pilot basis (the ``Pilot'') on June 4, 1999.\3\ The 
Pilot was subsequently amended and extended on March 30, 2001 until 
September 30, 2001.\4\ The Pilot has since been extended until January 
11, 2002,\5\ March 11, 2002,\6\ May 13, 2002,\7\ June 30, 2002,\8\ and 
August 31, 2002.\9\
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    \3\ See Securities Exchange Act Release No. 41479, 64 FR 31667 
(June 11, 1999) (notice of filing and order granting accelerated 
approval, on a pilot basis, to File No. SR-NYSE-98-32) (``Original 
Pilot Approval Order'').
    \4\ See Securities Exchange Act Release No. 44141, 66 FR 18334 
(April 6, 2001) (order granting approval, on a pilot basis, to the 
File No. SR-NYSE-00-32).
    \5\ See Securities Exchange Act Release No. 44886 (September 28, 
2001), 66 FR 51083 (October 5, 2001) (notice of filing and immediate 
effectiveness of File No. SR-NYSE-2001-37) (``2001 Extension 
Request'').
    \6\ See Securities Exchange Act Release No. 45275 (January 14, 
2002), 67 FR 2718 (January 18, 2002) (File No. SR-NYSE-2002-03).
    \7\ See Securities Exchange Act Release No. 45546 (March 12, 
2002), 67 FR 10272 (March 18, 2002) (File No. SR-NYSE-2002-14).
    \8\ See Securities Exchange Act Release No. 45918 (May 13, 
2002), 67 FR 35174 (May 17, 2002) (File No. SR-NYSE-2002-18).
    \9\ See Securities Exchange Act Release No. 46143 (June 28, 
2002), 67 FR 35174 (July 5, 2002) (File No. SR-NYSE-2002-22).
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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
    The Exchange has had the Pilot with respect to the definition of a 
``broadly-based'' stock option plan since June 4, 1999.\10\ On July 13, 
2000, the Exchange filed a proposed rule change seeking to extend the 
effectiveness of the Pilot until September 30, 2003.\11\ Following 
receipt of comments from interested parties and the SEC staff, on 
January 19, 2001, the Exchange amended the 2000 Extension Request to 
shorten the three-year extension request to one year and to amend the 
definition of ``broadly based'' under the Exchange's rule. While the 
2000 Extension Request was under consideration, the Commission extended 
the Pilot to provide the Commission and the Exchange with additional 
time to review and evaluate comment letters.\12\ On March 30, 2001, the 
Commission approved the 2000 Extension Request, which amended and 
extended the Pilot, on a pilot basis until September 30, 2001.\13\ The 
Exchange's 2001 Extension Request extended the Pilot until January 11, 
2002 to provide additional time to evaluate the issues presented by the 
Pilot.\14\ The Pilot was

[[Page 57263]]

