[Federal Register Volume 68, Number 22 (Monday, February 3, 2003)]
[Notices]
[Pages 5314-5316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2483]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47267; File No. SR-Amex-2002-113]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the American 
Stock Exchange LLC Regarding Listing Standards for Closed-End 
Management Investment Companies Registered Under the Investment Company 
Act of 1940

January 28, 2003.
    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 December 23, 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 and to grant accelerated 
approval to the proposed rule change.
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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 is proposing to make permanent its pilot regarding 
specific initial and continued listing standards applicable to closed-
end management investment companies registered under the Investment 
Company Act of 1940 (``closed-end funds'').\3\ The Amex is also 
proposing to renumber section 101(e) of the Amex Company Guide to 
section 101(f).\4\
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    \3\ The five-month pilot was approved by the Commission on 
November 7, 2002. See Securities and Exchange Act Release No. 46785, 
67 FR 69578 (November 18, 2002) (approving File No. SR-Amex-2002-
55).
    \4\ The Amex is renumbering the rule text to accommodate a 
proposed rule change submitted by the Amex on November 20, 2002. See 
Securities Exchange Act Release No. 47119 (January 3, 2003), 68 FR 
1494 (January 10, 2003) (approving File No. SR-Amex-2002-97). 
Telephone conversation between Claudia Crowley, Assistant General 
Counsel, Amex, and Terri Evans, Assistant Director, Division of 
Market Regulation (``Division''), Commission, on January 27, 2003.
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    The text of the proposed rule change is available at the Office of 
the Secretary, Amex, and at the Commission.

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 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 proposes to permanently amend sections 101 and 1003 of 
the Amex Company Guide to incorporate initial and continued listing 
standards specifically applicable to closed-end funds into the Amex 
Company Guide. The proposed listing standards were approved by the 
Commission on a five-month pilot basis on November 7, 2002.\5\ Under 
the pilot, Amex permits 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

[[Page 5315]]

section 102(a) of the Amex Company Guide.\6\
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    \5\ See Securities and Exchange Act Release No. 46785 (November 
7, 2002), 67 FR 69578 (November 18, 2002) (approving File No. SR-
Amex-2002-55). Previously, closed-end funds were 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.
    \6\ Section 102(a) of the Amex Company Guide requires a minimum 
public distribution of (i) 500,000 shares and 800 public 
shareholders; or (ii) 1,000,000 shares and 400 public shareholders; 
or (iii) 500,000 shares and 400 public shareholders and average 
daily trading volume of approximately 2,000 shares for the six 
months preceding the date of application.
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    In addition, pursuant to the pilot, the Exchange permits the 
listing of a group of closed-end funds listed by a single ``fund 
family'' (i.e., funds which have a common investment advisor or 
investment advisors who are ``affiliated persons'' as defined in 
section 2(a)(3) of the Investment Company Act of 1940, as amended),\7\ 
subject to the following standards:
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    \7\ 19 U.S.C. 80a-2(a)(3).
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    [sbull] The total group has a market value of publicly held shares 
or net assets of at least $75,000,000;
    [sbull] The average market value of publicly held shares or net 
assets per fund of the group is at least $15,000,000; and
    [sbull] No fund in the group has a market value of publicly held 
shares or net assets of less than $10,000,000.
    The group standards would be applicable to any closed-end fund that 
is part of a ``fund family'' even if the closed-end 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. Therefore, all funds listed on the 
Amex which are part of the ``fund family'' will be evaluated in 
determining whether a fund applicant is eligible for listing. Each fund 
will also be individually subject to the distribution criteria 
specified in section 102(a) of the Amex Company Guide.\8\ The Exchange 
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.
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    \8\ See supra note 6.
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    The Exchange represents 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 
$20,000,000 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.
    The Exchange is also proposing to permanently 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 publicly held shares and net assets 
are each less than $5,000,000 for more than 60 consecutive days, or it 
ceases to qualify as a closed-end fund (unless the resultant entity 
otherwise qualifies for listing).
    The Exchange represents that the pilot program has enabled the 
Exchange to apply more objective and transparent listing criteria to 
closed-end funds without unnecessarily limiting the listing of 
specialized and smaller funds that are suitable for listing, and has 
provided greater clarity to listing applicants and investors as to the 
applicable Exchange listing standards. The Exchange represents that the 
pilot program has operated smoothly, and the Exchange is not aware of 
any problems or concerns that have developed since approval thereof. It 
should also be noted that the Exchange is aware of only one comment 
letter submitted with respect to the pilot program, which supports the 
proposed rule change.\9\
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    \9\ See letter from Ari Burstein, Associate Counsel, Investment 
Company Institute (``ICI''), to Jonathan G. Katz, Secretary, 
Commission, dated December 6, 2002 (``ICI Letter'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change 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 continue to 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 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. 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 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-2002-113 and 
should be submitted by February 24, 2003.

