[Federal Register Volume 84, Number 100 (Thursday, May 23, 2019)]
[Notices]
[Pages 23815-23818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10753]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85889; File No. SR-NYSE-2019-20]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending Section 302 of the
Listed Company Manual To Provide Exemptions for the Issuers of Certain
Categories of Securities From the Obligation To Hold Annual
Shareholders' Meetings
May 17, 2019.
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 May 6, 2019, 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 Section 302 of the Listed Company
Manual (the ``Manual'') to provide exemptions for the issuers of
certain categories of securities from the obligation to hold annual
shareholders' meetings. 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 302 of the Manual provides that listed companies are
required to hold an annual shareholders' meeting during each fiscal
year.
Section 303A.00 of the Manual provides that preferred and debt
listings, passive business organizations in the form of trusts (such as
royalty trusts) and derivative and special purpose securities are not
required to comply with certain of the corporate governance
requirements set forth in Section 303A.\4\ Section 303A.00 does not
exclude the obligation to hold an annual meeting pursuant to Section
302 from those requirements with which such issuers must comply.
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\4\ To the extent that Rule 10A-3 under the Act applies to (i)
companies listing only preferred or debt securities, or (ii) passive
business organizations, such entities are required to comply with
the requirements of Section 303A.06 (Audit Committee) and certain
provisions of 303A.12(b) (Certification Requirements).
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Holders of non-voting preferred and debt securities, securities of
passive business organizations (such as royalty trusts) and derivative
and special purpose securities either do not have the right to elect
directors at annual meetings or have the right to elect directors only
in very limited circumstances. For example, holders of non-voting
preferred securities may have the right to temporarily elect directors
if dividends on such securities have not been paid for a specified
period of time. Absent such special circumstances, in no event do
holders of the securities listed above elect directors on an annual
basis. Despite the fact that there is no matter with respect to which
holders of these securities have an annual voting right under state law
or their governing documents, NYSE rules currently do not exclude the
issuers of
[[Page 23816]]
such securities from the requirement that they hold an annual meeting
of shareholders.
The Exchange now proposes to amend Section 302 to provide that
issuers of these securities would not be required to hold an annual
meeting. Specifically, Section 302 as amended would specify that the
annual meeting requirement does not apply to companies whose only
securities listed on the Exchange are non-voting preferred and debt,
passive business organizations (such as royalty trusts), or securities
listed pursuant to Rules 5.2(j)(2) (Equity Linked notes), 5.2(j)(3)
(Investment Company Units), 5.2(j)(4) (Index-Linked Exchangeable
Notes), 5.2(j)(5) (Equity Gold Shares), 5.2(j)(6) (Equity Index-Linked
Securities, Commodity-Linked Securities, Currency-Linked Securities,
Fixed Income Index-Linked Securities, Futures-Linked Securities and
Multifactor Index-Linked Securities), 8.100 (Portfolio Depositary
Receipts), 8.200 (Trust Issued Receipts), 8.201 (Commodity-Based Trust
Shares), 8.202 (Currency Trust Shares), 8.203 (Commodity Index Trust
Shares), 8.204 (Commodity Futures Trust Shares), 8.300 (Partnership
Units), 8.400 (Paired Trust Shares), 8.600 (Managed Fund Shares) and
8.700 (Managed Trust Securities). The Exchange is also amending the
rule text to make clear that, if an issuer also lists common stock or
voting preferred stock, or their equivalent, such issuer must still
hold an annual meeting for the holders of that common stock or voting
preferred stock, or their equivalent.\5\
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\5\ This proposed clarifying language is identical to that used
in the NYSE Arca and NASDAQ annual meeting rule. See NYSE Arca Rule
5.3-E(e) and NASDAQ Marketplace Rules IM-5620.
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The Exchange notes that the listing rules of NYSE Arca, Inc.
