[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Notices]
[Pages 72239-72241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30667]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46887; File No. SR-Amex-2002-97]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Relating to Initial and 
Continued Listing Standards

November 22, 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 November 20, 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. 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 Amex proposes to amend Sections 101, 102, and 1003 of the Amex 
Company Guide to modify initial and continued listing standards. The 
text of the proposed rule change is below. Proposed new language is in 
italics; proposed deletions are in brackets.
* * * * *
American Stock Exchange LLC Company Guide
Section 101
    (a) through (c)--No Change.

[[Page 72240]]

(d) Initial Listing Standard 4

    (1) Total Value of Market Capitalization--$75,000,000; or
    Total assets and total revenue--$75,000,000 each in its last fiscal 
year, or in two of its last three fiscal years.
    (2) Aggregate Market Value of Publicly Held Shares--$20,000,000.
    (3) Distribution `` See Section 102(a).
([d]e) Alternative Listing Standards
    The securities of certain issuers which do not satisfy any of the 
Initial Listing Standards set forth in paragraphs (a)-([c]d) of this 
Section may be eligible for initial listing pursuant to the appeal 
procedures and the Alternative Listing Standards specified in Section 
1203(c).
    Additional criteria applicable to various classes of securities and 
issuers are set forth below. Applicants should also consider the 
policies regarding conflicts of interest, independent directors and 
voting rights described in Sec. Sec.  120-125.
    Commentary .01--No Change.
Section 102
    (a)--No Change.
    (b) Stock Price/Market Value of Shares Publicly Held--The Exchange 
requires a minimum market price of $3 per share for applicants seeking 
to qualify for listing pursuant to Section 101 (a), [or] (b) or (d), 
and $3,000,000 aggregate market value of publicly held shares for 
applicants seeking to qualify for listing pursuant to Section 101(a). 
In certain instances, however, the Exchange may favorably consider 
listing an issue selling for less than $3 per share after considering 
all pertinent factors, including market conditions in general, whether 
historically the issue has sold above $3 per share, the applicant's 
capitalization and the number of outstanding and publicly-held shares 
of the issue.
    (c)--No change.
    * The terms ``public distribution'' and ``public 
shareholders'' as used in the Company Guide include both shareholders 
of record and beneficial holders, but are exclusive of the holdings of 
officers, directors, controlling shareholders and other concentrated 
(i.e. 10% or greater), affiliated or family holdings.
* * * * *
Section 1003
* * * * *
    (a) Financial Condition and/or Operating Results--The Exchange will 
normally consider suspending dealings in, or removing from the list, 
securities of a company which:
    (i) has stockholders' equity of less than $2,000,000 if such 
company has sustained losses from continuing operations and/or net 
losses in two of its three most recent fiscal years; or
    (ii) has stockholders' equity of less than $4,000,000 if such 
company has sustained losses from continuing operations and/or net 
losses in three of its four most recent fiscal years; or
    (iii) has stockholders' equity of less than $6,000,000 if such 
company has sustained losses from continuing operations and/or net 
losses in its five most recent fiscal years; or
    (iv) has sustained losses which are so substantial in relation to 
its overall operations or its existing financial resources, or its 
financial condition has become so impaired that it appears 
questionable, in the opinion of the Exchange, as to whether such 
company will be able to continue operations and/or meet its obligations 
as they mature.
    However, the Exchange will not normally consider suspending 
dealings in, or removing from the list, the securities of a company 
which is below any of standards (i) through (iii) above if the company 
is in compliance with the following:
    (1) Total value of market capitalization* of at least $50,000,000; 
or total assets and revenue of $50,000,000 each in its last fiscal 
year, or in two of its last three fiscal years; and
    (2) The company has at least 1,100,000 shares publicly held, a 
market value of publicly held shares of at least $15,000,000 and 400 
round lot shareholders.
    Companies falling below one of the above standards and considering 
a combination with an unlisted company should see Section 341 for the 
discussion of the Exchange's listing policies contained therein.
    * Market capitalization for purposes of Section 1003 
includes the total common stock outstanding (excluding treasury shares) 
as well as any common stock that would be issued upon conversion of 
another outstanding equity security, if such other security is a 
``substantial equivalent'' of common stock. Generally, the security 
must be (1) publicly traded or quoted, or (2) convertible into a 
publicly traded or quoted security. A convertible security will be 
considered the ``substantial equivalent'' of common stock if the 
convertible security is presently convertible, and the conversion price 
is equal to or less than the current market price of the common stock. 
For partnerships, the current capital structure will be analyzed to 
determine whether it is appropriate to include other publicly traded or 
quoted securities in the calculation.
* * * * *
    (b) Not applicable.
    (c) Not applicable.
* * * * *

