Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adjust the Earnings of Companies for Purposes of its Earnings Standard by Reversing the Income Statement Effects of Changes in Fair Value of Financial Instruments Extinguished at the Time of Listing on a Six Month Pilot Basis, 49033-49034 [E7-16837]
Download as PDF
Federal Register / Vol. 72, No. 165 / Monday, August 27, 2007 / Notices
authority. Nasdaq also proposes to add
new language highlighting Nasdaq
staff’s willingness to discuss remedial
measures with issuers. The Commission
believes that this proposal is reasonably
designed to enhance the transparency
and integrity of the Nasdaq’s initial or
continued listing denial process.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,6 that the
proposed rule change (SR–NASDAQ–
2007–024), as modified by Amendment
No. 1, be, and it hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.7
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–16879 Filed 8–24–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56290; File No. SR–NYSE–
2007–75]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adjust the
Earnings of Companies for Purposes
of its Earnings Standard by Reversing
the Income Statement Effects of
Changes in Fair Value of Financial
Instruments Extinguished at the Time
of Listing on a Six Month Pilot Basis
August 20, 2007.
rmajette on PROD1PC64 with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’),2 and Rule 19b–4
thereunder,3 notice is hereby given that
on August 13, 2007, New York Stock
Exchange LLC (the ‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission the proposed
rule changes as described in Items I and
II below, which items have been
prepared by the Exchange. NYSE has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4,4 which renders the proposal
effective upon receipt of this filing by
the Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
6 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 17 CFR 240.19b–4(f)(6).
7 17
VerDate Aug<31>2005
15:56 Aug 24, 2007
Jkt 211001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
earnings standard of Section 102.01C(I)
of the Exchange’s Listed Company
Manual (the ‘‘Manual’’) on a six-month
pilot program basis. The amendment
will enable the Exchange to adjust the
earnings of companies by reversing the
income statement effects for all periods
of any changes in fair value of financial
instruments classified as a liability
recorded by the company in earnings,
provided such financial instrument is
either being redeemed with the
proceeds of an offering occurring in
conjunction with the listing or
converted into or exercised for common
stock of the company at the time of
listing.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.nyse.com), at the
Exchange’s Office of the Secretary, 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 amend the
earnings standard of Section 102.01C(I)
of the Manual on a six-month pilot
program basis (the ‘‘Pilot Program’’).
The amendment will enable the
Exchange to adjust the earnings of
companies listing in conjunction with
an IPO by reversing the income
statement effects for all periods of
changes in fair value of financial
instruments classified as a liability
recorded by the company in earnings,
provided such financial instrument is
either being redeemed with the
proceeds of an offering occurring in
conjunction with the listing or
converted into or exercised for common
PO 00000
Frm 00052
Fmt 4703
Sfmt 4703
49033
stock of the company at the time of
listing.
Nonpublic companies engaging in
pre-IPO financings often raise capital
through the sale of preferred stock and
warrants to purchase preferred stock.
Preferred stock and preferred stock
warrants are also sometimes issued by
pre-IPO companies to service providers
in lieu of cash compensation. Typically,
at the time of the company’s IPO, the
preferred stock is converted into
common stock and the preferred stock
warrants are automatically exercised
and the underlying preferred stock is
converted into common stock of the
company. In some cases, companies
may also redeem some or all of the
outstanding preferred stock with a
portion of the proceeds from the IPO.
Some pre-IPO companies have
determined that they must record in
earnings changes in the fair value of
certain financial instruments classified
as liabilities. As the fair value of a preIPO company’s equity often increases as
the company gets closer to its IPO, many
companies have had to record
significant reductions in earnings
associated with increases in the fair
value of the preferred stock warrant
liability. In certain cases, the impact on
the company’s earnings as reported
under generally accepted accounting
principles (‘‘GAAP’’) of the preferred
stock liability causes otherwise
qualified companies to fail to qualify
under the Exchange’s earnings standard.
Under the Exchange’s current rules, the
Exchange cannot list these companies
even though the preferred stock warrant
liability will be extinguished at the time
of the IPO by conversion into common
stock or redemption out of the proceeds
of the IPO.
