Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and 3 Thereto, Relating to Annual Shareholder Meeting Requirements, 7614-7616 [E8-2347]
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7614
Federal Register / Vol. 73, No. 27 / Friday, February 8, 2008 / Notices
Office of Personnel Management.
Howard Weizmann,
Deputy Director.
[FR Doc. E8–2315 Filed 2–7–08; 8:45 am]
BILLING CODE 6325–38–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request; Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
pwalker on PROD1PC71 with NOTICES
New Information Collection:
Study on the Impact of Companies’
Compliance with the Requirements
Implementing section 404 of the
Sarbanes-Oxley Act of 2002; OMB
Control No. 3235–xxxx; SEC File No.
270–575.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this collection of
information to the Office of
Management and Budget for approval.
The Commission staff plans to
undertake a study that will involve
collecting and analyzing empirical data
regarding the impact on public
companies of compliance with the
requirements implementing section 404
of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7262). The study will consider
whether recent actions by the
Commission and the Public Company
Accounting Oversight Board are having
their intended effect of increasing
efficiency and lowering compliance
costs. Participation in the study will be
voluntary. Participants in the study are
expected to include companies subject
to the reporting requirements under
section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m(a)
or 15 U.S.C. 78o(d)), as well as financial
analysts, auditors, investors and other
interested parties.
We plan to invite up to 10,000
respondents to participate in the study.
If all of these respondents participate in
the study at an average estimated 1 hour
per response, the total annual burden
will be 10,000 hours. In addition, we
also plan to conduct a follow-up survey
and in-depth interviews with up to 500
respondents, at an estimated two hours
per response, for a total annual burden
of approximately 1,000 hours.
Therefore, the total aggregate burden
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17:11 Feb 07, 2008
Jkt 214001
associated with the study is an
estimated 11,000 hours.
Written comments are invited on: (a)
Whether this proposed collection of
information is necessary for the
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comment to
R. Corey Booth, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Shirley
Martinson, 6432 General Green Way,
Alexandria, Virginia 22312; or send an
e-mail to: PRA_Mailbox@sec.gov.
February 5, 2008.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2345 Filed 2–7–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57268; File No. SR–Amex–
2006–31]
Self-Regulatory Organizations;
American Stock Exchange LLC; Order
Approving Proposed Rule Change, as
Modified by Amendment Nos. 1, 2, and
3 Thereto, Relating to Annual
Shareholder Meeting Requirements
February 4, 2008.
I. Introduction
On April 7, 2006, the American Stock
Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend Section 704 (Annual
Meetings) of the Amex Company
Guide.3 On December 13, 2007, the
Exchange filed Amendment No. 1 to the
proposed rule change. On December 20,
2007, the Exchange filed Amendment
No. 2 to the proposed rule change. The
proposed rule change, as amended by
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Section 704 of the Amex Company Guide.
2 17
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
Amendment Nos. 1 and 2 thereto, was
published for comment in the Federal
Register on December 28, 2007.4 On
January 4, 2008, the Exchange filed
Amendment No. 3 to the proposed rule
change.5 The Commission received no
comments regarding the proposal. This
order approves the proposed rule
change, as modified by Amendment
Nos. 1, 2 and 3 thereto.
II. Description of the Proposal
Amex seeks to amend its annual
shareholder meeting requirement
applicable to its listed issuers.
Currently, Section 704 of the Amex
Company Guide requires all listed
companies to hold an annual meeting of
their shareholders in accordance with
such listed company’s charter, by-laws,
and applicable state or other laws. An
annual meeting allows the equity
owners of a company the opportunity to
elect directors and meet with
management to discuss company affairs.
The Exchange believes, however, that
this requirement is not necessary for
certain issuers of specific types of
securities because the holders of such
securities do not directly participate as
equity holders and vote in the election
of directors. In addition, Amex seeks to
clarify when an issuer should hold its
annual meeting and remove the notice
requirement for delayed annual
meetings.
