[Federal Register Volume 72, Number 248 (Friday, December 28, 2007)]
[Notices]
[Pages 73911-73913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-25202]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57016; File No. SR-Amex-2006-31]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2
Thereto Relating to Annual Shareholder Meeting Requirements
December 20, 2007.
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 April 7, 2006, the American Stock Exchange LLC (``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 substantially prepared by the
Exchange. On December 13, 2007, the Exchange filed Amendment No. 1 to
the proposed rule change. On December 20, 2007, the Exchange filed
Amendment No. 2 to the proposed rule change.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend section 704 (Annual Meetings) of the
Amex Company Guide. The text of the proposed rule change is available
at Amex, the Commission's Public Reference Room, and http://www.amex.com.
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 IV 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Amex seeks to amend its annual shareholder meeting requirement
applicable to its listed issuers. Currently, section 704 of the Amex
Company Guide requires all listed companies to hold an annual meeting
of their shareholders in accordance with such listed company's charter,
by-laws, and applicable state or other laws. An annual meeting allows
the equity owners of a company the opportunity to elect directors and
meet with management to discuss company affairs. The Exchange believes,
however, that this requirement is not necessary for certain issuers of
specific types of securities because the holders of such securities do
not directly participate as equity holders and vote in the election of
directors. In addition, Amex seeks to clarify when an issuer should
hold its annual meeting and remove the notice requirement for delayed
annual meetings.
First, Amex proposes to amend section 704 of its Company Guide to
explicitly state that an issuer generally must hold an annual meeting
within one year of the end of its fiscal year if it is subject to the
annual shareholder meeting requirement. In addition, a new listing that
was not previously subject to the requirement to hold an annual meeting
would be required to hold its first annual shareholder meeting within
one year of its fiscal year end following the date of listing. Amex
proposes two exceptions to these general requirements: (1) An issuer is
not required to hold an annual meeting if its fiscal year is less than
twelve months long as a result of a change in fiscal year end; and (2)
an issuer does not have to hold an annual meeting in the same year in
which such issuer completes its initial public offering. Amex believes
that codifying this time frame and the exceptions will provide
additional transparency to the annual shareholder meeting requirement.
Amex also proposes to list a variety of securities, the issuers of
which should not be subject to the foregoing general
[[Page 73912]]
annual shareholder meeting requirement. For example, Amex proposes to
exempt from the requirement issuers of a number of securities listed
pursuant to section 107 (Other Securities) of the Company Guide and
certain other securities issued by various passive business
organizations.\4\ The Exchange states that these types of securities
are typically not an issuer's primary equity security, and their
holders have only limited economic interests or other rights, which do
not include voting rights. Although many of these products are issued
by operating companies with listed equity securities and are thus
subject to an annual meeting requirement pursuant to the primary
market's rules, the Exchange submits that the Company Guide should
specifically exempt from such requirement those operating companies
which do not issue common stock or voting preferred stock.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The Exchange states that Amendment No. 2 supersedes and
replaces the proposed rule change, as originally filed, and
Amendment No. 1 in their entirety.
\4\ The various types of securities which the Exchange believes
should not be subject to the annual shareholder meeting requirement
include: bonds and debentures; currency and index warrants; trust
preferred securities; contingent value rights; equity-linked term
notes; index-linked exchangeable notes; index-linked securities;
commodity-linked securities; currency-linked securities; trust
certificate securities; investment trusts based on securities of
individual issuers, stock indexes, or debt instruments; equity
derivatives; trust issued receipts; commodity-based trust shares;
currency trust shares; certain partnership interests; and paired
trust shares. Amex believes that the foregoing securities should be
exempt because they do not entitle their respective holders to
voting rights.
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Similarly, Amex proposes to exempt from the general annual meeting
requirement portfolio depository receipts and index fund shares, which
are securities issued by unit investment trusts (``UITs'') and open-end
management investment companies, respectively (collectively, ``ETFs''),
and typically organized as business trusts. ETFs, which are generally
passive investment vehicles that seek to match the performance of an
index, must obtain an exemptive order from the Commission before they
offer securities. As a result, their operations are circumscribed by
numerous representations and conditions contained in the applicable
orders, and they do not typically experience the need for operational
or other changes requiring a shareholder vote, and, by extension, a
shareholder meeting.\5\ In addition, UITs do not have boards of
directors, which the UITs' unitholders would need to elect.\6\
Accordingly, the Exchange submits that section 704 of the Amex Company
Guide should specifically exclude ETFs from an annual shareholder
meeting requirement.
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\5\ The Exchange states that ETFs are registered under, and
remain subject to, the Investment Company Act of 1940, which already
imposes various shareholder-voting requirements that may be
applicable to the ETFs.
\6\ The Exchange states that UITs are typically operated or
administered by a corporate trustee, and the portfolio of a UIT,
which generally consists of a fixed pool of securities, is not
actively managed.
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Amex also proposes to exempt from the annual meeting requirement
issuers of a variety of trust issued receipts (``TIRs'')\7\ based on
securities, commodities, and currencies. Traditional TIRs (i.e.,
HOLDRs) are securities issued by a trust that holds, but does not
manage, specific securities on behalf of investors in the trust. Other
types of TIRs also include Commodity-Based Trust Shares\8\ and Currency
Trust Shares.\9\ The Exchange states that these trusts typically do not
hold shareholder (or unitholder) meetings because the trusts have no
board of directors and essentially serve as conduits for the investors'
indirect investments in the underlying securities, commodities, and/or
currencies of the trusts. Similarly, the Exchange lists Partnership
Units, which are securities issued by a partnership that invests in a
combination of futures contracts, options on futures contracts, forward
contracts, commodities, and/or securities.\10\ A holder of a
Partnership Unit does not have the right of equity ownership of the
partnership, but instead, obtains a beneficial interest in the
partnership. Because the partnership is a conduit for the investment in
the underlying assets, the operation and management of the partnership
is performed by a general partner without holding annual meetings.
