Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change To Update Its Rule 31.10-Corporate Governance-in Order To Comply With New Rule 10C-1 Under the Securities Exchange Act of 1934, 62558-62562 [2012-25283]
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Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / Notices
Number SR–Phlx–2012–115 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Phlx–2012–115. This file
number should be included on the
subject line if email 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 Web site viewing and
printing in the Commission’s Public
Reference Room on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing also
will be available for inspection and
copying at the principal offices 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–
2012–115, and should be submitted on
or before November 5, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–25279 Filed 10–12–12; 8:45 am]
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BILLING CODE 8011–01–P
[Release No. 34–68020; File No. SR–CBOE–
2012–094]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change To Update Its
Rule 31.10—Corporate Governance—in
Order To Comply With New Rule 10C–
1 Under the Securities Exchange Act of
1934
October 9, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 25, 2012, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. 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 the Substance
of the Proposed Rule Change
CBOE proposes to update its Rule
31.10—Corporate Governance—in order
to comply with new Rule 10C–1 under
the Act. The text of the proposed rule
change is available on the Exchange’s
Web site (https://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), 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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
CFR 200.30–3(a)(12).
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1. Purpose
Effective July 27, 2012, the
Commission adopted Rule 10C–1 (the
‘‘New Rule’’) to the Act.3 The New Rule
directs national securities exchanges to
establish listing standards that, among
other things, require each member of a
listed issuer’s compensation committee
to be a member of the board of directors
and to be ‘‘independent’’, as defined in
the listing standards of the national
securities exchanges. The New Rule also
discusses issuers’ retention of
compensation advisers. The Exchange
hereby proposes to update its Rule
31.10, which discusses corporate
governance requirements of issuers on
the Exchange, in order to place Rule
31.10 in compliance with the New Rule.
Rule 31.10 currently states that
compensation of the chief executive
officer, and all other executive officers,
of an issuer must be determined, or
recommended to the board of directors
of the issuer for determination, either by
a majority of all independent directors
or a compensation committee comprised
solely of independent directors. The
New Rule’s requirements regarding a
compensation committee, as well as the
broad definition of ‘‘compensation
committee’’ and the independence of
those directors on the compensation
committee (all described below), make
Rule 31.10(c)’s statement that
compensation of executive officers may
be determined by a majority of all
independent directors a bit superfluous.
Due to the broad definition of the term
‘‘compensation committee’’ as defined
in the New Rule, the Exchange hereby
proposes to simply state that
compensation of all executive officers of
an issuer be determined, or
recommended to the board of directors
of the issuer for determination, by a
compensation committee.
The New Rule provides a definition of
‘‘compensation committee’’, which the
Exchange proposes to adopt. For the
purposes of Rule 31.10, the term
‘‘compensation committee’’ shall mean:
(A) A committee of the board of
directors that is designated as the
compensation committee; or (B) in the
absence of a committee of the board of
directors that is designated as the
compensation committee, a committee
of the board of directors performing
functions typically performed by a
3 See Securities Exchange Act Release No. 67220
(June 20, 2012) 77 FR 38422 (June 27, 2012) (File
No. S7–13–11).
1 15
13 17
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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compensation committee, including
oversight of executive compensation,
even if it is not designated as the
compensation committee or also
performs other functions; or (C) in the
absence of a committee as described in
paragraphs (c)(1)(A) or (B) of Rule 31.10,
the members of the board of directors
who oversee executive compensation
matters on behalf of the board of
directors. The Exchange’s proposed
definition of ‘‘compensation committee’’
is modeled after that described in the
New Rule.4 The New Rule allows
exchanges to exempt issuers who, in the
absence of a committee as described in
paragraphs (c)(1)(A) or (B) of Rule 31.10,
have a ‘‘compensation committee’’ that
is composed of the members of the
board of directors who oversee
executive compensation matters on
behalf of the board of directors from
those requirements described in
paragraphs (a)(1) and (b) of proposed
Interpretation and Policy .11 to Rule
31.10 (described and discussed below).
However, the Exchange does not believe
that it is unduly burdensome to require
issuers who, in the absence of a
committee as described in paragraphs
(c)(1)(A) or (B) of Rule 31.10, have a
‘‘compensation committee’’ that is
composed of the members of the board
of directors who oversee executive
compensation matters on behalf of the
board of directors to comply with
paragraphs (a)(1) and (b) of proposed
Interpretation and Policy .11. Further,
providing this exemption might provide
issuers with a way to avoid those
requirements of paragraphs (a)(1) and
(b) of proposed Interpretation and
Policy .11 by simply not having a
‘‘compensation committee’’ as defined
in paragraphs (c)(1)(A) or (B) of Rule
31.10. Therefore, the Exchange does not
propose to exempt issuers who, in the
absence of a committee as described in
paragraphs (c)(1)(A) or (B) of Rule 31.10,
have a ‘‘compensation committee’’ that
is composed of the members of the
board of directors who oversee
executive compensation matters on
behalf of the board of directors from
those requirements described in
paragraphs (a)(1) and (b) of proposed
Interpretation and Policy .11 to Rule
31.10.
The New Rule states that ‘‘each
member of the compensation committee
must be an independent member of the
board of directors of the listed issuer,
and must otherwise be independent.’’ 5
The New Rule further clarifies that, in
determining the independence
requirements for the members of
4 17
5 17
CFR 240.10C–1(c)(2).
CFR 240.10C–1(b)(1)(i).
