[Federal Register Volume 67, Number 222 (Monday, November 18, 2002)]
[Notices]
[Pages 69578-69580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29169]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46785; File No. SR-Amex-2002-55]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by the American Stock Exchange LLC Instituting a Pilot 
Program To Amend the Listing Standards for Closed-End Management 
Investment Companies Registered Under the Investment Company Act of 
1940

November 7, 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 June 14, 2002, 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 Exchange. On 
November 1, 2002, the Amex filed amendment no. 1 to the proposed rule 
change with the Commission.\3\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons and to grant accelerated approval to the proposed 
rule change on a five-month pilot basis (``pilot'').
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Claudia Crowley, Assistant General Counsel, 
Amex, to Nancy Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated October 31, 2002 
(``amendment no. 1''). In amendment no. 1, among other things, the 
Exchange: (1) Amended proposed section 101(e)(2) of the Amex Company 
Guide to remove duplicative language and to explicitly provide that 
the listing standards applicable to a group of closed-end funds will 
apply to all listed funds with a common investment adviser or 
investment advisers who are ``affiliated persons'' as defined in 
section 2(a)(3) of the Investment Company Act of 1940; (2) clarified 
that all closed-end funds listed on Amex with a common investment 
adviser or investment advisers who are affiliated persons will be 
considered part of a ``fund family,'' regardless of when the 
individual funds were listed; (3) represented that the Amex will not 
have discretion to list a closed-end fund that does not satisfy the 
quantitative criteria set forth in section 101(e) of the Amex 
Company Guide, but will have discretion to exclude a closed-end fund 
that otherwise satisfies the criteria; and (4) requested accelerated 
approval of the proposed rule change on a five-month pilot basis.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend sections 101 and 1003 of the 
Amex Company Guide on a five-month pilot basis to include specific 
initial and continued listing standards applicable to closed-end funds.
    Below is the text of the proposed rule change. Proposed new 
language is italicized.
* * * * *

Section 101

    (a)-(d)--No Change.
    (e) Closed-End Management Investment Companies--The Exchange will 
generally authorize the listing of a closed-end management investment 
company registered under the Investment Company Act of 1940 (a 
``Closed-End Fund'') that meets the following criteria:
    (1) Size--market value of publicly held shares or net assets of at 
least $20,000,000; or
    (2) A Closed-End Fund which is part of a group of Closed-End Funds 
which are or will be listed on the Exchange, and which are managed by a 
common investment adviser or investment advisers who are ``affiliated 
persons'' as defined in Section 2(a)(3) of the Investment Company Act 
of 1940 as amended (the ``Group''), is subject to the following 
criteria:
    i. The Group has a total market value of publicly held shares or 
net assets of at least $75,000,000;
    ii. The Closed-End Funds in the Group have an average market value 
of publicly held shares or net assets of at least $15,000,000; and
    iii. Each Closed-End Fund in the Group has a market value of 
publicly held shares or net assets of at least $10,000,000.
    (3) Distribution--See section 102(a).
    Commentary .01--No Change.

Section 1003

    (a)--No Change.
    (b) Limited Distribution--Reduced Market Value--The Exchange will 
normally consider suspending dealings in, or removing from the list, a 
security when any one or more of the following conditions exist:
    (i)-(iv)--No Change.
    (v) Closed-End Funds:
    (A) If the total market value of publicly held shares and net 
assets are each less than $5,000,000 for more than 60 consecutive days; 
or
    (B) It ceases to qualify as a closed-end fund under the Investment 
Company Act of 1940 (unless the resultant entity otherwise qualifies 
for listing).
* * * * *

[[Page 69579]]

