Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Exempt Limited Partnerships From Certain of Its Shareholder Approval Rules, 15747-15749 [E7-5964]
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Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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:
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–5988 Filed 3–30–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–55528; File No. SR–NYSE–
2007–28]
• 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–NSX–2007–03 on the
subject line.
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Exempt Limited Partnerships From
Certain of Its Shareholder Approval
Rules
March 26, 2007.
hsrobinson on PROD1PC76 with NOTICES
Paper Comments
Pursuant to Section 19(b)(1) 1 of the
• Send paper comments in triplicate
Securities Exchange Act of 1934 (the
to Nancy M. Morris, Secretary,
‘‘Act’’),2 and Rule 19b–4 thereunder,3
Securities and Exchange Commission,
notice is hereby given that on March 9,
100 F Street, NE., Washington, DC
2007, New York Stock Exchange LLC
20549–1090.
(the ‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
All submissions should refer to File
Commission (‘‘Commission’’) the
Number SR–NSX–2007–03. This file
proposed rule changes as described in
number should be included on the
Items I, II, and III below, which items
subject line if e-mail is used. To help the
have been substantially prepared by the
Commission process and review your
Exchange. The Commission is
comments more efficiently, please use
publishing this notice to solicit
only one method. The Commission will
comments on the proposed rule changes
post all comments on the Commission’s
from interested persons.
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
I. Self-Regulatory Organization’s
submission, all subsequent
Statement of the Terms of Substance of
amendments, all written statements
the Proposed Rule Change
with respect to the proposed rule
The Exchange proposes to amend the
change that are filed with the
Exchange’s Listed Company Manual
Commission, and all written
(the ‘‘Manual’’) to exempt limited
communications relating to the
partnerships from the obligation to
proposed rule change between the
Commission and any person, other than obtain shareholder approval under the
circumstances set forth in Sections
those that may be withheld from the
312.03(b), (c), and (d) for the issuance of
public in accordance with the
common stock and securities
provisions of 5 U.S.C. 552, will be
convertible into or exchangeable for
available for inspection and copying in
common stock.4
the Commission’s Public Reference
The text of the proposed rule change
Room. Copies of the filing also will be
is available on the Exchange’s Web site
available for inspection and copying at
at https://www.nyse.com, the Office of
the principal office of NSX. All
the Secretary, the Exchange and at the
comments received will be posted
Commission’s Public Reference Room.
without change; the Commission does
not edit personal identifying
10 17 CFR 200.30–3(a)(12).
information from submissions. You
1 15 U.S.C. 78s(b)(1).
should submit only information that
2 15 U.S.C. 78a.
you wish to make available publicly. All
3 17 CFR 240.19b–4.
submissions should refer to File
4 NYSE-listed limited partnerships would still be
Number SR–NSX–2007–03 and should
subject to the Exchange’s shareholder approval
requirements for equity compensation plans. See
be submitted on or before April 23,
NYSE Listed Company Manual Sections 303A.08
2007.
and 312.03(a).
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15747
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
Exchange 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 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
The Exchange proposes to exempt
limited partnerships from the obligation
to obtain shareholder approval under
the circumstances set forth in Manual
Sections 312.03(b), (c), and (d) for the
issuance of common stock and
securities convertible into or
exchangeable for common stock.5
Subject to certain exceptions specified
therein, Manual Sections 312.03(b), (c),
and (d) require listed issuers to obtain
shareholder approval prior to the
issuance of common stock or securities
convertible into or exchangeable for
common stock in any transaction or
series of related transactions in the
following situations:
• Where the potential dilution exceeds
either one percent of the number of shares of
common stock or one percent of the voting
power outstanding before the issuance to: (a)
a director, officer or substantial security
holder of the company (each a ‘‘Related
Party’’); (b) a subsidiary, affiliate or other
closely-related person of a Related Party; or
(c) any company or entity in which a Related
Party has a substantial direct or indirect
interest.
• If the Related Party involved in a
transaction covered by the preceding bullet is
classified as such solely because such person
is a substantial security holder, and if the
issuance relates to a sale of stock for cash at
a price at least as great as each of the book
and market value of the issuer’s common
stock, then shareholder approval will not be
required unless the number of shares of
common stock to be issued, or unless the
number of shares of common stock into
which the securities may be convertible or
exercisable, exceeds either five percent of the
number of shares of common stock or five
percent of the voting power outstanding
before the issuance.
