Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Amendments to the NYSE Constitution and the Adoption of an Independence Policy of the NYSE Board of Directors, 2688-2693 [E5-144]
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Federal Register / Vol. 70, No. 10 / Friday, January 14, 2005 / Notices
Section 6(b)(5) 5 of the Act that an
exchange have rules that are 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, in general, to protect investors and
the public interest; and are not designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change, as amended,
will impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change, as amended.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will:
A. By order approve the proposed rule
change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–NYSE–2004–49. This file
number should be included on the
subject line if e-mail 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 Web site (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 inspection and copying in
the Commission’s Public Reference
Room. Copies of the filing also will be
available for inspection and copying at
the principal offices of the NYSE. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSE–2004–49 and should
be submitted on or before February 4,
2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.6
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–136 Filed 1–13–05; 8:45 am]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2004–49 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51015; File No. SR–NYSE–
2004–54]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
the New York Stock Exchange, Inc.
Relating to Amendments to the NYSE
Constitution and the Adoption of an
Independence Policy of the NYSE
Board of Directors
January 11, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934, (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
U.S.C. 78f(b)(5).
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The Exchange is proposing
amendments to the various provisions
of the NYSE Constitution. These
amendments further implement the new
governance architecture adopted by the
Exchange in December 2003. The text of
the proposed rule change is attached
hereto as Exhibits A–1 and A–2.
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
NYSE included statements concerning
the purpose of, and basis for, its
proposal and discussed any comments it
received on the proposal. The text of
these statements may be examined at
the places specified in Item IV below.
The NYSE has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Changes to the NYSE Constitution
6 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
5 15
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
1. Purpose
BILLING CODE 8010–01–P
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the amendment is
consistent with the Act. Comments may
be submitted by any of the following
methods:
notice is hereby given that on
September 17, 2004 the New York Stock
Exchange, Inc. (‘‘NYSE’’ or ‘‘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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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The proposed amendments to the
NYSE Constitution follow the basic
constructs of the Exchange’s new
governance architecture. The proposed
amendments to the various provisions
of the NYSE Constitution and the
proposed Independence Policy of the
Exchange Board of Directors, containing
standards which NYSE directors must
meet in order to be considered
independent, are attached, respectively,
as Exhibits A–1 and A–2 hereto.
The proposed amendments to the
NYSE Constitution mostly clarify the
positions of the separate Chief Executive
Officer and the members of the
Exchange’s Board of Executives under
that architecture. One proposed change
allows the Board to set the annual
membership meeting earlier in the year
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than the June date set under the current
scheme.
Under Article XIV, Section 1 of the
Constitution, amendment to many
Constitutional provisions requires
adoption by the members. However,
amendment to certain Constitutional
provisions (generally, provisions
dealing with the internal Exchange
matters not directly involving the
membership or other Exchange
constituent groups) may be made by the
Board without the vote of members,
except that no such amendment by the
Board alone can take effect without two
weeks’ notice being given to the
members. Following are descriptions of
the proposed amendments to the NYSE
Constitution. The last five amendments,
amendments (6)–(10), did not require a
membership vote.
1. An amendment to Article III,
Section 1 of the Constitution will enable
the Board to move up the Annual
Meeting of members closer to the end of
the fiscal (calendar) year. The
amendment also provides the Board a
degree of time flexibility in reporting
nominations to the membership, but
without reducing the current time
period for members to propose
nominations by petition.
2. An amendment to Article IV,
Section 14(b) of the Constitution will
recuse the Chief Executive Officer from
participation in the review by the Board
of Directors of decisions by Exchange
staff, officers and committees. The
Exchange believes that this is
appropriate because decisions appealed
to the Board include decisions in the
regulatory area, and decisions by the
Chief Executive Officer and those
reporting to the Chief Executive Officer.
Such recusal of the Chief Executive
Officer is consistent with the oversight
of Exchange management by the
independent Directors.
3. An amendment to Article IX,
Section 3 will prohibit Board of
Executives members from serving on the
Hearing Board in light of the
participation of certain Board of
Executives members on the Regulation,
Enforcement & Listing Standards
Committee.
4. An amendment to Article IX,
Section 6 will prohibit the Chief
Executive Officer from requiring
reviews of disciplinary decisions and
will recuse the Chief Executive Officer
from participating in reviews by the
Board of disciplinary decisions. The
Exchange believes that this is consistent
with the Chief Executive Officer’s
separation from the regulatory function.
5. An amendment to Article XV,
Section 9 will correct an incomplete
cross-reference in that section from
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‘‘Nominating Committee’’ to
‘‘Nominating & Governance
Committee.’’
As discussed above, the following
amendments did not require a member
vote.
6. An amendment to Article IV,
Section 12(a)(1)(vii) will eliminate the
Chairman as a mandated subject of
succession planning by the Nominating
& Governance Committee. Under the
Exchange’s new governance
architecture, the Board determines from
time to time whether to continue to
separate the offices of the Chairman of
the Board and the Chief Executive
Officer. The Exchange believes that
succession planning with respect to the
Chief Executive Officer is the norm in
corporate governance practice.
7. An amendment to Article IV,
Section 14(a) will correct an erroneous
cross-reference from ‘‘Article VII,
Section 1’’ (which pertains to Exchange
Contracts), to ‘‘Article VIII, Section 1’’
(which pertains to regulation).
8. Amendments to Article V, Sections
2(b) and 6(a), and to Article VI, Section
2 will permit either the Chairman of the
Board, or the Chief Executive Officer, as
the Chairman determines from time to
time, to preside over meetings of the
Board of Executives, to call meetings of
the Board of Executives and to
determine when circumstances require
shorter notice of meetings of the Board
of Executives than otherwise provided
for that group—all in the event the
Chairman is not also the Chief Executive
Officer. The Exchange believes that
these changes are consistent with the
function of the Board of Executives to
advise the Chief Executive Officer in the
management of the operations of the
Exchange.
9. An additional amendment to
Article V, Section 2(b) will clarify that
the Board may appoint as a nonspecialist floor member of the Board of
Executives any non-specialist who
spends a substantial part of his or her
time on the Floor of the Exchange. (The
current description of the non-specialist
floor members of the Board of
Executives was carried over from a
category of ‘‘industry director’’ which
applied under the prior Exchange
governance structure and appears to not
include the entire non-specialist
constituency as it exists today.)
10. An amendment to Article V,
Section 11 will replace the requirement
for Plenary Sessions of the Board and
the Board of Executives with a more
specific requirement for each director to
be present for at least three meetings of
the Board of Executives each year. A
related change in Article VI, Section 2
provides for the Chairman to make the
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Annual Report on the Exchange’s
activities to the Board of Executives,
rather than to a ‘‘Plenary Session’’ of the
Board and the Board of Executives.