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, as 
amended, 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 is proposing to incorporate initial and continued 
listing standards specifically applicable to closed-end management 
investment companies registered under the Investment Company Act of 
1940 (``closed-end funds'') into the Amex Company Guide. Currently, 
closed-end funds are evaluated for listing pursuant to the general 
listing standards contained in section 101 of the Amex Company Guide, 
as well as specialized internal procedures applicable to closed-end 
funds.
    In order to provide greater clarity to listing applicants and 
investors, the Exchange is proposing to incorporate revised closed-end 
fund listing standards into section 101 of the Amex Company Guide. 
These standards would permit the initial listing of a closed-end fund 
with a market value of publicly held shares or net assets of at least 
$20,000,000, which also satisfies the distribution criteria specified 
in section 102(a) of the Amex Company Guide.\4\ Because closed-end 
funds are subject to extensive federal regulation, the Exchange 
proposes not to require a review of a fund's investment objective and 
asset diversification, as had been included in the Exchange's internal 
procedures, as that could unnecessarily limit the listing of 
specialized funds. Similarly, the Exchange believes that registration 
of the fund under the Investment Company Act of 1940, as amended 
(``1940 Act''), which requires the fund adviser to be a registered 
investment adviser, obviates the need for the Exchange to subjectively 
evaluate the fund adviser.
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    \4\ Section 102(a) of the Amex Company Guide requires a minimum 
public distribution of (i) 500,000 shares and 800 shareholders; or 
(ii) 1,000,000 shares and 400 shareholders; or (iii) 500,000 shares 
and 400 shareholders and average daily trading volume of 
approximately 2,000 shares.
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    In addition, the Exchange is proposing to permit the listing of a 
group of funds listed by a single ``fund family'' (i.e., funds with a 
common investment adviser or investment advisers who are ``affiliated 
persons'' as defined in section 2(a)(3) of the 1940 Act) \5\ subject to 
the following standards:
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    \5\ 15 U.S.C. 80a-2(a)(3); See amendment no. 1, supra note 3.
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    [sbull] The group has a total market value of publicly held shares 
or net assets of at least $75,000,000;
    [sbull] The closed-end funds in the Group have an average market 
value of publicly held shares or net assets of at least $15,000,000; 
and
    [sbull] Each closed-end fund in the group has a market value of 
publicly held shares or net assets of at least $10,000,000.\6\
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    \6\ See Amendment No. 1, supra note 3.
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    The Exchange represents that the group standards would be 
applicable to any fund that is part of a ``fund family'' even if the 
fund is not listed concurrently with other funds in the family, as long 
as at the time of listing the individual fund, the entire ``fund 
family'' is in compliance with the group standards.\7\ Each fund will 
also be individually subject to the distribution criteria specified in 
section 102(a) of the Amex Company Guide.\8\
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    \7\ The Exchange represents that all such funds will thus be 
evaluated in determining whether a fund applicant is eligible for 
listing. See amendment no. 1, supra note 3.
    \8\ See supra note 4.
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    The Exchange believes that the ``fund family'' standards will 
enable the Exchange to accommodate the needs of fund sponsors, which 
often prefer to offer, issue and list funds in groups. The Exchange 
believes that when a fund is part of a larger family, compliance with a 
$20 million market value of publicly held shares or net asset 
requirement is not necessary for the fund to be suitable for listing, 
since the size of the fund family indicates that there is sufficient 
investor interest in the sponsor's funds.\9\
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    \9\ The Exchange represents that it will not have discretion to 
list a closed-end fund that does not satisfy the quantitative 
criteria set forth in section 101(e) of the Amex Company Guide, but 
will have discretion to exclude a closed-end fund that otherwise 
satisfies the criteria. See amendment no. 1, supra note 3.
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    The Exchange is also proposing to amend section 1003 of the Amex 
Company Guide to specify that each closed-end fund (regardless of 
whether it is part of a ``fund family'') will be subject to delisting 
if its market value of public held shares and net assets are each less 
than $5,000,000 for 60 consecutive trading days, or if it ceases to 
qualify as a closed-end fund (unless the resultant entity otherwise 
qualifies for listing).
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act,\10\ in general, and furthers 
the objectives of section 6(b)(5),\11\ in particular, in that it is 
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, and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. Specifically, the Exchange believes that the proposed rule 
change will provide greater transparency with respect to the listing of 
closed-end funds, and potentially provide a larger number of such funds 
and their investors with the benefits inherent in an Amex listing of 
comprehensive regulation, transparent price discovery and trade 
reporting to facilitate best execution, and increased depth and 
liquidity resulting from the confluence of order flow found in an 
auction market environment.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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, as 
amended, will impose any burden on competition.

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 any written 
comments with respect to the proposed rule change.

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 
designate 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 Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or

[[Page 69580]]

    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 
offices of the Amex. All submissions should refer to File No. SR-Amex-
2002-55 and should be submitted by December 9, 2002.

V. Commission Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, 
relating to the establishment of the pilot 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\ Specifically, the Commission believes that the proposed 
rule change will provide greater transparency to the Exchange's listing 
process for closed-end funds.
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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ In approving this pilot, 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 finds good cause for approving the pilot prior to 
the 30th day after publication in the Federal Register. The Amex has 
represented that it desires to promptly implement the proposed rule 
change and that accelerated approval will enable the Exchange to more 
quickly accommodate the listing of closed-end funds.\14\ The Commission 
believes that accelerated approval on a five-month basis will permit 
the Exchange to continue listing funds and accommodate the desire of 
fund families to list groups of closed-end funds on one marketplace 
without undue delay.\15\ Accordingly, the Commission finds it 
appropriate and consistent with sections 6(b)(5) and 19(b)(2) of the 
Act \16\ to approve the proposed rule change, as amended, prior to the 
thirtieth day after the date of publication of notice thereof in the 
Federal Register.
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    \14\ See amendment no. 1, supra note 3.
    \15\ Approval of the five-month pilot period should not be 
interpreted as suggesting that the Commission is predisposed to 
approving the proposal on a permanent basis.
    \16\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\17\ the proposed rule change, as amended, (File No. SR-Amex-2002-
55) is approved on a pilot basis until April 7, 2003.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-29169 Filed 11-15-02; 8:45 am]
BILLING CODE 8010-01-P