[Federal Register Volume 86, Number 49 (Tuesday, March 16, 2021)]
[Notices]
[Pages 14511-14513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05340]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91287; File No. SR-LTSE-2021-01]


Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Order Approving Proposed Rule Change To Amend LTSE Rule 14.501 To 
Specify the Process for Enforcing Compliance With LTSE Rule 14.425 for 
Listed Companies

March 10, 2021.

I. Introduction

    On January 19, 2021, Long-Term Stock Exchange, Inc. (``LTSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Rule 14.501(d)(2)(A)(iii) to specify the 
process for enforcing compliance with LTSE Rule 14.425, which requires 
each listed company of the Exchange to adopt and publish ``Long-Term 
Policies'' as set forth in the rule. The proposed rule change was 
published for comment in the Federal Register on February 4, 2021.\3\ 
No comment letters were received in response to the Notice. This order 
approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 91019 (January 29, 
2021), 86 FR 8243 (February 4, 2021) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to amend Rule 14.501(d)(2)(A)(iii) to specify 
the process under LTSE Rule Series 14.500 for enforcing compliance with 
LTSE Rule 14.425, which requires listed Companies \4\ to adopt and 
publish Long-Term Policies consistent with a defined set of principles 
(the ``Principles'') articulated in LTSE Rule 14.425(b).\5\ As the 
Exchange states, LTSE Rule 14.425(a) requires Companies to adopt and 
publish the following policies: A Long-Term Stakeholder Policy; a Long-
Term Strategy Policy; a Long-Term Compensation Policy; a Long-Term 
Board Policy; and a Long-Term Investor Policy (collectively, the 
``Policies'').\6\ LTSE Rule 14.425(b) establishes that Companies have 
flexibility in developing what they believe to be appropriate policies 
for their businesses on condition that each of the Policies must be 
consistent with the Principles.\7\ Under LTSE Rule 14.425(c), Companies 
also are required to review their Policies at least annually, make them 
publicly available free of charge on or through their websites, and 
provide related disclosures in certain filings with the Commission.\8\ 
In addition, the Exchange has represented to the Commission that it 
will enforce the provisions of LTSE Rule 14.425 by ensuring that each 
Company has addressed all of the requirements enumerated for each of 
the prescribed Policies, consistent with the Principles, and that each 
Company has made the Policies publicly available without cost.\9\
---------------------------------------------------------------------------

    \4\ ``Company'' means the issuer of a security listed or 
applying to list on the Exchange. For purposes of Chapter 14 of the 
LTSE Rules, the term ``Company'' includes an issuer that is not 
incorporated, such as, for example, a limited partnership. See LTSE 
Rule 14.002(a)(5).
    \5\ See Notice, supra note 3, at 8244. LTSE Rule Series 14.500 
sets forth the procedures of the Exchange relating to a Company's 
failure to meet the listing standards in Chapter 14 of the 
Exchange's rules, which comprises the corporate governance standards 
set forth in Rule Series 14.400, including Rule 14.425 regarding 
Long-Term Policies.
    \6\ See id. See also Securities Exchange Act Release No. 86722 
(August 21, 2019), 84 FR 44952 (August 27, 2019) (SR-LTSE-2019-01) 
(``Long-Term Policies Approval Order'') (Order Approving Proposed 
Rule Change To Adopt Rule 14.425, Which Would Require Companies 
Listed on the Exchange To Develop and Publish Certain Long-Term 
Policies).
    \7\ See Notice, supra note 3, at 8244.
    \8\ See id.
    \9\ See id. See also Long-Term Policies Approval Order, supra 
note 6, at 44954.
---------------------------------------------------------------------------

    Currently, LTSE states that it enforces the provisions of LTSE Rule 
14.425 through a number of rules in the LTSE Rulebook.\10\ The Exchange 
notes that, under LTSE Rule 14.101, the Exchange may at all times 
exercise its broad discretionary authority to suspend or delist 
Companies based on any event, condition, or circumstance that exists or