Independence Policy of the NYSE Board
of Directors
The NYSE Board of Directors also has
adopted an Independence Policy of the
Exchange Board of Directors (the
‘‘Independence Policy’’) in accordance
with the Constitution to ensure the
independence of its elected Directors
and its non-executive Chairman. Under
the Independence Policy, an elected
Director will not be considered
independent unless he or she meets the
independence standards required of a
director of an NYSE listed company.
Additional requirements address
independence from Exchange
constituents. Under Article IV, Section
2 of the Exchange Constitution, the
Independence Policy must be filed with
and approved by the Commission. The
Board is following this policy pending
Commission action.3
2. Statutory Basis
The Exchange represents that the
basis under the Act for this proposed
rule change is the requirement under
Section 6(b)(5) 4 that an exchange have
rules that are 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.
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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
3 The Commission notes that it recently published
for comment a proposed rulemaking that, among
other things, would establish governance
requirements for national securities exchanges and
registered securities associations and would include
a definition of the term ‘‘independent director.’’ See
Securities Exchange Act Release No. 50699
(November 18, 2004), 69 FR 71126 (December 8,
2004).
4 15 U.S.C. 78f(b)(5).
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date 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 such proposed
rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSE–2004–54 and should
be submitted on or before February 4,
2005.
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:
(New language is italicized; deletions
are [bracketed].)
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.5
Jill M. Peterson,
Assistant Secretary.
Exhibit A–1—Text of the Proposed Rule
Change
Constitution of the NYSE
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Article III. Meetings of Members
Sec. 1. Annual Meeting. A meeting of
the members of the Exchange entitled to
vote thereat shall be held annually for
Electronic Comments
the election of directors and other
• Use the Commission’s Internet
elective positions, and for the
comment form (https://www.sec.gov/
transaction of any other proper
rules/sro.shtml); or
business, at such time and date as the
• Send an e-mail to ruleBoard may select [on], but in no event
comments@sec.gov. Please include File
later than the first Thursday in June [in
Number SR–NYSE–2004–54 on the
each year] or, if the Exchange is not
subject line.
open for business on that day, on the
Paper Comments
next succeeding business day. At such
annual election, there shall be elected
• Send paper comments in triplicate
by the membership by ballot:
to Jonathan G. Katz, Secretary,
(a) all directors to be elected by
Securities and Exchange Commission,
members to serve for a term of one year;
450 Fifth Street, NW., Washington, DC
(b) two Trustees of the Gratuity Fund
20549–0609.
who shall be regular members (and not
All submissions should refer to File
lessor members), to serve for a term of
Number SR–NYSE–2004–54. This file
three years; and
number should be included on the
(c) qualified persons to fill any
subject line if e-mail is used. To help the
vacancies among the trustees of the
Commission process and review your
Gratuity Fund.
comments more efficiently, please use
The Board shall distribute its annual
only one method. The Commission will
post all comments on the Commission’s nominating report, which lists the
nominees to serve in the elective
Internet Web site (https://www.sec.gov/
positions, to each member [not less than
rules/sro.shtml). Copies of the
60 days in advance of the annual
submission, all subsequent
meeting] a sufficient number of days in
amendments, all written statements
advance of the annual meeting to take
with respect to the proposed rule
into account the number of days for the
change that are filed with the
filing of petitions by members for the
Commission, and all written
proposal of nominations for elective
communications relating to the
positions, the determination by the
proposed rule change between the
Commission and any person, other than Board of eligibility of persons
nominated by petition and the notice to
those that may be withheld from the
members of said annual meeting, all as
public in accordance with the
provided in this Article III.
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
Article IV. Board of Directors
the Commission’s Public Reference
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Room. Copies of such filing also will be *
available for inspection and copying at
5 17 CFR 200.30–3(a)(12).
the principal office of the NYSE. All
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Sec. 12. Standing Committees. The
Standing Committees and their
respective Chairmen shall be appointed
by the Board at its annual organizational
meeting. The Board shall adopt for each
Standing Committee a charter consistent
with the duties prescribed in the
subsections below, and including such
additional duties as may be considered
appropriate and not inconsistent with
this Constitution. Each Standing
Committee shall have the authority to
engage independent legal counsel and
other advisors as it determines
necessary to carry out its duties, but
may not use counsel or other advisors
who advise Exchange officers or
employees.
(a) Committees Consisting Solely of
Directors. The Standing Committees
described in Section 12(a)(1)–(4) shall
consist solely of directors, other than
the Chief Executive Officer, and shall
report to the Board. Such Standing
Committees may be combined with any
other such Standing Committee, be
subdivided into one or more such
Standing Committees, or the Board may
constitute itself as a committee of the
whole in respect of such a Standing
Committee. The Chief Executive Officer
shall be recused from deliberations of
the Board, whether it is acting as the
Board or as a committee of the whole,
with respect to the activities of the
Nominating & Governance Committee,
the Human Resources & Compensation
Committee, the Audit Committee or the
Regulatory Oversight & Regulatory
Budget Committee.
(1) Nominating & Governance
Committee. The Nominating &
Governance Committee shall be
responsible for (i) recommending to the
Board candidates for Board membership
in accordance with Article IV, Section 2
and candidates for Trustees of the
Gratuity Fund, (ii) recommending to the
Board candidates for Board of
Executives membership, (iii) conducting
the Board’s annual governance review,
(iv) reviewing and recommending the
Exchange’s corporate governance
guidelines, (v) establishing an
appropriate process for, and overseeing
implementation of, the Board’s selfassessments (including Board selfassessment, committee self-assessments
and director assessments) and the Board
of Executives’ self-assessments, (vi)
recommending director compensation,
and (vii) succession planning for the
[Chairman and] Chief Executive Officer
of the Exchange. In discharging its
responsibilities under clause (i) of the
immediately preceding sentence, the
Nominating & Governance Committee
shall propose persons as candidates for
the Board who, in the opinion of the
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Committee, (a) are committed to serving
the interests of the public and
strengthening the Exchange as a public
securities market; and (b) include
among their number individuals at least
one of whom is intended to allow the
Exchange to meet the requirements of
section 6(b)(3) of the Act concerning
issuers and at least one of whom is
intended to allow the Exchange to meet
the requirements of section 6(b)(3) of the
Act concerning investors. In addition,
the Nominating & Governance
Committee shall establish procedures to
solicit the input of investors in equity
securities and members regarding Board
candidates. The Nominating &
Governance Committee shall also solicit
input from the various Exchange
communities regarding candidates for
appointment by the Board to the Board
of Executives. Consensus
recommendations for candidates to
represent the groups referenced in
clauses (ii), (iii) and (iv) of Article V,
Section 2(b) put forward by the
respective representatives of those
groups shall be forwarded to the Board
as the recommendations of the
Nominating & Governance Committee
unless and to the extent such Committee
determines that a candidate does not
qualify for the position.
