[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23389-23392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08815]
[[Page 23389]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88717; File No. SR-NYSE-2020-36]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Provide a Longer Period for Listed Companies To Regain Compliance With
Its $50 Million Market Capitalization/Stockholders' Equity and $1.00
Price Continued Listing Requirements by Tolling the Compliance Periods
Through and Including June 30, 2020
April 21, 2020.
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 April 20, 2020, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 provide a longer period for listed
companies to regain compliance with its $50 million market
capitalization and $1.00 price continued listing requirements by
tolling compliance periods through and including June 30, 2020. 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 U.S. and global equities markets have experienced unprecedented
market-wide declines as a result of the ongoing spread of COVID-19. As
a consequence, since the commencement of the current market turbulence
in the last week of February 2020, the Exchange has experienced an
unusually high number (as compared to historical levels) of listed
companies:
That have been designated, or may soon be designated, as
below compliance with continued listing standards, as set forth in
Section 802.01B and become subject to a maximum 18-month cure period
(pursuant to the procedures set forth in Sections 802.02 and 802.03 as
applicable), as a consequence of having both stockholders' equity of
less than $50 million and an average global market capitalization over
a consecutive 30 trading-day period of less than $50 million (the ``$50
Million Standard''); or
that have stock prices that have fallen below the
Exchange's $1.00 price requirement for capital and common stock set
forth in Section 802.01C of the Manual (i.e., the average closing price
of their stock has fallen below $1.00 over a consecutive 30 trading day
period) (the ``Dollar Price Standard'') and that are consequently
subject to a six months compliance plan period (as set forth in Section
802.01C) or that may imminently fall below compliance with that listing
standard.\4\
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\4\ For illustrative purposes, the Exchange notes that the
number of listed companies with a trading price below $1.00 as of
the date of this filing is approximately 10 times as many as was the
case on the last trading day of 2019.
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In response to the conditions described above, the Exchange
proposes to provide a longer period of time to regain compliance with
the $50 Million Standard and Dollar Price Standard by tolling the
applicable compliance periods through June 30, 2020 (the ``Tolling
Period''). The Exchange proposes to continue to identify companies that
fall below the $50 million Standard and the Dollar Price Standard
during the Tolling Period and inform such companies of their
noncompliance. Any companies notified of noncompliance during the
Tolling Period would have to meet the press release requirements under
Section 802.02 or 802.03 (for companies identified as below the $50
Million Standard) or Section 802.01C (for companies identified as below
the Dollar Price Standard) and, where applicable, will be subject to
the Form 8-K disclosure requirement under SEC rules.\5\ In addition,
the Exchange would continue to attach a .BC indicator to such
companies' tickers \6\ and would continue to identify them as below
compliance on the Exchange's website during the Tolling Period.
However, any time period for which a company is deemed to be below
compliance during the Tolling Period, would not be counted toward the
maximum applicable compliance plan period of 18 months with respect to
the $50 million Standard or six months with respect to the Dollar Price
Standard. Instead, all applicable compliance plan periods for companies
newly identified as below compliance with these listing standards
during the Tolling Period would be calculated as beginning on July 1,
2020.
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\5\ The Exchange encourages companies to issue the required
press release as promptly as possible.
\6\ While the Exchange attaches a .BC indicator to the tickers
of listed companies that are below compliance when it provides data
to the Consolidated Tape, the Exchange cannot require commercial
data vendors to carry this information on their services and
understands that some of them do not include the .BC indicator in
their data packages.
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The Exchange notes that at the time of the financial crisis it
waived the Dollar Price Standard in its entirety, including ceasing to
identify companies as newly below compliance with that standard during
the period of the relief and freezing for that period the compliance
periods of companies that had previously been identified as
noncompliant with the Dollar Price Standard.\7\ In its conversations
with listed companies, the Exchange has learned that many companies are
experiencing severe disruptions to their businesses during the current
crisis, including employees who have contracted the COVID-19 virus and
the need to adopt emergency measures to protect their employees from
infection. The Exchange believes that it is undesirable to impose on
companies in the midst of this crisis the additional burden of
attempting to return to compliance with these market price-based
standards while the crisis is ongoing, which may be unrealistic for
many companies in the immediate term whereas their prospects may be
better once the current extraordinary conditions have passed.