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compensation committees, the Exchange
must consider all relevant factors,
including, but not limited to, the source
of compensation for that director
(including any consulting, advisory or
other compensatory fee paid by the
issuer to the director), and whether the
director is affiliated with the issuer or
a subsidiary or affiliate of a subsidiary
of the issuer.6
The Exchange hereby proposes to
amend Rule 31.10(c) to state that all
members of a compensation committee
must be ‘‘independent directors’’ as
defined in Rule 31.10(h)(2).
‘‘Independent director’’ is defined in
Rule 31.10(h)(2) as:
a person other than an officer or
employee of the company or its
subsidiaries or any other individual
having a relationship, which, in the
opinion of the company’s board of
directors, would interfere with the
exercise of independent judgment in
carrying out the responsibilities of a
director. The following persons shall
not be considered independent:
(A) a director who is, or at any time
during the past three years was,
employed by the company or by any
parent or subsidiary of the company;
(B) a director who accepted or who
has a family member who accepted any
payments from the company or any
parent or subsidiary of the company in
excess of $60,000 during the current or
any of the past three fiscal years, other
than the following:
(i) compensation for board or board
committee service;
(ii) payments arising solely from
investments in the company’s securities;
(iii) compensation paid to a family
member who is a non-executive
employee of the company or a parent or
subsidiary of the company;
(iv) benefits under a tax-qualified
retirement plan, or non-discretionary
compensation; or
(v) loans permitted under Exchange
Act Section 13(k).
Provided, however, that audit
committee members are subject to
additional, more stringent requirements
under Exchange Act Rule 10A–3, which
requirements are incorporated by
reference in the Exchange rules
pursuant to Rule 31.10(b).
(C) a director who is a family member
of an individual who is, or at any time
during the past three years was,
employed by the company or by any
parent or subsidiary of the company as
an executive officer;
(D) a director who is, or has a family
member who is, a partner in, or a
controlling shareholder or an executive
6 17
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62559
officer of, any organization to which the
company made, or from which the
company received, payments for
property or services in the current or
any of the past three fiscal years that
exceed 5% of the recipient’s
consolidated gross revenues for that
year, or $200,000, whichever is more,
other than the following:
(i) payments arising solely from
investments in the company’s securities;
or
(ii) payments under non-discretionary
charitable contribution matching
programs;
(E) a director of the listed company
who is, or has a family member who is,
employed as an executive officer of
another entity where at any time during
the past three years any of the executive
officers of the listed company serve on
the compensation committee of such
other entity;
(F) a director who is, or has a family
member who is, a current partner of the
company’s outside auditor, or was a
partner or employee of the company’s
outside auditor who worked on the
company’s audit at any time during any
of the past three years; or
(G) in the case of an investment
company, in lieu of Rules
31.10(h)(2)(A)–(F), a director who is an
‘‘interested person’’ of the company as
defined in Section 2(a)(19) of the
Investment Company Act of 1940, other
than in his or her capacity as a member
of the board of directors or any board
committee.7
The Exchange believes that the
current definition of ‘‘independent
director’’ meets the criteria listed for
determining independence
requirements under the New Rule. The
requirements that a director is not
considered ‘‘independent’’ if he or a
family member has accepted any
payments from the company or any
parent or subsidiary of the company in
excess of $60,000 during the current or
any of the past three fiscal years, other
than compensation for board or
committee service, payments arising
solely from investments in the
company’s securities, compensation
paid to a family member who is a nonexecutive employee of the company or
a parent or subsidiary of the company,
benefits under a tax-qualified retirement
plan, or non-discretionary
compensation, or loans permitted under
Exchange Act Section 13(k)
demonstrates that the definition of
‘‘independent’’ considers the sources of
compensation of a member of the
compensation committee.
7 See
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The Exchange believes that the
current definition of ‘‘independent
director’’ meets the requirement in the
New Rule that the Exchange’s rules
must consider whether the director is
affiliated with the issuer or a subsidiary
or affiliate of a subsidiary of the issuer.
For purposes of the New Rule, an
‘‘affiliate’’ of, or a person ‘‘affiliated’’
with, a specified person, is a person that
directly, or indirectly through one or
more intermediaries, controls, or is
controlled by, or is under common
control with, the person specified.8 Rule
31.10(h)(2) states that a director is not
‘‘independent’’ if, in the opinion of the
issuer’s board of directors, the person
has a relationship which would
interfere with the exercise of
independent judgment in carrying out
the responsibilities of a director. Any
kind of affiliate relationship, under the
definition provided above, could be
viewed as a conflict of interest that
might interfere with the exercise of
independent judgment in carrying out
the responsibilities of a director.
Therefore, by nature, a board of
directors would have to consider any
affiliate relationship in coming to that
manner of opinion. As such, a rule that
requires a board of directors to consider
whether a director has a relationship
which would interfere with the exercise
of independent judgment in carrying out
the responsibilities of a director in order
to determine whether or not the director
is ‘‘independent’’ naturally requires
consideration of whether the director is
affiliated with the issuer, a subsidiary of
the issuer or an affiliate of a subsidiary
of the issuer.