First, Amex proposes to amend
Section 704 of its Company Guide to
explicitly state that an issuer generally
must hold an annual meeting within
one year of the end of its fiscal year if
it is subject to the annual shareholder
meeting requirement. In addition, a new
listing that was not previously subject to
the requirement to hold an annual
meeting would be required to hold its
first annual shareholder meeting within
one year of its fiscal year end following
the date of listing. Amex proposes two
exceptions to these general
requirements: (1) An issuer is not
required to hold an annual meeting if its
fiscal year is less than twelve months
long as a result of a change in its fiscal
year end; and (2) an issuer does not
have to hold an annual meeting in the
same year in which it completes its
initial public offering.
Amex also proposes to list a variety of
securities, the issuers of which should
not be subject to the foregoing general
4 See Securities Exchange Act Release No. 57016
(December 20, 2007), 72 FR 73911.
5 In Amendment No. 3, Amex made several minor
typographical corrections to the proposed rule text
of Exhibit 5 to accurately reflect the names of
certain securities. Because Amendment No. 3 is
technical in nature, it is not subject to notice and
comment.
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Federal Register / Vol. 73, No. 27 / Friday, February 8, 2008 / Notices
pwalker on PROD1PC71 with NOTICES
annual shareholder meeting
requirement. For example, Amex
proposes to exempt from the
requirement issuers of a number of
securities listed pursuant to Section 107
(Other Securities) of the Company
Guide and certain other securities
issued by various passive business
organizations.6 The Exchange states that
these types of securities are typically
not an issuer’s primary equity security,
and their holders have only limited
economic interests or other rights,
which do not include voting rights.
Although many of these products are
issued by operating companies with
listed equity securities and are thus
subject to an annual meeting
requirement pursuant to the primary
market’s rules, the Exchange stated in
its filing that the Company Guide
should specifically exempt from such
requirement those operating companies
which do not issue common stock or
voting preferred stock.7
Similarly, Amex proposes to exempt
from the general annual meeting
requirement portfolio depository
receipts and index fund shares, which
are securities issued by unit investment
trusts (‘‘UITs’’) and open-end
management investment companies,
respectively (collectively, ‘‘ETFs’’), and
typically organized as business trusts.
ETFs, which are generally passive
investment vehicles that seek to match
the performance of an index, must
obtain an exemptive order from the
Commission before they offer securities.
As a result, their operations are
circumscribed by numerous
representations and conditions
contained in the applicable orders, and
they do not typically experience the
need for operational or other changes
requiring a shareholder vote, and, by
6 The various types of securities which the
Exchange believes should not be subject to the
annual shareholder meeting requirement include:
bonds and debentures; currency and index
warrants; trust preferred securities; contingent
value rights; equity-linked term notes; index-linked
exchangeable notes; index-linked securities;
commodity-linked securities; currency-linked
securities; trust certificate securities; investment
trusts based on securities of individual issuers,
stock indexes, or debt instruments; equity
derivatives; trust issued receipts; commodity-based
trust shares; currency trust shares; certain
partnership interests; and paired trust shares. Amex
believes that the foregoing securities should be
exempt because they do not entitle their respective
holders to voting rights.
7 The Commission notes that issuers of
convertible bonds and/or debentures listed
pursuant to Section 104 of the Amex Company
Guide are not exempt from the annual shareholder
meeting requirement because such issuers must
hold annual shareholder meetings with respect to
the underlying common stock. See infra note 15 and
accompanying text.
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17:11 Feb 07, 2008
Jkt 214001
extension, a shareholder meeting.8 In
addition, UITs do not have boards of
directors, which the UITs’ unitholders
would need to elect.9 Accordingly, the
Exchange submits that Section 704 of
the Amex Company Guide should
specifically exclude ETFs from the
annual shareholder meeting
requirement.
Amex further proposes to exempt
from the annual meeting requirement
issuers of a variety of trust issued
receipts (‘‘TIRs’’) 10 based on securities,
commodities, and currencies.
