Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Article FOURTH of its Restated Certificate of Incorporation, 61699-61701 [E7-21382]
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Federal Register / Vol. 72, No. 210 / Wednesday, October 31, 2007 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Nancy M. Morris,
Secretary.
[FR Doc. E7–21386 Filed 10–30–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56700; File No. SR–Phlx–
2007–78]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Article FOURTH of
its Restated Certificate of
Incorporation
October 24, 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 October
5, 2007, the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’ 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 substantially prepared by the
Exchange pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(3) thereunder.4 The Exchange
has designated this proposal as one
concerned solely with the
administration of the Exchange, which
renders the proposal 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
rwilkins on PROD1PC63 with NOTICES
Phlx proposes to amend its Restated
Certificate of Incorporation
(‘‘Certificate’’) by modifying the
definition of ‘‘Related Persons’’ in
Article FOURTH. The text of the
proposed rule change is available at the
Exchange, on the Exchange’s Web site at
http://www.phlx.com/exchange/
phlx_rule_fil.html, and at the
Commission’s Public Reference Room.
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(3).
1 15
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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
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
As discussed further below, the
Exchange represents that the purpose of
the proposed rule change is to amend
the definition of ‘‘Related Persons’’ as it
appears in Article FOURTH of the
Certificate to remove unnecessary
burdens on the flexibility of the
Exchange and its shareholders in
effecting certain types of lawful
fundamental transactions. The Exchange
believes that this should facilitate
appropriate deliberation, discussion,
and activities by the shareholders of the
Exchange in relation to fundamental
transactions and other appropriate
matters, without compromising the
policies underlying the concentration
limits on voting and ownership of
Common Stock of the Exchange
contained in Article FOURTH of the
Certificate.
Article FOURTH of the Certificate
imposes limitations on ownership and
voting by holders of Phlx’s Common
Stock.5 For purposes of applying these
limitations, the holdings of a Phlx
shareholder are combined with those of
the shareholder’s ‘‘Related Persons.’’
Clause (b)(iii)(B) of Article FOURTH
provides, in pertinent part, that:
* * * ‘‘Related Persons’’ shall mean (1)
with respect to any Person,6 all ‘‘affiliates’’
and ‘‘associates’’ of such Person (as such
5 The concentration limits in the Certificate limit
any person, either alone or together with its Related
Person, to (i) owning 40% of the outstanding
Common Stock of the Exchange (20% in the case
of Exchange members), and (ii) exercising voting
rights in respect of more than 20% of the Common
Stock. A waiver by the Board of Governors, subject
to Commission approval, is permitted in certain
cases. See Article FOURTH (b)(iii) and (v).
6 In Article FOURTH (a)(iv), ‘‘Person’’ is defined
as an individual, partnership (general or limited),
joint-stock company, corporation, limited liability
company, trust or unincorporated organization, and
a government or agency or political subdivision
thereof.
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Fmt 4703
Sfmt 4703
61699
terms are defined in Rule 12b–2 under the
Securities Exchange Act of 1934, as amended
(the ‘‘Exchange Act’’)), (2) with respect to any
natural person constituting a ‘‘member’’ (as
such term is defined in the Exchange Act) of
the Corporation, any broker or dealer with
which such member is associated and (3) any
two or more Persons that have any
agreement, arrangement or understanding
(whether or not in writing) to act together for
the purpose of acquiring, holding, voting or
disposing of shares of Common Stock.
(Footnote added).
The Exchange notes that ownership
and voting concentration limits are
intended to ensure that the Exchange’s
management is not beset with conflicts
of interest for the benefit of a small
number of individuals or entities such
that the Exchange cannot meet the
statutory standards for national
securities exchanges set forth in
Sections 6 7 and 19 8 of the Act.9 The
Exchange believes that the ‘‘Related
Persons’’ definition is intended to keep
members and other persons from
evading the numerical limits of holding
shares in multiple affiliates or by having
secret agreements with other
shareholders whereby their ‘‘true’’ level
of ownership, control, or voting power
indirectly exceeds the permitted
percentage limits.
