[Federal Register Volume 67, Number 223 (Tuesday, November 19, 2002)]
[Notices]
[Pages 69789-69793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29244]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46802; File No. SR-NYSE-2001-46]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change and Amendment Nos. 1 and 2 Thereto by the New York Stock 
Exchange, Inc. Amending Section 804 to the NYSE Listed Company Manual 
and NYSE Rule 499

November 8, 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 October 29, 2001, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. On October 30, 2002, the Exchange submitted Amendment No. 1 
to the proposed rule change.\3\ On November 7, 2002, the Exchange 
submitted Amendment No. 2 to the proposed rule change.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------

    \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 Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated October 29, 2002 (``Amendment No. 
1''). Amendment No. 1 replaces the original proposed rule change in 
its entirety, and clarifies: (1) The scope of the NYSE Committee for 
Review's review on appeal; (2) that neither document discovery nor 
depositions are available; and (3) the rationale for requiring 
payment of a non-refundable fee in connection with a request for 
review.
    \4\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Nancy Sanow, Assistant Director, Division, Commission 
(``Amendment No. 2''). Amendment No. 2 makes a technical correction 
to the proposed rule change.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 804 of the NYSE Listed 
Company Manual and NYSE Rule 499 to make the procedures for appealing 
delisting determinations more efficient and effective, and to charge 
issuers a non-refundable appeal fee in the amount of $20,000. Below is 
the text of the proposed rule change. Proposed new language is 
italicized; proposed deletions are in brackets.
* * * * *
804.00 Procedure for Delisting
    [sbull] If the Exchange staff should determine that a security be 
removed from the list, it will so notify the issuer in writing, 
describing the basis for such decision and the specific policy or 
criterion under which such action is to be taken. The Exchange will 
simultaneously (1) issue a press release disclosing the company's 
status and basis for the Exchange's determination and (2) begin daily 
dissemination of ticker and information notices identifying the 
security's status, and include similar information on the Exchange's 
web site.
    [sbull] The notice to the issuer shall also inform the issuer of 
its right to a review of the determination by a Committee of the Board 
of Directors of the Exchange (comprised of a majority of public 
Directors), provided a written request for such a review is filed with 
the Secretary of the Exchange within ten business days after receiving 
the aforementioned notice. Such written request must state with 
specificity the grounds on which the issuer intends to challenge the 
determination of the Exchange staff, must indicate whether the issuer 
desires to make an oral presentation to the Committee, and must be 
accompanied or preceded by payment of a non-refundable appeal fee in 
the amount of $20,000. [Such review will be conducted on the next 
monthly Review Day which is at least 25 business days from the date the 
request for review is filed with the Secretary of the Exchange. If the 
next Review Day is in less than 25 business days, the review will be 
scheduled for the following Review Day.]
    [sbull] If the issuer does not request a review within the 
specified period, the Exchange shall suspend trading in the security 
and an application shall be submitted by the Exchange staff to the 
Securities and Exchange Commission to strike the security from listing 
and a copy of such application shall be furnished to the issuer in 
accordance with Section 12 of the Securities Exchange Act of 1934 and 
the rules promulgated thereunder.
    [sbull] If a review is requested, the review will be [conducted by 
a Committee of the Board of Directors.] scheduled for the first Review 
Day which is at least 25 business days from the date the request for 
review is filed with the Secretary of the Exchange, unless the next 
subsequent Review Day must be selected to accommodate the Committee's 
schedule. The Committee's review shall be based on oral argument (if 
any) and the written briefs and accompanying materials submitted by the 
parties. The company shall not be permitted to argue grounds for 
reversing the staff's decision that are not identified in its request 
for review, however, the company may ask the Committee for leave to 
adduce additional evidence or raise arguments not identified in its 
request for review, if it can demonstrate that the proposed additional 
evidence or new arguments are material to its request for review and 
that there was reasonable ground for not adducing such evidence or 
identifying such issues earlier. This section shall not, however, (i) 
authorize a company to seek to file a reply brief in support of its 
request for review or (ii) be deemed to limit the staff's response to a 
request for review to the issues raised in the request for review. Upon 
review of a properly supported request, the Committee may in its sole 
discretion permit new arguments or additional evidence to be raised 
before the Committee. Following such event, the Committee may, as it 
deems appropriate, (i) itself decide the matter, or (ii) remand the 
matter to the