(``NYSE Arca''), the NASDAQ Stock Market LLC (``NASDAQ''), Cboe BZX
Exchange, Inc. (``Cboe BZX'') and NYSE American LLC (``NYSE American'')
all provide exclusions for issuers of ETFs and other derivative
securities products from the annual meeting requirements in their
rules.\6\ The following are rules for derivative and special purpose
securities listed on the Exchange and, in each case, a reference to a
rule of either NYSE Arca, NYSE American or NASDAQ providing for the
listing of similar securities on NYSE Arca, NYSE American or NASDAQ
that are explicitly excluded from the annual meeting requirement on
such exchange:
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\6\ See Exchange Act Release No. 83324 (SR-NYSEArca-2018-31)
(May 24, 2018); 83 FR 25076 (May 31, 2018) (approving [sic]
amendments to NYSE Arca Rule 5.3(e)-E). See also NASDAQ Marketplace
Rules IM-5620, Cboe BZX Rule 14.10, Interpretations and Policies 15;
and NYSE American Company Guide Section 704, Commentary .01.
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NYSE Rule 5.2(j)(2) (Equity Linked Notes): NYSE Arca Rule
5.2-E(j)(2) (Equity Linked Notes) and NYSE American Company Guide
Section 107B (Equity Linked Term Notes);
NYSE Rule 5.2(j)(3) (Investment Company Units): NYSE Arca
Rule 5.2-E(j)(3) (Investment Company Units) and NYSE American Rule
1002A (Index Fund Shares);
NYSE Rule 5.2(j)(4) (Index-Linked Exchangeable Notes):
NYSE Arca Rule 5.2-E(j)(4) (Index Linked Exchangeable Notes) and NYSE
American Company Guide Section 107C (Index Linked Exchangeable Notes);
NYSE Rule 5.2(j)(5) (Equity Gold Shares): NYSE Arca Rule
5.2-E(j)(5) (Equity Gold Shares) and NASDAQ Marketplace Rule 5711(b)
(Equity Gold Shares);
NYSE Rule 5.2(j)(6) (Equity Index-Linked Securities,
Commodity-Linked Securities, Currency-Linked Securities, Fixed Income
Index-Linked Securities, Futures-Linked Securities and Multifactor
Index-Linked Securities): NYSE Arca Rule 5.2-E(j)(6) (Index Linked
Securities) and NYSE American Company Guide Sections 107D (Index-Linked
Securities, 107E (Commodity-Linked Securities), 107F (Currency-Linked
Securities), 107G (Fixed Income-Linked Securities), 107H (Futures-
Linked Securities), and 107I (Combination-Linked Securities);
NYSE Rule 8.100 (Portfolio Depositary Receipts): NYSE Arca
Rule 8.100-E (Portfolio Depositary Receipts) and NYSE American Rule
1000A [sic] (Portfolio Depository Receipts);
NYSE Rule 8.200 (Trust Issued Receipts): NYSE Arca Rule
8.200-E (Trust Issued Receipts) and NYSE American Rule 1202 (Trust
Issued Receipts);
NYSE Rule 8.201 (Commodity-Based Trust Shares): NYSE Arca
Rule 8.201-E (Commodity Based Trust Shares) and NYSE American Rule
1200A (Commodity Based Trust Shares);
NYSE Rule 8.202 (Currency Trust Shares): NYSE Arca Rule
8.202-E (Currency Trust Shares) and NYSE American Rule 1202B (Currency
Trust Shares);
NYSE Rule 8.203 (Commodity Index Trust Shares): NYSE Arca
Rule 8.203-E (Commodity Index Trust Shares) and NASDAQ Marketplace Rule
5711(f) (Commodity Index Shares);
NYSE Rule 8.204 (Commodity Futures Trust Shares): NYSE
Arca Rule 8.204-E (Commodity Futures Trust Shares) and NASDAQ
Marketplace Rule 5711(g)(Commodity Futures Trust Shares);
NYSE Rule 8.300 (Partnership Units): NYSE Arca Rule 8.300-
E (Partnership Units) and NYSE American Rule 1502 (Partnership Units);
NYSE Rule 8.400 (Paired Trust Shares): NYSE Arca Rule
8.400-E (Paired Trust Shares) and NYSE American Rule 1402 (Paired Trust
Shares);
NYSE Rule 8.600 (Managed Fund Shares): NYSE Arca Rule
8.600-E;
NYSE Rule 8.700 (Managed Trust Securities): NYSE Arca Rule
8.700-E.