again extended several times, most recently until August 31, 2002 for 
the same reasons.\15\
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    \10\ See Original Pilot Approval Order note 3 supra.
    \11\ See Securities Exchange Act Release No. 43111 (August 2, 
2000), 65 FR 49046 (August 10, 2000) (notice of filing of File No. 
SR-NYSE-00-32) (``2000 Extension Request'').
    \12\ See Securities Exchange Act Release Nos. 43329 (September 
22, 2000), 65 FR 58833 (October 2, 2000) (notice of filing and 
immediate effectiveness of File No. SR-NYSE-00-38); 43647 (November 
30, 2000), 65 FR 77407 (December 11, 2000) (notice of filing and 
immediate effectiveness of File No. SR-NYSE-00-52); and 44018 
(February 28, 2001), 66 FR 13821 (March 7, 2001) (notice of filing 
and immediate effectiveness of File No. SR-NYSE-2001-04).
    \13\ See note 4 supra.
    \14\ See note 5 supra. One comment letter was received regarding 
the extension of the Pilot by the 2001 Extension Request. See letter 
from Sarah A.B. Teslick, Executive Director, Council of 
Institutional Investors (``CII'') to Jonathan G. Katz, Secretary, 
Office of the Secretary, Commission, dated October 16, 2001. The CII 
commented that the 2001 Extension Request should have been released 
for public comment prior to the Commission approving another 
extension to the Pilot and that any future proposed extensions 
should be released for prior public comment, that the Pilot not be 
extended after January 11, 2002, that the NYSE should be required to 
submit a dilution standard for approval which should be in place 
before the 2002 proxy season, and that the Commission act on the 
proposed disclosure standards for stock option plans. The Commission 
notes that the disclosure standards were approved by it on December 
21, 2001. See Release Nos. 33-8048 and 34-45189 (December 21, 2001), 
67 FR 232 (January 2, 2002).
    \15\ See notes 6 through 9 supra.
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    On June 6, 2002, the Exchange's special Committee on Corporate 
Accountability and Listing Standards recommended to the Exchange's 
Board of Directors that shareholders ``be given the opportunity to vote 
on all equity-compensation plans.''\16\ The Exchange's Board of 
Directors approved the final recommendations of the Committee at its 
August 2002 Board meeting. The proposed corporate governance standards 
were filed pursuant to Rule 19b-4 under the Act with the Commission on 
August 16, 2002.\17\ The Exchange requests an extension of the Pilot 
until October 30, 2002 to provide time for notice, public comment and 
approval of such rule changes by the Commission.
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    \16\ Report of Corporate Accountability and Listing Standards 
Committee, June 6, 2002, p. 17.
    \17\ See File No. SR-NYSE-2002-33.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\18\ which requires, among other 
things, that an Exchange have rules designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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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    \18\ 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 proposed rule change.

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

    Because the proposed rule change: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) does not become 
operative for 30 days from the date of filing, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) \20\ thereunder.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative prior to 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and public interest. The Exchange seeks to have 
the proposed rule change become operative prior to the end of the last 
extension in order to allow the Pilot to continue in effect on an 
uninterrupted basis. In addition, under Rule 19b-4(f)(6)(iii), the 
Exchange is required to provide the Commission with written notice of 
its intent to file the proposed rule change at least five business days 
prior to the filing date or such shorter time as designated by the 
Commission. The Commission waived the five-day pre-notice requirement 
for this proposed rule change. In addition, for the reasons discussed 
below, the Commission has also waived the thirty-day operative date 
requirement for this proposed rule change.
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    \21\ Id.
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission, consistent with the protection of investors and the 
public interest, has determined to make the proposed rule change to 
extend the Pilot through October 30, 2002, become operative on August 
31, 2002. The Commission notes that unless the Pilot is extended, the 
Pilot will expire and the provisions of Sections 312.01, 312.03, and 
312.04 of the Exchange's Listed Company Manual that were amended in the 
Pilot will revert to those in effect prior to June 4, 1999. The 
Commission believes that such a result could lead to confusion.
    The Commission recognizes that the Pilot has generated many comment 
letters from commenters that do not support the NYSE's definition of 
``broadly-based'' stock option plans under the Pilot.\23\ The 
Commission also notes that many commenters were critical of the NYSE's 
existing rules on broadly-based plans prior to the adoption of the 
original Pilot. As noted above, if the Pilot is not extended, the rules 
prior to the Pilot will go into effect. The proposed rule change merely 
extends the duration of the Pilot for only a short period of time and 
does not deal with the substantive issues presented by the Pilot 
itself.
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    \23\ See Original Pilot Approval Order, note 3 supra.
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    In addition, the Commission notes that the Exchange has filed a 
proposed rule change on proposed corporate governance listing standards 
with the Commission which would, in part, require shareholder approval 
of all equity compensation plans.\24\
    Based on these reasons, the Commission has determined that it is 
consistent with the protection of investors and the public interest 
that the proposed rule change to extend the Pilot through October 30, 
2002, become operative on August 31, 2002.\25\ At any time within 60 
days of the filing of the 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 furtherance of the 
purposes of the Act.
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    \24\ See note 17 supra.
    \25\ For purposes only of accelerating the operative date of 
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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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 such filing will also be 
available for inspection and copying at the principal office of the 
above-mentioned self-regulatory organization. All submissions should 
refer to the File

[[Page 57264]]

No. SR-NYSE-2002-42 and should be submitted by September 30, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22769 Filed 9-6-02; 8:45 am]
BILLING CODE 8010-01-P