Self-Regulatory Organizations; NYSE MKT LLC; Order Granting Approval of Proposed Rule Change To Harmonize the Requirements of the NYSE MKT Company Guide With the Periodic and Semi-Annual Reporting Requirements of the NYSE, 29592-29597 [2017-13590]
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operative delay so that the proposed
rule change may become effective on
June 27, 2017, permitting the proposed
change to take effect for the
compression forum scheduled to take
place using the amended procedures
prior to the end of the second quarter.
In justifying its requested waiver, the
Exchange noted that bank-imposed
capital limits may impact certain TPHs
on at least a quarterly basis, which can
effectively limit the amount of liquidity
that such TPHs, including some MarketMakers, are willing or able to provide in
SPX options. The month of June is the
end of a quarter, and the Exchange
expressed concern that those bank
capital requirements may have adverse
consequences on investors if the
impacted TPHs are not able to more
effectively reduce their open interest in
SPX. The Exchange therefore believes
that it is in the best interest of investors
and the general public to help ensure
consistent continued depth of liquidity
in the SPX options market by allowing
TPHs to utilize the modified
compression forum process set forth in
this proposal on the final three days of
trading of the second quarter.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because this waiver will enable the
Exchange to hold a compression forum
for SPX options under the proposed
amended procedures prior to the end of
the second quarter, thereby helping to
facilitate transactions and remove
impediments to quarter-end trading in
SPX options. The Commission notes
that CBOE’s compression forum rule, as
proposed to be amended, is limited in
its application, involves no material
changes to how trading is conducted on
the Exchange, involves a process in
which participation is voluntary and
open to all, and is designed as a means
to help Market Makers and other market
participants, as well as their clearing
brokers, to close positions in SPX
options that they carry on their books
and which may impact their available
capital. For this reason, the Commission
hereby waives the 30-day operative
delay and designates the proposal
effective on June 27, 2017.25
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
25 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
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–2017–049 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2017–049. 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, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–13585 Filed 6–28–17; 8:45 am]
BILLING CODE 8011–01–P
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:
PO 00000
2017–049 and should be submitted on
or before July 20, 2017.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81016; File No. SR–
NYSEMKT–2017–23]
Self-Regulatory Organizations; NYSE
MKT LLC; Order Granting Approval of
Proposed Rule Change To Harmonize
the Requirements of the NYSE MKT
Company Guide With the Periodic and
Semi-Annual Reporting Requirements
of the NYSE
June 23, 2017.
I. Introduction
On April 25, 2017, NYSE MKT LLC
(the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to harmonize the
periodic reporting requirements of the
NYSE MKT Company Guide (the
‘‘Company Guide’’) with those of the
New York Stock Exchange LLC
(‘‘NYSE’’). The proposed rule change
was published for comment in the
Federal Register on May 12, 2017.3 The
Commission received no comments
regarding the proposal. This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange has proposed to
harmonize the requirements of the
Company Guide with respect to (i)
periodic reporting and (ii) semi-annual
reporting by foreign private issuers,
with those of the NYSE Listed Company
Manual (‘‘NYSE Manual’’).
A. Amendment to Annual Report
Requirements
Currently, under Section 610(a) of the
Company Guide, listed companies must
provide specific enumerated disclosures
with regard to outstanding options.4 The
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80619
(May 8, 2017), 82 FR 22170 (‘‘Notice’’).
4 Specifically, Section 610(a) provides that a
listed company must disclose in its annual report
to security holders, for the year covered by the
1 15
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Exchange proposes to remove these
requirements because such companies
are already required to include
disclosures in their Form 10–K
regarding options available under equity
compensation plans, pursuant to Item
201(d) of Regulation S–K, and options
issued as executive compensation,
pursuant to Item 402 of Regulation S–
K.5 The Exchange believes that it is
appropriate to defer to the Commission
in determining what disclosures should
be required of a listed company with
respect to its outstanding options.6
Section 610(a) also currently specifies
that a company that fails to file its
annual report on Forms 10–K, 20–F, 40–
F or N–CSR with the Commission in a
timely manner would be subject to
delisting pursuant to Section 1002(d).7
The Exchange proposes to amend this
provision to provide that companies
delayed in making these filings would
be subject to the compliance procedures
set forth in proposed Section 1007 of the
Company Guide, which establishes
compliance procedures for companies
that are delayed in filing their annual
and quarterly reports with the
Commission, as further discussed
below.
Section 610(b) currently makes
reference to providing notice of material
news to the Exchange’s StockWatch and
Listing Qualifications Departments. The
Exchange proposes to delete these
outdated references and proposes to
include a statement that companies
should comply with the Exchange’s
material news policies set forth in
Sections 401 and 402 of the Company
Guide by providing notice to the
Exchange’s Market Watch Group
pursuant to the material news
notification requirements of Sections
401 and 402.8
Additionally, Section 610(b) of the
Company Guide currently provides that
a listed company that receives an audit
opinion that contains a going concern
report: (a) The number of unoptioned shares
available at the beginning and at the close of the
year for the granting of options under an option
plan; and (b) any changes in the exercise price of
outstanding options, through cancellation and
reissuance or otherwise, except price changes
resulting from the normal operation of anti-dilution
provisions of the options.
5 See Notice, supra note 3, at 22171.
6 Id.
7 Section 1002(d) of the Company Guide provides
that the Exchange, as a matter of policy, will
consider the suspension of trading in, or removal
from listing or unlisted trading of, any security
when, in the opinion of the Exchange, the issuer
has failed to comply with its listing agreements
with the Exchange.
8 The Exchange has proposed to delete the related
contact information for the Exchange’s StockWatch
and Listing Qualifications Department in Section
610(b) of the Company Guide.