Article IV. Board of Directors
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Sec. 14. Delegation. (a) Delegation
Authority. The Board may delegate such
of its powers as it may from time to time
determine, subject to the provisions of
the Constitution and applicable law, to
the Board of Executives, to such officers
and employees of the Exchange, and to
such committees, composed either of
directors or otherwise, as the Board may
from time to time authorize; provided,
however, that, except as this
Constitution otherwise provides, the
Board may not delegate, and no
committee may re-delegate, to the Board
of Executives, to officers and employees
of the Exchange or to any committee
other than a committee consisting solely
of directors (other than the Chief
Executive Officer) authority either to
adopt rules under Article VIII, Section
1 or Article IX, Section 1, or to act on
any subject matter described in Article
IV, Section 12(a) or (b)(1), except by
effecting a rule change within the
meaning of Section 19(b)(1) of the Act.
Notwithstanding the foregoing, the
Board may authorize an officer or
officers of the Exchange to adopt rules
as aforesaid, so long as the Board is
informed of any such action at its next
meeting, and the prior approval of the
Chief Regulatory Officer is obtained for
any regulatory matter. Any committee of
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directors to which authority is delegated
to adopt rules under Article [VII] VIII,
Section 1 or Article IX, Section 1 shall
include thereon at least one director
nominated by the Industry Members of
the Board of Executives, as provided in
Article IV, Section 2. The Board shall
diligently oversee the activities of the
Board of Executives, the officers and
employees of the Exchange, and any
committees to which the Board has
delegated authority pursuant hereto.
(b) Limitation of Delegation Authority.
A member, member organization, allied
member or approved person affected by
a decision of any officer, employee or
committee acting under powers
delegated by the Board may require a
review by the Board of such decision, by
filing with the Secretary of the Exchange
a written demand therefor[e] within 10
days after the decision has been
rendered, except as otherwise provided
in Article IX, Section 6. Any and all
powers delegated by the Board may
continue to be exercised by the Board
notwithstanding such delegation, and
the Board may exercise such review and
oversight over the exercise of (or
omission to exercise) any delegated
authority as it shall at any time
determine. Notwithstanding any other
provisions of this paragraph (b), the
Chief Executive Officer shall be recused
from deliberations and actions of the
Board with respect to matters to be
reviewed by the Board pursuant to this
paragraph (b).
Article V. Board of Executives.
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Sec. 2. Composition of Board of
Executives.
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(b) The Board of Executives shall
consist of the Chairman of the Board
[(who shall be the Chairman of the
Board of Executives)] (if such individual
is not also the Chief Executive Officer),
the Chief Executive Officer [(if such
individual is not also the Chairman)],
and at least 20 but no more than 25
members (‘‘Board of Executives
members’’). Either the Chairman of the
Board or the Chief Executive Officer, as
the Chairman of the Board determines
from time to time, shall serve as
Chairman of the Board of Executives.
The Board of Executives members (other
than the Chairman and Chief Executive
Officer) shall be appointed by the Board
at its annual organizational meeting and
shall consist of (i) at least six
individuals who are either the chief
executive or a principal executive
officer of a member organization that
engages in a business involving
substantial direct contact with securities
customers, (ii) at least two individuals,
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each of whom is registered as a
specialist and spends a substantial part
of his or her time on the Floor of the
Exchange, (iii) at least two individuals,
each of whom spends a [majority]
substantial part of his or her time on the
Floor of the Exchange [, and has a
substantial part of his or her business
the execution of transactions on the
Floor of the Exchange for other than his
or her own account or the account of his
or her member organization], but who
shall not be registered as a specialist,
(iv) at least two individuals who are
lessor members who are not affiliated
with a broker or dealer in securities, (v)
at least four individuals who are either
the chief executive or a principal
executive officer of an institution that is
a significant investor in equity
securities, at[s] least one of whom shall
be a fiduciary of a public pension fund;
(vi) at least one individual intended to
represent individuals who invest in
equity securities and are retail clients of
member organizations, and (vii) at least
four individuals who are either the chief
executive or a principal executive
officer of a listed company (the
members of the Board of Executives
referenced in subsections (i), (ii), and
(iii) herein collectively shall be called
‘‘Industry Members of the Board of
Executives’’). If the Board increases the
size of the Board of Executives it shall
strive to maintain approximately the
same balance between Industry
Members of the Board of Executives and
other members of the Board of
Executives as is represented above. If
the Board increases the size of the Board
of Executives, it shall also be free to add
members to the Board of Executives
who represent other elements of the
Exchange community. Each person who
is not a member of the Exchange and is
appointed to the Board of Executives
shall, by the acceptance of such
position, be deemed to have agreed to
uphold this Constitution.
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Sec. 6. Meetings. (a) Frequency of
Meetings. The Board of Executives shall
have not less than six meetings each
year. Special meetings of the Board of
Executives may be called by the
Chairman of the Board or by the Chief
Executive Officer, or pursuant to the
written request of not less than one
third of the Board of Executives
members then in office, in accordance
with the provision of notice of meetings,
except that when in the judgment of the
Chairman of the Board or the Chief
Executive Officer, emergency requires
shorter notice.
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Sec. 11. [Plenary Sessions of the]
Board Member Attendance at Meetings
of [and] the Board of Executives. [The
Board and the Board of Executives shall
meet jointly (a ‘‘Plenary Session’’)] Each
member of the Board shall attend a
meeting of the Board of Executives at
least [twice] three times each year. [The
Chairman of the Board shall chair all
Plenary Sessions.]
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Article VI. Officers.
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Sec. 2. The Chairman. The Chairman
shall preside at all meetings of the
Board [and of the Board of Executives]
and shall decide all questions of order,
subject, however, to an appeal to the
Board; provided, however, that if the
Chairman is also the Chief Executive
Officer, he or she shall not participate
in executive sessions of the Board. If the
Chairman is not the Chief Executive
Officer, he or she shall act as liaison
officer between the Board and the Chief
Executive Officer. In addition to his or
her usual duties, the Chairman shall
make an Annual Report on the
Exchange’s activities to [a Plenary
Session] the Board of Executives.
*
*
*
*
*
Article IX. Disciplinary Proceedings.
*
*
*
*
*
Sec. 3. Hearing Board. The Chairman
of the Board, subject to the approval of
the Board, shall from time to time
appoint a hearing board to be composed
of such number of members and allied
members of the Exchange who are not
members of the Board or of the Board
of Executives, and registered employees
and non-registered employees of
members and member organizations, as
the Chairman of the Board shall deem
necessary. The members of the hearing
board shall be appointed annually and
serve at the pleasure of the Board. The
Chairman of the Board, subject to the
approval of the Board, shall also
designate from among the officers and
employees of the Exchange a chief
hearing officer and one or more other
hearing officers who shall have no
Exchange duties or functions relating to
the investigation or preparation of
disciplinary matters and who shall be
appointed annually and shall serve as
hearing officers at the pleasure of the
Board.