Phlx is of the view that the policy
underlying these restrictions was not
intended to inhibit the Exchange or
shareholders from effecting certain
kinds of fundamental, and otherwise
lawful, transactions, such as effecting an
initial public offering or a merger or
from entering into agreements or
arrangements that are necessary or
directly related to the execution of such
transactions.10
7 15
U.S.C. 78f.
U.S.C. 78s.
9 See Securities Exchange Act Release No. 50699
(November 18, 2004), 69 FR 71126 (December 8,
2004) (proposed SRO governance rulemaking). The
organizational documents of other national
securities exchanges contain similar concentration
limits. See Securities Exchange Act Release Nos.
45803 (April 23, 2002), 67 FR 21306 (April 30,
2002) (SR–ISE–2002–01) (approving the
restructuring of International Securities Exchange,
Inc. from a limited liability company to a
corporation); and 49718 (May 17, 2004), 69 FR
29611 (May 24, 2004) (SR–PCX–2004–08)
(approving the demutualization of the former
Pacific Exchange, Inc.). See also Securities
Exchange Act Release Nos. 49067 (January 13,
2004), 64 FR 2761 (January 21, 2004) (SR–BSE–
2003–19) (approving the operating agreement of the
Boston Options Exchange); and 54399 (September
1, 2006), 71 FR 53728 (September 12, 2006) (SR–
ISE–2006–45) (granting accelerated approval of the
establishment of ISE Stock Exchange, LLC as a
facility of the International Securities Exchange,
Inc.).
10 Indeed, such fundamental transactions have
been consummated, and are currently
contemplated, by other national securities
exchanges. In these cases, charter provisions of
8 15
E:\FR\FM\31OCN1.SGM
Continued
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Federal Register / Vol. 72, No. 210 / Wednesday, October 31, 2007 / Notices
relating to an initial public offering,
merger agreements, asset purchase
agreements, lock-up and standstill
agreements, and voting agreements in
connection with an acquisition.
The Exchange believes that if these
types of agreements cannot be entered
into without causing existing
shareholders to be regarded as ‘‘Related
Persons’’ (and thereby causing the
aggregation of their shareholdings to
prohibited levels), then Phlx will be
severely hampered in its ability to
proceed to structure and negotiate an
otherwise lawful, fundamental
transaction of the type described above.
However, the proposal is intended to
narrowly define certain types of
transactions about which agreements,
arrangements, and understandings may
be concluded without causing the
shareholders that are party thereto to be
regarded as ‘‘Related Persons.’’ The Phlx
believes that the legitimate policy
concerns that are safeguarded by the
current voting and ownership
limitations in the Exchange’s Certificate
continue to be addressed, because
Article FOURTH would still treat as
‘‘Related Persons,’’ persons who are
parties to agreements that are formed for
any reason that is outside of the defined
list of exempted transactions and certain
related preparatory agreements (see
discussion below).11
a. Exempted Matters
The proposed amendment would
exclude from the scope of the ‘‘Related
Persons’’ definition any agreement,
arrangement, or understanding
pertaining to any of the following: A
merger, sale, acquisition, or other
corporate affiliation of or by the
Exchange or any subsidiary; the sale of
all or substantially all of the assets of
the Exchange; the issuance, offer, or sale
by the Exchange and/or one or more
shareholders (whether in one or more
public or private transactions) of
Common Stock of the Exchange.
The purpose of this language is to
provide that certain types of ordinary
and customary agreements and
arrangements in connection with
potential fundamental transactions,
such as those described above, do not
cause such shareholders to be ‘‘Related
Persons.’’ These would include, for
example, underwriting agreements
rwilkins on PROD1PC63 with NOTICES
Moreover, Phlx does not believe that
the concentration limits or the ‘‘Related
Persons’’ definition were intended to
have the effect of limiting discussions
among shareholders of any sort as they
relate to the business of the Exchange or
other matters of concern to the
shareholders. In order to structure a
fundamental transaction in a manner
that is mutually beneficial to all parties,
management and shareholders need the
freedom to discuss various aspects of
the transaction without the threat of
these initial discussions triggering subclause (3) of the ‘‘Related Person’’
definition, thereby potentially causing
the shareholders who are party to such
discussions to exceed their permitted
ownership and/or voting limits.