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‘‘qualification’’ must make a public
announcement through the news media
disclosing the receipt of such qualified
opinion. The Exchange proposes to
replace the reference to a going concern
‘‘qualification’’ with a reference to a
going concern ‘‘emphasis’’ as the
Exchange states that this is a more
accurate accounting characterization.9
In addition, the Exchange proposes to
provide that the public announcement
of the existence of a going concern
emphasis in an audit opinion must be
made contemporaneously with the filing
of such audit opinion with the
Commission, rather than within seven
calendar days of such filing as is
currently the case. The Exchange
believes a going concern emphasis is
material to investors and should be
immediately disclosed.10
The Exchange states that prior to an
amendment in 2009,11 Section 610 of
the Company Guide required a listed
company to physically deliver its
annual report filed with the
Commission to shareholders each
year.12 The Exchange states that, as a
result of the 2009 amendment, Section
610 no longer requires companies to
physically deliver their annual reports
but may instead rely on the fact that
listed company annual reports are
required to be made available on or
through the public Web site of the
Commission or the applicable listed
company.13 Accordingly, the Exchange
proposes to delete Sections 611 (Time of
Publication), 612 (Request for
Extension) and 613 (Good Cause for
Delay) of the Company Guide in their
entirety.14
Section 611 specifies timeframes
within which a company’s hard copy
annual report must be filed with the
Exchange and submitted to
shareholders. The Exchange proposes to
delete this provision as Section 610 no
longer requires the delivery of hard
copy annual reports and proposed
Section 1007 will include detailed
compliance requirements with respect
to delayed annual report filings.15
Similarly, Section 612 sets forth a
process for companies to request an
extension of time from the Exchange to
distribute hard copy annual reports to
their shareholders. The Exchange
proposes to delete this requirement, as
9 See
Notice, supra note 3, at 22171.
10 Id.
11 See Securities Exchange Act Release No. 59685
(April 1, 2009), 74 FR 16031 (April 8, 2009) (SR–
NYSEAmex–2009–04).
12 See Notice, supra note 3, at 22171.
13 Id.
14 The Exchange has proposed to mark each
deleted section as ‘‘Reserved.’’
15 See Notice, supra note 3, at 22171.
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companies are not required to deliver
hard copy annual reports under its
current rules and proposed Section 1007
will establish a process for granting
companies additional time when they
are delayed in submitting their annual
reports to the Commission.16 Section
613 specifies circumstances under
which good cause may exist for a
company being delayed in the
publication of its annual report. The
Exchange proposes to delete this
provision because all determinations as
to the continued listing of companies
that are delayed in their annual report
filings will be made pursuant to the
provisions of proposed Section 1007.17
B. Amendment to Timely Filing Criteria
Currently, the Exchange provides
listed companies that are delinquent in
submitting required periodic filings
with a compliance plan under its
general provisions for companies that
are non-compliant with Exchange rules,
as set forth in Section 1009 (Continued
Listing Evaluation and Follow-Up) of
the Company Guide. Section 1009(b)
gives the Exchange the sole discretion to
grant companies a time period of up to
18 months to regain compliance and
does not provide specific guidance on
how compliance periods should be
administered for companies delinquent
in submitting their periodic filings.18 In
contrast, Section 802.01E of the NYSE
Manual limits companies to a maximum
cure period of 12 months to submit all
delayed filings and includes specific
provisions for determining the period of
time companies should be given to
regain compliance within the context of
that maximum 12 month period and
what is required to be eligible for that
additional time.19 Accordingly, the
Exchange believes that the NYSE’s
procedures for dealing with delinquent
filings is more stringent and transparent
than its own and believes that it is
appropriate to harmonize its own
process with Section 802.01E of the
NYSE Manual to avoid confusion among
investors, companies, and their service
providers about the applicable rules.20
Specifically, the Exchange has
proposed to adopt new Section 1007
(‘‘Late Filer Rule’’) 21 to explicitly state
16 Id.
17 Id.
18 Id. at 22170. While Commentary .01 to Section
1009 states that delinquencies of Commission filing
obligations are among those that may warrant the
imposition of a compliance time period shorter than
18 months, the Exchange’s rules do not provide any
guidance on how this is applied or administered.
19 Id.
20 Id.
21 The Exchange states that any company that is
delayed in making a filing that would be subject to
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that, for purposes of remaining listed on
the Exchange, a company would incur
a filing delinquency and be subject to
the procedures set forth in the amended
rule on the date on which any of the
following occurs:
• The company fails to file its annual
report (Forms 10–K, 20–F, 40–F or N–
CSR) or its quarterly report on Form 10–
Q or semi-annual report on Form N–
CSR (‘‘Semi-Annual Form N–CSR’’)
with the Commission by the date such
report was required to be filed by the
applicable form, or if a Form 12b–25
was timely filed with the Commission,
the extended filing due date for the
annual report, Form 10–Q, or SemiAnnual Form N–CSR (for purposes of
this Section 1007, the later of these two
dates, along with any Semi-Annual
Report Filing Due Date as defined
below, will be referred to as the ‘‘Filing
Due Date’’ and the failure to file a report
by the applicable Filing Due Date, a
‘‘Late Filing Delinquency’’); 22
• a listed foreign private issuer fails
to file the Form 6–K containing semiannual financial information required
by proposed Section 110(e) (the ‘‘SemiAnnual Report’’) by the date specified in
that rule (the ‘‘Semi-Annual Report
Filing Due Date’’);
• the company files its annual report
without a financial statement audit
report from its independent auditor for
any or all of the periods included in
such annual report (a ‘‘Required Audit
Report’’ and the absence of a Required
Audit Report, a ‘‘Required Audit Report
Delinquency’’);
• the company’s independent auditor
withdraws a Required Audit Report or
the company files a Form 8–K with the
Commission pursuant to Item 4.02(b)
thereof disclosing that it has been
notified by its independent auditor that
a Required Audit Report or completed
interim review should no longer be
relied upon (a ‘‘Required Audit Report
Withdrawal Delinquency’’); or
• the company files a Form 8–K with
the Commission pursuant to Item
4.02(a) thereof to disclose that
previously issued financial statements
should no longer be relied upon because
of an error in such financial statements
or, in the case of a foreign private issuer,
makes a similar disclosure in a Form 6–
K filed with the Commission or by other
proposed Section 1007 will continue to be subject
to the compliance plan provisions of Section 1009
in relation to that delayed filing, but will be subject
to proposed Section 1007 in relation to any
subsequent delayed filings. See Notice, supra note
3, at 22173.
22 The proposed rule states that the annual report,
Form 10–Q, Semi-Annual Form N–CSR or SemiAnnual Report that gives rise to a Filing
Delinquency shall be referred to therein as the
‘‘Delinquent Report.’’