*
*
*
*
*
Sec. 6. Review. In a disciplinary
proceeding not involving a written
consent to the imposition of a specified
penalty, any member, member
organization, allied member, approved
person, or registered or non-registered
employee of a member or member
organization, adjudged guilty of any
VerDate jul<14>2003
14:36 Jan 13, 2005
Jkt 205001
charge, or the division or department of
the Exchange which brought the
charges, or any member of the Board or
the Board of Executives, may, in
accordance with procedures set forth in
the rules of the Exchange, require a
review by the Board, of any
determination or penalty, or both,
imposed by the hearing panel. Upon
review, the Board, by the affirmative
vote of a majority of the entire Board,
may sustain any determination or
penalty imposed, may modify or reverse
any such determination, and may
increase, decrease or eliminate any such
penalty, or impose any penalty
permitted under this Article as it deems
appropriate.
In a disciplinary proceeding involving
a written consent to the imposition of a
specified penalty, any member of the
Board or the Board of Executives may
require a review by the Board of any
determination or penalty, or both,
imposed by the hearing panel. In any
such proceeding, the division or
department which entered into the
written consent, may require a review
by the Board of any penalty, including
any determination related thereto,
imposed by the hearing panel, which is
less severe than the stipulated penalty.
The respondent or the division or
department which entered into the
written consent may require a review by
the Board of any rejection of the written
consent by the hearing panel. Any
review provided in this paragraph shall
be conducted in accordance with
procedures set forth in the rules of the
Exchange. Upon review, the Board, by
the affirmative vote of a majority of the
entire Board, may fix and impose the
penalty agreed to in such written
consent or any penalty which is less
severe than the stipulated penalty, or
remand the case for further proceedings.
Notwithstanding any other provisions
of this Section, the Chief Executive
Officer (a) may not require a review by
the Board under this Section and (b)
shall be recused from deliberations and
actions of the Board with respect to
matters to be reviewed by the Board
under this Section.
*
*
*
*
*
Article XV. The Gratuity Fund.
*
*
*
*
*
Sec. 9. Management of Gratuity Fund.
The management and distribution of the
Gratuity Fund shall be under the charge
of a board of trustees, acting as agent for
the Exchange, to be known as the
‘‘trustees of the Gratuity Fund,’’ and
shall consist of six regular members of
the Exchange who are not lessor
members and are elected by the
membership. In case of a vacancy
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
among the trustees, the Board, at its next
regular meeting thereafter, shall proceed
to fill the same until the next annual
election of the Exchange. Prior to filling
such vacancy, the Board shall request
the Nominating & Governance
Committee to submit to the Board the
name of the person recommended by
the Nominating & Governance
Committee to fill such vacancy.
Exhibit A–2—Text of the Proposed Rule
Change
(New language is italicized.)
INDEPENDENCE POLICY OF THE
EXCHANGE BOARD OF DIRECTORS
Purpose
The purpose of this Policy is to set
forth the independence requirements
that shall apply to the members of the
Board of Directors (the ‘‘Board’’) of the
Exchange in accordance with Article IV,
Section 2 of the New York Stock
Exchange Constitution.
Independence Requirements
1. Each Director elected by the
members and the Chairman of the
Board if not also the Chief Executive
Officer shall be independent within the
meaning of this Policy. A list of the
Directors shall be maintained on the
Exchange’s web site.
2. A Director shall be independent
only if the Board determines that the
Director does not have any material
relationships with the Exchange. When
assessing a Director’s relationships and
interests, the Board shall consider the
issue not merely from the standpoint of
the Director, but also from the
standpoint of persons or organizations
with which the Director is affiliated 6 or
associated.
3. In making independence
determinations, the Board shall
consider the special responsibilities of a
Director in light of the status of the
Exchange as a New York not-for-profit
corporation, and as a self-regulatory
organization and national securities
exchange subject to the supervision of
the Securities and Exchange
Commission.
4. The Board shall make an
independence determination with
respect to each Director elected by the
members upon the Director’s
nomination or appointment to the
Board and thereafter at such times as
the Board considers advisable in light of
the Director’s circumstances and any
6 An ‘‘affiliate’’ of, or a person ‘‘affiliated’’ with,
a specific person is a person that directly, or
indirectly through one or more intermediaries,
controls, or is controlled by, or is under common
control with, the person specified.
E:\FR\FM\14JAN1.SGM
14JAN1
Federal Register / Vol. 70, No. 10 / Friday, January 14, 2005 / Notices
changes to this Policy, but in any event
not less frequently than annually. Upon
adoption of this Policy, the Board shall
make an affirmative determination with
respect to the independence of each
Director then serving on the Board.
5. It shall be the responsibility of each
Director to inform the Chairman of the
Board and the Chairman of the
Nominating & Governance Committee
promptly and otherwise as requested of
the existence of such relationships and
interests which might reasonably be
considered to bear on the Director’s
independence.
6. Any Director elected by the
members who is no longer independent
due to the existence of a relationship
described in Article IV, Section 2(a)–(d)
of the Constitution or whom the Board
otherwise determines not to be
independent from the Exchange under
this Policy shall, pursuant to Article IV,
Section 9, be deemed to have tendered
his or her resignation for consideration
by the Board, and such resignation shall
not be effective unless and until
accepted by the Board.
Independence Qualifications
1. In making an independence
determination with respect to any
Director or Director candidate, the
Board shall consider the standards
below with respect to relationships or
interests of the Director or Director
candidate with or in (a) the Exchange or
its subsidiaries, (b) members, allied
members, and lessor members, (c)
member organizations of the Exchange
(‘‘Member Organizations’’) or nonmember broker-dealers that engage in
business involving substantial direct
contact with securities customers
(‘‘Non-Member Broker-Dealers’’), and
(d) companies other than Member
Organizations whose securities are
listed on the Exchange (‘‘Listed
Companies’’). The standards below
relating to category (a) are the same as
those that the Exchange applies to its
own listed companies. The standards
below relating to categories (b), (c) and
(d) stem from the differing regulatory
responsibilities and roles that the
Exchange exercises in overseeing the
organizations and companies included
in those categories.
2. The term ‘‘approved person’’ used
herein has the meaning set forth in the
NYSE Constitution.
3. The term ‘‘immediate family
member’’ with respect to any Director
has the meaning set forth in the NYSE
Listed Company Manual.
4. The following independence
criteria shall apply:
VerDate jul<14>2003
14:36 Jan 13, 2005
Jkt 205001
Independence From the Exchange
A Director is not independent if the
Director or an immediate family
member of the Director has or had a
relationship or interest with or in the
Exchange which, if such relationship or
interest existed with respect to a Listed
Company, would preclude a Director of
the Listed Company from being
considered an independent Director of
the Listed Company pursuant to Section
303A.02(a) or (b) of the Listed Company
Manual.7
Members, Allied Members and Lessor
Members
A Director is not independent if he or
she is, or within the last three years was,
or has an immediate family member
who is, or within the last three years
was, a member, allied member, lessor
member or approved person.