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\7\ See Securities Exchange Act Release No. 59510 (March 4,
2009), 74 FR 10636 (March 11, 2009) (SR-NYSE-2009-21) (suspending
the dollar price requirement through June 30, 2009). See also
Securities Exchange Act Release No. 60273 (July 9, 2009), 74 FR
34606 (July 16, 2009) (SR-NYSE-2009-64) (extending the suspension of
the dollar price requirement through July 31, 2009).
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The Exchange's proposed application of the Tolling Period in
relation to the $50 Million Standard and the Dollar Price Standard is
in addition to the ongoing temporary suspension of the $15 million
market capitalization standard of Section 802.01B through and including
June 30, 2020, with respect to which the Exchange submitted an earlier
rule filing.\8\ The extreme volatility and the precipitous decline in
trading prices of many securities experienced in the U.S. and global
equities markets could lead to a high number of securities being deemed
to be below compliance with continued listing standards during a short
period of highly volatile markets. The proposed Tolling Period would
provide temporary relief to these companies and their shareholders in
response to these extraordinary market conditions.
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\8\ See Securities Exchange Act Release No. 88441 (March 20,
20020), 85 FR 17136 (March 26, 20020) (SR-NYSE-2020-21).
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Under the proposed Tolling Period, the compliance period of any
company that is in a compliance period for non-compliance with the $50
Million Standard at the time of commencement of the Tolling Period
would have this compliance period tolled and recommence on July 1,
2020. Consistent with Sections 802.02 and 802.03, a company that is
operating under a compliance plan for non-compliance with the $50
Million Standard as of the date of this filing would be deemed to be
back in compliance with continued listing requirements if at any time,
including during the Tolling Period, the company is able to demonstrate
(1) compliance with the $50 Million Standard, or (2) the ability to
qualify under an original listing standard, in each case for a period
of two consecutive quarters.
Notwithstanding this proposal, companies will be required to submit
compliance plans within the applicable time frames set forth in
Sections 802.02 and 802.03 of the Manual, and the Exchange will review
companies' progress under their plans on a quarterly basis during the
Tolling Period as provided by those rules. In addition, Sections 802.02
and 802.03 provide the Exchange with the authority to commence
delisting proceedings against a company prior to the end of the maximum
compliance plan period if the company fails to meet the material
aspects of the compliance plan accepted by the Exchange or any of the
quarterly milestones in that plan. This proposal does not in any way
limit the Exchange's authority to take such action where it deems
appropriate.
Under the proposed application of the Tolling Period in relation to
the Dollar Price Standard, the compliance period of any company that is
in a compliance period at the time of commencement of the Tolling
Period would have this compliance period tolled and recommence on July
1, 2020. Consistent with the normal application of the rule, companies
that are in a compliance period at the time of commencement of the
Tolling Period would be deemed to have regained compliance during the
Tolling Period if, at the expiration of their respective six-month cure
periods established prior to the commencement of the Tolling Period,
they have a $1.00 closing share price on the last trading day of the
period and a $1.00 average share price based on the preceding 30
trading days (e.g., a company that is currently in a compliance period
with a specified end date of May 30, 2020, will be deemed to have
returned to compliance if it meets the applicable requirements on May
30, notwithstanding the fact that the Tolling Period will be in effect
at that time, and if it does not return to compliance as of May 30, it
will have its compliance period tolled through June 30. In addition,
consistent with the normal application of the rule, any company that is
in a compliance period at the time of commencement of the Tolling
Period can return to compliance during the Tolling Period earlier that
the specified end date for its compliance period if such company has
both a $1.00 closing share price on the last trading day of any
calendar month during the previously-established compliance period and
a $1.00 average share price based on the 30 trading days preceding the
end of such month.
The proposed adoption of the Tolling Period does not provide any
additional compliance period to any company with respect to which the
Exchange has commenced delisting proceedings prior to the date of this
filing, including those that have exercised their appeal right.