The proposed amendment is intended
to (i) provide that certain ordinary
agreements, arrangements or
understandings in connection with
potential fundamental transactions of
the type described above are expressly
permitted, and (ii) negate any inference
that discussions or other
communications among shareholders
affecting the interests of the
shareholders or the Exchange, as they
relate to such transactions or certain
other matters (that are not otherwise
exempted under the definition), would
cause shareholders to be regarded as
‘‘Related Persons.’’
b. Certain Preparatory Activities
such exchanges similar to those in Article FOURTH
of the Certificate were deleted or amended to
accommodate specific transactions, such as when
the Pacific Exchange was acquired by Archipelago
Holdings. See Securities Exchange Act Release
50170 (August 9, 2004), 69 FR 50419 (August 16,
2004) (SR–PCX–2004–56); see also International
Securities Exchange Holdings, Inc. Form 8–K, Item
5.02 (Accession Number 1193125–7–96585 (April
30, 2007)).
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The proposal will also exempt from
the ‘‘Related Persons’’ definition certain
agreements, arrangements, or
understandings that relate to
preparations for effecting fundamental
transactions, including the preparation,
filing with the Commission, or
dissemination of a registration, proxy, or
information statement in respect of any
of the matters or transactions described
in the Exempted Matters section above
and any proposal or plan to do any of
the foregoing, and any step that is
required for, or specifically and directly
related thereto.
11 Of course, if a fundamental transaction were to
proceed, the concentration limits and related
procedures set forth in Article FOURTH would
apply to any shareholder or prospective shareholder
of the Exchange, unless the Certificate is further
amended or the Exchange is not the surviving entity
in the case of a merger. In these latter cases, any
proposed amendment or any proposed new or
successor Certificate would need to be filed with
the Commission. See Sections 3(a)(27) (defining
‘‘rules of an exchange’’ to include the certificate of
incorporation or ‘‘instruments corresponding to the
foregoing’’) and 19(b) (specifying procedures
pertaining to filing and approval of self-regulatory
organizations’ rules and proposed rule changes) of
the Act, 15 U.S.C. 78c(a)(27) and 78s(b)(1). Thus,
the protections afforded by the concentration limits
would not be diluted in the case of a fundamental
transaction.
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The above language is intended to
cover activities relating to the
preparations, plans, and/or steps
required for, or specifically and directly
related to, the types of fundamental
transactions described above. This
clause expands the scope of activities
that are proposed to be permitted
without triggering the ‘‘Related Persons’’
definition. However, the proposal
clearly defines the scope of activities
that can be engaged in and cannot serve
as a subterfuge for members or affiliates
or other shareholders to join together to
use their ownership or voting rights to
attempt to manage the day-to-day
operations of the Exchange to their
benefit and disadvantage of others or to
deny access to the facilities of the
Exchange.
c. Discussions of Other Communications
This proposed amendment is also
intended to clarify that certain
communications among shareholders
affecting the interests of the
shareholders or the Exchange (other
than those relating to transactions or
activities that are otherwise exempted
under the proposal) will not be
presumed to constitute an ‘‘agreement,
arrangement, or understanding . . . to
act together for the purpose of acquiring,
holding, voting or disposing of shares of
Common Stock.’’ The Exchange believes
that Article FOURTH, as currently
drafted, could result in an inappropriate
chilling effect on legitimate discussions
or other communications that do not
implicate any of the Commission’s
concerns underlying the concentration
limits and the ‘‘Related Persons’’
definition, as discussed above.
