[Federal Register Volume 68, Number 238 (Thursday, December 11, 2003)]
[Notices]
[Pages 69092-69095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30663]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48872; File No. SR-Amex-2003-100]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to a Proposed Rule Change and Amendment 
No. 1 Thereto by the American Stock Exchange LLC Relating to Broker 
Voting on Stock Option and Equity Compensation Plans

December 3, 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 November 19, 2003, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On November 21, 2003, the Amex filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons and is 
approving the proposal and Amendment No. 1 on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Claudia Crowley, Vice President, Listing 
Qualifications, Amex, to Nancy Sanow, Assistant Director, Division 
of Market Regulation (``Division''), Commission, dated November 20, 
2003 (``Amendment No. 1''). In Amendment No. 1, the Exchange made 
technical corrections to the proposed rule change to correct 
typographical errors in the proposed rule text and an incorrect 
footnote citation in the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Amex Rule 577 and section 723 of the 
Amex Company Guide to provide that a member organization holding a 
customer's securities in ``street'' name will not be permitted to give 
a proxy to vote such shares without instructions from the customer when 
the matter to be voted upon authorizes the implementation of or 
material amendment to a stock option or equity compensation plan.
    Below is the text of the proposed rule change. Proposed new 
language is italicized; proposed deleted language is [bracketed].
* * * * *

American Stock Exchange Constitution and Rules

* * * * *
Rule 577. Giving Proxies by Member Organization
* * * * *
* * * Commentary
* * * * *
    .11 When member organization may not vote without customer 
instructions.--In the list of meetings of stockholders, after proxy 
material has been reviewed by the Exchange, each meeting will be 
designated by an appropriate symbol to indicate either (a) that members 
may vote a proxy without instructions of beneficial owners, (b) that 
members may not vote specific matters on the proxy, or (c) that members 
may not vote the entire proxy.
    Generally speaking, a member organization may not give a proxy to 
vote without instructions from beneficial owners when the matter to be 
voted upon:
    (1) through (8)--No change.
    (9) involves waiver or modification of preemptive rights [(except 
when the company's proposal is to waive such rights with respect to 
shares being offered pursuant to stock option or purchase plans 
involving the additional issuance of not more than 5% of the company's 
outstanding common shares (see Item 12))];
    (10) and (11)--No change.
    (12) [authorizes issuance of stock, or options to purchase stock, 
to directors, officers, or employees in an amount which exceeds 5% of 
the total amount of the class outstanding] authorizes the 
implementation of any equity compensation plan, or any material 
revision to the terms of any existing equity compensation plan (whether 
or not stockholder approval of such plan is required by Section 711 of 
the Exchange's Company Guide);
    (13) through (18)--No change.
* * * * *

American Stock Exchange Company Guide

* * * * *

[[Page 69093]]

Section 723. Giving Proxies By Member Organization (See Exchange Rule 
577)
* * * * *
    .11 When member organization may not vote without customer 
instructions.--In the list of meetings of stockholders, after proxy 
material has been reviewed by the Exchange, each meeting will be 
designated by an appropriate symbol to indicate either (a) that members 
may vote a proxy without instructions of beneficial owners, (b) that 
members may not vote specific matters on the proxy, or (c) that members 
may not vote the entire proxy.
    Generally speaking, a member organization may not give a proxy to 
vote without instructions from beneficial owners when the matter to be 
voted upon:
    (1) through (8)--No change.
    (9) involves waiver or modification of preemptive rights [(except 
when the company's proposal is to waive such rights with respect to 
shares being offered pursuant to stock option or purchase plans 
involving the additional issuance of not more than 5% of the company's 
outstanding common shares (see Item 12))];
    (10) and (11)--No change.
    (12) [authorizes issuance of stock, or options to purchase stock, 
to directors, officers, or employees in an amount which exceeds 5% of 
the total amount of the class outstanding] authorizes the 
implementation of any equity compensation plan, or any material 
revision to the terms of any existing equity compensation plan (whether 
or not stockholder approval of such plan is required by Section 711 of 
the Exchange's Company Guide);
    (13) through (18)--No change.
* * * * *