Traditional TIRs (i.e., HOLDRs) are
securities issued by a trust that holds,
but does not manage, specific securities
on behalf of investors in the trust. Other
types of TIRs also include CommodityBased Trust Shares 11 and Currency
Trust Shares.12 The Exchange states that
these trusts typically do not hold
shareholder (or unitholder) meetings
because the trusts have no board of
directors and essentially serve as
conduits for the investors’ indirect
investments in the underlying
securities, commodities, and/or
currencies of the trusts. Similarly, the
Exchange lists Partnership Units, which
are securities issued by a partnership
that invests in a combination of futures
contracts, options on futures contracts,
forward contracts, commodities, and/or
securities.13 A holder of a Partnership
Unit does not have the right of equity
ownership of the partnership, but
instead, obtains a beneficial interest in
the partnership. Because the partnership
is a conduit for the investment in the
underlying assets, the operation and
management of the partnership is
performed by a general partner without
holding annual meetings. Lastly, Paired
Trust Shares (also known as MACROS)
are securities designed to track either
the positive or negative performance of
a benchmark underlying asset.14 The
shares are issued by a trust in pairs,
8 The Exchange states that ETFs are registered
under, and remain subject to, the Investment
Company Act of 1940, which already imposes
various shareholder-voting requirements that may
be applicable to the ETFs.
9 The Exchange states that UITs are typically
operated or administered by a corporate trustee, and
the portfolio of a UIT, which generally consists of
a fixed pool of securities, is not actively managed.
10 A trust issued receipt is defined in Amex Rule
1200(b) as a security: (1) That is issued by a trust
which holds specified securities deposited with the
trust; (2) that, when aggregated in some specified
minimum number, may be surrendered to the trust
by the beneficial owner to receive the securities;
and (3) that pays beneficial owners dividends and
other distributions on the deposited securities, if
any are declared and paid to the trustee by an issuer
of the deposited securities.
11 See Amex Rule 1200A.
12 See Amex Rule 1200B.
13 See Amex Rule 1500.
14 See Amex Rule 1400.
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Fmt 4703
Sfmt 4703
7615
with the trust not holding the
underlying asset, but instead holding
only short-term U.S. Treasuries and
cash equivalents. As the market price of
the underlying asset fluctuates, U.S.
Treasuries and cash are moved between
the trusts. As indicated above in
connection with TIRs, issuers of Paired
Trust Shares typically do not hold
shareholder (or unitholder) meetings
because the trusts have no board of
directors and essentially serve as
conduits for the investors’ indirect
investments in the performance of the
underlying benchmark asset. As a result,
Amex believes that Section 704 of the
Amex Company Guide should
specifically exempt the issuers of TIRs,
Commodity-Based Trust Shares,
Currency Trust Share Shares,
Partnership Units, and Paired Trust
Shares from the annual shareholder
meeting requirement.
For these reasons, Amex states that it
has not generally required issuers of
these securities to hold annual
shareholder meetings in the past,
consistent with their respective
governance and organizational
documents. However, in order to
provide greater certainty and
transparency for listed issuers, Amex
believes it is appropriate to revise
Section 704 of the Company Guide to
clarify that only issuers of voting and
non-voting common stock and voting
preferred stock, and their equivalents
(e.g., callable common stock) are
required to hold an annual shareholder
meeting. With respect to the proposed
list of securities, the issuers of which
would be exempt from holding an
annual meeting, if such issuers also list
common stock or voting preferred stock,
or their equivalent, such issuers must
still hold an annual meeting for the
holders of that common stock or voting
preferred stock, or their equivalent.15 In
addition, the Exchange notes that the
proposed annual meeting requirement
and the listed exemptions from such
requirement do not supplant any
applicable state or Federal securities
laws concerning annual shareholder
meetings.
Finally, Amex proposes to remove the
provision from Section 704 of the
Company Guide that requires an issuer,
who is unable to hold an annual
shareholder meeting in a timely manner,
to notify the Exchange and the
stockholders of such issuer of the
reasons for the delay, and then use good
faith efforts to hold the meeting as soon
as reasonably practicable in light of the
15 See proposed Commentary .01 to Section 704
of the Amex Company Guide. See also supra note
7.
