[Federal Register Volume 89, Number 81 (Thursday, April 25, 2024)]
[Notices]
[Pages 31783-31785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08802]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99992; File No. SR-NYSE-2024-21]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, To Amend Section 802.01D of the NYSE Listed Company Manual 
Concerning the Suspension and Delisting of a Listed Company That Has 
Changed its Primary Business Focus

April 19, 2024.
    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 4, 2024, 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. On April 17, 
2024, the Exchange filed Amendment No. 1, which supersedes the original 
filing in its entirety. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as modified by Amendment 
No. 1, 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 802.01D of the NYSE Listed 
Company Manual (``Manual'') to provide the Exchange with discretion to 
commence suspension and delisting proceedings with respect to a listed 
company that has changed its primary business focus to a new area of 
business that it was not engaged in at the time of its original 
listing, or which was immaterial to its operations at the time of its 
original listing. The text of the proposed rule change is set forth in 
Exhibit 5. This Amendment No. 1 to SR-NYSE-2024-21 replaces SR-NYSE-
2024-21 as originally filed and supersedes such filing in its 
entirety.\4\
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    \4\ See note 5 infra.
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    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
    This Amendment No. 1 to SR-NYSE-2024-21 replaces SR-NYSE-2024-21 as 
originally filed and supersedes such filing in its entirety.\5\ 
Amendment No.1 amends the original filing to: (i) insert a new sentence 
in the proposed new paragraph in Section 802.01D stating that the 
Exchange would focus its analysis of a company's suitability for 
continued listing after a change in operations on whether it would have 
accepted the listed company for initial listing if it had been engaged 
in its modified business at the time of original listing; (ii) amend 
the lead-in language to Section 802.01D and the description in the 
Purpose section of the filing to include a parenthetical that specifies 
that, instead of applying the procedures outlined in Sections 802.02 
and 802.03, the Exchange will instead commence immediate suspension and 
delisting procedures if the individual paragraph of Section 802.01D so 
specifies; (iii) insert a sentence in the Purpose section noting that 
the Exchange's analysis of a company's change in business operations 
will focus on the qualitative aspects of the company's suitability for 
listing and will not entail an application of the quantitative 
standards for initial listing; (iv) amend the proposed new paragraph of 
Section 802.01D under the heading ``Change in Primary Business Focus'' 
to clarify that the proposed paragraph will apply only where the 
company has changed its primary business focus to a new area of 
business that is ``substantially different'' from the business it was 
engaged in at the time of its original listing or, as provided in the 
original filing, which was immaterial to its operations at the time of 
its original listing; (v) clarify that any

[[Page 31784]]