The New Rule states that any
exchange to which the New Rule
applies must provide issuers an
opportunity to cure any violations of the
rules that such exchange may put in
place as a result of the New Rule.9 The
New Rule further states that an
exchange’s rule regarding the curing of
violations may state that if a member of
a compensation committee ceases to be
an ‘‘independent director’’ for reasons
outside of that member’s reasonable
control, that person, with notice by the
issuer to the applicable exchange, may
remain a compensation committee
member until the earlier of the next
annual shareholders meeting of the
issuer or one year from the occurrence
8 17 CFR 240.12b–2. The term ‘‘control’’
(including the terms ‘‘controlling,’’ ‘‘controlled by’’
and ‘‘under common control with’’) means the
possession, direct or indirect, of the power to direct
or cause the direction of the management and
policies of a person, whether through the
ownership of voting securities, by contract, or
otherwise. 17 CFR 240.12b–2.
9 17 CFR 240.10C–1(a)(3).
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of the event that caused the member to
no longer be an ‘‘independent director’’.
As such, the Exchange proposes to
adopt this language and state that if a
member of a compensation committee
ceases to be an ‘‘independent director’’
for reasons outside of that member’s
reasonable control, that person may
remain a compensation committee
member until the earlier of the next
annual shareholders meeting of the
issuer or one year from the occurrence
of the event that caused the member to
no longer be an ‘‘independent director’’.
The Exchange will require that an issuer
relying on this provision must provide
notice to the Exchange immediately
upon learning of the event or
circumstance that caused the member to
cease to be an ‘‘independent director’’.
Rule 31.10(c) currently provides an
exception to the independence
requirement for compensation
committee members. This exception
states that, notwithstanding said
independence requirements, if the
compensation committee is comprised
of at least three members, one director,
who is not independent as defined in
Rule 31.10(h)(2) and is not a current
officer or employee or a family member
of an officer or employee, may be
appointed to the compensation
committee if the board, under
exceptional and limited circumstances,
determines that such individual’s
membership on the committee is
required by the best interests of the
company and its shareholders, and the
board discloses, in the proxy statement
for the next annual meeting subsequent
to such determination (or, if the issuer
does not file a proxy, in its Form 10–K
or 20–F), the nature of the relationship
and the reasons for the determination. A
member appointed under this exception
may not serve longer than two years.10
However, the New Rule includes no
such exception to the independence
requirements. The Exchange therefore
proposes to delete this exception. The
Exchange believes that independence of
compensation committee members is
important to ensure that there exist no
undue influences in the compensation
of executive officers. Further, in these
times during which executive
compensation has (understandably)
fallen under some scrutiny, it is
important to provide the appearance of
a transparent and not-undulyinfluenced process to determine
executive compensation, and an
exception that allows issuers to have
non-independent directors influence
10 See
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compensation can have a damaging
impact on the markets.
Currently, Rule 31.10(c) states that the
chief executive officer of an issuer may
not be present during voting or
deliberations regarding his salary. CBOE
proposes to extend this clause to all
executive officers and state that the
executive officer for whom
compensation is being determined may
not be present during voting or
deliberations regarding compensation of
that executive officer. The Exchange
believes that this extension is
appropriate and will further prevent any
executive officer for whom
compensation is being determined from
having undue or inappropriate
influence on his compensation.
The New Rule exempts from the
independence requirements limited
partnerships, companies in bankruptcy
proceedings, open-end management
investment companies registered under
the Investment Company Act of 1940,
and any foreign private issuer that
discloses in its annual report the
reasons that the foreign private issuer
does not have an independent
compensation committee.11 The
Exchange thereby proposes to
incorporate those exemptions into
proposed Rule 31.10(f)(6) by reference
by stating that the categories of issuers
listed in § 240.10C–1(b)(1)(iii)(A) of the
Securities Exchange Act of 1934 [sic] are
also exempt from the requirements Rule
31.10(c)(2) (which discusses
independence of directors on an issuer’s
compensation committee). These
categories of issuers are still subject to
all other requirements regarding
executive compensation (unless
otherwise noted).
Rule 31.10(f) currently exempts a
number of other categories of issuers
from the executive compensation
requirements of Rule 31.10(c). These
types of issuers are controlled
companies, registered management
investment companies (which are
similar to open-end management
investment companies), and assetbacked issuers and other passive
issuers, cooperatives.12 The Exchange
determined to exempt these categories
of issuers from executive compensation
requirements of Rule 31.10(c) due to
their various unique attributes.13 While
the New Rule changes some of the
executive compensation requirements,
The Exchange believes that these
categories of issues [sic] should still be
11 17
CFR 240.10C–1(b)(1)(iii).
CBOE Rule 31.10(f)(1)–(4).
13 See Securities Exchange Act Release No. 49995
(July 9, 2004), 69 FR 42476 (July 15, 2004) (SR–
CBOE–2004–028).
12 See
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exempt from all executive compensation
requirements in Rule 31.10(c) generally.
To the extent that the above-referenced
proposed Rule 31.10(f)(6)’s exemption
of open-end management investment
companies registered under the
Investment Company Act of 1940 from
the compensation committee director
independence requirements of Rule
31.10(c)(2) conflicts with the more
general already-existing exemption of
registered management investment
companies from the requirements of
Rule 31.10(c), the more general
exemption of registered management
investment companies from the
requirements of Rule 31.10(c) shall be
controlling. As such, Rule 31.10(f)(2)
shall be amended to state that the
exemption of management investment
companies from the requirements of
Rule 31.10(c) shall be controlling over
any other potentially-conflicting
exemptions that may arise under Rule
31.10(f)(6).