Member Organizations
A Director is not independent if the
Director (a) is, or within the last three
years was, employed by a Member
Organization, (b) has an immediate
family member who is, or within the last
three years was, an executive officer of
a Member Organization, (c) has within
the last three years received from any
Member Organization more than
$100,000 per year in direct
compensation, or received from Member
Organizations in the aggregate an
amount of direct compensation which in
any one year is more than 10 percent of
the Director’s annual gross income for
such year, excluding in each case
Director and committee fees and
pension or other forms of deferred
compensation for prior service
(provided such compensation is not
contingent in any way on continued
service), or (d) is affiliated, directly or
indirectly, with a Member Organization.
Non-Member Broker-Dealers
A Director is not independent if the
Director is employed by or affiliated,
directly or indirectly, with a NonMember Broker-Dealer.
Listed Companies
A Director is not independent if the
Director is an executive officer of an
issuer of securities listed on the
Exchange.
5. The Exchange shall make
disclosure of any charitable relationship
that a listed company would be required
to disclose pursuant to Listed Company
Manual Section 303A.02(b)(v) and
7 The relevant sections of the Listed Company
Manual and commentary are available on the
website at www.nyse.com/pdfs/
finalcorpgovrules.pdf
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
2693
commentary. Gifts by the Exchange or
by the NYSE Foundation shall not favor
charities on which any Director serves
as an executive officer or member of the
board of trustees or directors or
comparable governing body.
[FR Doc. E5–144 Filed 1–13–05; 8:45 am]
BILLING CODE 8010–01–P
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments and Recommendations
Notice and request for
comments.
ACTION:
SUMMARY: In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
March 15, 2005.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collection, to
Charles Ou, Senior Economist, Office of
Advocacy, Small Business
Administration, 409 3rd Street, SW.,
Suite 7800, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Charles Ou, Senior Economist, (202)
205–6966 or Curtis B. Rich,
Management Analyst, (202) 205–7030.
SUPPLEMENTARY INFORMATION: Title:
‘‘Impact of Credit Scoring on Lending to
Small Firms.’’
Description of Respondents: Senior
executives in banks and thrifts who are
knowledgeable about credit risk and
lending practices for small businesses.
Form No: N/A.
Annual Responses: 1,200.
Annual Burden: 300.
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. 05–856 Filed 1–13–05; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Declaration of Disaster #10005]
State of Texas (TX–00001)
(Amendment # 1)
The above numbered declaration is
hereby amended to establish the
incident period for this disaster as
E:\FR\FM\14JAN1.SGM
14JAN1
]]>Agencies
[Federal Register Volume 70, Number 10 (Friday, January 14, 2005)]
[Notices]
[Pages 2688-2693]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-144]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51015; File No. SR-NYSE-2004-54]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to Amendments to
the NYSE Constitution and the Adoption of an Independence Policy of the
NYSE Board of Directors
January 11, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on September 17, 2004 the New York Stock Exchange, Inc.
(``NYSE'' or ``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing amendments to the various provisions of
the NYSE Constitution. These amendments further implement the new
governance architecture adopted by the Exchange in December 2003. The
text of the proposed rule change is attached hereto as Exhibits A-1 and
A-2.
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 NYSE included statements
concerning the purpose of, and basis for, its proposal and discussed
any comments it received on the proposal. The text of these statements
may be examined at the places specified in Item IV below. The NYSE has
prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Changes to the NYSE Constitution
The proposed amendments to the NYSE Constitution follow the basic
constructs of the Exchange's new governance architecture. The proposed
amendments to the various provisions of the NYSE Constitution and the
proposed Independence Policy of the Exchange Board of Directors,
containing standards which NYSE directors must meet in order to be
considered independent, are attached, respectively, as Exhibits A-1 and
A-2 hereto.
The proposed amendments to the NYSE Constitution mostly clarify the
positions of the separate Chief Executive Officer and the members of
the Exchange's Board of Executives under that architecture. One
proposed change allows the Board to set the annual membership meeting
earlier in the year
[[Page 2689]]
than the June date set under the current scheme.
Under Article XIV, Section 1 of the Constitution, amendment to many
Constitutional provisions requires adoption by the members. However,
amendment to certain Constitutional provisions (generally, provisions
dealing with the internal Exchange matters not directly involving the
membership or other Exchange constituent groups) may be made by the
Board without the vote of members, except that no such amendment by the
Board alone can take effect without two weeks' notice being given to
the members. Following are descriptions of the proposed amendments to
the NYSE Constitution. The last five amendments, amendments (6)-(10),
did not require a membership vote.
1. An amendment to Article III, Section 1 of the Constitution will
enable the Board to move up the Annual Meeting of members closer to the
end of the fiscal (calendar) year. The amendment also provides the
Board a degree of time flexibility in reporting nominations to the
membership, but without reducing the current time period for members to
propose nominations by petition.
2. An amendment to Article IV, Section 14(b) of the Constitution
will recuse the Chief Executive Officer from participation in the
review by the Board of Directors of decisions by Exchange staff,
officers and committees. The Exchange believes that this is appropriate
because decisions appealed to the Board include decisions in the
regulatory area, and decisions by the Chief Executive Officer and those
reporting to the Chief Executive Officer. Such recusal of the Chief
Executive Officer is consistent with the oversight of Exchange
management by the independent Directors.
3. An amendment to Article IX, Section 3 will prohibit Board of
Executives members from serving on the Hearing Board in light of the
participation of certain Board of Executives members on the Regulation,
Enforcement & Listing Standards Committee.
4. An amendment to Article IX, Section 6 will prohibit the Chief
Executive Officer from requiring reviews of disciplinary decisions and
will recuse the Chief Executive Officer from participating in reviews
by the Board of disciplinary decisions. The Exchange believes that this
is consistent with the Chief Executive Officer's separation from the
regulatory function.
5. An amendment to Article XV, Section 9 will correct an incomplete
cross-reference in that section from ``Nominating Committee'' to
``Nominating & Governance Committee.''
As discussed above, the following amendments did not require a
member vote.
6. An amendment to Article IV, Section 12(a)(1)(vii) will eliminate
the Chairman as a mandated subject of succession planning by the
Nominating & Governance Committee. Under the Exchange's new governance
architecture, the Board determines from time to time whether to
continue to separate the offices of the Chairman of the Board and the
Chief Executive Officer. The Exchange believes that succession planning
with respect to the Chief Executive Officer is the norm in corporate
governance practice.
7. An amendment to Article IV, Section 14(a) will correct an
erroneous cross-reference from ``Article VII, Section 1'' (which
pertains to Exchange Contracts), to ``Article VIII, Section 1'' (which
pertains to regulation).
8. Amendments to Article V, Sections 2(b) and 6(a), and to Article
VI, Section 2 will permit either the Chairman of the Board, or the
Chief Executive Officer, as the Chairman determines from time to time,
to preside over meetings of the Board of Executives, to call meetings
of the Board of Executives and to determine when circumstances require
shorter notice of meetings of the Board of Executives than otherwise
provided for that group--all in the event the Chairman is not also the
Chief Executive Officer. The Exchange believes that these changes are
consistent with the function of the Board of Executives to advise the
Chief Executive Officer in the management of the operations of the
Exchange.