[[Page 14512]]

occurs that makes initial or continued listing of the securities on the 
Exchange inadvisable or unwarranted in the opinion of the Exchange to 
protect investors and the public interest, among other objectives.\11\ 
Under LTSE Rule 14.500(a), LTSE staff is responsible for identifying 
deficiencies that may lead to delisting.\12\ Under LTSE Rule 14.410, a 
Company is required to provide the Exchange with prompt notification 
after an Executive Officer of the Company becomes aware of any 
noncompliance by the Company with the LTSE Rule Series 14.400, which 
includes Rule 14.425.\13\ Under LTSE Rule 14.207(a)(1), the Exchange 
may request any additional information or documentation, public or non-
public, deemed necessary to make a determination regarding a Company's 
continued listing, and a Company may be denied continued listing if it 
fails to provide such information within a reasonable period of 
time.\14\ In addition, the Exchange states that it plans to monitor 
Company compliance with Rule 14.425 annually and on an ad hoc 
basis.\15\
---------------------------------------------------------------------------

    \10\ See Notice, supra note 3, at 8244.
    \11\ See id. at 8245.
    \12\ See id. at 8244.
    \13\ See id.
    \14\ See id.
    \15\ See id. at 8244 n.6.
---------------------------------------------------------------------------

    Finally, LTSE Rule 14.501 sets forth the provisions regarding the 
Exchange's process for notifying Companies regarding different types of 
deficiencies and their corresponding consequences.\16\ The Exchange 
states that there are four types of Company deficiency notifications 
that the Exchange may issue pursuant to LTSE Rule 14.501(a): (i) Staff 
Delisting Determinations, which are notifications of deficiencies that, 
unless appealed, subject the Company to immediate suspension and 
delisting; (ii) notifications of deficiencies for which the Company may 
submit a plan of compliance (``Plan of Compliance'') for staff review; 
(iii) notifications of deficiencies for which a Company is entitled to 
an automatic cure or compliance period; and (iv) Public Reprimand 
Letters.\17\ LTSE Rule 14.501(d) identifies the deficiencies that fall 
within each of these four categories,\18\ and provides that in the case 
of a deficiency not specified in LTSE Rule 14.501(d)(1)-(4), LTSE staff 
will issue either a Staff Delisting Determination or a Public Reprimand 
Letter.\19\
---------------------------------------------------------------------------

    \16\ See id. at 8244.
    \17\ See id.
    \18\ See id.
    \19\ See id. at 8244 n.7.
---------------------------------------------------------------------------

    The Exchange proposes to amend LTSE Rule 14.501(d)(2)(A)(iii) to 
specify that deficiencies relating to LTSE Rule 14.425 would be 
included among those for which a Company may submit a Plan of 
Compliance for staff review.\20\ The Exchange states that this would be 
similar to how other corporate governance rules are handled generally 
in LTSE Rule 14.501(d)(2)(A)(iii).\21\
---------------------------------------------------------------------------

    \20\ See id. at 8244. The proposed rule change would also remove 
two erroneous ``or''s in LTSE Rule 14.501(d)(2)(A)(iii). See id. at 
8244 n.8.
    \21\ See id. (citing LTSE Rules 14.408(a) (Meetings of 
Shareholders), 14.408(c) (Quorum), 14.411(Review of Related Party 
Transactions), 14.412 (Shareholder Approval), 14.406 (Code of 
Conduct), 14.407(a)(4)(D) (Partner Meetings of Limited Partners), 
14.407(a)(4)(E) (Quorum of Limited Partnerships), 14.407(a)(4)(G) 
(Related Party Transactions of Limited Partnerships), 14.413 (Voting 
Rights), and 14.414 (Internal Audit Function)).
---------------------------------------------------------------------------

    Under LTSE Rule 14.501(d)(2)(C), a Company has 45 calendar days to 
submit a plan to regain compliance.\22\ According to the Exchange, LTSE 
staff may extend this deadline for up to an additional five calendar 
days upon good cause shown and may request such additional information 
from the Company as is necessary to make a determination regarding 
whether to grant such an extension.\23\ The Exchange asserts that this 
time period appropriately balances the interests of the Exchange in 
ensuring compliance with its listing standards with the application of 
principles-based listing standards by the Company.\24\
---------------------------------------------------------------------------