The New Rule also discusses the
retention of compensation consultants,
independent legal counsel and other
compensation advisers to assist the
compensation committee of an issuer in
determining compensation for
executives.14 Rule 31.10 currently does
not speak to this issue. Therefore, the
Exchange proposes to adopt the
provisions of the New Rule regarding
this issue in a substantively identical
manner to that in the New Rule in new
Interpretation and Policy .11 to Rule
31.10. This new Interpretation and
Policy would state that the
compensation committee of an issuer, in
its capacity as a committee of the board
of directors, may, in its sole discretion,
retain or obtain the advice of a
compensation consultant, independent
legal counsel or other adviser. The
compensation committee shall be
directly responsible for the
appointment, compensation and
oversight of the work of any
compensation consultant, independent
legal counsel and other adviser retained
by the compensation committee.
Nothing in this Interpretation and
Policy .11 to Rule 31.10 shall be
construed to require the compensation
committee to implement or act
consistently with the advice or
recommendations of the compensation
consultant, independent legal counsel
or other adviser to the compensation
committee, or to affect the ability or
obligation of a compensation committee
to exercise its own judgment in
fulfillment of the duties of the
compensation committee.
14 17
CFR 240.10C–1(b)(2).
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Under this new Interpretation and
Policy .11 to Rule 31.10, each listed
issuer must provide for appropriate
funding, as determined by the
compensation committee, in its capacity
as a committee of the board of directors,
for payment of reasonable compensation
to a compensation consultant,
independent legal counsel or any other
adviser retained by the compensation
committee.
Under this new Interpretation and
Policy .11 to Rule 31.10, the
compensation committee of a listed
issuer may select a compensation
consultant, legal counsel or other
adviser to the compensation committee
only after taking into consideration the
following factors: (1) The provision of
other services to the issuer by the
person that employs the compensation
consultant, legal counsel or other
adviser, (2) the amount of fees received
from the issuer by the person that
employs the compensation consultant,
legal counsel or other adviser, as a
percentage of the total revenue of the
person that employs the compensation
consultant, legal counsel or other
adviser, (3) the policies and procedures
of the person that employs the
compensation consultant, legal counsel
or other adviser that are designed to
prevent conflicts of interest, (4) any
business or personal relationship of the
compensation consultant, legal counsel
or other adviser with a member of the
compensation committee, (5) any stock
of the issuer owned by the
compensation consultant, legal counsel
or other adviser, and (6) any business or
personal relationship of the
compensation consultant, legal counsel,
other adviser or the person employing
the adviser with an executive office of
the issuer. A compensation committee
must consider these factors with respect
to any compensation consultant, legal
counsel or other advisor that provides
advice to the compensation committee
(other than in-house legal counsel).
The requirements of this
Interpretation and Policy .11 to Rule
31.10 shall not apply to (1) any
controlled company or to any smaller
reporting company, (2) the listing of a
security futures product cleared by a
clearing agency that is registered
pursuant to section 17A of the Act (15
U.S.C. 78q–1) or that is exempt from the
registration requirements of section
17A(b)(7)(A) (15 U.S.C. 78q–1(b)(7)(A)),
or (3) the listing of a standardized
option, as defined in § 240.9b–1(a)(4),
issued by a clearing agency that is
registered pursuant to section 17A of the
Act (15 U.S.C. 78q–1). These
exemptions comply with those stated in
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62561
the New Rule.15 To be clear, small
reporting companies are still subject to
other corporate governance rules, as
applicable
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act 16
and the rules and regulations
thereunder and, in particular, the
requirements of Section 6(b) of the
Act.17 Specifically, the Exchange
believes the proposed rule change is
consistent with the Section 6(b)(5) 18
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to remove impediments to and to
perfect the mechanism for a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
proposed changes will protect investors
by ensuring independent and wellinformed determination of executive
compensation. In addition, the
Exchange believes that the proposed
changes bring the Exchange into
compliance with the requirements
described in the New Rule.
The Exchange further believes that the
proposed changes are consistent with
the New Rule. Further, these proposed
changes, in ensuring independent
determination of executive
compensation, will also improve
investor confidence regarding executive
compensation. This improved investor
confidence will perfect the mechanism
for a free and open market and a
national market system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
15 17
CFR 240.10C–1(b)(5).
U.S.C. 78s(b)(1).
17 15 U.S.C. 78f(b).
18 15 U.S.C. 78f(b)(5).
16 15
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Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / Notices
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
erowe on DSK2VPTVN1PROD with
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2012–094 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–CBOE–2012–094. This file
number should be included on the
subject line if email 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 Web site viewing and
printing in the Commission’s Public
Reference Room on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing also
will be available for inspection and
copying at the principal offices of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
VerDate Mar<15>2010
15:21 Oct 12, 2012
Jkt 229001
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2012–094, and should be submitted on
or before November 5, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–25283 Filed 10–12–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68016; File No. SR–ICC–
2012–14]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Schedule 502
of the ICC Rules
October 9, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
September 24, 2012, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change described in Items I, II and III,
below, which Items have been prepared
primarily by ICC. ICC filed the proposal
pursuant to Section 19(b)(3)(A) 2 of the
Act and Rule 19b–4(f)(4)(i) 3 thereunder,
so that the rule change was effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of the proposed rule
change is to update the Contract
Reference Obligation International
Securities Identification Numbers
(‘‘Contract Reference Obligation ISINs’’)
and entity names in Schedule 502 of the
ICC Rules in order to reflect the changes
to the industry standard Contract
Reference Obligation ISINs and entity
names for one single name credit default
swap contract that ICC currently clears
(the Sara Lee Corporation), which will
undergo a succession event on
September 17, 2012. As a result of the
Sara Lee Corporation’s succession event,
ICC will clear two single names (The
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78s(b)(3)(A).