The Exchange would be able to implement the proposed rule change
immediately upon effectiveness of this proposed rule change.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\9\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\10\ in particular, in that it is designed 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, and 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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As a result of uncertainty related to the ongoing spread of the
COVID-19 virus, the prices of securities listed on U.S. exchanges have
been experiencing rapid and significant changes. The proposed rule
change is designed to reduce uncertainty by extending time periods to
regain compliance with continued listing standards during the current
highly unusual market conditions, thereby protecting investors,
facilitating transactions in securities, and removing an impediment to
a free and open market. Notwithstanding the tolling of the compliance
periods, important investor protections will remain, including that
investors will be able to identify companies that are non-compliant
with the requirements on the Exchange's website, including for newly-
identified companies whose compliance periods have been tolled during
the Tolling Period, and the Exchange will append a .BC indicator to
such companies' tickers when providing data to the Consolidated Tape.
In addition, companies that become newly non-compliant with the
applicable continued listing standards will have to notify investors by
issuing a press release as required under NYSE rules and, where
required by SEC rules, a Form 8-K. With exception of companies that are
currently in delisting proceedings, all companies listed on the
Exchange that are currently below compliance with the $50 Million
Standard or the Dollar Price Standard as of the time of filing of this
proposal, or that fall below those standards after the submission of
this proposal, would be eligible to take advantage of the proposed
tolling period.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to reduce uncertainty for certain companies and their shareholders by
providing additional time for companies to regain compliance. In
addition, the proposed rule change is not designed to have any
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effect on intermarket competition but instead seeks to address concerns
the Exchange has observed surrounding the application of the $50
Million Price Requirement and the Dollar Price Requirement to companies
listed on the Exchange. Other exchanges can craft relief based on their
own rules and observations.
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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. The Exchange
stated that the proposed rule change is designed to respond to the
unprecedented uncertainty and resulting market declines related to the
global spread of the COVID-19 virus. Specifically, the Exchange stated
that the proposed rule change is designed to reduce uncertainty for
certain companies and their shareholders by providing additional time
for companies that are below compliance with the $50 Million Standard
and the Dollar Price Standard to regain compliance with these standards
during the current highly unusual market conditions. The Exchange also
stated that investors will still be able to identify companies that are
non-compliant with the requirements on the Exchange's website and the
Exchange will continue to append a .BC indicator to those companies'
tickers when providing data to the Consolidated Tape. In addition, the
Exchange noted that it will continue to notify companies about new
instances of non-compliance and any newly non-compliant companies will
have to notify investors by issuing a press release and, where required
by SEC rules, a Form 8-K.
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission notes that while the proposal provides additional
time for companies to comply with the $50 Million Standard and the
Dollar Price Standard, new companies that are deficient with these
standards during the Tolling Period will still continue to be notified
by the Exchange of the deficiency as they currently would be under
normal circumstances with no Tolling Period, and would continue to be
required to notify investors by issuing a press release as required
under NYSE rules and, where required by SEC rules, a Form 8-K.\15\ In
addition, the Exchange will continue to attach a .BC indicator to the
tickers of companies that fall below the $50 Million Standard and the
Dollar Price Standard during the Tolling Period, including companies
newly identified during the Tolling Period, and will continue to
identify such companies as below compliance on the Exchange's website
during the Tolling Period, so that shareholders and the public will
have access to such information as they normally would without the
Tolling Period. Pursuant to the requirements of Sections 802.02 and
802.03 of the Manual, companies below compliance will continue to be
required to submit compliance plans within the applicable time frames
set forth therein and the Exchange will continue to review companies'
progress under their plans on a quarterly basis during the Tolling
Period. The Commission notes that the additional time to comply with
the standards is meant to address the current unusual market conditions
while continuing to ensure that shareholders and the public have
relevant and accurate information concerning a company's deficiency
with the $50 Million Standard and the Dollar Price Standard. The
Commission also notes that the proposal is a temporary measure designed
to respond to current, unusual market conditions. For these reasons,
the Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposal operative upon filing.\16\
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\15\ The Commission notes that the Exchange encourages companies
to issue the required press release as promptly as possible. See
supra note 5.
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 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-2020-36 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-2020-36. 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
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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-2020-36 and should be submitted on or before May 18, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08815 Filed 4-24-20; 8:45 am]
BILLING CODE 8011-01-P