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08FEN1
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Federal Register / Vol. 73, No. 27 / Friday, February 8, 2008 / Notices
circumstances causing the delay. Amex
believes it is more appropriate to
address annual meeting delays through
its ‘‘Continued Listing and Evaluation
and Follow-Up’’ procedures which are
part of the rules governing suspension
and delisting under Section 1009(a)(i) of
the Company Guide.16 Amex states that
it currently does not rely on such
notification required in Section 704 of
the Company Guide to monitor
compliance with the annual shareholder
meeting requirement. Instead, the
Exchange staff utilizes an electronic
database supplemented by manual
review of proxy statements and, in the
case of issuers that do not file proxy
statements, other Commission filings to
determine compliance. The electronic
database receives public filings on a
real-time basis (i.e., deemed to be within
one business day) and generates alerts,
which are investigated by analysts.
III. Discussion
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After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.17 In
particular, the Commission believes that
the proposal is consistent with Section
6(b)(5) of the Act,18 which requires,
among other things, that the rules of a
national securities exchange be
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.
The Commission believes that the
Exchange’s proposal relating to the
annual shareholder meeting
requirement for listed issuers is
consistent with the Act. Specifically, the
Commission believes that clarifying that
the issuers of voting and non-voting
common stock and voting preferred
stock, and their equivalents (e.g.,
callable common stock) are required to
hold an annual shareholder meeting, the
time frame within which such issuer is
required to hold its annual shareholder
meeting, and the general exceptions to
this proposed rule will provide
additional transparency and certainty to
the annual shareholder meeting
requirement.
16 See Section 1009(a) of the Amex Company
Guide.
17 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
18 15 U.S.C. 78f(b)(5).
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17:11 Feb 07, 2008
Jkt 214001
In addition, with respect to the
proposed list of securities, the issuers of
which would be exempt under the
Exchange’s rules to hold an annual
shareholder meeting, the Commission
believes that the proposal furthers the
removal of impediments to a free and
open market while continuing to ensure
the protection of investors and the
public interest, two principles set forth
in Section 6(b)(5) of the Act. The
Commission believes the right of
shareholders to vote at an annual
meeting is an essential and important
one. The Commission, however, agrees
with Amex that the requirement to hold
an annual shareholder meeting may not
be necessary for certain issuers of
specific types of securities because the
holders of such securities do not
directly participate as equity holders
and vote in the election of directors or
on the affairs, operations, or policies of
the company. The Commission notes
that, although many of the securities
proposed to be exempt from the general
requirement are issued by operating
companies that have also issued listed
equity securities and would
nevertheless be subject to the annual
shareholder meeting requirement, only
those issuers which do not issue
common stock or voting preferred stock
or their equivalent would be exempt
from the annual shareholder meeting
requirement. The Commission further
notes that the proposed annual
shareholder meeting requirement and
the listed exemptions from such
requirement do not supplant any
applicable state or federal securities
laws concerning annual shareholder
meetings.19
Finally, the Commission believes that
Amex’s proposal to remove the
provisions relating to notification of a
delayed annual shareholder meeting
and the use of good faith efforts to hold
such meeting as soon as reasonably
practicable is consistent with the Act.
The Exchange states that it does not rely
on the notification requirement from
issuers to monitor compliance of the
annual shareholder meeting
requirement, but, instead, actively
utilizes a real-time electronic database
and manual review of proxy statements
or other Commission filings to
determine compliance. It appears that
Amex’s notification procedures provide
it with timely information to enforce
compliance with the annual shareholder
meeting requirement. Further, in the
19 The Commission submits that listed issuers
that would be exempt under Section 704 of the
Amex Company Guide, as proposed, would not be
precluded from holding special meetings of holders
of the relevant securities.