3 17 CFR 240.19b–4(f)(4)(i).
Hillshire Brands Company and DE US,
Inc.).
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, ICC
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
and comments may be examined at the
places specified in Item IV below. ICC
has prepared summaries, set forth in
sections A, B, and C, below, of the most
significant aspects of these statements.4
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The proposed rule change would
amend Schedule 502 of the ICC Rules,
which lists all the Contract Reference
Obligation ISINs and entity names of all
single name credit default swaps
contracts that ICC clears. This
amendment will update Schedule 502 to
account for the Sara Lee Corporation’s
September 17, 2012 succession event.
Specifically, the amendment will
remove Schedule 502’s listing of the
credit default swap contract that ICC
currently clears for the Sara Lee
Corporation, and replace it with listings
for the credit default swap contracts of
the Sara Lee Corporation’s successor
companies, The Hillshire Brands
Company and DE US, Inc. This update
does not require any changes to the
body of the ICC Rules. Also, the update
does not require any changes to the ICC
risk management framework.
Section 17A(b)(3)(F) 5 of the Act
requires, among other things, that the
rules of a clearing agency be designed to
promote the prompt and accurate
clearance and settlement of securities
transactions and, to the extent
applicable, derivative agreements,
contracts and transactions. ICC believes
that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to ICC, in
particular Section 17A(b)(3)(F), because
the change will facilitate the prompt
and accurate clearance and settlement of
securities transactions, and will assure
the safeguarding of securities and funds
associated with securities transactions
19 17
1 15
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
4 The Commission has modified the text of the
summaries provided by ICC.
5 15 U.S.C. 78q–1(b)(3)(F).
E:\FR\FM\15OCN1.SGM
15OCN1
]]>Agencies
[Federal Register Volume 77, Number 199 (Monday, October 15, 2012)]
[Notices]
[Pages 62558-62562]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-25283]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68020; File No. SR-CBOE-2012-094]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change To Update Its
Rule 31.10--Corporate Governance--in Order To Comply With New Rule 10C-
1 Under the Securities Exchange Act of 1934
October 9, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 25, 2012, Chicago Board Options Exchange,
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities
and Exchange Commission (the ``Commission'') the proposed rule change
as described in Items I, II, and III below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
CBOE proposes to update its Rule 31.10--Corporate Governance--in
order to comply with new Rule 10C-1 under the Act. The text of the
proposed rule change is available on the Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 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
Effective July 27, 2012, the Commission adopted Rule 10C-1 (the
``New Rule'') to the Act.\3\ The New Rule directs national securities
exchanges to establish listing standards that, among other things,
require each member of a listed issuer's compensation committee to be a
member of the board of directors and to be ``independent'', as defined
in the listing standards of the national securities exchanges. The New
Rule also discusses issuers' retention of compensation advisers. The
Exchange hereby proposes to update its Rule 31.10, which discusses
corporate governance requirements of issuers on the Exchange, in order
to place Rule 31.10 in compliance with the New Rule.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 67220 (June 20,
2012) 77 FR 38422 (June 27, 2012) (File No. S7-13-11).
---------------------------------------------------------------------------
Rule 31.10 currently states that compensation of the chief
executive officer, and all other executive officers, of an issuer must
be determined, or recommended to the board of directors of the issuer
for determination, either by a majority of all independent directors or
a compensation committee comprised solely of independent directors. The
New Rule's requirements regarding a compensation committee, as well as
the broad definition of ``compensation committee'' and the independence
of those directors on the compensation committee (all described below),
make Rule 31.10(c)'s statement that compensation of executive officers
may be determined by a majority of all independent directors a bit
superfluous. Due to the broad definition of the term ``compensation
committee'' as defined in the New Rule, the Exchange hereby proposes to
simply state that compensation of all executive officers of an issuer
be determined, or recommended to the board of directors of the issuer
for determination, by a compensation committee.
The New Rule provides a definition of ``compensation committee'',
which the Exchange proposes to adopt. For the purposes of Rule 31.10,
the term ``compensation committee'' shall mean: (A) A committee of the
board of directors that is designated as the compensation committee; or
(B) in the absence of a committee of the board of directors that is
designated as the compensation committee, a committee of the board of
directors performing functions typically performed by a
[[Page 62559]]
compensation committee, including oversight of executive compensation,
even if it is not designated as the compensation committee or also
performs other functions; or (C) in the absence of a committee as
described in paragraphs (c)(1)(A) or (B) of Rule 31.10, the members of
the board of directors who oversee executive compensation matters on
behalf of the board of directors. The Exchange's proposed definition of
``compensation committee'' is modeled after that described in the New
Rule.\4\ The New Rule allows exchanges to exempt issuers who, in the
absence of a committee as described in paragraphs (c)(1)(A) or (B) of
Rule 31.10, have a ``compensation committee'' that is composed of the
members of the board of directors who oversee executive compensation
matters on behalf of the board of directors from those requirements
described in paragraphs (a)(1) and (b) of proposed Interpretation and
Policy .11 to Rule 31.10 (described and discussed below). However, the
Exchange does not believe that it is unduly burdensome to require
issuers who, in the absence of a committee as described in paragraphs
(c)(1)(A) or (B) of Rule 31.10, have a ``compensation committee'' that
is composed of the members of the board of directors who oversee
executive compensation matters on behalf of the board of directors to
comply with paragraphs (a)(1) and (b) of proposed Interpretation and
Policy .11. Further, providing this exemption might provide issuers
with a way to avoid those requirements of paragraphs (a)(1) and (b) of
proposed Interpretation and Policy .11 by simply not having a
``compensation committee'' as defined in paragraphs (c)(1)(A) or (B) of
Rule 31.10. Therefore, the Exchange does not propose to exempt issuers
who, in the absence of a committee as described in paragraphs (c)(1)(A)
or (B) of Rule 31.10, have a ``compensation committee'' that is
composed of the members of the board of directors who oversee executive
compensation matters on behalf of the board of directors from those
requirements described in paragraphs (a)(1) and (b) of proposed
Interpretation and Policy .11 to Rule 31.10.