The proposal provides that the
following shall not create a presumption
or inference that persons have an
agreement, arrangement, or
understanding for the purposes of
determining ‘‘Related Persons,’’ as
defined by Article FOURTH: (i)
Communications by or among any
persons (or their officers, agents or
representatives) for the purpose of
understanding, considering, or
communicating the advisability,
desirability, or feasibility of any matter
concerning the interests of the Exchange
or its shareholders, or (ii) the fact that
two or more persons (or their officers,
agents or representatives) may have
expressed or communicated common
views as to the advisability, desirability
or feasibility of any matter concerning
the interests of the Exchange or its
shareholders (including, in either such
case, by way of voting or otherwise
acting as Governors,12 members of
12 See
E:\FR\FM\31OCN1.SGM
Phlx By-Law Article I, Section 1–1(m).
31OCN1
Federal Register / Vol. 72, No. 210 / Wednesday, October 31, 2007 / Notices
standing or other committees or
shareholders).
By listing non-exclusive examples of
permitted discussions and other
communications, the Exchange hopes to
clarify that certain customary and
appropriate conversations and other
communications between and among
shareholders will not cause the
shareholders to be considered ‘‘Related
Persons’’ and result in the aggregation of
their shares or voting rights in a way
that would improperly restrict
legitimate communication among
shareholders.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 13 in general, and furthers the
objectives of Sections 6(b)(5) of the
Act 14 in particular, in that it is designed
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 by
modifying Phlx’s Certificate to remove
unnecessary burdens on the flexibility
of the Exchange and its shareholders in
effecting certain types of lawful
fundamental transactions. The Exchange
also believes that its proposal is
consistent with Section 6(b)(1) of the
Act 15 in that it should facilitate
appropriate deliberation, discussion,
and activities by the shareholders of the
Exchange in relation to fundamental
transactions and other appropriate
matters, without compromising the
policies underlying the concentration
limits on voting and ownership of
Common Stock of the Exchange
contained in Article FOURTH of the
Certificate.
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.
rwilkins on PROD1PC63 with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
15 15 U.S.C. 78f(b)(1).
14 15
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change is
concerned solely with the
administration of the Exchange, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act and Rule 19b–
4(f)(3) thereunder. At any time within
60 days of the filing of such proposed
rule change the Commission may
summarily abrogate such 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 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:
Electronic Comments
• Use the Commission’s Internet
comment form (http://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Phlx–2007–78 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–Phlx–2007–78. 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 (http://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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
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61701
Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. 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–Phlx–2007–78 and should
be submitted on or before November 21,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Nancy M. Morris,
Secretary.
[FR Doc. E7–21382 Filed 10–30–07; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration # 11079 and # 11080]
California Disaster # CA–00074
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
SUMMARY: This is a Notice of the
Presidential declaration of a major
disaster for the State of California
(FEMA–1731–DR), dated 10/24/2007.
Incident: Wildfires.
Incident Period: 10/21/2007 and
continuing.
Effective Date: 10/24/2007.
Physical Loan Application Deadline
Date: 12/24/2007.
Economic Injury (EIDL) Loan
Application Deadline Date: 07/24/2008.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
DATES:
Notice is
hereby given that as a result of the
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locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties (Physical Damage and
Economic Injury Loans):
SUPPLEMENTARY INFORMATION:
16 17
E:\FR\FM\31OCN1.SGM
CFR 200.30–3(a)(12).
31OCN1
]]>Agencies
[Federal Register Volume 72, Number 210 (Wednesday, October 31, 2007)]
[Notices]
[Pages 61699-61701]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21382]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56700; File No. SR-Phlx-2007-78]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend Article FOURTH of its Restated Certificate of Incorporation
October 24, 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 October 5, 2007, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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 substantially prepared by the
Exchange pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(3) thereunder.\4\ The Exchange has designated this proposal as
one concerned solely with the administration of the Exchange, which
renders the proposal effective upon filing with 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\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(3).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Phlx proposes to amend its Restated Certificate of Incorporation
(``Certificate'') by modifying the definition of ``Related Persons'' in
Article FOURTH. The text of the proposed rule change is available at
the Exchange, on the Exchange's Web site at http://www.phlx.com/
exchange/phlx_rule_fil.html, 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 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
As discussed further below, the Exchange represents that the
purpose of the proposed rule change is to amend the definition of
``Related Persons'' as it appears in Article FOURTH of the Certificate
to remove unnecessary burdens on the flexibility of the Exchange and
its shareholders in effecting certain types of lawful fundamental
transactions. The Exchange believes that this should facilitate
appropriate deliberation, discussion, and activities by the
shareholders of the Exchange in relation to fundamental transactions
and other appropriate matters, without compromising the policies
underlying the concentration limits on voting and ownership of Common
Stock of the Exchange contained in Article FOURTH of the Certificate.