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means (a ‘‘Non-Reliance Disclosure’’)
and, in either case, the company does
not refile all required corrected financial
statements within 60 days of the
issuance of the Non-Reliance Disclosure
(an ‘‘Extended Non-Reliance Disclosure
Event’’ and, together with a Late Filing
Delinquency, a Required Audit Report
Delinquency and a Required Audit
Report Withdrawal Delinquency, a
‘‘Filing Delinquency’’) (for purposes of
the cure periods described below, an
Extended Non-Reliance Disclosure
Event would be deemed to have
occurred on the date of original issuance
of the Non-Reliance Disclosure); if the
Exchange believes that a company is
unlikely to refile all required corrected
financial statements within 60 days after
a Non-Reliance Disclosure or that the
errors giving rise to such Non-Reliance
Disclosure are particularly severe in
nature, the Exchange may, in its sole
discretion, determine earlier than 60
days that the applicable company has
incurred a Filing Delinquency as a
result of such Non-Reliance
Disclosure.23
Additionally, under the proposed
rule, the Exchange would deem a
company to have incurred a Filing
Delinquency if the company submits an
annual report, Form 10–Q, or SemiAnnual Form N–CSR to the Commission
by the applicable Filing Due Date, but
such filing fails to include an element
required by the applicable form and the
Exchange determines in the Exchange’s
sole discretion that such deficiency is
material in nature.24
A company that has an uncured Filing
Delinquency will not incur an
additional Filing Delinquency if it fails
to file a subsequent annual report, Form
10–Q, Semi-Annual Form N–CSR or
Semi-Annual Report (a ‘‘Subsequent
Report’’) by the applicable Filing Due
23 See proposed Section 1007 of the Company
Guide. Id.
24 Id. The Exchange states that the following is a
non-exclusive list of scenarios involving material
filing elements that would cause the Exchange to
deem the company to have incurred a Late Filing
Delinquency: The filing does not include required
financial statements or a required audit opinion; a
required financial statement audit opinion includes
qualifying or disclaiming language or the auditor
provides an adverse financial statement audit
opinion; a required financial statement audit
opinion is unsigned or undated; there is a
discrepancy between the period end date for
required financial statements and the date cited in
the related audit report; the company’s auditor has
not conducted a SAS 100 review with respect to the
company’s Form 10–Q; required chief executive
officer or chief financial officer certifications are
missing; a Sarbanes-Oxley Act Section 404 required
internal control report or auditor certification is
missing; the filing does not comply with the
applicable SEC XBRL requirements; or the filing
does not include signatures of officers or directors
required by the applicable form. See Notice, supra
note 3, at 22172, n.8.
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Frm 00121
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Date for such Subsequent Report.25
However, in order for the company to
cure its initial Filing Delinquency, no
Subsequent Report may be delinquent
or deficient on the date by which the
initial Filing Delinquency is required to
be cured.26
Upon the occurrence of a Filing
Delinquency, the Exchange would
promptly send written notification to a
company of the procedures relating to
late filings (the ‘‘Filing Delinquency
Notification’’). Within five days of the
date of the Filing Delinquency
Notification, the company would be
required to contact the Exchange to
discuss the status of the Delinquent
Report and issue a press release
disclosing the occurrence of the Filing
Delinquency, the reason therefor, and (if
known) the anticipated date such Filing
Delinquency will be cured via the filing
or refiling of the applicable report, as
the case may be.27
During the six-month period from the
date of the Filing Delinquency (the
‘‘Initial Cure Period’’), the Exchange
would monitor the company and the
status of the Delinquent Report and any
Subsequent Reports, including through
contact with the company, until the
Filing Delinquency is cured.28 If the
company fails to cure the Filing
Delinquency within the Initial Cure
Period, the Exchange may, in its sole
discretion, allow the company’s
securities to be traded for up to an
additional six-month period (the
‘‘Additional Cure Period’’) depending
on the company’s specific
circumstances.29 If the Exchange
determines that an Additional Cure
Period is not appropriate, suspension
and delisting procedures would
commence in accordance with the
procedures set out in Section 1010
(Procedures for Delisting and Removal)
of the Company Guide.30 A company
would not be eligible to follow the
procedures outlined in Section 1009
25 See
id.
id.
27 See proposed Section 1007 of the Company
Guide. If the company has not issued the required
press release within five days of the date of the
Filing Delinquency Notification, the Exchange will
issue a press release stating that the company has
incurred a Filing Delinquency and providing a
description thereof. Id.
28 Id. Under the proposed rule, a company that
has an uncured Filing Delinquency would not incur
an additional Filing Delinquency if it fails to file a
Subsequent Report by the applicable Filing Due
Date. However, in order for the company to cure its
initial Filing Delinquency, no Subsequent Report
may be delinquent or deficient on the date by
which the initial Filing Delinquency is required to
be cured. Id.
29 Id.
30 Id.
26 See
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with respect to these criteria.31
Notwithstanding the foregoing,
however, under the proposed rule the
Exchange may in its sole discretion
decide: (i) Not to afford a company any
Initial Cure Period or Additional Cure
Period, as the case may be, at all; or (ii)
at any time during the Initial Cure
Period or Additional Cure Period, as the
case may be, to truncate the Initial Cure
Period or Additional Cure Period and
immediately commence suspension and
delisting procedures if the company is
subject to delisting pursuant to any
other provision of the Company Guide,
including if the Exchange believes, in
the Exchange’s sole discretion, that
continued listing and trading of a
company’s securities on the Exchange is
inadvisable or unwarranted in
accordance with Sections 1001–1006 of
the Company Guide.32
The Exchange may also commence
suspension and delisting procedures if
it believes, in its sole discretion, that it
is advisable to do so based on an
analysis of all relevant factors,
including, but not limited to:
• Whether there are allegations of
financial fraud or other illegality in
relation to the company’s financial
reporting;
• the resignation or termination by
the company of the company’s
independent auditor due to a
disagreement;
• any extended delay in appointing a
new independent auditor after a prior
auditor’s resignation or termination;
• the resignation of members of the
company’s audit committee or other
directors;
• the resignation or termination of the
company’s chief executive officer, chief
financial officer or other key senior
executives;
• any evidence that it may be
impossible for the company to cure its
Filing Delinquency within the cure
periods otherwise available under the
Late Filer Rule; and
• any past history of late filings.33
In determining whether an Additional
Cure Period after the expiration of the
Initial Cure Period is appropriate, the
Exchange would consider the likelihood
that the Delinquent Report and all
Subsequent Reports can be filed or
refiled, as applicable, during the
Additional Cure Period, as well as the
company’s general financial status,
based on information provided by a
variety of sources, including the
company, its audit committee, its
outside auditors, the staff of the
C. Amendment to Semi-Annual
Reporting by Foreign Private Issuers
The Exchange has proposed to amend
Section 110 (Securities of Foreign
Companies) by adding new paragraph
(e), which provides that each listed
foreign private issuer will be required,
at a minimum, to submit to the
Commission a Form 6–K that includes
(i) an interim balance sheet as of the end
of its second fiscal quarter and (ii) a
semi-annual income statement that
covers its first two fiscal quarters.38 This
Form 6–K must be submitted no later
than six months following the end of the
company’s second fiscal quarter.39
Additionally, the financial information
included in the Form 6–K must be
presented in English, but does not have
34 Id.
35 Id.
36 Id.
37 Id.
38 The Exchange proposes to renumber existing
Section 110(e) to Section 110(f).
