[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Notices]
[Pages 9651-9653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4430]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49295; File No. SR-Amex-2004-06]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendments No. 1 and 2 by the 
American Stock Exchange LLC Relating to Small Business Issuers

February 23, 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 January 21, 2004, the American Stock Exchange LLC (the ``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 Amex. On January 30, 
2004, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ On February 12, 2004, the Exchange filed Amendment No. 2 to 
the proposed rule change.\4\ Amex has filed the proposed rule change as 
a ``non-controversial'' rule change under Rule 19b-4(f)(6) under the 
Act,\5\ which renders the proposal effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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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, Commission, dated January 29, 2004.
    \4\ See Letter from Claudia Crowley, Vice President, Listing 
Qualifications, Amex, to Nancy Sanow, Assistant Director, Division 
of Market Regulation, Commission, dated February 11, 2004.
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to make technical amendments to the Exchange's 
recently approved enhanced corporate governance requirements to: (i) 
Amend sections 121A, 121B(2)(c), 802(a), and 809(b) of the Amex Company 
Guide to reference small business issuers rather than small business 
filers, and (ii) insert in section 809 of the Amex Company Guide the 
date of Commission approval and certain effective dates based on the 
date of approval. Below is the text of the proposed rule change. 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *
American Stock Exchange Company Guide
Section 121. INDEPENDENT DIRECTORS AND AUDIT COMMITTEE
A. Independent Director
    Each listed company must have a sufficient number of independent 
directors on its Board of Directors (1) such that at least a majority 
of such directors are independent directors (subject to the exceptions 
set forth in section 801 and, with respect to small business [filers] 
issuers, section 121B(2)(c)), and (2) to satisfy the audit committee 
requirement set forth below. ``Independent director'' means a person 
other than an officer or employee of the

[[Page 9652]]

company or any parent or subsidiary. No director qualifies as 
independent unless the Board of Directors affirmatively determines that 
the director does not have a material relationship with the listed 
company that would interfere with the exercise of independent judgment. 
In addition, audit committee members must also comply with the 
requirements set forth in paragraph B(2) below. The following is a non-
exclusive list of persons who shall not be considered independent:
    (a) through (g)--No change.
    B. Audit Committee:
    (1)--No change.
    (2) Composition
    (a) and (b)--No change.
    (c) Small Business [Filers] Issuers--Small Business Issuers [that 
file reports under] (as defined in SEC Regulation S-B) are subject to 
all requirements specified in this Section, except that such issuers 
are only required to maintain a Board of Directors comprised of at 
least 50% independent directors, and an Audit Committee of at least two 
members, comprised solely of independent directors who also meet the 
requirements of Rule 10A-3 under the Securities Exchange Act of 1934.
Section 802. BOARD OF DIRECTORS
    (a) At least a majority of the directors on the Board of Directors 
of each listed company must be independent directors as defined in 
Section 121A, except for (i) a controlled company (see Section 801(a)), 
and (ii) a Small Business [filer] Issuer (see Section 121B(2)(c)).
    (b) through (e)--No change.
Section 809. EFFECTIVE DATES/TRANSITION
    (a) In order to permit listed companies to make necessary 
adjustments in the course of their regular annual meeting schedule, to 
the extent not inconsistent with Rule 10A-3 under the Securities 
Exchange Act of 1934, Sections 802-805 (other than Section 802(d)), as 
well as the corresponding changes to Section 121, are effective as set 
forth below. During the transition period between December 1, 2003 and 
the applicable effective date, listed companies must comply with 
Section 121 as in effect immediately prior to December 1, 2003 (see 
Commentary .01).
     July 31, 2005 for foreign private issuers and 
small business issuers (as defined in Rule 12b-2 under the Securities 
Exchange Act of 1934); and
     For all other listed companies, by the earlier 
of: (1) The listed company's first annual shareholders meeting after 
March 15, 2004; or (2) October 31, 2004.
    In the case of a company with a staggered board, to the extent not 
inconsistent with Rule 10A-3 under the Securities Exchange Act of 1934, 
if the company would be required to change a director who would 
normally not stand for election in such annual meeting, the company may 
continue such director in office until the second annual meeting after 
the date specified above, but no later than December 31, 2005.
    (b) Companies that have listed or will be listed in conjunction 
with their initial public offering shall be afforded exemptions from 
all board composition requirements consistent with the exemptions 
afforded in Rule 10A-3 under the Securities Exchange Act of 1934. That 
is, for each applicable committee that the company establishes (i.e., 
nominating and/or compensation) the company shall have one independent 
member at the time of listing, a majority of independent members within 
90 days of listing and all independent members within one year. Such 
companies will be required to meet the majority independent board 
requirement (or 50% independent in the case of a small-business [filer] 
issuer) within one year of listing. It should be noted however, that 
investment companies are not afforded these exemptions under Rule 10A-3 
under the Securities Exchange Act of 1934. Companies emerging from 
bankruptcy or which have ceased to be controlled companies will be 
required to meet the majority independent board requirement (or 50% 
independent in the case of a small-business [filer] issuer) within one 
year. Companies may choose not to establish a compensation or 
nomination committee and may rely instead upon a majority of 
independent directors to discharge responsibilities under Part 8.
    (c) Companies transferring from other markets with a substantially 
similar requirement shall be afforded the balance of any grace period 
afforded by the other market. Companies transferring from other markets 
that do not have a substantially similar requirement shall be afforded 
one year from the date of listing, to the extent not inconsistent with 
Rule 10A-3 under the Securities Exchange Act of 1934.
    (d) Section 807 is effective June 1, 2004.
    (e) Section 808 and the amendments to Sections 110, 120, 401, 402 
and 610 are effective December 31, 2003.
    (f) The amendments to Section 1009 and the adoption of Section 
802(d) are effective December 1, 2003.
    Commentary--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 IV 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
    On December 1, 2003 the Commission approved comprehensive 
enhancements to the corporate governance requirements applicable to 
listed companies in order to promote accountability, transparency and 
integrity by such companies, including the changes required by 
Commission Rule 10A-3 \6\ with respect to listed company audit 
committees.\7\ In order to provide consistency between certain 
provisions of Amex requirements and Rule 10A-3 with respect to small 
business issuers, the Exchange is proposing to revise Section 
121B(2)(c) of the Amex Company Guide to reference small business 
issuers rather than small business filers. Section 121B(2)(c) of the 
Amex Company Guide provides a limited exception from certain of new 
requirements. Specifically, such companies are subject to the enhanced 
corporate governance requirements, except that they are only required 
to have a board of directors comprised of at least 50% independent 
directors, rather than a majority, and must have an audit committee of 
at least two, rather than three, independent directors. Small business 
companies are required to fully comply with Rule 10A-3.
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    \6\ 17 CFR 240.10A-3.
    \7\ See Securities Exchange Act Release No. 48863 (December 1, 
2003), 68 FR 68432 (December 8, 2003) (order approving File No. SR-
Amex-2003-65).
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    Rule 10A-3 provides a later effective date for small business 
issuers than is available for other listed companies. The Amex states 
that the proposed change to Section 121B(2)(c) of the Amex Company 
Guide will provide consistency between these two provisions. Further, 
by limiting the applicability of section 121B(2)(c) of the Amex Company 
Guide to small business filers, the provision provides a

