[Federal Register Volume 68, Number 49 (Thursday, March 13, 2003)]
[Notices]
[Pages 12121-12122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5997]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47452; File No. SR-NYSE-2001-27]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change, as Amended by Amendment No. 1 Thereto, by the New York Stock 
Exchange, Inc. Relating to Amendments to Section 804 of the Listed 
Company Manual and Rule 499 of the Exchange

March 6, 2003.

I. Introduction

    On August 17, 2001, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), 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 amend Section 804 of the Listed Company Manual 
to specify that public directors will constitute a majority of the 
directors of the Committee for Review voting on final delisting 
determinations; and to codify this change in the parallel Exchange Rule 
499, as well as make other minor conforming changes. On January 22, 
2003, the NYSE filed Amendment No. 1 to the proposed rule change with 
the Commission.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Darla Stuckey, Corporate Secretary, NYSE, to 
Nancy Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated January 17, 2003 (``Amendment No. 1'').
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    The Commission published the proposed rule change, as amended, for 
comment in the Federal Register on February 3, 2003.\4\ No comments 
were received on the proposal. This order approves the amended 
proposal.
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    \4\ See Securities Exchange Act Release No. 47253 (January 24, 
2003), 68 FR 5322.
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II. Description of the Proposal

    Section 804 of the Listed Company Manual describes the procedures 
to be followed when the Exchange determines that a security should be 
removed from the list. It provides that the issuer has a right to 
request a review of the Exchange's determination by a Committee of the 
Board of Directors of the Exchange, and currently specifies that that 
committee is to be ``comprised of a majority of public Directors.'' 
This requirement was added as part of a larger revision of these 
procedures that became effective in 2000.\5\ The Committee for Review 
is the committee of the Board that reviews both disciplinary and 
delisting matters and, according to the NYSE, it has often been 
comprised of equal numbers of public and industry directors. According 
to the Exchange, in order to reconcile the majority of public Directors 
requirement with the Committee's traditional composition, and to allow 
all members of the Committee for Review present at a meeting to 
participate in discussions, the Committee required that the quorum for 
delisting matters include two public directors and one industry 
director. Consequently, a rotation system was established with respect 
to industry directors voting on delisting matters so that those voting 
were comprised of a majority of public directors and at least one 
industry director.\6\
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    \5\ See Securities Exchange Act Release No. 42863 (May 30, 
2000), 65 FR 36488 (June 8, 2000).
    \6\ Pursuant to the rotation system, the Committee designates 
prior to each delisting hearing which industry director(s) shall 
vote. At all hearings, all public directors present shall vote. For 
example, at a Committee meeting attended by three (3) public 
directors and three (3) industry directors at which two delisting 
appeals are considered, all public directors present and industry 
directors 1 and 2 will vote on the first delisting matter and all 
public directors present and industry directors 3 and 1 will vote on 
the second delisting matter. If, on the Committee's next review 
date, the meeting is attended by two (2) public directors and three 
(3) industry directors and one delisting appeal is considered, all 
public directors present and industry director 2 will vote on the 
matter; industry directors 1 and 3 will not vote. If any of the 
industry directors designated to vote next is not present at a 
Committee meeting, the next succeeding industry director(s) will 
vote. The rotation system is subject to the composition of the 
Committee, which varies at each meeting as described above, 
depending upon each director's availability. As is the case with 
other procedures of the Committee, the rotation system may also be 
changed from time to time.
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    The proposal amends section 804 of the Listed Company Manual to 
more accurately describe the Exchange's procedures. In addition, 
pursuant to the proposed rule change, the Chairman of the Committee 
would be required to disclose to the issuer and the staff at the 
commencement of each delisting hearing which of the industry directors 
will be voting on the delisting matter. Furthermore, the decision 
relating to the delisting appeal would be required to identify by name 
which directors participated only and which directors voted on the 
matter. The written decision issued by the Committee would also be 
required to clearly state that, in reaching its decision, the Committee 
considered only the oral arguments, written briefs and accompanying 
materials presented by the parties at the time of the hearing. The 
Exchange also proposes to codify these changes in the parallel Exchange 
Rule 499. Proposed NYSE Rule 499 also reflects a previous amendment to

[[Page 12122]]

section 804 of the Listed Company Manual that was inadvertently not 
added to NYSE Rule 499.

III. Discussion

    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.\7\ 
Specifically, the Commission believes the proposal is consistent with 
the section 6(b)(5) \8\ requirements 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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    \7\ In approving this rule change, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal provides fair procedures 
for issuers appealing delisting determinations by continuing to ensure 
that a majority of the members voting on a delisting matter will be 
public directors and by clarifying that decisions will be based on the 
record developed by the parties. The Commission also believes that the 
proposal should add greater transparency to the process since the 
Chairman of the Committee would be required to disclose to the issuer 
and the staff at the commencement of each delisting hearing which of 
the industry directors will be voting on the delisting matter.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-NYSE-2001-27) is approved, as 
amended.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-5997 Filed 3-12-03; 8:45 am]
BILLING CODE 8010-01-P