Article FOURTH of the Certificate imposes limitations on ownership
and voting by holders of Phlx's Common Stock.\5\ For purposes of
applying these limitations, the holdings of a Phlx shareholder are
combined with those of the shareholder's ``Related Persons.'' Clause
(b)(iii)(B) of Article FOURTH provides, in pertinent part, that:
---------------------------------------------------------------------------
\5\ The concentration limits in the Certificate limit any
person, either alone or together with its Related Person, to (i)
owning 40% of the outstanding Common Stock of the Exchange (20% in
the case of Exchange members), and (ii) exercising voting rights in
respect of more than 20% of the Common Stock. A waiver by the Board
of Governors, subject to Commission approval, is permitted in
certain cases. See Article FOURTH (b)(iii) and (v).
* * * ``Related Persons'' shall mean (1) with respect to any
Person,\6\ all ``affiliates'' and ``associates'' of such Person (as
such terms are defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the ``Exchange Act'')), (2) with respect to
any natural person constituting a ``member'' (as such term is
defined in the Exchange Act) of the Corporation, any broker or
dealer with which such member is associated and (3) any two or more
Persons that have any agreement, arrangement or understanding
(whether or not in writing) to act together for the purpose of
acquiring, holding, voting or disposing of shares of Common Stock.
(Footnote added).
---------------------------------------------------------------------------
\6\ In Article FOURTH (a)(iv), ``Person'' is defined as an
individual, partnership (general or limited), joint-stock company,
corporation, limited liability company, trust or unincorporated
organization, and a government or agency or political subdivision
thereof.
The Exchange notes that ownership and voting concentration limits
are intended to ensure that the Exchange's management is not beset with
conflicts of interest for the benefit of a small number of individuals
or entities such that the Exchange cannot meet the statutory standards
for national securities exchanges set forth in Sections 6 \7\ and 19
\8\ of the Act.\9\ The Exchange believes that the ``Related Persons''
definition is intended to keep members and other persons from evading
the numerical limits of holding shares in multiple affiliates or by
having secret agreements with other shareholders whereby their ``true''
level of ownership, control, or voting power indirectly exceeds the
permitted percentage limits.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78s.
\9\ See Securities Exchange Act Release No. 50699 (November 18,
2004), 69 FR 71126 (December 8, 2004) (proposed SRO governance
rulemaking). The organizational documents of other national
securities exchanges contain similar concentration limits. See
Securities Exchange Act Release Nos. 45803 (April 23, 2002), 67 FR
21306 (April 30, 2002) (SR-ISE-2002-01) (approving the restructuring
of International Securities Exchange, Inc. from a limited liability
company to a corporation); and 49718 (May 17, 2004), 69 FR 29611
(May 24, 2004) (SR-PCX-2004-08) (approving the demutualization of
the former Pacific Exchange, Inc.). See also Securities Exchange Act
Release Nos. 49067 (January 13, 2004), 64 FR 2761 (January 21, 2004)
(SR-BSE-2003-19) (approving the operating agreement of the Boston
Options Exchange); and 54399 (September 1, 2006), 71 FR 53728
(September 12, 2006) (SR-ISE-2006-45) (granting accelerated approval
of the establishment of ISE Stock Exchange, LLC as a facility of the
International Securities Exchange, Inc.).