The Exchange believes that it is
appropriate to exclude the effects of
changes in fair value of a financial
instrument classified as a liability from
a company’s earnings where the
financial instrument is being retired at
the time of a company’s listing either
out of the proceeds of a concurrent
offering or by conversion into common
stock at the time of listing. The
Exchange believes that adjusting
company earnings for charges arising
out of the changes in fair value of
financial instruments that are retired
with the proceeds of an offering
occurring in conjunction with the listing
or converted into common stock at the
time of listing is consistent with the
adjustments that are currently permitted
under Section 102.01C for a number of
other nonrecurring charges to earnings
that are included in net income as
recorded under GAAP, such as the
exclusion of impairment charges on
E:\FR\FM\27AUN1.SGM
27AUN1
49034
Federal Register / Vol. 72, No. 165 / Monday, August 27, 2007 / Notices
long-lived assets, the exclusion of gains
and losses on sales of a subsidiary’s or
investee’s stock and the exclusion of inprocess purchased research and
development charges. The Exchange
also believes that this adjustment is
reasonable given the purpose of the
earnings standard, which is to
determine the suitability for listing of
companies on a forward-looking basis.
2. Statutory Basis
The basis under the Exchange Act for
this proposed rule change is the
requirement under Section 6(b)(5) 5 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.
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 Exchange 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
Because the proposed rule change: (i)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not become operative for 30
days after the date of the filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest, the proposed rule change has
become effective pursuant to Section
19(b)(3)(A) of the Exchange Act 6 and
Rule 19b–4(f)(6) thereunder.7
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Exchange Act 8 normally does not
become operative for 30 days after the
date of its filing. However, Rule 19b–
4(f)(6)(iii) 9 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission hereby grants
the request.10 The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest
because the proposed rule change is
consistent with other adjustments the
Exchange makes when evaluating
applicants on a forward-looking, postIPO basis under the existing earnings
standard in Section 102.01C(I) of the
Listed Company Manual, and the
proposal will take effect as a Pilot
Program, allowing the Commission to
evaluate the suitability of the proposal
during the pilot period.11
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Exchange 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 Exchange
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 e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2007–75 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
8 17
rmajette on PROD1PC64 with NOTICES
5 15
U.S.C. 78f(b)(5).
6 15 U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f)(6). Pursuant to Rule 19b–
4(f)(6)(iii) under the Exchange Act, the Exchange is
required to give the Commission written notice of
its intent to file the proposed rule change, along
with a brief description and text of the proposed
rule change, at least five business days prior to the
date of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied the five-day pre-filing
requirement.
VerDate Aug<31>2005
15:56 Aug 24, 2007
Jkt 211001
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
10 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
11 Not later than 60 days prior to the expiration
of the Pilot Program, the NYSE should provide the
Commission with information regarding the nature
of the adjustments that have been made to the
financial statements of individual companies that
have listed on the Exchange using the proposed rule
change.
9 17
PO 00000
Frm 00053
Fmt 4703
Sfmt 4703
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSE–2007–75. 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of such filing will also 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–
2007–75 and should be submitted on or
before September 17, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–16837 Filed 8–24–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56288; File No. SR–OCC–
2007–06]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Granting Approval of a Proposed Rule
Change Relating to Credit Default
Basket Options
August 20, 2007.
I. Introduction
On April 20, 2007, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) a
12 17
E:\FR\FM\27AUN1.SGM
CFR 200.30–3(a)(12).
27AUN1
Agencies
[Federal Register Volume 72, Number 165 (Monday, August 27, 2007)]
[Notices]
[Pages 49033-49034]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-16837]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56290; File No. SR-NYSE-2007-75]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adjust the Earnings of Companies for Purposes of its Earnings Standard
by Reversing the Income Statement Effects of Changes in Fair Value of
Financial Instruments Extinguished at the Time of Listing on a Six
Month Pilot Basis
August 20, 2007.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Exchange Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is
hereby given that on August 13, 2007, New York Stock Exchange LLC (the
``NYSE'' or the ``Exchange'') filed with the Securities and Exchange
Commission the proposed rule changes as described in Items I and II
below, which items have been prepared by the Exchange. NYSE has
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4,\4\
which renders the proposal effective upon receipt of this filing by the
Commission. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the earnings standard of Section
102.01C(I) of the Exchange's Listed Company Manual (the ``Manual'') on
a six-month pilot program basis. The amendment will enable the Exchange
to adjust the earnings of companies by reversing the income statement
effects for all periods of any changes in fair value of financial
instruments classified as a liability recorded by the company in
earnings, provided such financial instrument is either being redeemed
with the proceeds of an offering occurring in conjunction with the
listing or converted into or exercised for common stock of the company
at the time of listing.