---------------------------------------------------------------------------
\4\ 17 CFR 240.10C-1(c)(2).
---------------------------------------------------------------------------
The New Rule states that ``each member of the compensation
committee must be an independent member of the board of directors of
the listed issuer, and must otherwise be independent.'' \5\ The New
Rule further clarifies that, in determining the independence
requirements for the members of compensation committees, the Exchange
must consider all relevant factors, including, but not limited to, the
source of compensation for that director (including any consulting,
advisory or other compensatory fee paid by the issuer to the director),
and whether the director is affiliated with the issuer or a subsidiary
or affiliate of a subsidiary of the issuer.\6\
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\5\ 17 CFR 240.10C-1(b)(1)(i).
\6\ 17 CFR 240.10C-1(b)(1)(ii).
---------------------------------------------------------------------------
The Exchange hereby proposes to amend Rule 31.10(c) to state that
all members of a compensation committee must be ``independent
directors'' as defined in Rule 31.10(h)(2). ``Independent director'' is
defined in Rule 31.10(h)(2) as:
a person other than an officer or employee of the company or its
subsidiaries or any other individual having a relationship, which, in
the opinion of the company's board of directors, would interfere with
the exercise of independent judgment in carrying out the
responsibilities of a director. The following persons shall not be
considered independent:
(A) a director who is, or at any time during the past three years
was, employed by the company or by any parent or subsidiary of the
company;
(B) a director who accepted or who has a family member who accepted
any payments from the company or any parent or subsidiary of the
company in excess of $60,000 during the current or any of the past
three fiscal years, other than the following:
(i) compensation for board or board committee service;
(ii) payments arising solely from investments in the company's
securities;
(iii) compensation paid to a family member who is a non-executive
employee of the company or a parent or subsidiary of the company;
(iv) benefits under a tax-qualified retirement plan, or non-
discretionary compensation; or
(v) loans permitted under Exchange Act Section 13(k).
Provided, however, that audit committee members are subject to
additional, more stringent requirements under Exchange Act Rule 10A-3,
which requirements are incorporated by reference in the Exchange rules
pursuant to Rule 31.10(b).
(C) a director who is a family member of an individual who is, or
at any time during the past three years was, employed by the company or
by any parent or subsidiary of the company as an executive officer;
(D) a director who is, or has a family member who is, a partner in,
or a controlling shareholder or an executive officer of, any
organization to which the company made, or from which the company
received, payments for property or services in the current or any of
the past three fiscal years that exceed 5% of the recipient's
consolidated gross revenues for that year, or $200,000, whichever is
more, other than the following:
(i) payments arising solely from investments in the company's
securities; or
(ii) payments under non-discretionary charitable contribution
matching programs;
(E) a director of the listed company who is, or has a family member
who is, employed as an executive officer of another entity where at any
time during the past three years any of the executive officers of the
listed company serve on the compensation committee of such other
entity;
(F) a director who is, or has a family member who is, a current
partner of the company's outside auditor, or was a partner or employee
of the company's outside auditor who worked on the company's audit at
any time during any of the past three years; or
(G) in the case of an investment company, in lieu of Rules
31.10(h)(2)(A)-(F), a director who is an ``interested person'' of the
company as defined in Section 2(a)(19) of the Investment Company Act of
1940, other than in his or her capacity as a member of the board of
directors or any board committee.\7\
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\7\ See CBOE Rule 31.10(h)(2).
---------------------------------------------------------------------------
The Exchange believes that the current definition of ``independent
director'' meets the criteria listed for determining independence
requirements under the New Rule. The requirements that a director is
not considered ``independent'' if he or a family member has accepted
any payments from the company or any parent or subsidiary of the
company in excess of $60,000 during the current or any of the past
three fiscal years, other than compensation for board or committee
service, payments arising solely from investments in the company's
securities, compensation paid to a family member who is a non-executive
employee of the company or a parent or subsidiary of the company,
benefits under a tax-qualified retirement plan, or non-discretionary
compensation, or loans permitted under Exchange Act Section 13(k)
demonstrates that the definition of ``independent'' considers the
sources of compensation of a member of the compensation committee.