39 See proposed Section 110(e) of the Company
Guide.
31 Id.
32 Id.
33 Id.
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Commission and any other regulatory
body.34 Further, the Exchange would
strongly encourage companies to
provide ongoing disclosure on the status
of the Delinquent Report and any
Subsequent Reports to the market
through press releases, and would also
take the frequency and detail of such
information into account in determining
whether an Additional Cure Period is
appropriate.35
As proposed, if the Exchange
determines that an Additional Cure
Period is appropriate and the company
fails to file the Delinquent Report and
all Subsequent Reports by the end of
such additional period, suspension and
delisting procedures would commence
immediately in accordance with the
procedures set out in Section 1010.36 In
no event would the Exchange continue
to trade a company’s securities if: (i) It
has failed to cure its Filing Delinquency;
or (ii) it is not current with all
Subsequent Reports, on the date that is
twelve months after its initial Filing
Delinquency.37
The Exchange also proposed to
include a cross-reference to proposed
Section 1007 in Section 1101 of the
Company Guide, which discusses
general Commission filing obligations of
listed companies. In addition, the
Exchange proposed to remove a
reference to a company’s Listing
Qualifications analyst in Section 1101
and replace it with a reference to
Exchange staff, as the Exchange no
longer has a department under the
Listings Qualification title.
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to be reconciled to U.S. GAAP.40 The
Exchange has stated that new Section
110(e) would provide a more specific
interim reporting requirement for listed
foreign private issuers and harmonize
such rules with Section 203.03 of the
NYSE Manual.41
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange.42 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Exchange
Act,43 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; and
are not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission believes that the
goal of ensuring that listed companies
have filed accurate, up-to-date reports
under the Exchange Act is of critical
importance so that investors have
reliable information upon which they
can make informed investment
decisions. For the same reason, it is also
important that companies with stale or
defective publicly filed financial
information do not remain listed on a
national securities exchange if such
information is not brought up-to-date or
the deficiency cured in a timely manner.
As noted above, under the existing
provisions of the Company Guide, a
delinquent filer of Commission required
periodic reports could receive up to 18
months to become up to date in its
filings. While the Company Guide
suggests a time period of less than 18
months to achieve compliance may be
appropriate for late filers, there is no
specific guidance in the Company Guide
on how such a determination is made
and for what time period. The
Commission has also previously noted
the importance of ensuring that
companies listed on a national
securities exchange are up to date in
40 See proposed Section 110(e) of the Company
Guide.
41 See Notice, supra note 3, at 22170.
42 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
43 15 U.S.C. 78f(b)(5).
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their filings so accurate and timely
information is available to investors.44
The Commission believes that the
proposed rule change should help to
prevent an undue amount of time from
passing without the company’s annual,
quarterly or semi-annual reports, as
applicable,45 being provided to the
marketplace. In addition, the
Commission believes that harmonizing
the requirements of the Company Guide
with respect to periodic reporting with
those of the NYSE Manual are
reasonably designed to help investors
and companies avoid confusion and
achieve consistent results for the
applicable rules.
The Commission also believes that
proposed Section 1007 should help to
ensure that companies cannot continue
to trade for extended periods of time
without making their annual and
interim reports publicly available. In
this regard, the Commission notes that
the proposed rule change should help
reduce those situations in which
investors continuously have outdated or
stale financial information upon which
to base their investment decisions. As is
discussed above, a company that has an
uncured Filing Delinquency would not
be able to cure the Filing Delinquency
until all subsequent annual or interim
reports that are delinquent have been
filed.46 In other words, once it is a
delinquent filer, a company can only
become current in its filings if all of its
annual and interim filings have been
submitted to the Commission within 12
months of the first Filing Delinquency.
Furthermore, a listed company that
demonstrates a history of delinquent
filings could still be subject to delisting
under the proposed rule change without
the Exchange affording it any cure
period at all (or at any time during an
initial or additional cure period) as a
result of the Exchange’s ability to
commence suspension and delisting
procedures based on a company’s ‘‘past
history of late filings.’’ 47 The
Commission believes these provisions
will enable the Exchange to delist those
companies that have demonstrated a
history of providing outdated or stale
financial information to investors and
help the Exchange address the situation
where a company becomes current
within 12 months and then a short
while later, such as by the next
Commission filing date, incurs another
Filing Delinquency. In such a case, the
44 See, e.g., Securities and Exchange Act Release
No. 51777 (June 2, 2005), 70 FR 33573 (June 8,
2005).
45 Hereinafter, quarterly and semi-annual reports
shall be referred to as ‘‘interim reports.’’
46 See supra note 28.
47 See supra note 33 and accompanying text.
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18:29 Jun 28, 2017
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Commission would be concerned that
investors continue to rely on outdated
information and do not have current
financial information on a timely basis
in which to make their trading and
investment decisions. The Commission
believes that the proposal is reasonably
designed to further these goals of
investor protection and therefore is
consistent with the Exchange Act and
Section 6(b)(5) thereunder.
Additionally, by clearly stating that
the Exchange’s Late Filer Rule applies to
companies that file late or defective
annual and interim reports, the
Commission believes that the proposal
should benefit the public interest and
protect investors by helping to assure
that a larger segment of the financial
information investors may rely upon
when deciding whether to invest in a
company listed on the Exchange is updo-date and accurate. Further, by
detailing what the Exchange considers
to be a defective annual or interim
report and how the Exchange treats
listed companies whose filed reports
suffer from a deficiency, the
Commission believes that the proposed
rule change promotes just and equitable
principles of trade by providing
additional transparency to listed
companies as to what could cause them
to become subject to proposed Section
1007 for a late or deficient filing. For
example, as noted above, Exchange
rules will be clear that a company that
files a Form 8–K pursuant to Item
4.02(b) thereof and has a Required Audit
Report Withdrawal Delinquency will be
subject to the procedures in proposed
Section 1007 and can only be extended
a maximum of 12 months to cure the
delinquency. Moreover, and
importantly, this additional
transparency, as well as the more
stringent requirements set forth in the
proposed rule, could encourage listed
companies to take extra care to ensure
that their filed reports are timely and
accurate, which would protect investors
and the public interest. To the extent
this occurs, the Commission believes
that the proposal also has the potential
to enhance the reliability of reports filed
by companies listed on the Exchange as
well as investor confidence in such
reports, which should help to perfect
the mechanism of a free and open
market.