Lastly, Paired Trust Shares (also known as MACROS) are securities
designed to track either the positive or negative performance of a
benchmark underlying asset.\11\ The shares are issued by a trust in
pairs, with the trust not holding the underlying asset, but instead
holding only short-term U.S. Treasuries and cash equivalents. As the
market price of the underlying asset fluctuates, U.S. Treasuries and
cash are moved between the trusts. As indicated above in connection
with TIRs, issuers of Paired Trust Shares typically do not hold
shareholder (or unitholder) meetings because the trusts have no board
of directors and essentially serve as conduits for the investors'
indirect investments in the performance of the underlying benchmark
asset. As a result, Amex believes that section 704 of the Amex Company
Guide should specifically exempt the issuers of TIRs, Commodity-Based
Trust Shares, Currency Trust Share Shares, Partnership Units, and
Paired Trust Shares from the annual shareholder meeting requirement.
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\7\ A trust issued receipt is defined in Amex Rule 1200(b) as a
security: (1) that is issued by a trust which holds specified
securities deposited with the trust; (2) that, when aggregated in
some specified minimum number, may be surrendered to the trust by
the beneficial owner to receive the securities; and (3) that pays
beneficial owners dividends and other distributions on the deposited
securities, if any are declared and paid to the trustee by an issuer
of the deposited securities.
\8\ See Amex Rule 1200A.
\9\ See Amex Rule 1200B.
\10\ See Amex Rule 1500.
\11\ See Amex Rule 1400.
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For these reasons, Amex has not generally required issuers of these
securities to hold annual shareholder meetings in the past, consistent
with their respective governance and organizational documents. However,
in order to provide greater certainty and transparency for listed
issuers, Amex believes it is appropriate to revise section 704 of the
Company Guide to clarify that only issuers of voting and non-voting
common stock and voting preferred stock, and their equivalents (e.g.,
callable common stock) are required to hold an annual shareholder
meeting. With respect to the proposed list of securities, the issuers
of which would be exempt from holding an annual meeting, if such
issuers also list common stock or voting preferred stock, or their
equivalent, such issuers must still hold an annual meeting for the
holders of that common stock or voting preferred stock, or their
equivalent.\12\ In addition, the Exchange notes that the proposed
annual meeting requirement and the listed exemptions from such
requirement do not supplant any applicable state or federal securities
laws concerning annual shareholder meetings. The Exchange further notes
that the proposed rule change is similar to the changes approved by the
Commission that were proposed by The Nasdaq Stock Market, Inc. (n/k/a
The NASDAQ Stock Market LLC) (``Nasdaq'')\13\ and the New York Stock
Exchange LLC (``NYSE'').\14\
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\12\ See proposed Commentary .01 to Section 704 of the Amex
Company Guide.
\13\ See Securities Exchange Act Release No. 53578 (March 30,
2006), 71 FR 17532 (April 6, 2006) (SR-NASD-2005-073) (approving
certain changes to Nasdaq's annual shareholder meeting requirement).
\14\ See Securities Exchange Act Release No. 54029 (June 21,
2006), 71 FR 37147 (June 29, 2006) (SR-NYSE-2005-68) (approving,
among other things, certain changes to NYSE's annual shareholder
meeting requirement).
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Finally, Amex proposes to remove the provision from section 704 of
the Company Guide that requires an issuer, who is unable to hold an
annual shareholder meeting in a timely manner,
[[Page 73913]]
to notify the Exchange and the stockholders of such issuer of the
reasons for the delay, and then use good faith efforts to hold the
meeting as soon as reasonably practicable in light of the circumstances
causing the delay. Amex believes it is more appropriate to address
annual meeting delays through its ``Continued Listing and Evaluation
and Follow-Up'' procedures which are a part of the rules governing
suspension and delisting in section 1009(a)(i) of the Company
Guide.\15\ Amex currently does not rely on the notification required in
section 704 of the Company Guide to monitor compliance with the annual
shareholder meeting requirement. Instead, the Exchange staff utilizes
an electronic database supplemented by manual review of proxy
statements and, in the case of issuers that do not file proxy
statements, other Commission filings to determine compliance. The
electronic database receives public filings on a real-time basis (i.e.,
deemed to be within one business day) and generates alerts, which are
investigated by analysts. Finally, because neither Nasdaq nor NYSE
require its respective listed issuers to notify them of their good
faith efforts to hold the annual meeting as soon as reasonably
practicable, continuing to enforce such a provision at Amex places the
Exchange at a competitive disadvantage.
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\15\ See Section 1009(a) of the Amex Company Guide.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\16\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\17\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanisms 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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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change does not 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
The Exchange states that no written comments were solicited or
received with respect to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which Amex consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. 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. Comments may be submitted by any of
the following methods:
Electronic comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-Amex-2006-31 on the subject line.
Paper comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Amex-2006-31. 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,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal offices of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Amex-2006-31 and should be
submitted on or before January 18, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Florence E. Harmon,
Deputy Secretary.
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\18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-25202 Filed 12-27-07; 8:45 am]
BILLING CODE 8011-01-P