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Frm 00111
Fmt 4703
Sfmt 4703
absence of a compelling regulatory
concern, the Commission believes that it
is a reasonable exercise of the
Exchange’s self-regulatory oversight to
choose the means of best addressing
compliance with its proposed annual
shareholder meeting requirement. The
Commission also notes that the proposal
to remove the provision regarding the
use of good faith efforts to hold the
annual shareholder meeting as soon as
reasonably practicable is similar to, and
conforms with, the equivalent annual
shareholder meeting rules of other
national securities exchanges.20 The
Commission further notes that under the
proposed rule change, companies will
be required to hold their annual
shareholder meeting within the specific
time periods set forth in Section 704 of
the Amex Company Guide. Thus, the
new rule will require stricter adherence
to the annual shareholder meeting
requirement, in furtherance of the
public interest and investor protection.
Companies that do not comply with the
annual shareholder meeting time
periods will be in violation of the
Exchange’s new rules.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,21 that the
proposed rule change (SR–Amex–2006–
31), as modified by Amendment Nos. 1,
2, and 3 thereto, be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2347 Filed 2–7–08; 8:45 am]
BILLING CODE 8011–01–P
20 See, e.g., Rule IM–4350–8 (Shareholder
Meetings) of The NASDAQ Stock Market LLC;
Sections 302 and 401 of the Listed Company
Manual of the New York Stock Exchange LLC.
21 15 U.S.C. 78s(b)(2).
22 See 17 CFR 200.30–3(a)(12).
E:\FR\FM\08FEN1.SGM
08FEN1
]]>Agencies
[Federal Register Volume 73, Number 27 (Friday, February 8, 2008)]
[Notices]
[Pages 7614-7616]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2347]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57268; File No. SR-Amex-2006-31]
Self-Regulatory Organizations; American Stock Exchange LLC; Order
Approving Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and
3 Thereto, Relating to Annual Shareholder Meeting Requirements
February 4, 2008.
I. Introduction
On April 7, 2006, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Section 704 (Annual Meetings) of the Amex
Company Guide.\3\ On December 13, 2007, the Exchange filed Amendment
No. 1 to the proposed rule change. On December 20, 2007, the Exchange
filed Amendment No. 2 to the proposed rule change. The proposed rule
change, as amended by Amendment Nos. 1 and 2 thereto, was published for
comment in the Federal Register on December 28, 2007.\4\ On January 4,
2008, the Exchange filed Amendment No. 3 to the proposed rule
change.\5\ The Commission received no comments regarding the proposal.
This order approves the proposed rule change, as modified by Amendment
Nos. 1, 2 and 3 thereto.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Section 704 of the Amex Company Guide.
\4\ See Securities Exchange Act Release No. 57016 (December 20,
2007), 72 FR 73911.
\5\ In Amendment No. 3, Amex made several minor typographical
corrections to the proposed rule text of Exhibit 5 to accurately
reflect the names of certain securities. Because Amendment No. 3 is
technical in nature, it is not subject to notice and comment.
---------------------------------------------------------------------------
II. Description of the Proposal
Amex seeks to amend its annual shareholder meeting requirement
applicable to its listed issuers. Currently, Section 704 of the Amex
Company Guide requires all listed companies to hold an annual meeting
of their shareholders in accordance with such listed company's charter,
by-laws, and applicable state or other laws. An annual meeting allows
the equity owners of a company the opportunity to elect directors and
meet with management to discuss company affairs. The Exchange believes,
however, that this requirement is not necessary for certain issuers of
specific types of securities because the holders of such securities do
not directly participate as equity holders and vote in the election of
directors. In addition, Amex seeks to clarify when an issuer should
hold its annual meeting and remove the notice requirement for delayed
annual meetings.
First, Amex proposes to amend Section 704 of its Company Guide to
explicitly state that an issuer generally must hold an annual meeting
within one year of the end of its fiscal year if it is subject to the
annual shareholder meeting requirement. In addition, a new listing that
was not previously subject to the requirement to hold an annual meeting
would be required to hold its first annual shareholder meeting within
one year of its fiscal year end following the date of listing. Amex
proposes two exceptions to these general requirements: (1) An issuer is
not required to hold an annual meeting if its fiscal year is less than
twelve months long as a result of a change in its fiscal year end; and
(2) an issuer does not have to hold an annual meeting in the same year
in which it completes its initial public offering.