The text of the proposed rule change is available on the Exchange's
Web site (https://www.nyse.com), at the Exchange's Office of the
Secretary, 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 amend the earnings standard of Section
102.01C(I) of the Manual on a six-month pilot program basis (the
``Pilot Program''). The amendment will enable the Exchange to adjust
the earnings of companies listing in conjunction with an IPO by
reversing the income statement effects for all periods of changes in
fair value of financial instruments classified as a liability recorded
by the company in earnings, provided such financial instrument is
either being redeemed with the proceeds of an offering occurring in
conjunction with the listing or converted into or exercised for common
stock of the company at the time of listing.
Nonpublic companies engaging in pre-IPO financings often raise
capital through the sale of preferred stock and warrants to purchase
preferred stock. Preferred stock and preferred stock warrants are also
sometimes issued by pre-IPO companies to service providers in lieu of
cash compensation. Typically, at the time of the company's IPO, the
preferred stock is converted into common stock and the preferred stock
warrants are automatically exercised and the underlying preferred stock
is converted into common stock of the company. In some cases, companies
may also redeem some or all of the outstanding preferred stock with a
portion of the proceeds from the IPO.
Some pre-IPO companies have determined that they must record in
earnings changes in the fair value of certain financial instruments
classified as liabilities. As the fair value of a pre-IPO company's
equity often increases as the company gets closer to its IPO, many
companies have had to record significant reductions in earnings
associated with increases in the fair value of the preferred stock
warrant liability. In certain cases, the impact on the company's
earnings as reported under generally accepted accounting principles
(``GAAP'') of the preferred stock liability causes otherwise qualified
companies to fail to qualify under the Exchange's earnings standard.
Under the Exchange's current rules, the Exchange cannot list these
companies even though the preferred stock warrant liability will be
extinguished at the time of the IPO by conversion into common stock or
redemption out of the proceeds of the IPO.
The Exchange believes that it is appropriate to exclude the effects
of changes in fair value of a financial instrument classified as a
liability from a company's earnings where the financial instrument is
being retired at the time of a company's listing either out of the
proceeds of a concurrent offering or by conversion into common stock at
the time of listing. The Exchange believes that adjusting company
earnings for charges arising out of the changes in fair value of
financial instruments that are retired with the proceeds of an offering
occurring in conjunction with the listing or converted into common
stock at the time of listing is consistent with the adjustments that
are currently permitted under Section 102.01C for a number of other
nonrecurring charges to earnings that are included in net income as
recorded under GAAP, such as the exclusion of impairment charges on
[[Page 49034]]
long-lived assets, the exclusion of gains and losses on sales of a
subsidiary's or investee's stock and the exclusion of in-process
purchased research and development charges. The Exchange also believes
that this adjustment is reasonable given the purpose of the earnings
standard, which is to determine the suitability for listing of
companies on a forward-looking basis.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5) \5\ 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.
---------------------------------------------------------------------------
\5\ 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 Exchange 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
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days after the date of the filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Exchange Act
\6\ and Rule 19b-4(f)(6) thereunder.\7\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Exchange Act, the Exchange is required to give the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied the five-day pre-filing
requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Exchange Act \8\ normally does not become operative for 30 days after
the date of its filing. However, Rule 19b-4(f)(6)(iii) \9\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay. The
Commission hereby grants the request.\10\ The Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest because the proposed rule change is
consistent with other adjustments the Exchange makes when evaluating
applicants on a forward-looking, post-IPO basis under the existing
earnings standard in Section 102.01C(I) of the Listed Company Manual,
and the proposal will take effect as a Pilot Program, allowing the
Commission to evaluate the suitability of the proposal during the pilot
period.\11\
---------------------------------------------------------------------------
\8\ 17 CFR 240.19b-4(f)(6).
\9\ 17 CFR 240.19b-4(f)(6)(iii).
\10\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\11\ Not later than 60 days prior to the expiration of the Pilot
Program, the NYSE should provide the Commission with information
regarding the nature of the adjustments that have been made to the
financial statements of individual companies that have listed on the
Exchange using the proposed rule change.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Exchange 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 Exchange 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 e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSE-2007-75 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-2007-75. 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, on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing will
also 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-2007-75 and should be submitted on or before September 17, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-16837 Filed 8-24-07; 8:45 am]
BILLING CODE 8010-01-P