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
    Based upon an evaluation of trends and developments within the Amex 
listed company community, as well as public issuers generally, the 
Exchange is proposing to modify initial and continued listing standards 
to enable it to evaluate listing eligibility against broader and more 
in-depth measures of financial condition. Specifically, some 
financially sound issuers may be unable to satisfy the shareholders' 
equity requirement contained in existing listing standards as a result 
of certain accounting conventions. An issuer may be forced to write-off 
goodwill associated with merger and acquisition activity or take 
significant depreciation charges which are customary in a particular 
industry (e.g., telecommunications) which could have the effect of 
reducing the issuer's shareholders' equity and income.\3\
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    \3\ A number of large telecommunications issuers report 
significant deficit equity. For example, Cablevisions Systems 
Corporation (NYSE:CVC) reported a deficit of $1.8 billion; Nextel 
Communications, Inc. (Nasdaq NMS: NXTL) reported a deficit of $479 
million; and Level 3 Communications Inc. (Nasdaq NMS: LVLT) reported 
a deficit of $78 million as of each issuer's most recent periodic 
SEC filing. Similarly, Amazon.com, Inc. (Nasdaq NMS: AMZN) reported 
a deficit of $1.5 billion.
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    Accordingly, the Exchange is proposing to adopt a new initial 
listing standard (in addition to existing standards) which is designed 
to permit an assessment of an issuer's suitability for listing on the 
basis of compliance with total market capitalization or total

[[Page 72241]]

assets and revenues in substitution of shareholders' equity. As 
accounting requirements become increasingly complex, it is important to 
provide such alternative criteria so that financially sound issuers are 
not precluded from listing on the Exchange solely on the basis of 
particular accounting conventions. Specifically, the new initial 
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listing standard would require the following:

Total value of market capitalization: $75 million, or
Total assets and total revenue: $75 million each (in most recent fiscal 
year or two of last three most recently completed fiscal years)
Price: $3
Market value of public float: $20 million
Public float shares/public stockholders: 500,000/800 or 1 million/400 
or 500,000/400 (plus average daily volume of 2,000 shares)

    The Exchange states that the proposed new standard is not 
materially different from standards in place at other marketplaces and 
is consistent with existing Amex listing standards. In this regard it 
should be noted that both the New York Stock Exchange (``NYSE'') and 
Nasdaq listing standards contain a variety of alternative 
qualifications standards, including standards based on measures of 
market capitalization, revenue and assets.
    It is also proposed that corresponding revisions be adopted to the 
continued listing standards to provide that a listed company will not 
be subject to delisting (assuming compliance with other applicable 
standards) even if it has experienced net losses or losses from 
continuing operations, and does not satisfy existing equity 
requirements \4\ if it is in compliance with the following 
requirements:
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    \4\ Section 1003(a) of the Amex Company Guide provides that a 
listed company which has sustained losses in two of its three, three 
of its four, or five of its most recent fiscal years will be subject 
to delisting if its stockholders' equity is less than $2 million, $4 
million or $6 million, respectively.
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    [sbull] Total value of market capitalization: $50 million, or
    [sbull] Total assets and revenue: $50 million each (in most recent 
fiscal year or two of last three most recently completed fiscal years), 
and
    [sbull] At least 1,100,000 shares publicly held, a market value of 
publicly held shares of at least $15,000,000 and 400 round lot 
shareholders.
    The Exchange believes that an issuer with significant market 
capitalization or assets and revenue should be able to continue its 
listing despite several years of losses (and assuming compliance with 
other applicable continued listing standards), in that these financial 
measures are generally an indication of a company's strength.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act \5\ in general, and 
furthers the objectives of Section 6(b)(5) \6\ 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 allow for the evaluation of an issuer's 
listing eligibility against more meaningful and comprehensive criteria. 
The Exchange also believes that the proposed rule change will provide 
investors and potential investors in the securities that would be 
eligible for listing with the benefits inherent in an Amex listing. 
According to the Exchange, these benefits include: 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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
    (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 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-Amex-2002-97 and 
should be submitted by December 26, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30667 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P