[[Page 69790]]

staff for further review. Should the Committee remand the matter to the 
staff, the Committee will instruct the staff to (i) give prompt 
consideration to the matter, and, (ii) complete its review and inform 
the Committee of its conclusions no later than seven (7) days before 
the first Review Day which is at least 25 business days from the date 
the matter is remanded to the staff.
    [sbull] A request for review will ordinarily stay the suspension of 
the subject security pending the review, but the Exchange staff may 
immediately suspend from trading any security pending review should it 
determine that such immediate suspension is necessary or appropriate in 
the public interest, for the protection of investors, or to promote 
just and equitable principles of trade.
    [sbull] Promptly following receipt of a request for review and the 
appeal fee, the Exchange's Office of the General Counsel will notify 
the issuer and the Exchange staff of the scheduled Review Day and the 
briefing schedule. The schedule will be set by the Office of the 
General Counsel so as to provide the Committee adequate time to review 
materials submitted to it, with the remaining time split so as to 
afford the issuer and the Exchange staff substantially equal periods 
for the submission of a brief by the issuer and a responsive brief by 
the Exchange staff. [Any brief or memorandum dealing with the issuer's 
or the Exchange staff's position as well as any other written material 
which the aforementioned parties want the Committee to consider must be 
received by the Office of the General Counsel of the Exchange within 17 
business days from the date the issuer receives the notice of its right 
to a review so that such material can be furnished to the members of 
the Committee.] Each party must [also serve such materials] submit its 
brief and any accompanying materials to [on]both its counterparty 
[simultaneously with the submission to] and to the Office of the 
General Counsel of the Exchange, and must do so by means calculated to 
ensure the party's submission reaches both the Office of the General 
Counsel and the counterparty at or prior to the deadline specified in 
the briefing schedule. [The counterparty service must be made in the 
same manner as such material is filed with the Office of the General 
Counsel of the Exchange.]
    [sbull] The Committee, in its sole discretion upon written motion 
of either party or upon its own motion, may extend any of the time 
periods specified above. The Committee in its sole discretion [and] may 
permit the parties to make oral presentations on their Review Day in 
accordance with such procedures as the Committee may specify at the 
time. If the Committee denies a request by either party to make an oral 
presentation, its reason for doing so must be included in its written 
decision on the review, which decision is provided to all parties. 
Document discovery and depositions will not be permitted.
    [sbull] If the Committee decides that the security of the issuer 
should be removed from listing, the Exchange shall suspend trading in 
the security as soon as practicable and an application shall be 
submitted by the Exchange to the Securities and Exchange Commission to 
strike the security from listing and registration and a copy of such 
application shall be furnished to the issuer in accordance with Section 
12 of the Securities Exchange Act of 1934 and the rules promulgated 
thereunder. If the Committee decides that the security should not be 
removed from listing, the issuer will receive from the Exchange a 
notice to that effect.
* * * * *
Rule 499
Delisting of Securities
Suspension from Dealings or Removal From List by Action of the Exchange
* * * * *
    * * * Supplementary Material:
    .70 Procedure for Delisting.
    a. If the Exchange staff should determine that a security be 
removed from the list, it will so notify the issuer in writing, 
describing the basis for such decision and the specific policy or 
criterion under which such action is to be taken. The Exchange will 
simultaneously: (1) Issue a press release disclosing the company's 
status and basis for the Exchange' s determination and (2) begin 
appending a suffix to the security's ticker symbol identifying the 
security's status. The notice to the issuer shall also inform the 
issuer of its right to a review of the determination by a Committee of 
the Board of Directors of the Exchange (comprised of a majority of 
public Directors), provided a written request for such a review is 
filed with the Secretary of the Exchange within ten business days after 
receiving the aforementioned notice. Such written request must state 
with specificity the grounds on which the issuer intends to challenge 
the determination of the Exchange staff, must indicate whether the 
issuer desires to make an oral presentation to the Committee, and must 
be accompanied or preceded by payment of a non-refundable appeal fee in 
the amount of $20,000. [Such review will be conducted on the next 
monthly Review Day which is at least 25 business days from the date the 
request for review is filed with the Secretary of the Exchange. If the 
next Review Day is in less than 25 business days, the review will be 
scheduled for the following Review Day.]
    b. If the issuer does not request a review within the specified 
period, the Exchange shall suspend trading in the security and an 
application shall be submitted by the Exchange staff to the Securities 
and Exchange Commission to strike the security from listing and a copy 
of such application shall be furnished to the issuer in accordance with 
Section 12 of the Securities Exchange Act of 1934 and the rules 
promulgated thereunder.
    c. If a review is requested, the review will be [conducted by a 
Committee of the Board of Directors.] scheduled for the first Review 
Day which is at least 25 business days from the date the request for 
review is filed with the Secretary of the Exchange, unless the next 
subsequent Review Day must be selected to accommodate the Committee's 
schedule. The Committee's review shall be based on oral argument (if 
any) and the written briefs and accompanying materials submitted by the 
parties. The company shall not be permitted to argue grounds for 
reversing the staff's decision that are not identified in its request 
for review, however, the company may ask the Committee for leave to 
adduce additional evidence or raise arguments not identified in its 
request for review, if it can demonstrate that the proposed additional 
evidence or new arguments are material to its request for review and 
that there was reasonable ground for not adducing such evidence or 
identifying such issues earlier. This section shall not, however, (i) 
authorize a company to seek to file a reply brief in support of its 
request for review or (ii) be deemed to limit the staff's response to a 
request for review to the issues raised in the request for review. Upon 
review of a properly supported request, the Committee may in its sole 
discretion permit new arguments or additional evidence to be raised 
before the Committee. Following such event, the Committee may, as it 
deems appropriate, (i) itself decide the matter, or (ii) remand the 
matter to the staff for further review. Should the Committee remand the 
matter to the staff, the Committee will instruct the staff to (i) give 
prompt consideration to the matter, and, (ii) complete its review and 
inform the Committee of its conclusions no later than seven (7) days 
before the first Review Day which is at least 25 business days from the 
date the matter is remanded to the staff.