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 III below. The Amex 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
    According to the Amex, the Amex and the New York Stock Exchange, 
Inc. (``NYSE'') have historically had virtually identical rules with 
respect to the circumstances under which a broker holding a customer's 
securities in ``street name'' may give a proxy to vote such shares on a 
particular issuer proposal without the beneficial owner's instructions. 
Amex Rule 577 and section 723 of the Amex Company Guide provide that 
the Exchange will review issuer proxy materials and designate with 
respect to each proposal whether Amex member organizations holding 
customer shares may vote without instructions from the beneficial owner 
(i.e., the proposal is ``routine'') or may only vote with instructions 
(i.e., the proposal is ``non-routine'').
    On June 30, 2003, the Commission jointly approved NYSE and National 
Association of Securities Dealers, Inc. (``NASD'')/The Nasdaq Stock 
Market, Inc. (``Nasdaq'') proposals that required companies to obtain 
shareholder approval of all equity compensation plans, subject to 
limited exceptions, and approved rules in the NYSE proposal that 
classified such plans as ``non-routine'' for broker voting purposes.\4\ 
On October 9, 2003, the Commission approved a comparable Amex proposal 
with respect to shareholder approval of stock option and equity 
compensation plans.\5\ That proposal, however, did not address the 
proxy voting issue being addressed in this instant filing.
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    \4\ The Commission notes that NASD rules do not allow broker 
voting on any matters. See Securities Exchange Act Release No. 48108 
(June 30, 2003), 68 FR 39995 (July 3, 2003) (order approving File 
Nos. SR-NYSE-2002-46 and SR-NASD-2002-140) (``NYSE and Nasdaq 
proposals''). See also Securities Exchange Act Release No. 48627 
(October 14, 2003), 68 FR 60426 (October 22, 2003) (notice of filing 
and order granting accelerated approval to File No. SR-NASD-2003-
130, incorporating amendments to the NASD's recently approved 
shareholder approval rules for equity compensation plans applicable 
to Nasdaq quoted securities). The Commission also published a 
correction to the notice of File No. SR-NASD-2003-130. See 
Securities Exchange Act Release No. 48627A (October 22, 2003), 68 FR 
61532 (October 28, 2003). The Federal Register subsequently 
published another correction. See Securities Exchange Act Release 
No. 48627A, 68 FR 62161 (October 31, 2003). Most recently, on 
October 31, 2003, the Commission simultaneously approved similar 
proposals regarding shareholder approval of equity compensation 
plans, including a preclusion on broker voting on such plans, for 
the Boston Stock Exchange, Inc., the Chicago Stock Exchange, Inc, 
the Pacific Exchange Inc., the Philadelphia Stock Exchange, Inc., 
the Chicago Board Options Exchange, Inc., and the Cincinnati Stock 
Exchange on an accelerated basis. See Securities Exchange Act 
Release Nos. 48733 (October 31, 2003), 68 FR 63143 (November 7, 
2003); 48734 (October 31, 2003), 68 FR 63159 (November 7, 2003); 
48735 (October 31, 2003), 68 FR 63173 (November 7, 2003); 48736 
(October 31, 2003), 68 FR 63180 (November 7, 2003); 48737 (October 
31, 2003), 68 FR 63150 (November 7, 2003); and 48738 (October 31, 
2003), 68 FR 63166 (November 7, 2003) (collectively, ``the Regional 
Exchange proposals'').
    \5\ See Securities Exchange Act Release No. 48610 (October 9, 
2003), 68 FR 59650 (October 16, 2003) (order approving File No. SR-
Amex-2003-42).
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    The Amex represents that the prior NYSE rules had provided, and 
that the current Amex rules do provide, that stock option plans are 
``routine'' if all proposals included in the proxy to be voted on do 
not authorize the issuance of in excess of 5% of the total amount of 
the shares outstanding to directors, officers or employees. In order to 
provide greater consistency between marketplaces, the Amex proposes to 
amend Amex Rule 577 and section 723 of the Amex Company Guide to 
classify stock option and equity compensation plans as ``non-routine'' 
for broker voting purposes, thereby requiring instructions from the 
beneficial owner before a broker can give a proxy on matters related to 
the implementation of or material amendment to an equity compensation 
plan. The Amex further proposes that this proposed change become 
effective as of January 31, 2004.\6\
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    \6\ The Amex has represented that it will notify its members of 
the effective date of the proposed rule change on the Amex's 
website. Telephone conversation between Claudia Crowley, Vice 
President, Listing Qualifications, Amex, and Sapna C. Patel, Special 
Counsel, Division of Market Regulation, Commission, on November 20, 
2003.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6 of the Act \7\ in general and furthers the objectives of 
section 6(b)(5) \8\ 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, to protect investors and the 
public interest and is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