Proposed Section 1007 also gives the
Exchange discretion in certain areas
when a filing fails to include an element
required by the applicable Commission
form and the Exchange determines in its
sole discretion that such deficiency is
material in nature. Proposed Section
1007 provides a non-exclusive list of
elements that, if missing from a filing,
PO 00000
Frm 00123
Fmt 4703
Sfmt 4703
would cause the Exchange to deem the
company to have incurred a Filing
Delinquency. The Commission notes
that any determination by the Exchange
that a missing element is not material
for purposes of a Filing Delinquency has
no effect on the company’s compliance
with Commission rules. The
Commission further notes that while
there is a provision in the new rules
concerning a listed company that files a
Form 8–K or Form 6–K announcing a
Non-Reliance Disclosure having 60 days
to correct its financial statements, the
proposal makes clear that the Filing
Delinquency will date from the original
announcement of the Non-Reliance
Disclosure if it is not cured within 60
days. This will ensure that the period
for curing a Non-Reliance Disclosure
will not extend past the 12 month
period given to listed companies that
have had another type of Filing
Delinquency.
The Commission notes that the time
periods allowed to cure a Filing
Delinquency are maximums for
purposes of continued listing. The new
provisions being adopted provide
additional transparency to investors and
the marketplace but also give the
Exchange discretion to analyze the
particular case and consider whether it
is appropriate to commence suspension
and delisting procedures immediately
based on the particular facts, as well
giving the Exchange discretion to grant
an additional six month cure period, or
shorten any time periods previously
given. The new rules provide additional
transparency by setting forth certain
factors that may cause immediate
delisting or shortened periods, such as
resignation of a company’s chief
executive officer, financial officer or
members of the audit committee;
allegations of fraud or other illegality in
relation to financial reporting; and past
history of late filings. We expect the
Exchange to carefully review each Filing
Deficiency and ensure that the public
interest is being served by continued
trading. As noted above, the importance
of timely and complete Commission
filings to ensure that investors and the
marketplace have accurate and up-todate information about publicly traded
companies is of extreme importance for
confidence in our public markets.48
48 As noted above, the Exchange strongly
encourages companies to provide ongoing
disclosure on the status of the Delinquent Report
and any Subsequent Reports to the market through
press releases, and would also take the frequency
and detail of such information into account in
determining whether an Additional Cure Period is
appropriate. The Commission believes such
disclosures are very important to the marketplace
during the delinquency period.
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The Commission believes that the
amendments to Chapter Six of the
Company Guide will add clarity to the
periodic reporting requirements in
connection with proposed Section 1007.
For example, as noted above, the
deletion and replacement in Section
610(a) of a reference to Section 1002(d)
regarding delisting procedures with
proposed Section 1007 will avoid
confusion among investors and
companies about the applicable rules for
failure to timely file an annual report
with the Commission. In addition, the
Commission believes the proposed
modifications to delete Sections 611
through 613 of the Company Guide are
reasonably designed to protect investors
and the public interest by removing
obsolete language that will be replaced
with a more detailed compliance regime
in proposed Section 1007.
The Commission further believes the
Exchange’s deletion of the specific
enumerated disclosures with regard to
outstanding options in Section 610(a) of
the Company Guide is consistent with
the Exchange Act since listed
companies are already required to
comply with the Commission’s
disclosure regime for options in the
companies’ Form 10–K. In this regard
the Commission believes it is reasonable
for the Exchange to determine it will
defer to Commission disclosure
requirements as to options, some of
which are similar to the NYSE
requirements.49 Similarly, the deletion
of outdated references to the Exchange’s
StockWatch and Listing Qualifications
Departments in Section 610(b) of the
Company Guide and their replacement
with a statement that companies should
comply with the Exchange’s material
news policies set forth in Sections 401
and 402 would provide additional
transparency to a listed company on the
disclosure steps that it must take when
it receives an audit opinion that
contains a going concern emphasis.50
Additionally, the Commission
believes that the amendment to require
the public announcement of the
existence of a going concern in an audit
opinion be made contemporaneously
with the filing of such audit opinion
with the Commission furthers investor
protection by ensuring that investors are
made aware, as soon as possible, of
material information that may impact
their investment decisions. The
Commission also notes that eliminating
49 See
supra note 5 and accompanying text.
Commission further believes that the
Exchange’s proposal to update the reference to a
going concern ‘‘qualification’’ with a reference to a
going concern ‘‘emphasis’’ would align the
Exchange’s rules more accurately with general
accounting characterizations.
50 The
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the possibility that a company can delay
the public announcement of a going
concern opinion for up to seven days, as
currently permitted under the Company
Guide, will help to further investor
protection consistent with Section
6(b)(5) of the Exchange Act.
Finally, the Commission believes the
proposed amendment to harmonize the
semi-annual reporting requirement by
foreign private issuers in new Section
110(e) with the applicable rule in the
NYSE Manual would provide a more
precise compliance guideline and
establish a minimum interim reporting
regime applicable to all listed foreign
private issuers.51 Additionally, the
Commission believes the proposed
amendment is consistent with the
investor protection objectives of Section
6(b)(5) because it is reasonably designed
to ensure that foreign private issuers
provide timely financial information
that is necessary to enable investors to
make informed investment decisions.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,52
that the proposed rule change (SR–
NYSEMKT–2017–23) be, and hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.53
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–13590 Filed 6–28–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81011; File No. SR–FINRA–
2017–012]
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend FINRA
Rule 7730 (Trade Reporting and
Compliance Engine (TRACE)) to reduce
the minimum delay from 18 months to
six months for transactions included in
the Historic TRACE Data Sets relating to
corporate and agency debt securities.
The proposed rule change was
published for comment in the Federal
Register on May 22, 2017.3 The
Commission did not receive any
comments on the proposal.4 For the
reasons discussed below, the
Commission approving the proposed
rule change.
II. Description of the Proposal
FINRA Rule 7730, among other
things, sets forth the TRACE data
products offered by FINRA and the fees
applicable to such products. In addition
to a real-time data feed, FINRA offers a
Historic Corporate Bond Data Set,
Agency Data Set, Securitized Product
Data Set, and Rule 144A Data Set
(collectively, the ‘‘Historic TRACE
Data’’).5 The Historic TRACE Data
includes information such as the price,
date, time of execution, yield, and
uncapped volume for each transaction
occurring at least 18 months ago.6
FINRA originally established this 18month delay to address the possibility
that the Historic TRACE Data might be
used to identify positions or strategies of
market participants.7 FINRA has
proposed to reduce the delay applicable
to transactions included in the Historic
Corporate Bond Data Set and the
Historic Agency Data Set—and Rule
144A transactions in corresponding
securities (together, the ‘‘Corporate and
Agency Historic TRACE Data’’)—from a
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80685
(May 16, 2017), 82 FR 23385 (May 22, 2017)
(‘‘Notice’’).