[[Page 69791]]

    A request for review will ordinarily stay the suspension of the 
subject security pending the review, but the Exchange staff may 
immediately suspend from trading any security pending review should it 
determine that such immediate suspension is necessary or appropriate in 
the public interest, for the protection of investors, or to promote 
just and equitable principles of trade.
    d. Promptly following receipt of a request for review and the 
appeal fee, the Exchange's Office of the General Counsel will notify 
the issuer and the Exchange staff of the scheduled Review Day and the 
briefing schedule. The schedule will be set by the Office of the 
General Counsel so as to provide the Committee adequate time to review 
materials submitted to it, with the remaining time split so as to 
afford the issuer and the Exchange staff substantially equal periods 
for the submission of a brief by the issuer and a responsive brief by 
the Exchange staff. [Any brief or memorandum dealing with the issuer's 
or the Exchange staff's position as well as any other written material 
which the aforementioned parties want the Committee to consider must be 
received by the Office of the General Counsel of the Exchange within 17 
business days from the date the issuer receives the notice of its right 
to a review so that such material can be furnished to the members of 
the Committee.] Each party must [also serve such materials] submit its 
brief and any accompanying materials to [on]both its counterparty 
[simultaneously with the submission to]and to the Office of the General 
Counsel of the Exchange, and must do so by means calculated to ensure 
the party's submission reaches both the Office of the General Counsel 
and the counterparty at or prior to the deadline specified in the 
briefing schedule. [The counterparty service must be made in the same 
manner as such material is filed with the Office of the General Counsel 
of the Exchange.]
    e. The Committee, in its sole discretion upon written motion of 
either party or upon its own motion, may extend any of the time periods 
specified above. The Committee in its sole discretion [and] may permit 
the parties to make oral presentations on their Review Day in 
accordance with such procedures as the Committee may specify at the 
time. If the Committee denies a request by either party to make an oral 
presentation, its reason for doing so must be included in its written 
decision on the review, which decision is provided to all parties. 
Document discovery and depositions will not be permitted.
    f. If the Committee decides that the security of the issuer should 
be removed from listing, the Exchange shall suspend trading in the 
security as soon as practicable and an application shall be submitted 
by the Exchange to the Securities and Exchange Commission to strike the 
security from listing and registration and a copy of such application 
shall be furnished to the issuer in accordance with section 12 of the 
Securities Exchange Act of 1934 and the rules promulgated thereunder. 
If the Committee decides that the security should not be removed from 
listing, the issuer will receive from the Exchange a notice to that 
effect.
* * * * *