    \22\ See id. at 8244.
    \23\ See id.
    \24\ See id. The Exchange also states that, notwithstanding the 
mandated period to submit a Plan of Compliance and regain compliance 
under LTSE Rule 14.501(d)(2), as set forth in LTSE Rule 14.501(c) 
and repeated in LTSE Rule 14.207(b)(2), ``a listed Company that 
receives a notification of deficiency from the Exchange is required 
to make a public announcement by filing a Form 8-K, where required 
by [Commission] rules, or by issuing a press release disclosing 
receipt of the notification and the Rule(s) upon which the 
deficiency is based, and describing each specific basis and concern 
identified by the Exchange in reaching its determination that the 
Company does not meet the listing standard.'' For avoidance of 
doubt, the Exchange further states that a request for information by 
LTSE staff pursuant to LTSE Rule 14.207(a)(1), absent a notification 
of deficiency, will not require a public announcement by the subject 
Company pursuant to LTSE Rules 14.501(c) or 14.207(b)(2). See id. at 
8244 n.9.
---------------------------------------------------------------------------

    According to the Exchange, the process for reviewing such a Plan of 
Compliance is set forth in LTSE Rule 14.501(d)(2)(B) and would be 
unchanged by this proposal.\25\ Under that provision, the Exchange may 
provide the Company with up to 180 days to regain compliance (with 
certain exceptions), issue a Staff Delisting Determination letter, or 
issue a Public Reprimand Letter in accordance with LTSE Rule 
14.501(d)(4).\26\ Under LTSE Rule 14.500(a), a Public Reprimand Letter 
or Staff Delisting Determination, upon timely request by a Company, is 
subject to review by a Listings Review Committee, which will adjudicate 
the request in accordance with the procedures and timelines set forth 
in LTSE Rules 14.502, 14.504, and 14.505.\27\
---------------------------------------------------------------------------

    \25\ See id. at 8244.
    \26\ See id.
    \27\ See id.
---------------------------------------------------------------------------

    The Exchange asserts that providing an opportunity for remediation 
to Companies that face a deficiency with respect to LTSE Rule 14.425 
will allow Companies to formulate effective Policies tailored to 
Company-specific needs.\28\ The Exchange argues that the ability to 
tailor Policies, if necessary, to changing circumstances, while 
remaining anchored to the Principles, is essential for ensuring that 
the Policies are effective and meaningful tools for supporting long-
term value creation for Companies and their investors.\29\ To that end, 
the Exchange maintains that, in case of a deficiency, Companies will be 
able to achieve compliance by changing Policies or practices related to 
the deficiency, amending the applicable Policies, or some combination 
of both, provided that the changes are consistent with the 
Principles.\30\
---------------------------------------------------------------------------

    \28\ See id. at 8245.
    \29\ See id.
    \30\ See id. For the avoidance of doubt, the Exchange states 
that each Company shall be solely responsible for ensuring any 
changes in its practices to conform to its Policies do not violate 
any legal, regulatory, contractual, or other requirements applicable 
to the Company. See id. at 8245 n.11.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act.\31\ In particular, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\32\ which 
requires, among other things, that rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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 that those rules are not designed to

[[Page 14513]]

permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that the proposed rule change will bring the 
Exchange's handling of deficiencies in a Company's compliance with LTSE 
Rule 14.425 into alignment with its handling of deficiencies in a 
Company's compliance with other LTSE Rules pertaining to corporate 
governance,\33\ as detailed in the adjudicatory process set forth in 
LTSE Rule Series 14.500. The Commission further notes that any Company 
listed on LTSE would already have had to adopt and publish Long-Term 
Policies prior to being accepted for listing. The Commission therefore 
believes it is reasonable to afford a Company the opportunity to submit 
a Plan of Compliance should a deficiency subsequently arise in this 
area. The Commission notes in this regard that, in addition to 
submitting a Plan of Compliance, a listed Company that receives a 
deficiency notification from the Exchange is required to make a public 
announcement that discloses its receipt of the notification and the 
basis for it, and that such announcement must be made as promptly as 
possible but not more than four business days following receipt of the 
notification.\34\ Based on the foregoing, the Commission finds that the 
proposed rule change is consistent with the Act.
---------------------------------------------------------------------------

    \33\ See supra note 21 and accompanying text.
    \34\ See LTSE Rule 14.501(c); supra note 24.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\35\ that the proposed rule change (SR-LTSE-2021-01), be, and 
hereby is, approved.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05340 Filed 3-15-21; 8:45 am]
BILLING CODE 8011-01-P