• If: (a) the common stock has, or will have
upon issuance, voting power equal to or in
5 See
E:\FR\FM\02APN1.SGM
supra note 4.
02APN1
15748
Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices
excess of 20 percent of the voting power
outstanding before the issuance of such stock
or of securities convertible into or exercisable
for common stock; or (b) the number of
shares of common stock to be issued is, or
will be upon issuance, equal to or in excess
of 20 percent of the number of shares of
common stock outstanding before the
issuance of the common stock or of securities
convertible into or exercisable for common
stock.
• If the issuance will result in a change of
control of the issuer.
hsrobinson on PROD1PC76 with NOTICES
The policy underlying these
requirements is that shareholders
should have the right to vote on any
issuance of common stock that is
materially dilutive of either their voting
or economic interest in the company.
Nasdaq has similar shareholder
approval requirements to those of the
NYSE. However, Nasdaq exempts
limited partnerships (‘‘LPs’’) from those
requirements,6 which the Exchange
believes has placed it at a significant
disadvantage in competing with Nasdaq
for initial public offerings and transfers
of LPs. To be treated as a partnership for
federal tax purposes, an LP must ensure
that 90% of its income is derived from
‘‘qualified sources,’’ which generally
refers only to income derived from
natural resource-related activities. Most
listed LPs are engaged in energy-related
businesses. The typical business model
of LPs in the energy industry is to use
their capital to acquire assets (e.g.,
pipelines) that produce predictable
revenue streams and to commit in their
partnership agreements to distribute
most of their profits to the LP’s unit
holders. These LPs acquire assets
frequently on an opportunistic basis and
pay for them by issuing additional LP
units. The Exchange believes that the
ability of an LP listed on Nasdaq to
issue additional LP units without the
expense and uncertainty of obtaining
shareholder approval provides Nasdaq
with a significant advantage over the
Exchange in attracting and retaining
listings of LPs.
The Exchange believes that an
analysis of the policies regarding voting
6 See Nasdaq Marketplace Rule 4360 (‘‘Qualitative
Listing Requirements for Nasdaq Issuers That Are
Limited Partnerships’’), which does not include the
shareholder approval requirements found in Nasdaq
Marketplace Rule 4350 (‘‘Qualitative Listing
Requirements for Nasdaq Issuers That Are Not
Limited Partnerships’’). See also Securities
Exchange Act Release No. 30811 (June 15, 1992); 57
FR 28542 (June 25, 1992) (SR–NASD–91–58)
(approving the NASD’s adoption of nonquantitative listing standards for partnerships,
which did not include shareholder approval
requirements). See also Securities Exchange Act
Release No. 34533 (August 15, 1994); 59 FR 43147
(August 22, 1994) (SR–NASD–93–3) (approving the
NASD’s adoption of the predecessor rule to Rule
4360, which also did not include shareholder
approval requirements for listed limited
partnerships).
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and economic dilution underpinning its
shareholder approval requirements
demonstrates that it is appropriate to
exempt LPs from their application.
Listed LPs generally provide very
limited voting rights to their unit
holders. Typically, control of the LP
resides with the general partner (‘‘GP’’)
and the LP’s board is that of the GP. The
owner of the GP appoints the board and
the common unit holders of the LP have
no voting rights with respect to the
election of directors. LP partnership
agreements generally provide that LP
unit holders can vote only on a merger
or dissolution of the LP or on any
amendment to the partnership
agreement that is adverse to their
interests. As such, the Exchange
believes that investors who buy LP units
have no expectation that they will be
able to vote and, therefore, the policy
that shareholders should be able to vote
on any stock issuances that are
materially dilutive of their voting power
is of less relevance to LPs than to
regular corporations. Furthermore,
because LP unit holders generally do
not have the right to elect directors,
most LPs do not hold annual meetings.