[[Page 62560]]
The Exchange believes that the current definition of ``independent
director'' meets the requirement in the New Rule that the Exchange's
rules must consider whether the director is affiliated with the issuer
or a subsidiary or affiliate of a subsidiary of the issuer. For
purposes of the New Rule, an ``affiliate'' of, or a person
``affiliated'' with, a specified person, is a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person
specified.\8\ Rule 31.10(h)(2) states that a director is not
``independent'' if, in the opinion of the issuer's board of directors,
the person has a relationship which would interfere with the exercise
of independent judgment in carrying out the responsibilities of a
director. Any kind of affiliate relationship, under the definition
provided above, could be viewed as a conflict of interest that might
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. Therefore, by nature, a board of
directors would have to consider any affiliate relationship in coming
to that manner of opinion. As such, a rule that requires a board of
directors to consider whether a director has a relationship which would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director in order to determine whether or not the
director is ``independent'' naturally requires consideration of whether
the director is affiliated with the issuer, a subsidiary of the issuer
or an affiliate of a subsidiary of the issuer.
---------------------------------------------------------------------------
\8\ 17 CFR 240.12b-2. The term ``control'' (including the terms
``controlling,'' ``controlled by'' and ``under common control
with'') means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise. 17 CFR 240.12b-2.
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The New Rule states that any exchange to which the New Rule applies
must provide issuers an opportunity to cure any violations of the rules
that such exchange may put in place as a result of the New Rule.\9\ The
New Rule further states that an exchange's rule regarding the curing of
violations may state that if a member of a compensation committee
ceases to be an ``independent director'' for reasons outside of that
member's reasonable control, that person, with notice by the issuer to
the applicable exchange, may remain a compensation committee member
until the earlier of the next annual shareholders meeting of the issuer
or one year from the occurrence of the event that caused the member to
no longer be an ``independent director''. As such, the Exchange
proposes to adopt this language and state that if a member of a
compensation committee ceases to be an ``independent director'' for
reasons outside of that member's reasonable control, that person may
remain a compensation committee member until the earlier of the next
annual shareholders meeting of the issuer or one year from the
occurrence of the event that caused the member to no longer be an
``independent director''. The Exchange will require that an issuer
relying on this provision must provide notice to the Exchange
immediately upon learning of the event or circumstance that caused the
member to cease to be an ``independent director''.
---------------------------------------------------------------------------
\9\ 17 CFR 240.10C-1(a)(3).
---------------------------------------------------------------------------
Rule 31.10(c) currently provides an exception to the independence
requirement for compensation committee members. This exception states
that, notwithstanding said independence requirements, if the
compensation committee is comprised of at least three members, one
director, who is not independent as defined in Rule 31.10(h)(2) and is
not a current officer or employee or a family member of an officer or
employee, may be appointed to the compensation committee if the board,
under exceptional and limited circumstances, determines that such
individual's membership on the committee is required by the best
interests of the company and its shareholders, and the board discloses,
in the proxy statement for the next annual meeting subsequent to such
determination (or, if the issuer does not file a proxy, in its Form 10-
K or 20-F), the nature of the relationship and the reasons for the
determination. A member appointed under this exception may not serve
longer than two years.\10\ However, the New Rule includes no such
exception to the independence requirements. The Exchange therefore
proposes to delete this exception. The Exchange believes that
independence of compensation committee members is important to ensure
that there exist no undue influences in the compensation of executive
officers. Further, in these times during which executive compensation
has (understandably) fallen under some scrutiny, it is important to
provide the appearance of a transparent and not-unduly-influenced
process to determine executive compensation, and an exception that
allows issuers to have non-independent directors influence compensation
can have a damaging impact on the markets.
---------------------------------------------------------------------------
\10\ See CBOE Rule 31.10(c)(3).
---------------------------------------------------------------------------
Currently, Rule 31.10(c) states that the chief executive officer of
an issuer may not be present during voting or deliberations regarding
his salary. CBOE proposes to extend this clause to all executive
officers and state that the executive officer for whom compensation is
being determined may not be present during voting or deliberations
regarding compensation of that executive officer. The Exchange believes
that this extension is appropriate and will further prevent any
executive officer for whom compensation is being determined from having
undue or inappropriate influence on his compensation.
The New Rule exempts from the independence requirements limited
partnerships, companies in bankruptcy proceedings, open-end management
investment companies registered under the Investment Company Act of
1940, and any foreign private issuer that discloses in its annual
report the reasons that the foreign private issuer does not have an
independent compensation committee.\11\ The Exchange thereby proposes
to incorporate those exemptions into proposed Rule 31.10(f)(6) by
reference by stating that the categories of issuers listed in Sec.
240.10C-1(b)(1)(iii)(A) of the Securities Exchange Act of 1934 [sic]
are also exempt from the requirements Rule 31.10(c)(2) (which discusses
independence of directors on an issuer's compensation committee). These
categories of issuers are still subject to all other requirements
regarding executive compensation (unless otherwise noted).
---------------------------------------------------------------------------
\11\ 17 CFR 240.10C-1(b)(1)(iii).
---------------------------------------------------------------------------
Rule 31.10(f) currently exempts a number of other categories of
issuers from the executive compensation requirements of Rule 31.10(c).