IV. Comment Summary

    As noted above, the Commission received one comment letter from the 
ICI regarding the five-month pilot program, which supported the 
pilot.\12\ The ICI believed that the changes set forth in the five-
month pilot program would facilitate the listing of closed-end funds on 
the Amex, particularly listings of closed-end funds from a single fund 
family. The ICI noted the adoption of listing eligibility criteria for 
closed-end funds should take into account that closed-end funds are 
structured and regulated differently from regular operating companies. 
Further, the ICI asserted that, in light of these

[[Page 5316]]

differences, it is appropriate to apply different financial standards 
to closed-end funds as compared to regular operating companies.\13\
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    \12\ See letter from Ari Burstein, Associate Counsel, Investment 
Company Institute, to Jonathan G. Katz, Secretary, Commission, dated 
December 6, 2002 (``ICI Letter'').
    \13\ Id.
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V. Commission Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\14\ 
Specifically, the Commission believes the proposal is consistent with 
the requirements under section 6(b)(5) of the Act \15\ 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 interest.
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    \14\ 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).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change will continue 
to allow the Amex to provide greater transparency to its listing 
process for closed-end funds. In addition, the Commission believes that 
the proposed rule change will continue to allow the Amex to strike a 
reasonable balance between the Exchange's obligation to protect 
investors and their confidence in the market and the Exchange's 
obligation to perfect the mechanism of a free and open market by 
listing funds, including fund families, on the Exchange. Further, the 
Commission believes that providing an alternative method to list 
closed-end funds on the Exchange should continue to accommodate the 
desire of fund families to list groups of closed-end funds on one 
marketplace. Finally, the Commission notes that it has no knowledge of 
any problems or regulatory concerns that have developed since the 
approval of the five-month pilot program.\16\
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    \16\ Telephone conversation between Claudia Crowley, Assistant 
General Counsel, Amex, and Frank N. Genco, Attorney, Division, 
Commission, on January 17, 2003.
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after publication in the Federal Register. 
The Amex has requested accelerated approval of the proposed rule change 
to ensure that the proposal is effective on a permanent basis prior to 
the expiration of the existing pilot program, and because it raises no 
new or novel issues and is conceptually similar to existing New York 
Stock Exchange closed-end fund listing standards.\17\ The Commission 
believes that the proposed rule change does not raise any new or 
significant regulatory issues, and that accelerated approval should 
permit the Exchange to continue listing funds and accommodating the 
desire of fund families to list groups of closed-end funds on one 
marketplace. The Commission notes that it received only one comment 
letter, which supported File No. Amex-2002-55,\18\ in which the Amex 
originally proposed the changes set forth in this proposal on a five-
month pilot basis.\19\
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    \17\ See Securities Exchange Act Release No. 46163 (July 3, 
2002), 67 FR 46559 (July 15, 2002) (File No. SR-NYSE-2001-45) 
(approving initial listing standards and allocation policy for 
closed-end funds).
    \18\ See ICI letter.
    \19\ See Securities Exchange Act Release No. 46785 (November 7, 
2002) 67 FR 69578 (November 18, 2002) (approving File No. SR-Amex-
2002-55).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\20\ that the proposed rule change (File No. SR-Amex-2002-113) is 
approved on an accelerated basis.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-2483 Filed 1-31-03; 8:45 am]
BILLING CODE 8010-01-P