suspension and delisting resulting from a change in operations will be 
undertaken in accordance with the procedures set out in Section 804.00 
of the Manual; and (vi) make conforming changes to the Statutory Basis 
section.
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    \5\ See SR-NYSE-2024-21 (April 4, 2024).
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    It has been the Exchange's experience that listed companies 
occasionally change the focus of their operations from the business 
they were engaged in at the time of initial listing to a business line 
that is completely unrelated or that was not material at the time of 
its original listing. The Exchange is concerned that, in such 
circumstances, investors who acquired the company's stock prior to this 
change in operations (including, in many cases, in connection with the 
company's initial public offering) may have made their investment 
decision based on the company's disclosure about its original business 
and might not have made their investment if they had been aware of how 
the company would change. In addition, a wholesale change in business 
operations may give rise to a concern about the suitability for listing 
of the company had it been in engaged in that line of business at the 
time of its application for listing. The Exchange notes that, in some 
circumstances, there has been significant downward price movement 
subsequent to such a change in business focus, which resulted in 
significant investor losses and an inability to meet exchange continued 
listing standards.\6\
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    \6\ For example, Bit Brother, a company listed on Nasdaq, 
initially focused on selling tea products but ultimately changed its 
business line to crypto. After three reverse splits, one of which 
was quite large (1000:1), the company was still unable to regain 
sustained compliance with listing standards. The stock was delisted 
from Nasdaq in February 2024. See https://www.wsj.com/finance/stocks/as-trading-frenzies-grip-penny-stocks-criticism-of-nasdaq-grows-8bd4118b (Feb 23, 2024).
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    In light of the foregoing, the Exchange proposes to amend Section 
802.01D of the Manual (``Other Criteria'') to include a new paragraph 
(``Change in Primary Business Focus'') providing that the Exchange may 
in its sole discretion subject a listed company to immediate suspension 
and delisting in accordance with the procedures set forth in Section 
804.00 of the Manual if that listed company has changed its primary 
business focus to a new area of business that it was not engaged in at 
the time of its original listing or which was immaterial to its 
operations at the time of its original listing. If the Exchange becomes 
aware of such a change in the company's primary business focus, the 
Exchange's Staff would conduct a thorough assessment of the company's 
suitability for continued listing in light of such change. The Exchange 
would focus its analysis on whether it would have accepted the listed 
company for initial listing if it had been engaged in its modified 
business at the time of original listing. The Exchange notes that this 
analysis will focus on the qualitative aspects of the company's 
suitability for listing and will not entail an application of the 
quantitative standards for initial listing. For example, the Exchange 
would, where appropriate, take into consideration other changes that 
may have occurred in connection with the change in the company's 
primary business focus, including, but not limited to, changes in the 
management, board of directors, voting power, ownership, and financial 
structure of the company. The Exchange acknowledges that seeking to 
suspend and delist a company's stock under this revised rule would be 
an extraordinary action. The Exchange therefore anticipates seldom 
relying on this new discretionary authority, and only after thorough 
analysis of all relevant facts and circumstances.
    The lead-in to Section 802.01D provides that if any of the factors 
set forth in 802.01D apply to a listed company, the Exchange may in its 
sole discretion subject the company to the procedures outlined in 
Paras. 802.02 and 802.03, which provide noncompliant companies with an 
opportunity to cure their deficiencies. The Exchange proposes to add a 
parenthetical to this lead-in language to specify that, instead of 
applying the procedures outlined in Paras. 802.02 and 802.03, the 
Exchange will instead commence immediate suspension and delisting 
procedures if the individual paragraph of Section 802.01D so 
specifies). This proposed parenthetical provision in the lead-in to 
Section 802.01D will make the lead-in consistent with the Exchange's 
proposal to include a provision in the proposed new paragraph of that 
rule providing that any listed company that is deemed to be unsuitable 
for continued listing because of a change of business operations will 
be subject to immediate suspension and delisting procedures.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes it is consistent with the protection of 
investors to amend Section 802.01D to provide the Exchange with the 
discretion to immediately commence suspension and delisting procedures 
in accordance with Section 804.00 of the Manual with respect to a 
listed company that has changed its primary business focus to a new 
area of business that it was not engaged in at the time of its original 
listing or which was immaterial to its operations at the time of its 
original listing. The Exchange notes that investors who acquired the 
company's stock prior to this change in operations (including, in many 
cases, in connection with the company's initial public offering) may 
have made their investment decision based on the company's disclosure 
about its original business and might not have made their investment if 
they had been aware of how the company would change. In addition, the 
Exchange is concerned that a listed company may change its business 
operations to a line of business that would have given rise to a 
concern about the suitability for listing of the company had it been in 
engaged in that line of business at the time of its application for 
listing. The Exchange notes that taking delisting action in such cases 
would be discretionary and that the Exchange would undertake such 
action only after a careful analysis of the company's suitability for 
continued listing, taking into account all relevant factors, including, 
but not limited to, changes in the management, board of directors, 
voting power, ownership, and financial structure of the company. In 
making these determinations, the Exchange would focus its analysis on 
whether it would have accepted the listed company for initial listing 
if it had been engaged in its modified business at the time of original 
listing. The Exchange notes that this analysis will focus on the 
qualitative aspects of the company's suitability for listing and will 
not entail an application of the quantitative standards for initial 
listing.
    The proposed inclusion of new parenthetical language in the lead-in 
to Section 802.01D makes that lead-in consistent with the proposed new 
paragraph with respect to a company's change in business, as it 
provides that

[[Page 31785]]

he Exchange can immediately suspend and delist a company under Section 
802.01D where the applicable paragraph of the rule so provides, as is 
the case with the proposed new provision with respect to changes in 
business operations.

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 Exchange notes that 
there are several listing venues and that any company that the Exchange 
deemed unsuitable for continued listing under the proposed rule could 
apply for listing on one or more other exchanges.

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 within such longer period up 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, as 
modified by Amendment No. 1, or
    (B) institute proceedings to determine whether the proposed rule 
change as modified by Amendment No. 1, 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, as modified by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSE-2024-21 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-2024-21. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSE-2024-21 and should be 
submitted on or before May 16, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-08802 Filed 4-24-24; 8:45 am]
BILLING CODE 8011-01-P