[[Page 9653]]

disincentive for small business companies to voluntarily provide the 
greater disclosure required pursuant to Regulation S-K. The limited 
exception for small business companies is intended to provide narrow 
relief for smaller companies in view of the difficulties that such 
issuers may face in recruiting independent directors. Companies that 
choose to provide enhanced disclosure should not be penalized in this 
regard.
    The Exchange is also proposing to make conforming changes in 
Sections 121A, 802(a), and 809(b) and to amend Section 809 of the Amex 
Company Guide to insert the effective date of Commission approval of 
the new corporate governance standards and related effective dates.
2. Statutory Basis
    The Amex believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \8\ in general and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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, as 
amended, 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 did not receive any written comments on the proposed 
rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has been filed by the Amex as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act 
\10\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    Consequently, because the foregoing proposed rule change: (1) Does 
not significantly affect the protection of investors or the public 
interest, (2) does not impose any significant burden on competition, 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate, if consistent with the protection of investors and the 
public interest, and the self-regulatory organization has given the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of the 
proposed rule change, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
    Pursuant to Rule 19b-4(f)(6)(iii),\12\ a proposed ``non-
controversial'' rule change does not become operative for 30 days after 
the date of filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest. The Amex has requested that the Commission waive the 30-day 
operative delay.
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The revision contained in the proposed rule change relating to small 
business issuers would provide consistency between the treatment 
afforded to such entities under Amex's enhanced corporate governance 
listing standards and the provisions of those standards that were 
adopted to comply with Rule 10A-3. Acceleration of the operative date 
will ease implementation of the new rules. The other revisions 
contained in the proposed rule change are non-substantive. For these 
reasons, the Commission designates the proposed rule change, as 
amended, to be effective and operative upon filing with the 
Commission.\13\
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    \13\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rules 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\14\
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    \14\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the period to commence on February 12, 
2004, the date that the Exchange filed Amendment No. 2.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule change, as amended, 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-2004-06 . This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your 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 Amex. All submissions should refer to the File 
No. SR-Amex-2004-06 and should be submitted by March 22, 2004.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4430 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P