Amex also proposes to list a variety of securities, the issuers of
which should not be subject to the foregoing general
[[Page 7615]]
annual shareholder meeting requirement. For example, Amex proposes to
exempt from the requirement issuers of a number of securities listed
pursuant to Section 107 (Other Securities) of the Company Guide and
certain other securities issued by various passive business
organizations.\6\ The Exchange states that these types of securities
are typically not an issuer's primary equity security, and their
holders have only limited economic interests or other rights, which do
not include voting rights. Although many of these products are issued
by operating companies with listed equity securities and are thus
subject to an annual meeting requirement pursuant to the primary
market's rules, the Exchange stated in its filing that the Company
Guide should specifically exempt from such requirement those operating
companies which do not issue common stock or voting preferred stock.\7\
---------------------------------------------------------------------------
\6\ The various types of securities which the Exchange believes
should not be subject to the annual shareholder meeting requirement
include: bonds and debentures; currency and index warrants; trust
preferred securities; contingent value rights; equity-linked term
notes; index-linked exchangeable notes; index-linked securities;
commodity-linked securities; currency-linked securities; trust
certificate securities; investment trusts based on securities of
individual issuers, stock indexes, or debt instruments; equity
derivatives; trust issued receipts; commodity-based trust shares;
currency trust shares; certain partnership interests; and paired
trust shares. Amex believes that the foregoing securities should be
exempt because they do not entitle their respective holders to
voting rights.
\7\ The Commission notes that issuers of convertible bonds and/
or debentures listed pursuant to Section 104 of the Amex Company
Guide are not exempt from the annual shareholder meeting requirement
because such issuers must hold annual shareholder meetings with
respect to the underlying common stock. See infra note 15 and
accompanying text.
---------------------------------------------------------------------------
Similarly, Amex proposes to exempt from the general annual meeting
requirement portfolio depository receipts and index fund shares, which
are securities issued by unit investment trusts (``UITs'') and open-end
management investment companies, respectively (collectively, ``ETFs''),
and typically organized as business trusts. ETFs, which are generally
passive investment vehicles that seek to match the performance of an
index, must obtain an exemptive order from the Commission before they
offer securities. As a result, their operations are circumscribed by
numerous representations and conditions contained in the applicable
orders, and they do not typically experience the need for operational
or other changes requiring a shareholder vote, and, by extension, a
shareholder meeting.\8\ In addition, UITs do not have boards of
directors, which the UITs' unitholders would need to elect.\9\
Accordingly, the Exchange submits that Section 704 of the Amex Company
Guide should specifically exclude ETFs from the annual shareholder
meeting requirement.
---------------------------------------------------------------------------
\8\ The Exchange states that ETFs are registered under, and
remain subject to, the Investment Company Act of 1940, which already
imposes various shareholder-voting requirements that may be
applicable to the ETFs.
\9\ The Exchange states that UITs are typically operated or
administered by a corporate trustee, and the portfolio of a UIT,
which generally consists of a fixed pool of securities, is not
actively managed.
