[Federal Register Volume 69, Number 33 (Thursday, February 19, 2004)]
[Notices]
[Pages 7843-7845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3542]



[[Page 7843]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49218; File No. SR-NYSE-2003-31]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change and Order Granting Accelerated Approval to the Proposed 
Rule Change and Amendment No. 1 Thereto by the New York Stock Exchange, 
Inc. Relating to Minor Revisions to Sections 303A.08, 303.00, and 
312.03 of the NYSE's Listed Company Manual

February 11, 2004.
    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 9, 2003, the New York Stock Exchange, Inc. (``NYSE'' 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 February 9, 2004, the NYSE 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\ Amendment No. 1 replaces the NYSE's original 19b-4 filing in 
its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes to amend section 303.00 (``Corporate Governance 
Standards''), section 303A.08 (``Shareholder Approval of Equity 
Compensation Plans''), and section 312.03 (``Shareholder Approval'') of 
the NYSE's Listed Company Manual. The NYSE represents that the proposed 
rule amendments reflect a need for minor clean-up revisions that became 
apparent following the addition of section 303A.08 to the NYSE's Listed 
Company Manual.
    The text of the proposed rule change is available at the Office of 
the Secretary, the NYSE, 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 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 III 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
    On August 16, 2002, the NYSE filed with the Commission amendments 
to its Listed Company Manual to implement significant changes to its 
listing standards aimed at helping to restore investor confidence by 
empowering and ensuring the independence of directors and strengthening 
corporate governance practices (the ``Corporate Governance 
Proposals'').\4\ On October 7, 2002, the NYSE filed certain of the 
proposals included in the Corporate Governance Proposals, including 
section 303A.08 providing for shareholder approval of equity-
compensation plans and amendments to NYSE Rule 452, ``Broker No-
Votes,'' to comply with a request from the Commission staff to address 
this issue separately from the remainder of the Corporate Governance 
proposals (the ``October Proposals''). That filing was approved by the 
SEC on June 30, 2003.\5\
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    \4\ See File No. SR-NYSE-2002-33. This filing was approved on 
November 4, 2003. See Securities Exchange Act Release No. 48745 
(November 4, 2003), 68 FR 64154 (November 12, 2003).
    \5\ See Securities Exchange Act Release No. 48108 (June 30, 
2003), 68 FR 39995 (July 3, 2003) (SR-NYSE-2002-46).
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    Following approval of the October Proposals, the NYSE's Listed 
Company Manual was updated to reflect the approved amendments. During 
that process, it became apparent to the NYSE that minor clean-up 
revisions were necessary. The amendments proposed in this filing 
reflect the need for these revisions. The NYSE proposes to revise 
Section 312.03(a) to clarify that the section applies to equity-
compensation plans, and to include a cross-reference to section 
303A.08. The NYSE proposes to clarify through these proposed amendments 
that shareholder approval is also required for equity-compensation 
plans under section 312.03, its shareholder approval policy. The NYSE 
also proposes to delete a provision of section 303.00 that was 
duplicated in different formats in both the October Proposals and the 
Corporate Governance Proposals. The format approved in the Corporate 
Governance Proposals will be retained in section 303.00.
    In addition, the NYSE proposes to delete two paragraphs in section 
303A.08 that relate to broker voting. These paragraphs relate to 
amendments approved to NYSE Rule 452 regarding broker voting and were 
inadvertently included in the rule text relating to equity-compensation 
plans, rather than in NYSE Rule 452 itself. One of these paragraphs 
relates to a 90-day transition period regarding a prohibition on broker 
voting on equity-compensation plans, which expired as of September 29, 
2003. The other paragraph relates to the NYSE's intention to establish 
a working group to advise with respect to the need for, and design of, 
mechanisms to facilitate implementation of the requirement that brokers 
may not vote on equity-compensation plans presented to shareholders 
without instructions from the beneficial owners. Since September 29, 
2003, the date the rule change went into effect, the working group has 
been monitoring stockholder meetings of companies at which equity-
compensation plans were subject to shareholder approval. The NYSE 
represents that there have been 65 such situations to date. To the 
NYSE's knowledge, only one equity-compensation plan failed to receive 
shareholder approval; that plan also would have required that brokers 
not vote under the former rule due to the fact that the number of 
shares reserved for the plan exceeded 5% of the company's outstanding 
shares. The NYSE has also solicited feedback from Automatic Data 
Processing, Inc. (``ADP'') and the proxy solicitor community on whether 
difficulties were being encountered with respect to the amended rule. 
No problems were reported for listed companies. In addition, the NYSE 
represents that the working group has not received any complaints 
directly from listed companies following effectiveness of the amended 
rule. The NYSE further represents that the working group will continue 
to monitor this issue throughout the 2004 proxy season.\6\
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    \6\ The Commission notes that the paragraph on the working group 
that the NYSE is proposing to delete only refers to the intention to 
establish a working group.
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2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, 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

[[Page 7844]]

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.
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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 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

    Written comments were neither solicited nor received.