4 FINRA previously solicited comments on the
proposal as Regulatory Notice 15–24 (June 2015)
and received four comments. Regulatory Notice 15–
24 and the related comment letters are available as
Exhibit 2 to the Notice on both FINRA and the
SEC’s Web sites.
5 The Historic TRACE Data originally included
only the Corporate Bond and Agency Data Sets. The
Securitized Product Data Set and the Rule 144A
Data Set were added later as information about
transactions in those securities became subject to
public dissemination. FINRA has stated that
additional securities may be included in Historic
TRACE Data as they become subject to public
dissemination.
6 Historic TRACE Data also may include
transactions or items of information that were not
previously disseminated, such as exact trade
volumes, where the real-time disseminated amount
was capped.
7 See Securities Exchange Act Release No. 56327
(August 28, 2007), 72 FR 51689, 51690 (September
10, 2007).
2 17
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Granting
Approval of Proposed Rule Change To
Reduce the Delay Period for
Transactions Included in the Historic
TRACE Data Sets Relating to
Corporate and Agency Debt Securities
June 23, 2017.
I. Introduction
On May 12, 2017, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
51 See,
e.g., Section 203.03 of the NYSE Manual.
U.S.C. 78f(b)(2).
53 17 CFR 200.30–3(a)(12).
52 15
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29597
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]]>Agencies
[Federal Register Volume 82, Number 124 (Thursday, June 29, 2017)]
[Notices]
[Pages 29592-29597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13590]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81016; File No. SR-NYSEMKT-2017-23]
Self-Regulatory Organizations; NYSE MKT LLC; Order Granting
Approval of Proposed Rule Change To Harmonize the Requirements of the
NYSE MKT Company Guide With the Periodic and Semi-Annual Reporting
Requirements of the NYSE
June 23, 2017.
I. Introduction
On April 25, 2017, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to harmonize the periodic reporting requirements of the NYSE MKT
Company Guide (the ``Company Guide'') with those of the New York Stock
Exchange LLC (``NYSE''). The proposed rule change was published for
comment in the Federal Register on May 12, 2017.\3\ The Commission
received no comments regarding the proposal. This order approves the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 80619 (May 8, 2017),
82 FR 22170 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange has proposed to harmonize the requirements of the
Company Guide with respect to (i) periodic reporting and (ii) semi-
annual reporting by foreign private issuers, with those of the NYSE
Listed Company Manual (``NYSE Manual'').
A. Amendment to Annual Report Requirements
Currently, under Section 610(a) of the Company Guide, listed
companies must provide specific enumerated disclosures with regard to
outstanding options.\4\ The
[[Page 29593]]
Exchange proposes to remove these requirements because such companies
are already required to include disclosures in their Form 10-K
regarding options available under equity compensation plans, pursuant
to Item 201(d) of Regulation S-K, and options issued as executive
compensation, pursuant to Item 402 of Regulation S-K.\5\ The Exchange
believes that it is appropriate to defer to the Commission in
determining what disclosures should be required of a listed company
with respect to its outstanding options.\6\
---------------------------------------------------------------------------
\4\ Specifically, Section 610(a) provides that a listed company
must disclose in its annual report to security holders, for the year
covered by the report: (a) The number of unoptioned shares available
at the beginning and at the close of the year for the granting of
options under an option plan; and (b) any changes in the exercise
price of outstanding options, through cancellation and reissuance or
otherwise, except price changes resulting from the normal operation
of anti-dilution provisions of the options.
\5\ See Notice, supra note 3, at 22171.
\6\ Id.
---------------------------------------------------------------------------
Section 610(a) also currently specifies that a company that fails
to file its annual report on Forms 10-K, 20-F, 40-F or N-CSR with the
Commission in a timely manner would be subject to delisting pursuant to
Section 1002(d).\7\ The Exchange proposes to amend this provision to
provide that companies delayed in making these filings would be subject
to the compliance procedures set forth in proposed Section 1007 of the
Company Guide, which establishes compliance procedures for companies
that are delayed in filing their annual and quarterly reports with the
Commission, as further discussed below.
---------------------------------------------------------------------------
\7\ Section 1002(d) of the Company Guide provides that the
Exchange, as a matter of policy, will consider the suspension of
trading in, or removal from listing or unlisted trading of, any
security when, in the opinion of the Exchange, the issuer has failed
to comply with its listing agreements with the Exchange.
---------------------------------------------------------------------------
Section 610(b) currently makes reference to providing notice of
material news to the Exchange's StockWatch and Listing Qualifications
Departments. The Exchange proposes to delete these outdated references
and proposes to include a statement that companies should comply with
the Exchange's material news policies set forth in Sections 401 and 402
of the Company Guide by providing notice to the Exchange's Market Watch
Group pursuant to the material news notification requirements of
Sections 401 and 402.\8\
---------------------------------------------------------------------------
\8\ The Exchange has proposed to delete the related contact
information for the Exchange's StockWatch and Listing Qualifications
Department in Section 610(b) of the Company Guide.
---------------------------------------------------------------------------
Additionally, Section 610(b) of the Company Guide currently
provides that a listed company that receives an audit opinion that
contains a going concern ``qualification'' must make a public
announcement through the news media disclosing the receipt of such
qualified opinion. The Exchange proposes to replace the reference to a
going concern ``qualification'' with a reference to a going concern
``emphasis'' as the Exchange states that this is a more accurate
accounting characterization.\9\ In addition, the Exchange proposes to
provide that the public announcement of the existence of a going
concern emphasis in an audit opinion must be made contemporaneously
with the filing of such audit opinion with the Commission, rather than
within seven calendar days of such filing as is currently the case. The
Exchange believes a going concern emphasis is material to investors and
should be immediately disclosed.\10\
---------------------------------------------------------------------------
\9\ See Notice, supra note 3, at 22171.
\10\ Id.