---------------------------------------------------------------------------
Amex further proposes to exempt from the annual meeting requirement
issuers of a variety of trust issued receipts (``TIRs'') \10\ based on
securities, commodities, and currencies. Traditional TIRs (i.e.,
HOLDRs) are securities issued by a trust that holds, but does not
manage, specific securities on behalf of investors in the trust. Other
types of TIRs also include Commodity-Based Trust Shares \11\ and
Currency Trust Shares.\12\ The Exchange states that these trusts
typically do not hold shareholder (or unitholder) meetings because the
trusts have no board of directors and essentially serve as conduits for
the investors' indirect investments in the underlying securities,
commodities, and/or currencies of the trusts. Similarly, the Exchange
lists Partnership Units, which are securities issued by a partnership
that invests in a combination of futures contracts, options on futures
contracts, forward contracts, commodities, and/or securities.\13\ A
holder of a Partnership Unit does not have the right of equity
ownership of the partnership, but instead, obtains a beneficial
interest in the partnership. Because the partnership is a conduit for
the investment in the underlying assets, the operation and management
of the partnership is performed by a general partner without holding
annual meetings. Lastly, Paired Trust Shares (also known as MACROS) are
securities designed to track either the positive or negative
performance of a benchmark underlying asset.\14\ The shares are issued
by a trust in pairs, with the trust not holding the underlying asset,
but instead holding only short-term U.S. Treasuries and cash
equivalents. As the market price of the underlying asset fluctuates,
U.S. Treasuries and cash are moved between the trusts. As indicated
above in connection with TIRs, issuers of Paired Trust Shares typically
do not hold shareholder (or unitholder) meetings because the trusts
have no board of directors and essentially serve as conduits for the
investors' indirect investments in the performance of the underlying
benchmark asset. As a result, Amex believes that Section 704 of the
Amex Company Guide should specifically exempt the issuers of TIRs,
Commodity-Based Trust Shares, Currency Trust Share Shares, Partnership
Units, and Paired Trust Shares from the annual shareholder meeting
requirement.
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\10\ A trust issued receipt is defined in Amex Rule 1200(b) as a
security: (1) That is issued by a trust which holds specified
securities deposited with the trust; (2) that, when aggregated in
some specified minimum number, may be surrendered to the trust by
the beneficial owner to receive the securities; and (3) that pays
beneficial owners dividends and other distributions on the deposited
securities, if any are declared and paid to the trustee by an issuer
of the deposited securities.
\11\ See Amex Rule 1200A.
\12\ See Amex Rule 1200B.
\13\ See Amex Rule 1500.
\14\ See Amex Rule 1400.
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For these reasons, Amex states that it has not generally required
issuers of these securities to hold annual shareholder meetings in the
past, consistent with their respective governance and organizational
documents. However, in order to provide greater certainty and
transparency for listed issuers, Amex believes it is appropriate to
revise Section 704 of the Company Guide to clarify that only issuers of
voting and non-voting common stock and voting preferred stock, and
their equivalents (e.g., callable common stock) are required to hold an
annual shareholder meeting. With respect to the proposed list of
securities, the issuers of which would be exempt from holding an annual
meeting, if such issuers also list common stock or voting preferred
stock, or their equivalent, such issuers must still hold an annual
meeting for the holders of that common stock or voting preferred stock,
or their equivalent.\15\ In addition, the Exchange notes that the
proposed annual meeting requirement and the listed exemptions from such
requirement do not supplant any applicable state or Federal securities
laws concerning annual shareholder meetings.
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\15\ See proposed Commentary .01 to Section 704 of the Amex
Company Guide. See also supra note 7.
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Finally, Amex proposes to remove the provision from Section 704 of
the Company Guide that requires an issuer, who is unable to hold an
annual shareholder meeting in a timely manner, to notify the Exchange
and the stockholders of such issuer of the reasons for the delay, and
then use good faith efforts to hold the meeting as soon as reasonably
practicable in light of the
[[Page 7616]]
circumstances causing the delay. Amex believes it is more appropriate
to address annual meeting delays through its ``Continued Listing and
Evaluation and Follow-Up'' procedures which are part of the rules
governing suspension and delisting under Section 1009(a)(i) of the
Company Guide.\16\ Amex states that it currently does not rely on such
notification required in Section 704 of the Company Guide to monitor
compliance with the annual shareholder meeting requirement. Instead,
the Exchange staff utilizes an electronic database supplemented by
manual review of proxy statements and, in the case of issuers that do
not file proxy statements, other Commission filings to determine
compliance. The electronic database receives public filings on a real-
time basis (i.e., deemed to be within one business day) and generates
alerts, which are investigated by analysts.