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. 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
    Section 804 of the NYSE Listed Company Manual and NYSE Rule 499 
describe the procedures to be followed when the Exchange determines 
that a security should be removed from listing with the Exchange. They 
provide that the issuer has a right to request a review of the 
Exchange's determination by a committee of the Exchange's Board of 
Directors (``Committee For Review'' or ``Committee''), and contains the 
procedures to be followed in connection with such an appeal. In 2000, 
the SEC approved certain changes in the appeal procedures to allow 
companies to continue to trade on the Exchange during the appeal 
process, and set certain time parameters intended to ensure that 
appeals for delisting determinations are handled expeditiously by the 
Exchange.\5\ After more than a year's experience under the new 
procedures, the Exchange believes that certain changes are needed to 
make the process more efficient and effective, for both issuers and the 
Committee.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 42863 (May 30, 
2000), 65 FR 36488 (June 8, 2000) (File No. SR-NYSE-99-30).
---------------------------------------------------------------------------

    Under the current procedures, both the issuer and the Exchange 
staff are required to file their appeal briefs at the same time. In 
contrast, the Exchange asserts that most court procedures call for the 
appellant to submit its brief first. This allows the respondent to 
focus on the arguments advanced by the appellant, rather than having to 
speculate on what issues the appellant will raise. The Exchange 
believes that having the appellant submit its brief first would more 
effectively utilize the resources of both the Committee and the 
Exchange staff. Accordingly, the Exchange proposes to amend the 
procedures to specify that the issuer will submit its written brief 
first, including any accompanying materials, with the Exchange 
permitted to respond. In addition, the Exchange proposes to clarify 
that the briefing schedule will be set to provide the Committee with 
adequate time to review the materials submitted to it in advance of the 
review date.
    The Exchange's Office of the General Counsel, which oversees the 
appeals process on behalf of the Committee, will schedule reviews on 
the first review day that is at least 25 business days from the date an 
issuer files the request for review, unless the next subsequent Review 
Day must be selected to accommodate the Committee's schedule,\6\ and 
can establish a briefing schedule that takes account of both the 
Committee's caseload and the complexities of the specific case. To 
assist in the Committee's evaluation, an issuer will be required to 
specify in its written request for review the grounds on which it 
intends to challenge the Exchange staff's determination, and whether it 
is requesting to make an oral presentation to the Committee. To cover 
other procedural questions, the Exchange proposes to specify in the 
procedures that document discovery and depositions are not permitted.
---------------------------------------------------------------------------

    \6\ The Committee For Review typically meets every two months.
---------------------------------------------------------------------------

    The Exchange also proposes to specify in its appeal procedures the 
scope of the Committee's review on appeal and the guidelines pursuant 
to which the Committee may decide to hear new issues or evidence not 
identified in an issuer's original request for review.\7\ The

[[Page 69792]]

proposed rule changes states that the Committee for Review's review 
shall be based on oral argument (if any) and the written briefs and 
accompanying materials submitted by the parties. Typically, 
accompanying materials include materials the issuer or NYSE staff 
relies on in support of its position and are supplied as exhibits to 
the brief submitted by the party.
---------------------------------------------------------------------------