---------------------------------------------------------------------------
The Exchange states that prior to an amendment in 2009,\11\ Section
610 of the Company Guide required a listed company to physically
deliver its annual report filed with the Commission to shareholders
each year.\12\ The Exchange states that, as a result of the 2009
amendment, Section 610 no longer requires companies to physically
deliver their annual reports but may instead rely on the fact that
listed company annual reports are required to be made available on or
through the public Web site of the Commission or the applicable listed
company.\13\ Accordingly, the Exchange proposes to delete Sections 611
(Time of Publication), 612 (Request for Extension) and 613 (Good Cause
for Delay) of the Company Guide in their entirety.\14\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 59685 (April 1,
2009), 74 FR 16031 (April 8, 2009) (SR-NYSEAmex-2009-04).
\12\ See Notice, supra note 3, at 22171.
\13\ Id.
\14\ The Exchange has proposed to mark each deleted section as
``Reserved.''
---------------------------------------------------------------------------
Section 611 specifies timeframes within which a company's hard copy
annual report must be filed with the Exchange and submitted to
shareholders. The Exchange proposes to delete this provision as Section
610 no longer requires the delivery of hard copy annual reports and
proposed Section 1007 will include detailed compliance requirements
with respect to delayed annual report filings.\15\ Similarly, Section
612 sets forth a process for companies to request an extension of time
from the Exchange to distribute hard copy annual reports to their
shareholders. The Exchange proposes to delete this requirement, as
companies are not required to deliver hard copy annual reports under
its current rules and proposed Section 1007 will establish a process
for granting companies additional time when they are delayed in
submitting their annual reports to the Commission.\16\ Section 613
specifies circumstances under which good cause may exist for a company
being delayed in the publication of its annual report. The Exchange
proposes to delete this provision because all determinations as to the
continued listing of companies that are delayed in their annual report
filings will be made pursuant to the provisions of proposed Section
1007.\17\
---------------------------------------------------------------------------
\15\ See Notice, supra note 3, at 22171.
\16\ Id.
\17\ Id.
---------------------------------------------------------------------------
B. Amendment to Timely Filing Criteria
Currently, the Exchange provides listed companies that are
delinquent in submitting required periodic filings with a compliance
plan under its general provisions for companies that are non-compliant
with Exchange rules, as set forth in Section 1009 (Continued Listing
Evaluation and Follow-Up) of the Company Guide. Section 1009(b) gives
the Exchange the sole discretion to grant companies a time period of up
to 18 months to regain compliance and does not provide specific
guidance on how compliance periods should be administered for companies
delinquent in submitting their periodic filings.\18\ In contrast,
Section 802.01E of the NYSE Manual limits companies to a maximum cure
period of 12 months to submit all delayed filings and includes specific
provisions for determining the period of time companies should be given
to regain compliance within the context of that maximum 12 month period
and what is required to be eligible for that additional time.\19\
Accordingly, the Exchange believes that the NYSE's procedures for
dealing with delinquent filings is more stringent and transparent than
its own and believes that it is appropriate to harmonize its own
process with Section 802.01E of the NYSE Manual to avoid confusion
among investors, companies, and their service providers about the
applicable rules.\20\
---------------------------------------------------------------------------
\18\ Id. at 22170. While Commentary .01 to Section 1009 states
that delinquencies of Commission filing obligations are among those
that may warrant the imposition of a compliance time period shorter
than 18 months, the Exchange's rules do not provide any guidance on
how this is applied or administered.
\19\ Id.
\20\ Id.
---------------------------------------------------------------------------
Specifically, the Exchange has proposed to adopt new Section 1007
(``Late Filer Rule'') \21\ to explicitly state
[[Page 29594]]
that, for purposes of remaining listed on the Exchange, a company would
incur a filing delinquency and be subject to the procedures set forth
in the amended rule on the date on which any of the following occurs:
---------------------------------------------------------------------------
\21\ The Exchange states that any company that is delayed in
making a filing that would be subject to proposed Section 1007 will
continue to be subject to the compliance plan provisions of Section
1009 in relation to that delayed filing, but will be subject to
proposed Section 1007 in relation to any subsequent delayed filings.
See Notice, supra note 3, at 22173.
---------------------------------------------------------------------------
The company fails to file its annual report (Forms 10-K,
20-F, 40-F or N-CSR) or its quarterly report on Form 10-Q or semi-
annual report on Form N-CSR (``Semi-Annual Form N-CSR'') with the
Commission by the date such report was required to be filed by the
applicable form, or if a Form 12b-25 was timely filed with the
Commission, the extended filing due date for the annual report, Form
10-Q, or Semi-Annual Form N-CSR (for purposes of this Section 1007, the
later of these two dates, along with any Semi-Annual Report Filing Due
Date as defined below, will be referred to as the ``Filing Due Date''
and the failure to file a report by the applicable Filing Due Date, a
``Late Filing Delinquency''); \22\
---------------------------------------------------------------------------
\22\ The proposed rule states that the annual report, Form 10-Q,
Semi-Annual Form N-CSR or Semi-Annual Report that gives rise to a
Filing Delinquency shall be referred to therein as the ``Delinquent
Report.''
---------------------------------------------------------------------------
a listed foreign private issuer fails to file the Form 6-K
containing semi-annual financial information required by proposed
Section 110(e) (the ``Semi-Annual Report'') by the date specified in
that rule (the ``Semi-Annual Report Filing Due Date'');
the company files its annual report without a financial
statement audit report from its independent auditor for any or all of
the periods included in such annual report (a ``Required Audit Report''
and the absence of a Required Audit Report, a ``Required Audit Report
Delinquency'');
the company's independent auditor withdraws a Required
Audit Report or the company files a Form 8-K with the Commission
pursuant to Item 4.02(b) thereof disclosing that it has been notified
by its independent auditor that a Required Audit Report or completed
interim review should no longer be relied upon (a ``Required Audit
Report Withdrawal Delinquency''); or
the company files a Form 8-K with the Commission pursuant
to Item 4.02(a) thereof to disclose that previously issued financial
statements should no longer be relied upon because of an error in such
financial statements or, in the case of a foreign private issuer, makes
a similar disclosure in a Form 6-K filed with the Commission or by
other means (a ``Non-Reliance Disclosure'') and, in either case, the
company does not refile all required corrected financial statements
within 60 days of the issuance of the Non-Reliance Disclosure (an
``Extended Non-Reliance Disclosure Event'' and, together with a Late
Filing Delinquency, a Required Audit Report Delinquency and a Required
Audit Report Withdrawal Delinquency, a ``Filing Delinquency'') (for
purposes of the cure periods described below, an Extended Non-Reliance
Disclosure Event would be deemed to have occurred on the date of
original issuance of the Non-Reliance Disclosure); if the Exchange
believes that a company is unlikely to refile all required corrected
financial statements within 60 days after a Non-Reliance Disclosure or
that the errors giving rise to such Non-Reliance Disclosure are
particularly severe in nature, the Exchange may, in its sole
discretion, determine earlier than 60 days that the applicable company
has incurred a Filing Delinquency as a result of such Non-Reliance
Disclosure.\23\
---------------------------------------------------------------------------
\23\ See proposed Section 1007 of the Company Guide. Id.