These types of issuers are controlled companies, registered management
investment companies (which are similar to open-end management
investment companies), and asset-backed issuers and other passive
issuers, cooperatives.\12\ The Exchange determined to exempt these
categories of issuers from executive compensation requirements of Rule
31.10(c) due to their various unique attributes.\13\ While the New Rule
changes some of the executive compensation requirements, The Exchange
believes that these categories of issues [sic] should still be
[[Page 62561]]
exempt from all executive compensation requirements in Rule 31.10(c)
generally. To the extent that the above-referenced proposed Rule
31.10(f)(6)'s exemption of open-end management investment companies
registered under the Investment Company Act of 1940 from the
compensation committee director independence requirements of Rule
31.10(c)(2) conflicts with the more general already-existing exemption
of registered management investment companies from the requirements of
Rule 31.10(c), the more general exemption of registered management
investment companies from the requirements of Rule 31.10(c) shall be
controlling. As such, Rule 31.10(f)(2) shall be amended to state that
the exemption of management investment companies from the requirements
of Rule 31.10(c) shall be controlling over any other potentially-
conflicting exemptions that may arise under Rule 31.10(f)(6).
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\12\ See CBOE Rule 31.10(f)(1)-(4).
\13\ See Securities Exchange Act Release No. 49995 (July 9,
2004), 69 FR 42476 (July 15, 2004) (SR-CBOE-2004-028).
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The New Rule also discusses the retention of compensation
consultants, independent legal counsel and other compensation advisers
to assist the compensation committee of an issuer in determining
compensation for executives.\14\ Rule 31.10 currently does not speak to
this issue. Therefore, the Exchange proposes to adopt the provisions of
the New Rule regarding this issue in a substantively identical manner
to that in the New Rule in new Interpretation and Policy .11 to Rule
31.10. This new Interpretation and Policy would state that the
compensation committee of an issuer, in its capacity as a committee of
the board of directors, may, in its sole discretion, retain or obtain
the advice of a compensation consultant, independent legal counsel or
other adviser. The compensation committee shall be directly responsible
for the appointment, compensation and oversight of the work of any
compensation consultant, independent legal counsel and other adviser
retained by the compensation committee. Nothing in this Interpretation
and Policy .11 to Rule 31.10 shall be construed to require the
compensation committee to implement or act consistently with the advice
or recommendations of the compensation consultant, independent legal
counsel or other adviser to the compensation committee, or to affect
the ability or obligation of a compensation committee to exercise its
own judgment in fulfillment of the duties of the compensation
committee.
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\14\ 17 CFR 240.10C-1(b)(2).
---------------------------------------------------------------------------
Under this new Interpretation and Policy .11 to Rule 31.10, each
listed issuer must provide for appropriate funding, as determined by
the compensation committee, in its capacity as a committee of the board
of directors, for payment of reasonable compensation to a compensation
consultant, independent legal counsel or any other adviser retained by
the compensation committee.
Under this new Interpretation and Policy .11 to Rule 31.10, the
compensation committee of a listed issuer may select a compensation
consultant, legal counsel or other adviser to the compensation
committee only after taking into consideration the following factors:
(1) The provision of other services to the issuer by the person that
employs the compensation consultant, legal counsel or other adviser,
(2) the amount of fees received from the issuer by the person that
employs the compensation consultant, legal counsel or other adviser, as
a percentage of the total revenue of the person that employs the
compensation consultant, legal counsel or other adviser, (3) the
policies and procedures of the person that employs the compensation
consultant, legal counsel or other adviser that are designed to prevent
conflicts of interest, (4) any business or personal relationship of the
compensation consultant, legal counsel or other adviser with a member
of the compensation committee, (5) any stock of the issuer owned by the
compensation consultant, legal counsel or other adviser, and (6) any
business or personal relationship of the compensation consultant, legal
counsel, other adviser or the person employing the adviser with an
executive office of the issuer. A compensation committee must consider
these factors with respect to any compensation consultant, legal
counsel or other advisor that provides advice to the compensation
committee (other than in-house legal counsel).
The requirements of this Interpretation and Policy .11 to Rule
31.10 shall not apply to (1) any controlled company or to any smaller
reporting company, (2) the listing of a security futures product
cleared by a clearing agency that is registered pursuant to section 17A
of the Act (15 U.S.C. 78q-1) or that is exempt from the registration
requirements of section 17A(b)(7)(A) (15 U.S.C. 78q-1(b)(7)(A)), or (3)
the listing of a standardized option, as defined in Sec. 240.9b-
1(a)(4), issued by a clearing agency that is registered pursuant to
section 17A of the Act (15 U.S.C. 78q-1). These exemptions comply with
those stated in the New Rule.\15\ To be clear, small reporting
companies are still subject to other corporate governance rules, as
applicable
---------------------------------------------------------------------------
\15\ 17 CFR 240.10C-1(b)(5).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \16\ and the rules and regulations thereunder and, in
particular, the requirements of Section 6(b) of the Act.\17\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \18\ requirements that the rules of
an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest. The proposed changes will protect investors by
ensuring independent and well-informed determination of executive
compensation. In addition, the Exchange believes that the proposed
changes bring the Exchange into compliance with the requirements
described in the New Rule.
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\16\ 15 U.S.C. 78s(b)(1).
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
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The Exchange further believes that the proposed changes are
consistent with the New Rule. Further, these proposed changes, in
ensuring independent determination of executive compensation, will also
improve investor confidence regarding executive compensation. This
improved investor confidence will perfect the mechanism for a free and
open market and a national market system.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal
[[Page 62562]]
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2012-094 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2012-094. This file
number should be included on the subject line if email 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 Web site viewing and
printing in the Commission's Public Reference Room on official business
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for inspection and copying at the
principal offices 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-CBOE-2012-094, and should be submitted on or before
November 5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-25283 Filed 10-12-12; 8:45 am]
BILLING CODE 8011-01-P