    \7\ In this regard, the Commission specifically notes that the 
NYSE's proposal would not permit the issuer to argue grounds for 
reversing the NYSE staff's decision that are not identified in its 
request for review. However, the issuer would be permitted to ask 
the Committee for leave to adduce additional evidence or raise 
arguments not identified in its request for review, if it can 
demonstrate that the proposed additional evidence or new arguments 
are material to its request for review and that there was reasonable 
ground for not adducing such evidence or identifying such issues 
earlier. The proposed rule language would not, however, (i) 
authorize an issuer to seek to file a reply brief in support of its 
request for review or (ii) be deemed to limit the NYSE staff's 
response to a request for review to the issues raised in the request 
for review. Upon review of a properly supported request, the 
Committee may in its sole discretion permit new arguments or 
additional evidence to be raised before the Committee. Following 
such event, the Committee may, as it deems appropriate, (i) itself 
decide the matter, or (ii) remand the matter to the NYSE staff for 
further review. Should the Committee remand the matter to the staff, 
the proposed rules provide that the Committee will instruct the 
staff to (i) give prompt consideration to the matter, and, (ii) 
complete its review and inform the Committee of its conclusions no 
later than seven (7) days before the first Review Day which is at 
least 25 business days from the date the matter is remanded to the 
staff.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to institute a non-refundable 
appeal fee in the amount of $20,000. The Exchange has not previously 
considered it necessary to charge a separate fee to companies appealing 
an Exchange delisting decision. The Exchange believes that this 
historical approach, however, has to be considered in the context of 
the delisting and related appeal policies in effect at the time. 
According to the Exchange, changes in policies and procedures adopted 
or formalized in 1999 have resulted in a larger number of companies 
being delisted, compared to prior years.\8\ More recently, the Exchange 
notes that the percentage of delistings that are appealed has 
significantly increased, a result the Exchange ascribes to the changes 
made to the appeal procedures in 2000, whereby a company that has 
appealed a delisting would likely be permitted to trade on the Exchange 
during the appeal process. In a 21-month period since the new appeal 
procedures were in effect, there were 18 appeals out of 114 delisting 
determinations. In contrast, during the previous 21 months, there were 
only 6 appeals out of 104 delisting determinations. In sum, there are 
now more potential appellants, and they are appealing at a greater 
rate. Finally, while difficult to evidence with statistics, the 
Exchange staff is also under the impression that the appeals since the 
rule change have been more zealously contended by the companies 
involved, compared with previous years.
---------------------------------------------------------------------------

    \8\ For example, there were an average of 22 financial 
delistings per year during the three years from 1996 through 1998, 
but an average of 61 per year during the period 1999 through 2001.
---------------------------------------------------------------------------

    The Exchange has elected to use outside counsel to represent the 
Exchange's Financial Compliance staff in these delisting appeals. 
During the 12 months ending December 31, 2001, the Exchange paid 
slightly in excess of $300,000 in legal fees to cover 11 delisting 
appeals completed during that time, giving an average out of pocket 
cost of slightly less than $30,000 for each appeal. This does not 
include the resources of the Exchange's own Financial Compliance and 
Office of the General Counsel personnel consumed in servicing these 
appeals. The Exchange considers it only fair and appropriate that the 
companies incurring these added out of pocket costs defray these costs 
by paying the proposed $20,000 appeal fee.
    The Exchange does not believe that the appeal fee will deter 
companies from taking reasonable appeals. Most companies that do appeal 
Exchange staff determinations are represented in that appeal by their 
own outside counsel, suggesting that they are able to invest a 
significant sum in the prosecution of their appeal. While the proposed 
Exchange appeal fee is greater than the amount charged at other listing 
markets, the Exchange notes that its original and continuing annual 
listing fees are also higher than those at other markets, and that its 
listed company population in general represents larger capitalization 
companies than on the other markets. The Exchange also notes that, 
particularly in the case of companies that have been delisted after 
attempting to utilize the financial plan process outlined in Section 
802 of the NYSE Listed Company Manual, companies delisted by the 
Exchange typically have received a significant quantum of service and 
attention from the Exchange's Financial Compliance staff. For these 
reasons the Exchange believes that companies electing to appeal a 
delisting decision can bear, and should pay, the $20,000 appeal fee 
that has been proposed.
2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is the requirement under section 6(b)(5) that an 
exchange have rules that are designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to, and perfect the 
mechanism of a free and open market and, in general, to protect 
investors and the public interest.

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 Exchange 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

    Within 35 days of the 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
    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 such 
filing will also be available for inspection and copying at the 
principal office of the Exchange. All submissions should refer to File 
No. SR-NYSE-2001-46 and should be submitted by December 10, 2002.


[[Page 69793]]


    For the Commission, by the Division of Market Regulation, 
pursuant to the delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-29244 Filed 11-18-02; 8:45 am]
BILLING CODE 8010-01-P