[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Notices]
[Pages 56447-56449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15037]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100460; File No. SR-NYSE-2024-35]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending Section 302.00 of the 
NYSE Listed Company Manual To Exempt Closed-End Funds Registered Under 
the Investment Company Act of 1940 From the Requirement To Hold Annual 
Shareholder Meetings

July 3, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 21, 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, 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\ 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 302.00 of the NYSE Listed 
Company Manual (``Manual'') to exempt closed-end funds registered under 
the 1940 Act from the requirement to hold annual shareholder 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
    Closed-end funds (``CEFs'') are a category of investment companies 
that are registered under the Investment Company Act of 1940 (``1940 
Act'') \3\ and listed by the NYSE under Section 102.04A of the Manual. 
Section 302.00 of the Manual provides that companies listing common 
stock or voting preferred stock and their equivalents are required to 
hold an annual shareholders' meeting for the holders of such securities 
during each fiscal year.\4\ CEFs are presently required to comply with 
the annual shareholder meeting requirement. The Exchange now proposes 
to amend Section 302.00 of the Manual to include CEFs among the 
categories of issuers that are exempt from this requirement.
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    \3\ 15 U.S.C. 80a-1 et seq.
    \4\ Section 302.00 of the Manual exempts from this requirement 
companies whose only securities listed on the Exchange are non-
voting preferred and debt securities, passive business organizations 
(such as royalty trusts), or securities listed pursuant to Rule 
5.2(j)(2) (Equity Linked Notes), Rule 5.2(j)(3) (Investment Company 
Units), Rule 5.2(j)(4) (Index-Linked Exchangeable Notes), Rule 
5.2(j)(5) (Equity Gold Shares), 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), Rule 5.2(j)(8) (Exchange-
Traded Fund Shares), Rule 8.100 (Portfolio Depositary Receipts), 
Rule 8.200 (Trust Issued Receipts), Rule 8.201 (Commodity-Based 
Trust Shares), Rule 8.202 (Currency Trust Shares), Rule 8.203 
(Commodity Index Trust Shares), Rule 8.204 (Commodity Futures Trust 
Shares), Rule 8.300 (Partnership Units), Rule 8.400 (Paired Trust 
Shares), Rule 8.600 (Managed Fund Shares), Rule 8.601 (Active Proxy 
Portfolio Shares), Rule 8.700 (Managed Trust Securities), and 8.900 
(Managed Portfolio Shares).
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    The Exchange notes that, in addition to the listing under Section 
102.04A of the Manual of CEFs registered under the 1940 Act, the 
Exchange also lists under Section 102.04B of the Manual business 
development companies (``BDCs''). A BDC is a closed-end management 
investment company that is registered under the Exchange Act and that 
has filed an election to be treated as a business development company 
under the 1940 Act. The Exchange does not at this time propose to 
provide an exemption from the annual meeting requirement of Section 
302.00 to BDCs.
    The Exchange notes that there are significant differences between 
CEFs and listed operating companies that justify exempting CEFs from 
the Exchange's annual meeting requirement. In particular, the Exchange 
notes that the 1940 Act includes specific requirements with respect to 
the election of directors by CEF shareholders, while there is no such 
requirement under federal law for listed operating companies. 
Specifically, Section 16(a) of the 1940 Act \5\ specifies the right of 
CEF shareholders to elect directors as follows:
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    \5\ 15 U.S.C. 80a-16(a).
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    No person shall serve as a director of a registered investment 
company unless elected to that office by the holders of the outstanding 
voting securities of such company, at an annual or a special meeting 
duly called for that purpose; except that vacancies occurring between 
such meetings may be filled in any otherwise legal manner if 
immediately after filling any such vacancy at least two-thirds of the 
directors then holding office shall have been elected to such office by 
the holders of the outstanding voting securities of the company at such 
an annual or special meeting. In the event that at any time less than a 
majority of the directors of such company holding office at that time 
were so elected by the holders of the outstanding voting securities, 
the board of directors or proper officer of such company shall 
forthwith cause to be held as promptly as possible and in any event 
within sixty days a meeting of such holders for the purpose of electing 
directors to fill any existing vacancies in the board of directors 
unless the Commission shall by order extend such period. The foregoing 
provisions of this subsection shall not apply to members of an advisory 
board.
    The Exchange also notes that the 1940 Act requires that directors 
who are not ``interested persons'' \6\ (``1940 Act Interested 
Persons'') must comprise at least 40% of an investment company's 
board.\7\ In the Exchange's experience, a large majority of listed CEFs 
exceed this requirement by having boards on which more than 50% of 
members are not 1940 Act Interested Persons.
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    \6\ The term ``interested person'' is defined in Section 
2(a)(19) of the 1940 Act.
    \7\ 15 U.S.C. 80a-2(a)(19).
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    In addition to the director election provisions described above, 
the 1940 Act requires that a majority of directors who are not 1940 Act 
Interested Persons approve significant actions, such as approval of the 
investment advisory agreement between a CEF and its investment 
advisor.\8\ Specifically, the following types of actions require 
approval of a majority of a CEF's directors who are not 1940 Act 
Interested Persons: approval of advisory agreements; \9\ approval of 
underwriting