[[Page 69094]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-Amex-2003-100. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hard copy or by e-mail, 
but not by both methods. 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 at 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-2003-100 and should be 
submitted by January 2, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful review, the Commission finds that the Amex's proposal 
is consistent with the Act and the rules and regulations promulgated 
thereunder applicable to a national securities exchange and, in 
particular, with the requirements of section 6(b) of the Act.\9\ 
Specifically, the Commission finds that approval of the Amex's proposal 
is consistent with section 6(b)(5) of the Act \10\ in that it is 
designed to, among other things, facilitate transactions in securities; 
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 a national market 
system; and in general, to protect investors and the public interest, 
and does not permit unfair discrimination among issuers.
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    \9\ 15 U.S.C. 78f(b). In approving the Amex's proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    When it approved Amex's proposal relating to shareholder approval 
of equity compensation plans,\11\ the Commission had urged the Amex to 
adopt a rule similar to the NYSE's rules prohibiting members and member 
organizations from giving a proxy to vote without explicit instructions 
from beneficial owners when the matter to be voted on authorizes the 
implementation of any equity compensation plan, or any material 
revision to the terms of any existing equity compensation plan.\12\
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    \11\ See supra note 5.
    \12\ See NYSE Rule 452 and section 402.08 of the NYSE's Listed 
Company Manual.
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    The Commission believes that the Amex's amended provision 
precluding broker voting on equity compensation plans is consistent 
with the Act. The Commission notes that equity compensation plans have 
become an important issue for shareholders. Because of the potential 
for dilution from such issuances, shareholders should be making the 
determination rather than brokers on their behalf. The Commission 
further notes that, generally under Amex rules, only matters that are 
considered routine are allowed to be voted on by a broker on behalf of 
a beneficial owner. Because of the recent significance and concern 
about equity compensation plans, the Commission believes that it is 
appropriate for the Amex to decide that shareholder approval of equity 
compensation plans is not a routine matter and must be voted on by the 
beneficial owner. As noted above, NASD rules do not provide for broker 
voting on any matters, and NYSE rules prohibit broker voting on equity 
compensation plans.\13\ Most recently, the Commission approved similar 
broker voting prohibitions for all of the regional exchanges.\14\ 
Therefore, the Exchange's proposed provision would be consistent with 
NASD and NYSE rules regarding broker voting on equity compensation 
plans, as well as with the rules of the regional exchanges. In its 
approval of the NYSE and Nasdaq proposals, the Commission had 
considered the impact on smaller issuers, such as those listed on 
Nasdaq and the Amex, in response to the comments received on this 
issue.\15\ The Commission believes that the benefit of ensuring that 
the votes reflect the views of beneficial shareholders on equity 
compensation plans outweighs the potential difficulties in obtaining 
the vote.
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    \13\ See NASD Rule 2260 and supra note 12.
    \14\ See the Regional Exchange proposals, supra note 4.
    \15\ See also supra notes 4, 12, and 13.
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    The Commission notes that the Amex has implemented a transition 
period that would make the proposed new preclusion on broker voting on 
equity compensation plans effective as of January 31, 2004. The 
Commission further notes that this transition period is consistent with 
the transition periods recently approved for the regional exchanges and 
should ensure that the Amex's broker voting prohibition is in place for 
the upcoming proxy season and will be implemented by the same time as 
the other marketplaces.

V. Accelerated Approval of the Amex's Proposal and Amendment No. 1

    The Commission finds good cause for approving the Amex's proposal 
and Amendment No. 1 prior to the thirtieth day after the date of 
publication of notice thereof in the Federal Register. The Commission 
notes that the Amex's proposal is similar to rules that it has recently 
approved for the NYSE and the regional exchanges on this issue, and is 
consistent with current NASD rules.\16\ The Commission believes that it 
has already considered and addressed issues that may be raised by the 
Amex's proposal when it approved the NYSE and Nasdaq proposals.\17\ The 
Commission believes that accelerated approval of the Amex's proposal 
will allow for immediate harmonization of, and consistency in, the 
broker voting requirements on equity compensation plans among all of 
the exchanges and the NASD/Nasdaq. The Commission further believes that 
making the Amex's rule change effective as of January 31, 2004, is 
consistent with the transition periods that the Commission has recently 
approved for the regional exchanges, and will allow the Amex's new 
broker voting prohibition to be in place for this upcoming proxy 
season. Further, accelerated approval should allow sufficient time for 
Amex members to make any necessary adjustments to implement the change 
by the transition date. Finally, accelerated approval of the Amex 
proposal will immediately

[[Page 69095]]

impose the same regulatory standards on Amex members as those imposed 
on members of other exchanges and the NASD/Nasdaq. Based on the above, 
the Commission finds good cause, consistent with sections 6(b)(5) and 
19(b)(2) of the Act \18\ to approve the Amex's proposal and Amendment 
No. 1 on an accelerated basis.
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    \16\ See supra note 4. See also section 303A(8) of the NYSE's 
Listed Company Manual; NASD Rule 4350(i) and IM-4350-5. See also 
supra notes 12 and 13.
    \17\ See supra note 4.
    \18\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-Amex-2003-100) and Amendment 
No. 1 are hereby approved on an accelerated basis.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-30663 Filed 12-10-03; 8:45 am]
BILLING CODE 8010-01-P