9. An additional amendment to Article V, Section 2(b) will clarify
that the Board may appoint as a non-specialist floor member of the
Board of Executives any non-specialist who spends a substantial part of
his or her time on the Floor of the Exchange. (The current description
of the non-specialist floor members of the Board of Executives was
carried over from a category of ``industry director'' which applied
under the prior Exchange governance structure and appears to not
include the entire non-specialist constituency as it exists today.)
10. An amendment to Article V, Section 11 will replace the
requirement for Plenary Sessions of the Board and the Board of
Executives with a more specific requirement for each director to be
present for at least three meetings of the Board of Executives each
year. A related change in Article VI, Section 2 provides for the
Chairman to make the Annual Report on the Exchange's activities to the
Board of Executives, rather than to a ``Plenary Session'' of the Board
and the Board of Executives.
Independence Policy of the NYSE Board of Directors
The NYSE Board of Directors also has adopted an Independence Policy
of the Exchange Board of Directors (the ``Independence Policy'') in
accordance with the Constitution to ensure the independence of its
elected Directors and its non-executive Chairman. Under the
Independence Policy, an elected Director will not be considered
independent unless he or she meets the independence standards required
of a director of an NYSE listed company. Additional requirements
address independence from Exchange constituents. Under Article IV,
Section 2 of the Exchange Constitution, the Independence Policy must be
filed with and approved by the Commission. The Board is following this
policy pending Commission action.\3\
---------------------------------------------------------------------------
\3\ The Commission notes that it recently published for comment
a proposed rulemaking that, among other things, would establish
governance requirements for national securities exchanges and
registered securities associations and would include a definition of
the term ``independent director.'' See Securities Exchange Act
Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8,
2004).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange represents that the basis under the Act for this
proposed rule change is the requirement under Section 6(b)(5) \4\ that
an exchange have rules that are 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.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
[[Page 2690]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 such 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 e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2004-54 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-NYSE-2004-54. This
file number should be included on the subject line if e-mail 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 Web site (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 inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the NYSE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSE-2004-54 and should be submitted on or before
February 4, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
Exhibit A-1--Text of the Proposed Rule Change
(New language is italicized; deletions are [bracketed].)
Constitution of the NYSE
* * * * *
Article III. Meetings of Members
Sec. 1. Annual Meeting. A meeting of the members of the Exchange
entitled to vote thereat shall be held annually for the election of
directors and other elective positions, and for the transaction of any
other proper business, at such time and date as the Board may select
[on], but in no event later than the first Thursday in June [in each
year] or, if the Exchange is not open for business on that day, on the
next succeeding business day. At such annual election, there shall be
elected by the membership by ballot:
(a) all directors to be elected by members to serve for a term of
one year;
(b) two Trustees of the Gratuity Fund who shall be regular members
(and not lessor members), to serve for a term of three years; and
(c) qualified persons to fill any vacancies among the trustees of
the Gratuity Fund.
The Board shall distribute its annual nominating report, which
lists the nominees to serve in the elective positions, to each member
[not less than 60 days in advance of the annual meeting] a sufficient
number of days in advance of the annual meeting to take into account
the number of days for the filing of petitions by members for the
proposal of nominations for elective positions, the determination by
the Board of eligibility of persons nominated by petition and the
notice to members of said annual meeting, all as provided in this
Article III.
Article IV. Board of Directors
* * * * *
Sec. 12. Standing Committees. The Standing Committees and their
respective Chairmen shall be appointed by the Board at its annual
organizational meeting. The Board shall adopt for each Standing
Committee a charter consistent with the duties prescribed in the
subsections below, and including such additional duties as may be
considered appropriate and not inconsistent with this Constitution.
Each Standing Committee shall have the authority to engage independent
legal counsel and other advisors as it determines necessary to carry
out its duties, but may not use counsel or other advisors who advise
Exchange officers or employees.
(a) Committees Consisting Solely of Directors. The Standing
Committees described in Section 12(a)(1)-(4) shall consist solely of
directors, other than the Chief Executive Officer, and shall report to
the Board. Such Standing Committees may be combined with any other such
Standing Committee, be subdivided into one or more such Standing
Committees, or the Board may constitute itself as a committee of the
whole in respect of such a Standing Committee. The Chief Executive
Officer shall be recused from deliberations of the Board, whether it is
acting as the Board or as a committee of the whole, with respect to the
activities of the Nominating & Governance Committee, the Human
Resources & Compensation Committee, the Audit Committee or the
Regulatory Oversight & Regulatory Budget Committee.
(1) Nominating & Governance Committee. The Nominating & Governance
Committee shall be responsible for (i) recommending to the Board
candidates for Board membership in accordance with Article IV, Section
2 and candidates for Trustees of the Gratuity Fund, (ii) recommending
to the Board candidates for Board of Executives membership, (iii)
conducting the Board's annual governance review, (iv) reviewing and
recommending the Exchange's corporate governance guidelines, (v)
establishing an appropriate process for, and overseeing implementation
of, the Board's self-assessments (including Board self-assessment,
committee self-assessments and director assessments) and the Board of
Executives' self-assessments, (vi) recommending director compensation,
and (vii) succession planning for the [Chairman and] Chief Executive
Officer of the Exchange. In discharging its responsibilities under
clause (i) of the immediately preceding sentence, the Nominating &
Governance Committee shall propose persons as candidates for the Board
who, in the opinion of the
[[Page 2691]]
Committee, (a) are committed to serving the interests of the public and
strengthening the Exchange as a public securities market; and (b)
include among their number individuals at least one of whom is intended
to allow the Exchange to meet the requirements of section 6(b)(3) of
the Act concerning issuers and at least one of whom is intended to
allow the Exchange to meet the requirements of section 6(b)(3) of the
Act concerning investors. In addition, the Nominating & Governance
Committee shall establish procedures to solicit the input of investors
in equity securities and members regarding Board candidates. The
Nominating & Governance Committee shall also solicit input from the
various Exchange communities regarding candidates for appointment by
the Board to the Board of Executives. Consensus recommendations for
candidates to represent the groups referenced in clauses (ii), (iii)
and (iv) of Article V, Section 2(b) put forward by the respective
representatives of those groups shall be forwarded to the Board as the
recommendations of the Nominating & Governance Committee unless and to
the extent such Committee determines that a candidate does not qualify
for the position.