Therefore, it would not be possible for
an LP to arrange for shareholder
approval to be obtained in conjunction
with an annual meeting, as would be
possible for a regular company. Rather,
an LP would have to call a special
meeting every time it needed approval
of an issuance pursuant to the
shareholder approval rules.
The Exchange also believes that the
economic dilution concerns
underpinning the shareholder approval
rules are also less relevant in the case
of LPs. Listed LPs typically are required
under their partnership agreements to
distribute almost all of their earnings to
their unit holders and specify a
minimum quarterly distribution that the
LP is required to make. As such, LPs
will only invest in new assets if they
know that those assets will be
sufficiently accretive to earnings to pay
the minimum quarterly distribution
required for the additional units that are
sold to raise the capital to pay for those
assets. A failure to pay the minimum
quarterly distribution, or a reduction in
the actual distribution level historically
paid, would likely have a negative effect
on the trading price of a listed LP,
imposing a market discipline on
management to ensure that any
additional issuances will not be
economically dilutive.
PO 00000
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 7 of the Act
in general, and furthers the objectives of
Section 6(b)(5),8 in particular, in that it
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanisms of a free and
open market and a national market
system. The Exchange believes that the
proposed rule change will increase
competition among listing markets and
will remove a competitive disadvantage
the Exchange currently has vis a vis
Nasdaq and is therefore designed to
perfect the mechanism of a free and
open market.
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
Written comments were neither
solicited nor received.
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 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:
7 15
8 15
Frm 00105
Fmt 4703
Sfmt 4703
E:\FR\FM\02APN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
02APN1
Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices
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–2007–28 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSE–2007–28. 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–2007–28 and should
be submitted on or before April 23,
2007.
hsrobinson on PROD1PC76 with NOTICES
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–5964 Filed 3–30–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55537; File No. SR–NYSE–
2007–30]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Rule 123D (Openings and Halts in
Trading)
March 27, 2007.
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 March 19,
2007, the 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 substantially prepared by the
Exchange. The NYSE has filed this
proposal pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(5)
thereunder,4 which renders it effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NYSE proposes to amend NYSE
Rule 123D(3) to establish that any orders
received by the NYSE in a security
subject to a ‘‘Sub-penny Trading’’
condition will be routed to NYSE Arca,
Inc. (‘‘NYSE Arca’’) and handled in
accordance with the rules governing
that market. The text of the proposed
rule change is available at the
Exchange’s Office of the Secretary, on
the Exchange’s Web site at https://
www.nyse.com/
Frameset.html?displayPage=https://
apps.nyse.com/commdata/pub19b4.nsf/
rulefilings?openview, 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
Exchange 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 these
statements may be examined at the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(5).
2 17
9 17
CFR 200.30–3(a)(12).
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15749
places specified in Item IV below. The
Exchange 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
Recently, the Exchange amended
NYSE Rule 123D to add subsection (3),5
which provides for a non-regulatory
trading halt on the NYSE when
securities listed on the Exchange
approach the price at which quoting and
trading in sub-penny increments is
permitted pursuant to SEC Rules.6
Pursuant to NYSE Rule 123D(3),
whenever a security trading on the
Exchange is reported on the
consolidated tape during normal trading
hours as having traded at a price of
$1.05 or less, or if a security would open
on the Exchange at a price of $1.05 or
less, trading in the security on the
Exchange shall be immediately halted
due to a ‘‘Sub-penny Trading’’
condition. Once halted for such reason,
trading shall not resume on the
Exchange until the security has traded
on another automated trading center as
defined in Commission Rule 600(b)(4) 7
for at least one entire trading day at a
price or prices that are at all times at or
above $1.10. Any such resumption of
trading shall occur at the beginning of
a trading day, so that normal opening
procedures can apply. In contrast to
other trading halts described in NYSE
Rule 123D, a ‘‘Sub-penny Trading’’ halt
is automatic and does not require the
approval of any Floor Officials.
However, if a determination is made by
a Floor Official that a trade that
triggered a halt because of a ‘‘Sub-penny
Trading’’ condition was made in error or
otherwise was an anomaly, trading of
the security on the Exchange will
resume immediately.
