[Federal Register Volume 83, Number 249 (Monday, December 31, 2018)]
[Notices]
[Pages 67775-67777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28389]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84935; File No. SR-NYSE-2018-64]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Chapter 9 of the NYSE Listed Company Manual Relating to Fees for
Business Development Companies
December 21, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on December 20, 2018, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the self-
regulatory organization. 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 Chapter 9 of the NYSE Listed Company
Manual (the ``Manual'') to provide that business development companies
will be subject to the same fee schedule as domestic operating
companies and no longer treated as closed-end funds for fee purposes.
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
Section 902.04 of the Manual sets forth listing fees applicable to
all listed closed-end funds. Along with all other closed-end funds,
these fees are applied to any closed-end fund that elects to be taxed
as a business development company (``BDC'') and is listed under Section
102.04B of the Manual.
The purpose and operation of a business development company is very
different from that of a non-BDC closed-end fund. A non-BDC closed-end
fund is a vehicle for the passive investment in securities and the role
of its management is limited to choosing when to buy and sell
securities in the fund's portfolio. By contrast, a condition to
obtaining and retaining business development company status is that the
business development company must make available management assistance
to the companies in which it has made investments. As such, in the
Exchange's opinion, the purpose and operation of a business development
company is therefore more analogous to that of an
[[Page 67776]]
operating company than to a non-BDC closed-end fund.
In light of the Exchange's opinion that BDCs function more like
operating companies than they do like other closed-end funds, the
Exchange believes it would be more consistent to subject them to the
same fee requirements as are applied to domestic operating companies
than to continue to apply to them the fees applicable to closed-end
funds.\4\ Consequently, the Exchange proposes to amend Sections 902.02,
902.03 and 903.04 of the Manual to state that BDCs will not be subject
to the closed-end fund fee schedule in Section 902.04, but rather, that
for all purposes in Chapter 9, BDCs listed under Section 102.04B will
be treated the same as domestic operating companies (including the fees
applicable to domestic operating companies set forth in Section 902.03)
and will not be subject to the fees for closed-end funds as set forth
in Section 902.04.
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\4\ All listed BDCs are domestic companies, as only domestic
entities can register under the Investment Company Act.
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Under Section 902.04, a BDC is charged initial listing fees when it
first lists a class of common stock, or first lists a class of
preferred stock in a case where common stock is not already listed,
according to a tiered schedule. Under this tiered schedule, a BDC pays
$20,000 (for up to and including 10 million shares), $30,000 (for over
10 million up to and including 20 million shares) or $40,000 (for over
20 million shares). By comparison, under the operating company fee
schedule, a BDC will pay listing fees the first time it lists a class
of common shares at a rate of $0.004 per share. The first time that an
issuer lists a class of common shares, the issuer is also subject to a
one-time special charge of $50,000, in addition to fees calculated
according to the Listing Fee schedule.\5\ The minimum and maximum
listing fees applicable the first time an issuer lists a class of
common shares under the operating company fee schedule are $150,000 and
$295,000, respectively, which amounts include the special charge of
$50,000. In light of the minimum payment of $150,000, newly-listed BDCs
will in all instances be subject to higher initial listing fees under
the amended fee schedule than under the closed-end fund schedule as
currently in effect. The Exchange believes it is reasonable to bill
BDCs under the operating company initial listing fee schedule rather
than the closed-end fund initial listing fee schedule because: (i) In
the Exchange's opinion, BDCs function more like operating companies
than like other closed-end funds; and (ii) BDCs are generally subject
to the same corporate governance requirements as operating companies,
so the Exchange expends regulatory resources in determining the initial
listing qualification of a BDC that are comparable to the effort
involved in listing an operating company and significantly greater than
in the case of a closed-end fund.
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\5\ A BDC will also be charged $0.004 per share:
At the time it first lists, an issuer lists one or more classes
of preferred stock or warrants, whether or not common shares are
also listed at that time;
Once listed, an issuer lists a new class of preferred stock or
warrants.
These types of listings are not subject to the special charge or
to the minimum or maximum Listing Fees applicable to an initial
listing of common shares.