Article IV. Board of Directors
* * * * *
Sec. 14. Delegation. (a) Delegation Authority. The Board may
delegate such of its powers as it may from time to time determine,
subject to the provisions of the Constitution and applicable law, to
the Board of Executives, to such officers and employees of the
Exchange, and to such committees, composed either of directors or
otherwise, as the Board may from time to time authorize; provided,
however, that, except as this Constitution otherwise provides, the
Board may not delegate, and no committee may re-delegate, to the Board
of Executives, to officers and employees of the Exchange or to any
committee other than a committee consisting solely of directors (other
than the Chief Executive Officer) authority either to adopt rules under
Article VIII, Section 1 or Article IX, Section 1, or to act on any
subject matter described in Article IV, Section 12(a) or (b)(1), except
by effecting a rule change within the meaning of Section 19(b)(1) of
the Act. Notwithstanding the foregoing, the Board may authorize an
officer or officers of the Exchange to adopt rules as aforesaid, so
long as the Board is informed of any such action at its next meeting,
and the prior approval of the Chief Regulatory Officer is obtained for
any regulatory matter. Any committee of directors to which authority is
delegated to adopt rules under Article [VII] VIII, Section 1 or Article
IX, Section 1 shall include thereon at least one director nominated by
the Industry Members of the Board of Executives, as provided in Article
IV, Section 2. The Board shall diligently oversee the activities of the
Board of Executives, the officers and employees of the Exchange, and
any committees to which the Board has delegated authority pursuant
hereto.
(b) Limitation of Delegation Authority. A member, member
organization, allied member or approved person affected by a decision
of any officer, employee or committee acting under powers delegated by
the Board may require a review by the Board of such decision, by filing
with the Secretary of the Exchange a written demand therefor[e] within
10 days after the decision has been rendered, except as otherwise
provided in Article IX, Section 6. Any and all powers delegated by the
Board may continue to be exercised by the Board notwithstanding such
delegation, and the Board may exercise such review and oversight over
the exercise of (or omission to exercise) any delegated authority as it
shall at any time determine. Notwithstanding any other provisions of
this paragraph (b), the Chief Executive Officer shall be recused from
deliberations and actions of the Board with respect to matters to be
reviewed by the Board pursuant to this paragraph (b).
Article V. Board of Executives.
* * * * *
Sec. 2. Composition of Board of Executives.
* * * * *
(b) The Board of Executives shall consist of the Chairman of the
Board [(who shall be the Chairman of the Board of Executives)] (if such
individual is not also the Chief Executive Officer), the Chief
Executive Officer [(if such individual is not also the Chairman)], and
at least 20 but no more than 25 members (``Board of Executives
members''). Either the Chairman of the Board or the Chief Executive
Officer, as the Chairman of the Board determines from time to time,
shall serve as Chairman of the Board of Executives. The Board of
Executives members (other than the Chairman and Chief Executive
Officer) shall be appointed by the Board at its annual organizational
meeting and shall consist of (i) at least six individuals who are
either the chief executive or a principal executive officer of a member
organization that engages in a business involving substantial direct
contact with securities customers, (ii) at least two individuals, each
of whom is registered as a specialist and spends a substantial part of
his or her time on the Floor of the Exchange, (iii) at least two
individuals, each of whom spends a [majority] substantial part of his
or her time on the Floor of the Exchange [, and has a substantial part
of his or her business the execution of transactions on the Floor of
the Exchange for other than his or her own account or the account of
his or her member organization], but who shall not be registered as a
specialist, (iv) at least two individuals who are lessor members who
are not affiliated with a broker or dealer in securities, (v) at least
four individuals who are either the chief executive or a principal
executive officer of an institution that is a significant investor in
equity securities, at[s] least one of whom shall be a fiduciary of a
public pension fund; (vi) at least one individual intended to represent
individuals who invest in equity securities and are retail clients of
member organizations, and (vii) at least four individuals who are
either the chief executive or a principal executive officer of a listed
company (the members of the Board of Executives referenced in
subsections (i), (ii), and (iii) herein collectively shall be called
``Industry Members of the Board of Executives''). If the Board
increases the size of the Board of Executives it shall strive to
maintain approximately the same balance between Industry Members of the
Board of Executives and other members of the Board of Executives as is
represented above. If the Board increases the size of the Board of
Executives, it shall also be free to add members to the Board of
Executives who represent other elements of the Exchange community. Each
person who is not a member of the Exchange and is appointed to the
Board of Executives shall, by the acceptance of such position, be
deemed to have agreed to uphold this Constitution.
* * * * *
Sec. 6. Meetings. (a) Frequency of Meetings. The Board of
Executives shall have not less than six meetings each year. Special
meetings of the Board of Executives may be called by the Chairman of
the Board or by the Chief Executive Officer, or pursuant to the written
request of not less than one third of the Board of Executives members
then in office, in accordance with the provision of notice of meetings,
except that when in the judgment of the Chairman of the Board or the
Chief Executive Officer, emergency requires shorter notice.
* * * * *
[[Page 2692]]
Sec. 11. [Plenary Sessions of the] Board Member Attendance at
Meetings of [and] the Board of Executives. [The Board and the Board of
Executives shall meet jointly (a ``Plenary Session'')] Each member of
the Board shall attend a meeting of the Board of Executives at least
[twice] three times each year. [The Chairman of the Board shall chair
all Plenary Sessions.]
* * * * *
Article VI. Officers.
* * * * *
Sec. 2. The Chairman. The Chairman shall preside at all meetings of
the Board [and of the Board of Executives] and shall decide all
questions of order, subject, however, to an appeal to the Board;
provided, however, that if the Chairman is also the Chief Executive
Officer, he or she shall not participate in executive sessions of the
Board. If the Chairman is not the Chief Executive Officer, he or she
shall act as liaison officer between the Board and the Chief Executive
Officer. In addition to his or her usual duties, the Chairman shall
make an Annual Report on the Exchange's activities to [a Plenary
Session] the Board of Executives.
* * * * *
Article IX. Disciplinary Proceedings.
* * * * *
Sec. 3. Hearing Board. The Chairman of the Board, subject to the
approval of the Board, shall from time to time appoint a hearing board
to be composed of such number of members and allied members of the
Exchange who are not members of the Board or of the Board of
Executives, and registered employees and non-registered employees of
members and member organizations, as the Chairman of the Board shall
deem necessary. The members of the hearing board shall be appointed
annually and serve at the pleasure of the Board. The Chairman of the
Board, subject to the approval of the Board, shall also designate from
among the officers and employees of the Exchange a chief hearing
officer and one or more other hearing officers who shall have no
Exchange duties or functions relating to the investigation or
preparation of disciplinary matters and who shall be appointed annually
and shall serve as hearing officers at the pleasure of the Board.
* * * * *
Sec. 6. Review. In a disciplinary proceeding not involving a
written consent to the imposition of a specified penalty, any member,
member organization, allied member, approved person, or registered or
non-registered employee of a member or member organization, adjudged
guilty of any charge, or the division or department of the Exchange
which brought the charges, or any member of the Board or the Board of
Executives, may, in accordance with procedures set forth in the rules
of the Exchange, require a review by the Board, of any determination or
penalty, or both, imposed by the hearing panel. Upon review, the Board,
by the affirmative vote of a majority of the entire Board, may sustain
any determination or penalty imposed, may modify or reverse any such
determination, and may increase, decrease or eliminate any such
penalty, or impose any penalty permitted under this Article as it deems
appropriate.