The purpose of this filing is to amend
NYSE Rule 123D(3) to reflect that orders
entered with the Exchange in a security
subject to a ‘‘Sub-penny Trading’’
5 See Securities Exchange Act Release No. 55398
(March 5, 2007), 72 FR 11072 (March 12, 2007) (SR–
NYSE–2007–25).
6 See Regulation NMS Rule 612, 17 CFR 242.612,
which permits markets to accept bids, offers, orders
and indications of interest in increments smaller
than a $0.01, but not less than $0.0001, for stocks
priced below $1.00 per share and to quote and trade
such stocks in sub-pennies. Markets may choose not
to accept such bids, offers, orders or indications of
interest and the NYSE has done so, maintaining a
minimum trading and quoting variation of $0.01 for
all securities trading below $100,000. See NYSE
Rule 62.
7 See 17 CFR. 242.600(b)(4).
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02APN1
]]>Agencies
[Federal Register Volume 72, Number 62 (Monday, April 2, 2007)]
[Notices]
[Pages 15747-15749]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-5964]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55528; File No. SR-NYSE-2007-28]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Exempt Limited Partnerships
From Certain of Its Shareholder Approval Rules
March 26, 2007.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on March 9, 2007, New York Stock Exchange LLC (the ``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule changes as described in Items I, II,
and III below, which items have been substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule changes from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Listed Company Manual
(the ``Manual'') to exempt limited partnerships from the obligation to
obtain shareholder approval under the circumstances set forth in
Sections 312.03(b), (c), and (d) for the issuance of common stock and
securities convertible into or exchangeable for common stock.\4\
---------------------------------------------------------------------------
\4\ NYSE-listed limited partnerships would still be subject to
the Exchange's shareholder approval requirements for equity
compensation plans. See NYSE Listed Company Manual Sections 303A.08
and 312.03(a).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nyse.com, the Office of the Secretary, 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 Exchange 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 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
The Exchange proposes to exempt limited partnerships from the
obligation to obtain shareholder approval under the circumstances set
forth in Manual Sections 312.03(b), (c), and (d) for the issuance of
common stock and securities convertible into or exchangeable for common
stock.\5\
---------------------------------------------------------------------------
\5\ See supra note 4.
---------------------------------------------------------------------------
Subject to certain exceptions specified therein, Manual Sections
312.03(b), (c), and (d) require listed issuers to obtain shareholder
approval prior to the issuance of common stock or securities
convertible into or exchangeable for common stock in any transaction or
series of related transactions in the following situations:
Where the potential dilution exceeds either one percent
of the number of shares of common stock or one percent of the voting
power outstanding before the issuance to: (a) a director, officer or
substantial security holder of the company (each a ``Related
Party''); (b) a subsidiary, affiliate or other closely-related
person of a Related Party; or (c) any company or entity in which a
Related Party has a substantial direct or indirect interest.
If the Related Party involved in a transaction covered
by the preceding bullet is classified as such solely because such
person is a substantial security holder, and if the issuance relates
to a sale of stock for cash at a price at least as great as each of
the book and market value of the issuer's common stock, then
shareholder approval will not be required unless the number of
shares of common stock to be issued, or unless the number of shares
of common stock into which the securities may be convertible or
exercisable, exceeds either five percent of the number of shares of
common stock or five percent of the voting power outstanding before
the issuance.
If: (a) the common stock has, or will have upon
issuance, voting power equal to or in
[[Page 15748]]
excess of 20 percent of the voting power outstanding before the
issuance of such stock or of securities convertible into or
exercisable for common stock; or (b) the number of shares of common
stock to be issued is, or will be upon issuance, equal to or in
excess of 20 percent of the number of shares of common stock
outstanding before the issuance of the common stock or of securities
convertible into or exercisable for common stock.
If the issuance will result in a change of control of
the issuer.
