[Federal Register Volume 67, Number 203 (Monday, October 21, 2002)]
[Notices]
[Pages 64687-64688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26683]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46654; File No. SR-NYSE-2002-01]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Approving Proposed Rule Change and Amendment No. 1 Thereto 
Relating to Removal of Separate Exchange Requirements Regarding the Use 
of Consent Solicitations

October 11, 2002.
    On January 3, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), 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 to remove separate NYSE 
requirements regarding the use of consent solicitations. The NYSE 
submitted Amendment No. 1 to the proposed rule change on May 23, 
2002.\3\ The proposed rule change was published for comment on June 26, 
2002.\4\ The Commission received no comments on the amended proposal. 
This order approves the proposed rule change, as amended.
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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, Commission, dated May 22, 2002 (``Amendment No. 1''). In 
Amendment No. 1, the Exchange: (1) Added the following language to 
the proposed rule text: ``(including interpretations thereof), 
including, without limitation,'' and (2) added language to the 
purpose section clarifying the two options available to listed 
companies for obtaining shareholder approval.
    \4\ See Securities Exchange Act Release No. 46092 (June 19, 
2002), 67 FR 43199.
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    The proposed rule change would amend Section 306 of the NYSE Listed 
Company Manual (``NYSE Manual'') to remove separate NYSE requirements 
regarding the use of consent solicitations. Currently, Section 306 of 
the NYSE Manual requires NYSE listed companies to obtain NYSE's 
permission to use consents in lieu of special meetings as proper 
authorization for shareholder approval of corporate action. In 
addition, Section 306 of the NYSE Manual currently sets forth the 
following guidelines that NYSE listed companies must follow in order to 
receive NYSE's permission: (1) A record date must be used; (2) consent 
material must be sent to all shareholders; (3) corporate action can not 
be taken until the solicitation period has expired--even if the 
required vote is received earlier; (4) a 30-day solicitation period is 
recommended and a minimum of 20 days is required; and (5) consent 
material must conform to normal proxy statement disclosure standards. 
In effect, these guidelines require corporations to solicit the consent 
of all shareholders.
    Under the federal securities laws, when a corporation is permitted 
under state law to take corporate action without a shareholder meeting 
upon the written consent of a specified percentage of shareholders, 
such corporation is not required to solicit the consent of all 
shareholders. Instead, under certain circumstances, under Section 14(c) 
of the Exchange Act and Regulation 14C thereunder, the corporation is 
required to furnish to all shareholders an information statement that 
contains the same disclosure as a proxy or consent solicitation at 
least 20 days prior to the earliest date the corporate action can be 
taken.\5\ The NYSE believes that under certain circumstances, the 
current requirements of Section 306 of the NYSE Manual are more onerous 
than those of the federal securities laws. Accordingly, the Exchange 
proposes to modify Section 306 of the NYSE Manual to eliminate the 
separate Exchange requirements with respect to use of consents in lieu 
of special meetings. Under the proposal, NYSE listed companies will no 
longer be required to obtain Exchange approval before using consents in 
lieu of special meetings as proper authorization for shareholder 
approval of corporate action. NYSE listed companies will be permitted 
to either: (1) Hold a special meeting of shareholders, or (2) use 
consents in lieu of special meetings when and as permitted by 
applicable law.\6\
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    \5\ See 15 U.S.C. 78n(c) and 17 CFR 240.14C.
    \6\ As amended, Section 306 of the NYSE Manual specifically 
states that listed companies must comply with ``applicable state and 
federal law and rules (including interpretations thereof), 
including, without limitation, SEC Regulations 14A and 14C.''
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    The Exchange represents that it would, however, retain its 
traditional policy that listed companies may not use written consents 
in lieu of the annual meeting of shareholders at which directors are to 
be elected.\7\
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    \7\ See Section 306 of the NYSE Manual.
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    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 \8\ 
and, in particular, the requirements of section 6 of the

[[Page 64688]]

Act.\9\ The Commission finds specifically that the proposed rule change 
is consistent with section 6(b)(5) of the Act \10\ because the proposed 
rule change requires NYSE listed companies to obtain shareholder 
consent in a manner that is consistent with federal securities laws.
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    \8\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
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    As noted above, listed companies would be permitted to hold a 
special meeting of shareholders to take corporate action and nothing in 
NYSE rules require companies to use one method over the other to obtain 
shareholder approval of corporate action. Rather, the changes being 
approved to the NYSE rules simply permit listed companies to utilize 
consent as an alternative to shareholder approval only when and as 
permitted by applicable federal securities laws and state laws. 
Shareholder approval at a special meeting and consent under the 
conditions noted above would be the only two ways for listed companies 
to take corporate action under NYSE rules when shareholder approval is 
required. In approving the proposal, we note that the federal security 
law requirements help to ensure, among other things, that all 
shareholders receive adequate disclosure prior to such corporate action 
being taken.
    Based on the above, the Commission believes the changes should 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, protect investors 
and the public interest; and are not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
    It is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NYSE-2002-01), as amended by 
Amendment No. 1, is approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26683 Filed 10-18-02; 8:45 am]
BILLING CODE 8010-01-P