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agreements; \10\ selection of independent public accountant; \11\ 
acquisition of securities by a CEF from an underwriting syndicate of 
which the CEF's advisor or certain other affiliates are members; \12\ 
the purchase or sale of securities between CEFs that have the same 
investment advisor; \13\ mergers or asset acquisitions involving CEFs 
that have the same investment advisor; \14\ use of an affiliate broker-
dealer to effect portfolio transactions on a national securities 
exchange; \15\ and approval of the CEF's fidelity bond coverage.\16\
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    \8\ See Section 15 of the 1940 Act. 15 U.S.C. 80a-15.
    \9\ Ibid.
    \10\ Ibid.
    \11\ See Section 32 of the 1940 Act. 15 U.S.C. 80a-32.
    \12\ See 1940 Act Rule 10f-3(h).
    \13\ See 1940 Act Rule 17a-7(e).
    \14\ See 1940 Act Rule 17a-8(e).
    \15\ See 1940 Act Rule 17e-1(b).
    \16\ See 1940 Act Rule 17g-1(d).
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    There are also a number of material matters with respect to which 
the 1940 Act requires registered investment companies, including CEFs, 
to obtain shareholder approval. These matters include: a new investment 
management agreement or a material amendment to an investment 
management agreement; \17\ a change from closed-end to open-end status 
or vice versa; \18\ a change from diversified company to non-
diversified company; \19\ a change in a policy with respect to 
borrowing money, issuing senior securities; underwriting securities 
that other persons issue, purchasing or selling real estate or 
commodities or making loans to other persons, except in each case in 
accordance with the recitals of policy contained in its registration 
statement in respect thereto; \20\ a deviation from a policy in respect 
of concentration of investments in any particular industry or 
fundamental investment policy; \21\ and a change in the nature of the 
investment company's business so as to cease to be an investment 
company.\22\
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    \17\ See U.S.C. 80a-15.
    \18\ See U.S.C. 80a-13.
    \19\ Ibid.
    \20\ Ibid.
    \21\ Ibid.
    \22\ Ibid.
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    In light of the above-described significant statutory protections 
under the 1940 Act provided to the shareholders of CEFs, for which 
there are no parallel legal protections for the shareholders of public 
operating companies, the Exchange believes that it is appropriate to 
exempt CEFs from the annual shareholder meeting requirements of Section 
302.00 of the Manual. The Exchange notes that all of the categories of 
investment companies for which the Exchange has listing standards other 
than CEFs are already explicitly exempt from the annual shareholder 
meeting requirement of Section 302.00 of the Manual.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\23\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\24\ in particular, because 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 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 because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed exemption of CEFs from the 
annual shareholder meeting requirement of Section 302.00 of the Manual 
is consistent with the protection of investors and the public interest 
because of the provisions in the 1940 Act providing significant 
protection of CEF shareholders, including by requiring: (i) the 
election of directors by the CEF's shareholders when the number of 1940 
Act Interested Persons on the board exceed specified levels; (ii) the 
approval of certain specified material matters by a majority of the 
directors who are not 1940 Act Interested Persons ; and (ii) the 
approval of certain specified material matters by the shareholders.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal will not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.
    The Exchange believes that the proposal will not impose a burden on 
either intramarket or intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
rule change is designed to permit CEFs to rely on the shareholder 
voting requirements under the 1940 Act rather than complying with the 
annual meeting requirement of Section 302.00 of the Manual. As all CEFs 
listed on the NYSE would be treated the same under the proposed amended 
rule, the Exchange does not believe that the proposal would impose any 
burden on intramarket competition. Any other market that lists CEFs 
could seek to amend its own annual meeting requirements applicable to 
CEFs and, as such, the Exchange does not believe that the proposal 
places any undue burden on intermarket 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

    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, 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSE-2024-35 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-2024-35. 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

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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-2024-35 and should be submitted on 
or before July 30, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-15037 Filed 7-8-24; 8:45 am]
BILLING CODE 8011-01-P