---------------------------------------------------------------------------
Phlx is of the view that the policy underlying these restrictions
was not intended to inhibit the Exchange or shareholders from effecting
certain kinds of fundamental, and otherwise lawful, transactions, such
as effecting an initial public offering or a merger or from entering
into agreements or arrangements that are necessary or directly related
to the execution of such transactions.\10\
---------------------------------------------------------------------------
\10\ Indeed, such fundamental transactions have been
consummated, and are currently contemplated, by other national
securities exchanges. In these cases, charter provisions of such
exchanges similar to those in Article FOURTH of the Certificate were
deleted or amended to accommodate specific transactions, such as
when the Pacific Exchange was acquired by Archipelago Holdings. See
Securities Exchange Act Release 50170 (August 9, 2004), 69 FR 50419
(August 16, 2004) (SR-PCX-2004-56); see also International
Securities Exchange Holdings, Inc. Form 8-K, Item 5.02 (Accession
Number 1193125-7-96585 (April 30, 2007)).
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[[Page 61700]]
Moreover, Phlx does not believe that the concentration limits or
the ``Related Persons'' definition were intended to have the effect of
limiting discussions among shareholders of any sort as they relate to
the business of the Exchange or other matters of concern to the
shareholders. In order to structure a fundamental transaction in a
manner that is mutually beneficial to all parties, management and
shareholders need the freedom to discuss various aspects of the
transaction without the threat of these initial discussions triggering
sub-clause (3) of the ``Related Person'' definition, thereby
potentially causing the shareholders who are party to such discussions
to exceed their permitted ownership and/or voting limits.
The proposed amendment is intended to (i) provide that certain
ordinary agreements, arrangements or understandings in connection with
potential fundamental transactions of the type described above are
expressly permitted, and (ii) negate any inference that discussions or
other communications among shareholders affecting the interests of the
shareholders or the Exchange, as they relate to such transactions or
certain other matters (that are not otherwise exempted under the
definition), would cause shareholders to be regarded as ``Related
Persons.''
a. Exempted Matters
The proposed amendment would exclude from the scope of the
``Related Persons'' definition any agreement, arrangement, or
understanding pertaining to any of the following: A merger, sale,
acquisition, or other corporate affiliation of or by the Exchange or
any subsidiary; the sale of all or substantially all of the assets of
the Exchange; the issuance, offer, or sale by the Exchange and/or one
or more shareholders (whether in one or more public or private
transactions) of Common Stock of the Exchange.
The purpose of this language is to provide that certain types of
ordinary and customary agreements and arrangements in connection with
potential fundamental transactions, such as those described above, do
not cause such shareholders to be ``Related Persons.'' These would
include, for example, underwriting agreements relating to an initial
public offering, merger agreements, asset purchase agreements, lock-up
and standstill agreements, and voting agreements in connection with an
acquisition.
The Exchange believes that if these types of agreements cannot be
entered into without causing existing shareholders to be regarded as
``Related Persons'' (and thereby causing the aggregation of their
shareholdings to prohibited levels), then Phlx will be severely
hampered in its ability to proceed to structure and negotiate an
otherwise lawful, fundamental transaction of the type described above.
However, the proposal is intended to narrowly define certain types of
transactions about which agreements, arrangements, and understandings
may be concluded without causing the shareholders that are party
thereto to be regarded as ``Related Persons.'' The Phlx believes that
the legitimate policy concerns that are safeguarded by the current
voting and ownership limitations in the Exchange's Certificate continue
to be addressed, because Article FOURTH would still treat as ``Related
Persons,'' persons who are parties to agreements that are formed for
any reason that is outside of the defined list of exempted transactions
and certain related preparatory agreements (see discussion below).\11\
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\11\ Of course, if a fundamental transaction were to proceed,
the concentration limits and related procedures set forth in Article
FOURTH would apply to any shareholder or prospective shareholder of
the Exchange, unless the Certificate is further amended or the
Exchange is not the surviving entity in the case of a merger. In
these latter cases, any proposed amendment or any proposed new or
successor Certificate would need to be filed with the Commission.
See Sections 3(a)(27) (defining ``rules of an exchange'' to include
the certificate of incorporation or ``instruments corresponding to
the foregoing'') and 19(b) (specifying procedures pertaining to
filing and approval of self-regulatory organizations' rules and
proposed rule changes) of the Act, 15 U.S.C. 78c(a)(27) and
78s(b)(1). Thus, the protections afforded by the concentration
limits would not be diluted in the case of a fundamental
transaction.