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\16\ See Section 1009(a) of the Amex Company Guide.
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III. Discussion
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\17\ In particular, the Commission believes that the proposal
is consistent with Section 6(b)(5) of the Act,\18\ which requires,
among other things, that the rules of a national securities exchange be
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.
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\17\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\18\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the Exchange's proposal relating to
the annual shareholder meeting requirement for listed issuers is
consistent with the Act. Specifically, the Commission believes that
clarifying that the issuers of voting and non-voting common stock and
voting preferred stock, and their equivalents (e.g., callable common
stock) are required to hold an annual shareholder meeting, the time
frame within which such issuer is required to hold its annual
shareholder meeting, and the general exceptions to this proposed rule
will provide additional transparency and certainty to the annual
shareholder meeting requirement.
In addition, with respect to the proposed list of securities, the
issuers of which would be exempt under the Exchange's rules to hold an
annual shareholder meeting, the Commission believes that the proposal
furthers the removal of impediments to a free and open market while
continuing to ensure the protection of investors and the public
interest, two principles set forth in Section 6(b)(5) of the Act. The
Commission believes the right of shareholders to vote at an annual
meeting is an essential and important one. The Commission, however,
agrees with Amex that the requirement to hold an annual shareholder
meeting may not be necessary for certain issuers of specific types of
securities because the holders of such securities do not directly
participate as equity holders and vote in the election of directors or
on the affairs, operations, or policies of the company. The Commission
notes that, although many of the securities proposed to be exempt from
the general requirement are issued by operating companies that have
also issued listed equity securities and would nevertheless be subject
to the annual shareholder meeting requirement, only those issuers which
do not issue common stock or voting preferred stock or their equivalent
would be exempt from the annual shareholder meeting requirement. The
Commission further notes that the proposed annual shareholder meeting
requirement and the listed exemptions from such requirement do not
supplant any applicable state or federal securities laws concerning
annual shareholder meetings.\19\
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\19\ The Commission submits that listed issuers that would be
exempt under Section 704 of the Amex Company Guide, as proposed,
would not be precluded from holding special meetings of holders of
the relevant securities.
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Finally, the Commission believes that Amex's proposal to remove the
provisions relating to notification of a delayed annual shareholder
meeting and the use of good faith efforts to hold such meeting as soon
as reasonably practicable is consistent with the Act. The Exchange
states that it does not rely on the notification requirement from
issuers to monitor compliance of the annual shareholder meeting
requirement, but, instead, actively utilizes a real-time electronic
database and manual review of proxy statements or other Commission
filings to determine compliance. It appears that Amex's notification
procedures provide it with timely information to enforce compliance
with the annual shareholder meeting requirement. Further, in the
absence of a compelling regulatory concern, the Commission believes
that it is a reasonable exercise of the Exchange's self-regulatory
oversight to choose the means of best addressing compliance with its
proposed annual shareholder meeting requirement. The Commission also
notes that the proposal to remove the provision regarding the use of
good faith efforts to hold the annual shareholder meeting as soon as
reasonably practicable is similar to, and conforms with, the equivalent
annual shareholder meeting rules of other national securities
exchanges.\20\ The Commission further notes that under the proposed
rule change, companies will be required to hold their annual
shareholder meeting within the specific time periods set forth in
Section 704 of the Amex Company Guide. Thus, the new rule will require
stricter adherence to the annual shareholder meeting requirement, in
furtherance of the public interest and investor protection. Companies
that do not comply with the annual shareholder meeting time periods
will be in violation of the Exchange's new rules.
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\20\ See, e.g., Rule IM-4350-8 (Shareholder Meetings) of The
NASDAQ Stock Market LLC; Sections 302 and 401 of the Listed Company
Manual of the New York Stock Exchange LLC.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the proposed rule change (SR-Amex-2006-31), as modified
by Amendment Nos. 1, 2, and 3 thereto, be, and it hereby is, approved.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ See 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2347 Filed 2-7-08; 8:45 am]
BILLING CODE 8011-01-P