The policy underlying these requirements is that shareholders
should have the right to vote on any issuance of common stock that is
materially dilutive of either their voting or economic interest in the
company. Nasdaq has similar shareholder approval requirements to those
of the NYSE. However, Nasdaq exempts limited partnerships (``LPs'')
from those requirements,\6\ which the Exchange believes has placed it
at a significant disadvantage in competing with Nasdaq for initial
public offerings and transfers of LPs. To be treated as a partnership
for federal tax purposes, an LP must ensure that 90% of its income is
derived from ``qualified sources,'' which generally refers only to
income derived from natural resource-related activities. Most listed
LPs are engaged in energy-related businesses. The typical business
model of LPs in the energy industry is to use their capital to acquire
assets (e.g., pipelines) that produce predictable revenue streams and
to commit in their partnership agreements to distribute most of their
profits to the LP's unit holders. These LPs acquire assets frequently
on an opportunistic basis and pay for them by issuing additional LP
units. The Exchange believes that the ability of an LP listed on Nasdaq
to issue additional LP units without the expense and uncertainty of
obtaining shareholder approval provides Nasdaq with a significant
advantage over the Exchange in attracting and retaining listings of
LPs.
---------------------------------------------------------------------------
\6\ See Nasdaq Marketplace Rule 4360 (``Qualitative Listing
Requirements for Nasdaq Issuers That Are Limited Partnerships''),
which does not include the shareholder approval requirements found
in Nasdaq Marketplace Rule 4350 (``Qualitative Listing Requirements
for Nasdaq Issuers That Are Not Limited Partnerships''). See also
Securities Exchange Act Release No. 30811 (June 15, 1992); 57 FR
28542 (June 25, 1992) (SR-NASD-91-58) (approving the NASD's adoption
of non-quantitative listing standards for partnerships, which did
not include shareholder approval requirements). See also Securities
Exchange Act Release No. 34533 (August 15, 1994); 59 FR 43147
(August 22, 1994) (SR-NASD-93-3) (approving the NASD's adoption of
the predecessor rule to Rule 4360, which also did not include
shareholder approval requirements for listed limited partnerships).
---------------------------------------------------------------------------
The Exchange believes that an analysis of the policies regarding
voting and economic dilution underpinning its shareholder approval
requirements demonstrates that it is appropriate to exempt LPs from
their application. Listed LPs generally provide very limited voting
rights to their unit holders. Typically, control of the LP resides with
the general partner (``GP'') and the LP's board is that of the GP. The
owner of the GP appoints the board and the common unit holders of the
LP have no voting rights with respect to the election of directors. LP
partnership agreements generally provide that LP unit holders can vote
only on a merger or dissolution of the LP or on any amendment to the
partnership agreement that is adverse to their interests. As such, the
Exchange believes that investors who buy LP units have no expectation
that they will be able to vote and, therefore, the policy that
shareholders should be able to vote on any stock issuances that are
materially dilutive of their voting power is of less relevance to LPs
than to regular corporations. Furthermore, because LP unit holders
generally do not have the right to elect directors, most LPs do not
hold annual meetings. Therefore, it would not be possible for an LP to
arrange for shareholder approval to be obtained in conjunction with an
annual meeting, as would be possible for a regular company. Rather, an
LP would have to call a special meeting every time it needed approval
of an issuance pursuant to the shareholder approval rules.
The Exchange also believes that the economic dilution concerns
underpinning the shareholder approval rules are also less relevant in
the case of LPs. Listed LPs typically are required under their
partnership agreements to distribute almost all of their earnings to
their unit holders and specify a minimum quarterly distribution that
the LP is required to make. As such, LPs will only invest in new assets
if they know that those assets will be sufficiently accretive to
earnings to pay the minimum quarterly distribution required for the
additional units that are sold to raise the capital to pay for those
assets. A failure to pay the minimum quarterly distribution, or a
reduction in the actual distribution level historically paid, would
likely have a negative effect on the trading price of a listed LP,
imposing a market discipline on management to ensure that any
additional issuances will not be economically dilutive.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \7\ of the
Act in general, and furthers the objectives of Section 6(b)(5),\8\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system. The Exchange believes that the
proposed rule change will increase competition among listing markets
and will remove a competitive disadvantage the Exchange currently has
vis a vis Nasdaq and is therefore designed to perfect the mechanism of
a free and open market.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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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
Written comments were neither solicited nor received.
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 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:
[[Page 15749]]
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-2007-28 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2007-28. 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-2007-28 and should be submitted on or before April
23, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-5964 Filed 3-30-07; 8:45 am]
BILLING CODE 8010-01-P