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b. Certain Preparatory Activities
The proposal will also exempt from the ``Related Persons''
definition certain agreements, arrangements, or understandings that
relate to preparations for effecting fundamental transactions,
including the preparation, filing with the Commission, or dissemination
of a registration, proxy, or information statement in respect of any of
the matters or transactions described in the Exempted Matters section
above and any proposal or plan to do any of the foregoing, and any step
that is required for, or specifically and directly related thereto.
The above language is intended to cover activities relating to the
preparations, plans, and/or steps required for, or specifically and
directly related to, the types of fundamental transactions described
above. This clause expands the scope of activities that are proposed to
be permitted without triggering the ``Related Persons'' definition.
However, the proposal clearly defines the scope of activities that can
be engaged in and cannot serve as a subterfuge for members or
affiliates or other shareholders to join together to use their
ownership or voting rights to attempt to manage the day-to-day
operations of the Exchange to their benefit and disadvantage of others
or to deny access to the facilities of the Exchange.
c. Discussions of Other Communications
This proposed amendment is also intended to clarify that certain
communications among shareholders affecting the interests of the
shareholders or the Exchange (other than those relating to transactions
or activities that are otherwise exempted under the proposal) will not
be presumed to constitute an ``agreement, arrangement, or understanding
. . . to act together for the purpose of acquiring, holding, voting or
disposing of shares of Common Stock.'' The Exchange believes that
Article FOURTH, as currently drafted, could result in an inappropriate
chilling effect on legitimate discussions or other communications that
do not implicate any of the Commission's concerns underlying the
concentration limits and the ``Related Persons'' definition, as
discussed above.
The proposal provides that the following shall not create a
presumption or inference that persons have an agreement, arrangement,
or understanding for the purposes of determining ``Related Persons,''
as defined by Article FOURTH: (i) Communications by or among any
persons (or their officers, agents or representatives) for the purpose
of understanding, considering, or communicating the advisability,
desirability, or feasibility of any matter concerning the interests of
the Exchange or its shareholders, or (ii) the fact that two or more
persons (or their officers, agents or representatives) may have
expressed or communicated common views as to the advisability,
desirability or feasibility of any matter concerning the interests of
the Exchange or its shareholders (including, in either such case, by
way of voting or otherwise acting as Governors,\12\ members of
[[Page 61701]]
standing or other committees or shareholders).
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\12\ See Phlx By-Law Article I, Section 1-1(m).
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By listing non-exclusive examples of permitted discussions and
other communications, the Exchange hopes to clarify that certain
customary and appropriate conversations and other communications
between and among shareholders will not cause the shareholders to be
considered ``Related Persons'' and result in the aggregation of their
shares or voting rights in a way that would improperly restrict
legitimate communication among shareholders.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \13\ in general, and furthers the objectives of
Sections 6(b)(5) of the Act \14\ in particular, in that it is designed
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 by modifying Phlx's Certificate to remove unnecessary
burdens on the flexibility of the Exchange and its shareholders in
effecting certain types of lawful fundamental transactions. The
Exchange also believes that its proposal is consistent with Section
6(b)(1) of the Act \15\ in that it should facilitate appropriate
deliberation, discussion, and activities by the shareholders of the
Exchange in relation to fundamental transactions and other appropriate
matters, without compromising the policies underlying the concentration
limits on voting and ownership of Common Stock of the Exchange
contained in Article FOURTH of the Certificate.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(b)(1).
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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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change is concerned solely with the
administration of the Exchange, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act and Rule 19b-4(f)(3) thereunder. At
any time within 60 days of the filing of such proposed rule change the
Commission may summarily abrogate such 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 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:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Phlx-2007-78 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-Phlx-2007-78. 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 (http://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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. 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-Phlx-2007-78 and should be
submitted on or before November 21, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-21382 Filed 10-30-07; 8:45 am]
BILLING CODE 8011-01-P