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Under Section 902.04, BDCs are currently subject to annual fees at
a rate of $0.001025 per share, subject to a $25,000 minimum fee. Other
than a fund family discount for which BDCs are not typically qualified
(as they are not generally part of a family of at least three listed
funds), Section 902.04 does not include a limit on an issuer's annual
fee obligations. By comparison, under the operating company fee
schedule, BDCs will be charged $0.0011 per share for common shares,
preferred shares and warrants, subject to a $68,000 minimum for the
primary class of common shares or primary class of preferred stock (if
there is no class of common shares listed), a $20,000 minimum for any
additional class of common shares, and a $5,000 minimum for any class
of warrants or preferred shares. In addition to these minimum payments,
BDCs will benefit from the $500,000 cap imposed on annual fees and
listing fees set forth in Section 902.02. As a consequence of the
higher minimum annual fee requirements and per share rates applicable
to operating companies, BDCs with smaller numbers of shares outstanding
will generally pay somewhat higher fees as a result of the proposed
rule change. The Exchange believes this is reasonable in light of the
fact that BDCs are subject to the same corporate governance
requirements as operating companies and require the Exchange to expend
comparable levels of regulatory resources. However, the application of
the $500,000 fee cap may result in certain larger BDCs paying less in
annual fees than would be the case under the closed-end fund schedule,
as the closed-end fund fee schedule does not include a cap on annual
fees. The Exchange believes this fee limitation is reasonable due to
the economies of scale involved in dealing with large issuers.
The Exchange does not anticipate any reduction in revenues
associated with the proposed amendments and does not expect them to
have any effect on its ability to appropriately fund its regulatory
program.
The proposed rule change will take effect as of January 1, 2019.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(4) \7\ of the Act, in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges. The Exchange also believes that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\8\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes it is reasonable to bill BDCs under the
operating company initial listing fee schedule rather than the closed-
end fund initial listing fee schedule because: (i) In the Exchange's
opinion, BDCs function more like operating companies than like other
closed-end funds; and (ii) BDCs are generally subject to the same
corporate governance requirements as operating companies, so the
Exchange expends regulatory resources in determining the initial
listing qualification of a BDC that are comparable to the effort
involved in listing an operating company and significantly greater than
in the case of a closed-end fund.
The Exchange believes that it is not unfairly discriminatory and
represents an equitable allocation of reasonable fees to charge BDCs
the same fees as domestic operating companies rather than charge them
the closed-end fund fee schedule, as the Exchange believes that the
purpose and operation of a BDC are more analogous to those of an
operating company than to a non-BDC closed end fund and it is therefore
more consistent to charge BDCs the same fees as are paid by domestic
operating companies.
As a consequence of the higher minimum annual fee requirements and
per share rates applicable to operating
[[Page 67777]]
companies, BDCs with smaller numbers of shares outstanding will
generally pay somewhat higher fees as a result of the proposed rule
change. The Exchange believes this is reasonable in light of the fact
that BDCs are subject to the same corporate governance requirements as
operating companies and require the Exchange to expend comparable
levels of regulatory resources. However, the application of the
$500,000 fee cap may result in certain larger BDCs paying less in
annual fees than would be the case under the closed-end fund schedule,
as the closed-end fund fee schedule does not include a cap on annual
fees. The Exchange believes this fee limitation is reasonable due to
the economies of scale involved in dealing with large issuers.
The Exchange does not anticipate any reduction in revenues
associated with the proposed amendments and does not expect them to
have any effect on its ability to appropriately fund its regulatory
program.
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 rule change is
designed to ensure that the fees charged by the Exchange accurately
reflect the services provided and benefits realized by listed
companies. The market for listing services is extremely competitive.
Each listing exchange has a different fee schedule that applies to
issuers seeking to list securities on its exchange. Issuers have the
option to list their securities on these alternative venues based on
the fees charged and the value provided by each listing. Because
issuers have a choice to list their securities on a different national
securities exchange, the Exchange does not believe that the proposed
fee changes impose a burden on competition.
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 foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
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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) \11\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\11\ 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-NYSE-2018-64 on the subject line.
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-NYSE-2018-64. 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 the 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-NYSE-2018-64 and should be submitted on
or before January 22, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28389 Filed 12-28-18; 8:45 am]
BILLING CODE 8011-01-P