Shareholders of ETFs and derivative securities products listed on
the Exchange receive regular disclosure documents describing the
pricing mechanism for their securities and detailing how they can value
their holdings. Moreover, the net asset value of the categories of ETFs
and other derivative securities products listed above is determined by
the market price of each fund's underlying securities or other
reference asset. Because shareholders can value their investments on an
ongoing basis, the Exchange believes that there is less need for
shareholders to engage management at an annual meeting. In addition,
while holders of such securities may have the right to vote in certain
limited circumstances, they do not have the right to vote on the annual
election of a board of directors, further eliminating the need for an
annual meeting.
Notwithstanding the existence of an exemption from the Exchange's
annual shareholder meeting requirement as proposed to be amended,
issuers of listed securities will remain subject to any applicable
state and federal securities laws with respect to the holding of annual
meetings; as a result, an issuer that lists one or more of the types of
securities that the Exchange proposes to exclude from its annual
meeting requirement may still be required to hold annual shareholder
meetings in accordance with such state and federal securities laws. In
addition, the Exchange notes that issuers of NYSE-listed securities,
including the types of securities that the Exchange proposes to exclude
from its annual meeting requirement, remain subject to state and
federal securities laws that may require other types of shareholder
meetings, such as special meetings of shareholders. For example,
exchange-traded funds are registered under, and remain subject to, the
Investment Company Act of 1940 (``Investment Company Act''), which
imposes various shareholder-voting requirements that may be applicable
to such funds.\7\
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\7\ See, e.g., Section 16 of the Investment Company Act, which
requires, among other things, an investment company's initial board
of directors to be elected by the shareholders at an annual or
special meeting. 15 U.S.C. 80a-16(a).
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[[Page 23817]]
Lastly, the Exchange notes that any security listed under Section
703.19 of the Manual (``Other Securities'') that has the attributes of
common stock or voting preferred stock, or their equivalents will still
be subject to the Exchange's annual meeting requirements.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Exchange Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendment is consistent
with the protection of investors, as the holders of non-voting
preferred stock, bonds, the listed shares of passive business
organizations (such as royalty trusts), ETFs and certain other
derivative and special purpose securities do not have voting rights
with respect to the election of directors except in very limited
circumstances as required by state law or their governing documents. In
addition, the net asset value of the categories of ETFs and other
derivative securities products that the Exchange proposes to exclude
from its annual meeting requirement is determined by the market price
of each fund's underlying securities or other reference asset.
Shareholders of such ETFs and derivative securities products listed on
the Exchange receive regular disclosure documents describing the
pricing mechanism for their securities and detailing how they can value
their holdings. Accordingly, holders of such securities can value their
investment on an ongoing basis. Because of these factors, the Exchange
believes there is no need for the issuers of such securities to hold
annual shareholder meetings.
Further, notwithstanding the existence of an exemption from the
Exchange's annual shareholder meeting requirement as proposed to be
amended, issuers of listed securities will remain subject to any
applicable state and federal securities laws with respect to the
holding of annual meetings; as a result, an issuer that lists one or
more of the types of securities that the Exchange proposes to exclude
from its annual meeting requirement may still be required to hold
annual shareholder meetings in accordance with such state and federal
securities laws. In addition, the Exchange notes that issuers of NYSE-
listed securities, including the types of securities that the Exchange
proposes to exclude from its annual meeting requirement, remain subject
to state and federal securities laws that may require other types of
shareholder meetings, such as special meetings of shareholders.
Lastly, the Exchange notes that any security listed under Section
703.19 of the Manual (``Other Securities'') that has the attributes of
common stock or voting preferred stock, or their equivalents will still
be subject to the Exchange's annual meeting requirements.
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 amendments will
not impose any burden on competition, as they simply conform the
Exchange's rules to those of its competitors in the market for the
listing of the specified types of securities.
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
Within 45 days of the date of publication of this notice in the
Federal Register or up [sic] to 90 days (i) as the Commission may
designate if it finds such longer period to be appropriate and
publishes its reasons for so finding or (ii) as to which the self-
regulatory organization consents, the Commission will:
(A) By order approve or disapprove the 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 email to [email protected]. Please include
File Number SR-NYSE-2019-20 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-2019-20. 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-2019-20 and should be submitted on
or before June 13, 2019.
[[Page 23818]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10753 Filed 5-22-19; 8:45 am]
BILLING CODE 8011-01-P