In a disciplinary proceeding involving a written consent to the
imposition of a specified penalty, any member of the Board or the Board
of Executives may require a review by the Board of any determination or
penalty, or both, imposed by the hearing panel. In any such proceeding,
the division or department which entered into the written consent, may
require a review by the Board of any penalty, including any
determination related thereto, imposed by the hearing panel, which is
less severe than the stipulated penalty. The respondent or the division
or department which entered into the written consent may require a
review by the Board of any rejection of the written consent by the
hearing panel. Any review provided in this paragraph shall be conducted
in accordance with procedures set forth in the rules of the Exchange.
Upon review, the Board, by the affirmative vote of a majority of the
entire Board, may fix and impose the penalty agreed to in such written
consent or any penalty which is less severe than the stipulated
penalty, or remand the case for further proceedings.
Notwithstanding any other provisions of this Section, the Chief
Executive Officer (a) may not require a review by the Board under this
Section and (b) shall be recused from deliberations and actions of the
Board with respect to matters to be reviewed by the Board under this
Section.
* * * * *
Article XV. The Gratuity Fund.
* * * * *
Sec. 9. Management of Gratuity Fund. The management and
distribution of the Gratuity Fund shall be under the charge of a board
of trustees, acting as agent for the Exchange, to be known as the
``trustees of the Gratuity Fund,'' and shall consist of six regular
members of the Exchange who are not lessor members and are elected by
the membership. In case of a vacancy among the trustees, the Board, at
its next regular meeting thereafter, shall proceed to fill the same
until the next annual election of the Exchange. Prior to filling such
vacancy, the Board shall request the Nominating & Governance Committee
to submit to the Board the name of the person recommended by the
Nominating & Governance Committee to fill such vacancy.
Exhibit A-2--Text of the Proposed Rule Change
(New language is italicized.)
INDEPENDENCE POLICY OF THE EXCHANGE BOARD OF DIRECTORS
Purpose
The purpose of this Policy is to set forth the independence
requirements that shall apply to the members of the Board of Directors
(the ``Board'') of the Exchange in accordance with Article IV, Section
2 of the New York Stock Exchange Constitution.
Independence Requirements
1. Each Director elected by the members and the Chairman of the
Board if not also the Chief Executive Officer shall be independent
within the meaning of this Policy. A list of the Directors shall be
maintained on the Exchange's web site.
2. A Director shall be independent only if the Board determines
that the Director does not have any material relationships with the
Exchange. When assessing a Director's relationships and interests, the
Board shall consider the issue not merely from the standpoint of the
Director, but also from the standpoint of persons or organizations with
which the Director is affiliated \6\ or associated.
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\6\ An ``affiliate'' of, or a person ``affiliated'' with, a
specific person is a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, the person specified.
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3. In making independence determinations, the Board shall consider
the special responsibilities of a Director in light of the status of
the Exchange as a New York not-for-profit corporation, and as a self-
regulatory organization and national securities exchange subject to the
supervision of the Securities and Exchange Commission.
4. The Board shall make an independence determination with respect
to each Director elected by the members upon the Director's nomination
or appointment to the Board and thereafter at such times as the Board
considers advisable in light of the Director's circumstances and any
[[Page 2693]]
changes to this Policy, but in any event not less frequently than
annually. Upon adoption of this Policy, the Board shall make an
affirmative determination with respect to the independence of each
Director then serving on the Board.
5. It shall be the responsibility of each Director to inform the
Chairman of the Board and the Chairman of the Nominating & Governance
Committee promptly and otherwise as requested of the existence of such
relationships and interests which might reasonably be considered to
bear on the Director's independence.
6. Any Director elected by the members who is no longer independent
due to the existence of a relationship described in Article IV, Section
2(a)-(d) of the Constitution or whom the Board otherwise determines not
to be independent from the Exchange under this Policy shall, pursuant
to Article IV, Section 9, be deemed to have tendered his or her
resignation for consideration by the Board, and such resignation shall
not be effective unless and until accepted by the Board.
Independence Qualifications
1. In making an independence determination with respect to any
Director or Director candidate, the Board shall consider the standards
below with respect to relationships or interests of the Director or
Director candidate with or in (a) the Exchange or its subsidiaries, (b)
members, allied members, and lessor members, (c) member organizations
of the Exchange (``Member Organizations'') or non-member broker-dealers
that engage in business involving substantial direct contact with
securities customers (``Non-Member Broker-Dealers''), and (d) companies
other than Member Organizations whose securities are listed on the
Exchange (``Listed Companies''). The standards below relating to
category (a) are the same as those that the Exchange applies to its own
listed companies. The standards below relating to categories (b), (c)
and (d) stem from the differing regulatory responsibilities and roles
that the Exchange exercises in overseeing the organizations and
companies included in those categories.
2. The term ``approved person'' used herein has the meaning set
forth in the NYSE Constitution.
3. The term ``immediate family member'' with respect to any
Director has the meaning set forth in the NYSE Listed Company Manual.
4. The following independence criteria shall apply:
Independence From the Exchange
A Director is not independent if the Director or an immediate
family member of the Director has or had a relationship or interest
with or in the Exchange which, if such relationship or interest existed
with respect to a Listed Company, would preclude a Director of the
Listed Company from being considered an independent Director of the
Listed Company pursuant to Section 303A.02(a) or (b) of the Listed
Company Manual.\7\
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\7\ The relevant sections of the Listed Company Manual and
commentary are available on the website at www.nyse.com/pdfs/
finalcorpgovrules.pdf
_____________________________________-
Members, Allied Members and Lessor Members
A Director is not independent if he or she is, or within the last
three years was, or has an immediate family member who is, or within
the last three years was, a member, allied member, lessor member or
approved person.
Member Organizations
A Director is not independent if the Director (a) is, or within the
last three years was, employed by a Member Organization, (b) has an
immediate family member who is, or within the last three years was, an
executive officer of a Member Organization, (c) has within the last
three years received from any Member Organization more than $100,000
per year in direct compensation, or received from Member Organizations
in the aggregate an amount of direct compensation which in any one year
is more than 10 percent of the Director's annual gross income for such
year, excluding in each case Director and committee fees and pension or
other forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued service), or (d)
is affiliated, directly or indirectly, with a Member Organization.
Non-Member Broker-Dealers
A Director is not independent if the Director is employed by or
affiliated, directly or indirectly, with a Non-Member Broker-Dealer.
Listed Companies
A Director is not independent if the Director is an executive
officer of an issuer of securities listed on the Exchange.
5. The Exchange shall make disclosure of any charitable
relationship that a listed company would be required to disclose
pursuant to Listed Company Manual Section 303A.02(b)(v) and commentary.
Gifts by the Exchange or by the NYSE Foundation shall not favor
charities on which any Director serves as an executive officer or
member of the board of trustees or directors or comparable governing
body.
[FR Doc. E5-144 Filed 1-13-05; 8:45 am]
BILLING CODE 8010-01-P
