[Federal Register Volume 69, Number 98 (Thursday, May 20, 2004)]
[Notices]
[Pages 29151-29152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11376]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49700; File No. SR-Amex-2004-12]


Self-Regulatory Organizations; Order Granting Approval of 
Proposed Rule Change by the American Stock Exchange LLC Relating to 
Audit Committee Meeting Requirements Applicable to Registered Closed-
End Management Investment Companies

May 13, 2004.

I. Introduction

    On February 13, 2004, the American Stock Exchange LLC (``Amex'' 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 121 of the Amex Company Guide to 
modify the audit committee meeting requirements applicable to 
registered closed-end management investment companies (``closed-end 
funds''). On March 12, 2004, the Commission published the proposed rule 
change for comment in the Federal Register.\3\ The Commission received 
one comment letter on the proposal.\4\ This Order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 49371 (March 5, 
2004), 69 FR 11919 (March 12, 2004).
    \4\ Letter from Dorothy M. Donohue, Associate Counsel, 
Investment Company Institute, to Jonathan G. Katz, Secretary, 
Commission, dated March 31, 2004 (``ICI Letter'').
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II. Description of the Proposed Rule Change

    In December 2003, the Commission approved a broad array of 
enhancements to the corporate governance requirements applicable to 
companies

[[Page 29152]]

listed on the Amex.\5\ Included within those changes was a revision to 
Section 121 of the Amex Company Guide to explicitly require listed 
company audit committees to meet on at least a quarterly basis. The 
Amex states that the quarterly meeting requirement was intended to 
codify the existing practice of virtually all operating companies. The 
Amex proposes to modify this requirement with respect to closed-end 
funds to specify that the audit committee of a closed-end fund must 
meet on a regular basis as often as necessary to fulfill its 
responsibilities, including at least annually in connection with the 
issuance of the fund's audited financial statements. The Amex believes 
that its proposal would align more closely the requirement for closed-
end funds with the customary practices of most of these entities.
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    \5\ 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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    The one comment letter received by the Commission with respect to 
the proposal supported the proposed rule change.\6\
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    \6\ Specifically, the commenter maintained that because 
Commission rules do not require closed-end funds to file quarterly 
financial statements, it is not necessary or appropriate to impose a 
quarterly audit committee meeting requirement on them. See ICI 
Letter.
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange and, in 
particular, with the requirements of Section 6(b) of the Act.\7\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\8\ in that it is designed, 
among other things, 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. 78(b). In approving the proposed rule change, as 
amended, the Commission has considered its impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78(b)(5).
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    In the Commission's view, Amex's proposal to require the audit 
committee of a closed-end fund to meet on a regular basis as often as 
necessary to fulfill its responsibilities, including at least annually 
in connection with issuance of the fund's audited financial statements, 
is designed to help ensure the effective operation of a closed-end 
fund's audit committee. Under the Investment Company Act of 1940,\9\ a 
closed-end fund is not required to file quarterly reports, and thus the 
Amex proposal does not mandate quarterly meetings of the audit 
committee. Nevertheless, as recognized by the Exchange, the proposed 
rule change would require closed-end fund audit committees to meet as 
often as necessary, even if more frequently than quarterly, if the 
unique circumstances facing a particular fund so require.
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    \9\ 15 U.S.C. 80a-1 et seq.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act\10\, that the proposed rule change (File No. SR-Amex-2004-12) be, 
and hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-11376 Filed 5-19-04; 8:45 am]
BILLING CODE 8010-01-P