[Federal Register Volume 83, Number 217 (Thursday, November 8, 2018)]
[Notices]
[Pages 55922-55924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24399]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84527; File No. SR-NYSEAMER-2018-47]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Section 805(c)(5) of the Guide to Change the Threshold for Qualifying
as a Smaller Reporting Company To Qualify for Certain Exemptions From
the Compensation Committee Requirements
November 2, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on October 23, 2018, NYSE American LLC (``NYSE American'' or the
``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 the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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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 Section 805(c)(5) of the NYSE
American Company Guide (the ``Company Guide'') to change the threshold
for listed companies to benefit from the exemptions from the Exchange's
compensation committee requirements applicable to smaller reporting
companies so that all companies that qualify for smaller reporting
company status under the revised SEC definition will qualify for those
exemptions. The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The SEC recently adopted \4\ amendments to the definition of
``smaller reporting company'' set forth in Item 10(f)(1) of Regulation
S-K \5\, Rule 12b-2 under the Act \6\ and Rule 405 under the Securities
Act of 1933.\7\ The amendments raise the smaller reporting company cap
from less than $75 million in public float to less than $250 million
and also include as smaller reporting companies issuers with less than
$100 million in annual revenues if they also have either no public
float or a public float that is less than $700 million. The amendments
became effective on September 10, 2018. The Exchange estimates that a
consequence of the SEC rule changes is that a significantly larger
number of its listed companies will qualify for smaller reporting
company status than was previously the case.
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\4\ Release Nos. 33-10513 and 34-83550 (June 28, 2018); 83 FR
31992 (July 10, 2018).
\5\ 17 CFR 229.10(F)(1).
\6\ 17 CFR 240.12b-2.
\7\ 17 CFR 230.405.
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Section 805(c)(1) of the Company Guide requires a heightened
standard of independence for compensation committee members.\8\ Section
805(c)(4) requires the compensation committee to undertake an
independence analysis when hiring a compensation consultant. Section
801(h) of the Company Guide provides that smaller reporting companies
are exempt from these heightened independence requirements. Section
805(c)(5) of the Company Guide includes a provision describing the
period within which a company must comply with Sections 805(c)(1) and
805(c)(4) after it ceases to be smaller reporting company.\9\ This
provision
[[Page 55923]]
currently states explicitly that a smaller reporting company must have
less than $75 million in public float. In light of the recent changes
to the SEC's rules with respect to smaller reporting companies, the
Exchange proposes to delete this reference to the $75 million public
float cap and revise the provision to state simply that a smaller
reporting company that fails to meet the requirements for smaller
reporting company status as of the Smaller Reporting Company
Determination Date will cease to be a smaller reporting company as of
the beginning of the following fiscal year. The effect of this
amendment will be to change the threshold for listed companies to be
eligible to benefit from the exemptions from the compensation committee
independence requirements applicable to smaller reporting companies so
that all companies that qualify for smaller reporting company status
under the revised SEC definition will qualify for those exemptions.
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\8\ In addition to the director independence requirements of
Section 803A, the board must affirmatively determine that all of the
members of the Compensation Committee or, in the case of a company
that does not have a Compensation Committee, all of the independent
directors, are independent under Section 805(c)(1). In affirmatively
determining the independence of any director who will serve on the
Compensation Committee, the Board must consider all factors
specifically relevant to determining whether a director has a
relationship to the listed company which is material to that
director's ability to be independent from management in connection
with the duties of a Compensation Committee member, including, but
not limited to: (A) The source of compensation of such director,
including any consulting, advisory or other compensatory fee paid by
the listed company to such director; and (B) whether such director
is affiliated with the listed company, a subsidiary of the listed
company or an affiliate of a subsidiary of the listed company.
\9\ Under the applicable SEC rules, a company tests its status
as a smaller reporting company on an annual basis at the end of its
most recently completed second fiscal quarter (the ``Smaller
Reporting Company Determination Date''). A smaller reporting company
ceases to be a smaller reporting company as of the beginning of the
fiscal year following the Smaller Reporting Company Determination
Date. The compensation committee of a company that has ceased to be
a smaller reporting company is required to comply with Section
805(c)(4)) as of six months from the date it ceases to be a smaller
reporting company and must have:
One member of its compensation committee that meets the
independence standard of Section 805(c)(1) within six months of that
date;
a majority of directors on its compensation committee
meeting those requirements within nine months of that date; and
a compensation committee comprised solely of members
that meet those requirements within twelve months of that date.
Any such company that does not have a compensation committee
must comply with this transition requirement with respect to all of
its independent directors as a group.
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The Exchange also proposes to delete from Section 805(c)(5) text
referencing the transition period for companies to comply with the
enhanced compensation committee provisions at the time of their
original adoption, as the transition period ended on October 31, 2014
and the text is therefore no longer relevant.\10\
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\10\ The Exchange also proposes to remove a typographical error
from Section 805(c)(5).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \12\ in particular, in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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 is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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As noted above, the effect of the proposed change to the definition
in Section 805(c)(5) of the definition of a smaller reporting company
is to change the threshold for listed companies to benefit from the
exemptions from the compensation committee independence requirements
applicable to smaller reporting companies so that all companies that
qualify for smaller reporting company status under the revised SEC
definition will qualify for those exemptions. Listed smaller reporting
companies must comply with all other applicable Exchange corporate
governance requirements, including all other applicable compensation
committee requirements. The Commission has already determined through
its own rulemaking that the revised thresholds for smaller reporting
company status proposed in this rule proposal are consistent with the
goal of the Act to further the protection of investors and the public
interest \13\ and the Exchange believes that its own proposal is
consistent with Section 6(b)(5) of the Act for the same reasons.
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\13\ See footnote 4, supra.
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The deletion from Section 805(c)(5) of the text referencing the
transition period for companies to comply with the enhanced
compensation committee provisions at the time of their original
adoption is consistent with Section 6(b)(5), as the transition period
ended on October 31, 2014 and the text is therefore no longer relevant.
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. The proposed change to the
definition of smaller reporting company in Section 805(c)(5) will not
impose any burden competition as its sole purpose is to change the
threshold for listed companies to benefit from the exemptions from the
Exchange's compensation committee independence requirements applicable
to smaller reporting companies so that all companies that qualify for
smaller reporting company status under the revised SEC definition will
qualify for those exemptions. The deletion from Section 805(c)(5) of
the text referencing the transition period for companies to comply with
the enhanced compensation committee provisions at the time of their
original adoption will not impose any burden on competition, as the
transition period ended on October 31, 2014 and the text is therefore
no longer relevant.
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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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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 email to [email protected]. Please include
File Number SR-NYSEAMER-2018-47 on the subject line.
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Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAMER-2018-47. This
file number should be included on the subject line if email 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2018-47, and should be
submitted on or before November 29, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24399 Filed 11-7-18; 8:45 am]
BILLING CODE 8011-01-P