III. 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. Comments may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-NYSE-2003-31. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review comments more efficiently, comments should be sent 
in hardcopy 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-NYSE-2003-31 and should be 
submitted by March 11, 2004.

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

    After careful review, the Commission finds that the NYSE's proposed 
rule change, as amended, 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 
NYSE's proposed rule change, as amended, 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.
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    \9\ 15 U.S.C. 78f(b). In approving the NYSE's proposal, as 
amended, 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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    The Commission believes that the proposed clarification to section 
312.03(a) of the NYSE's Listed Company Manual (``Shareholder 
Approval'') to explicitly state that shareholder approval is required 
under that section for equity-compensation plans, in addition to the 
equity-compensation plan shareholder approval requirements set out in 
section 303A.08 of the NYSE's Listed Company Manual (``Shareholder 
Approval of Equity Compensation Plans''), should help to explicitly 
clarify that shareholder approval is required for equity-compensation 
plans pursuant to section 312.03, its shareholder approval policy. 
Furthermore, the Commission believes that the cross-reference in 
section 312.03(a) to the section 303A.08 shareholder approval 
requirements for equity-compensation plans should provide companies 
with further guidance as to the shareholder approval requirements for 
such plans.
    Moreover, the Commission believes that it is appropriate for the 
NYSE to delete the two paragraphs under section 303A.08, which relate 
to broker voting. The Commission notes these two paragraphs, which 
apply to NYSE members, should have been incorporated into NYSE Rule 452 
(``Giving Proxies by Member Organization'') instead of section 303A.08, 
which applies to NYSE-listed companies. The Commission further notes 
that the paragraph regarding a 90-day transition period for the 
implementation of amendments to NYSE Rule 452 restricting broker voting 
on equity compensation plans is no longer necessary because the 90-day 
transition period expired on September 29, 2003. Therefore, the 
Commission agrees with the NYSE that this rule language is no longer 
necessary. In addition, the Commission believes that it is appropriate 
for the NYSE to delete the paragraph concerning the working group 
because it only refers to the NYSE's intention to establish a working 
group to advise on, and to facilitate, the implementation of the new 
broker voting prohibition for equity-compensation plans. In its filing, 
the NYSE stated that it established the working group, which has been 
monitoring the implementation of the amendment to NYSE Rule 452 since 
it became effective on September 29, 2003. In addition, the NYSE has 
represented that the working group will continue to monitor this issue 
during the 2004 proxy season.
    Finally, the Commission believes that the NYSE's proposed deletion 
of a duplicative provision in section 303.00 of the NYSE's Listed 
Company Manual (``Corporate Governance Standards'') should eliminate 
any confusion and provide clarity as to the rule requirements.
    The Commission finds good cause for approving the NYSE's proposal 
and Amendment No. 1 thereto prior to the thirtieth day after the date 
of publication of notice thereof in the Federal Register. The NYSE has 
requested accelerated approval of this proposal, as amended, because it 
believes that the proposed amendments are non-controversial in nature 
and reflect minor clean-up revisions of rule text following the 
Commission's approval of section 303A.08. The proposal makes minor 
clean-up changes to sections 303.00, 303A.08, and 312.03 of the NYSE's 
Listed Company Manual. The Commission believes that accelerated 
approval of these minor clean-up revisions should help to facilitate 
the updating and accuracy of the NYSE's rules and Listed Company Manual 
and avoid confusion about outdated provisions. Based on the above, the 
Commission finds good cause, consistent with sections 6(b)(5) and 
19(b)(2) of the Act,\11\ to approve the NYSE's proposal and Amendment 
No. 1 on an accelerated basis.
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    \11\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).

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[[Page 7845]]

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NYSE-2003-31) and Amendment 
No. 1 are hereby approved on an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-3542 Filed 2-18-04; 8:45 am]
BILLING CODE 8010-01-P