---------------------------------------------------------------------------
Additionally, under the proposed rule, the Exchange would deem a
company to have incurred a Filing Delinquency if the company submits an
annual report, Form 10-Q, or Semi-Annual Form N-CSR to the Commission
by the applicable Filing Due Date, but such filing fails to include an
element required by the applicable form and the Exchange determines in
the Exchange's sole discretion that such deficiency is material in
nature.\24\
---------------------------------------------------------------------------
\24\ Id. The Exchange states that the following is a non-
exclusive list of scenarios involving material filing elements that
would cause the Exchange to deem the company to have incurred a Late
Filing Delinquency: The filing does not include required financial
statements or a required audit opinion; a required financial
statement audit opinion includes qualifying or disclaiming language
or the auditor provides an adverse financial statement audit
opinion; a required financial statement audit opinion is unsigned or
undated; there is a discrepancy between the period end date for
required financial statements and the date cited in the related
audit report; the company's auditor has not conducted a SAS 100
review with respect to the company's Form 10-Q; required chief
executive officer or chief financial officer certifications are
missing; a Sarbanes-Oxley Act Section 404 required internal control
report or auditor certification is missing; the filing does not
comply with the applicable SEC XBRL requirements; or the filing does
not include signatures of officers or directors required by the
applicable form. See Notice, supra note 3, at 22172, n.8.
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A company that has an uncured Filing Delinquency will not incur an
additional Filing Delinquency if it fails to file a subsequent annual
report, Form 10-Q, Semi-Annual Form N-CSR or Semi-Annual Report (a
``Subsequent Report'') by the applicable Filing Due Date for such
Subsequent Report.\25\ However, in order for the company to cure its
initial Filing Delinquency, no Subsequent Report may be delinquent or
deficient on the date by which the initial Filing Delinquency is
required to be cured.\26\
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\25\ See id.
\26\ See id.
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Upon the occurrence of a Filing Delinquency, the Exchange would
promptly send written notification to a company of the procedures
relating to late filings (the ``Filing Delinquency Notification'').
Within five days of the date of the Filing Delinquency Notification,
the company would be required to contact the Exchange to discuss the
status of the Delinquent Report and issue a press release disclosing
the occurrence of the Filing Delinquency, the reason therefor, and (if
known) the anticipated date such Filing Delinquency will be cured via
the filing or refiling of the applicable report, as the case may
be.\27\
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\27\ See proposed Section 1007 of the Company Guide. If the
company has not issued the required press release within five days
of the date of the Filing Delinquency Notification, the Exchange
will issue a press release stating that the company has incurred a
Filing Delinquency and providing a description thereof. Id.
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During the six-month period from the date of the Filing Delinquency
(the ``Initial Cure Period''), the Exchange would monitor the company
and the status of the Delinquent Report and any Subsequent Reports,
including through contact with the company, until the Filing
Delinquency is cured.\28\ If the company fails to cure the Filing
Delinquency within the Initial Cure Period, the Exchange may, in its
sole discretion, allow the company's securities to be traded for up to
an additional six-month period (the ``Additional Cure Period'')
depending on the company's specific circumstances.\29\ If the Exchange
determines that an Additional Cure Period is not appropriate,
suspension and delisting procedures would commence in accordance with
the procedures set out in Section 1010 (Procedures for Delisting and
Removal) of the Company Guide.\30\ A company would not be eligible to
follow the procedures outlined in Section 1009
[[Page 29595]]
with respect to these criteria.\31\ Notwithstanding the foregoing,
however, under the proposed rule the Exchange may in its sole
discretion decide: (i) Not to afford a company any Initial Cure Period
or Additional Cure Period, as the case may be, at all; or (ii) at any
time during the Initial Cure Period or Additional Cure Period, as the
case may be, to truncate the Initial Cure Period or Additional Cure
Period and immediately commence suspension and delisting procedures if
the company is subject to delisting pursuant to any other provision of
the Company Guide, including if the Exchange believes, in the
Exchange's sole discretion, that continued listing and trading of a
company's securities on the Exchange is inadvisable or unwarranted in
accordance with Sections 1001-1006 of the Company Guide.\32\
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\28\ Id. Under the proposed rule, a company that has an uncured
Filing Delinquency would not incur an additional Filing Delinquency
if it fails to file a Subsequent Report by the applicable Filing Due
Date. However, in order for the company to cure its initial Filing
Delinquency, no Subsequent Report may be delinquent or deficient on
the date by which the initial Filing Delinquency is required to be
cured. Id.
\29\ Id.
\30\ Id.
\31\ Id.
\32\ Id.
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The Exchange may also commence suspension and delisting procedures
if it believes, in its sole discretion, that it is advisable to do so
based on an analysis of all relevant factors, including, but not
limited to:
Whether there are allegations of financial fraud or other
illegality in relation to the company's financial reporting;
the resignation or termination by the company of the
company's independent auditor due to a disagreement;
any extended delay in appointing a new independent auditor
after a prior auditor's resignation or termination;
the resignation of members of the company's audit
committee or other directors;
the resignation or termination of the company's chief
executive officer, chief financial officer or other key senior
executives;
any evidence that it may be impossible for the company to
cure its Filing Delinquency within the cure periods otherwise available
under the Late Filer Rule; and
any past history of late filings.\33\
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\33\ Id.
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In determining whether an Additional Cure Period after the
expiration of the Initial Cure Period is appropriate, the Exchange
would consider the likelihood that the Delinquent Report and all
Subsequent Reports can be filed or refiled, as applicable, during the
Additional Cure Period, as well as the company's general financial
status, based on information provided by a variety of sources,
including the company, its audit committee, its outside auditors, the
staff of the Commission and any other regulatory body.\34\ Further, the
Exchange would strongly encourage companies to provide ongoing
disclosure on the status of the Delinquent Report and any Subsequent
Reports to the market through press releases, and would also take the
frequency and detail of such information into account in determining
whether an Additional Cure Period is appropriate.\35\
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\34\ Id.
\35\ Id.
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As proposed, if the Exchange determines that an Additional Cure
Period is appropriate and the company fails to file the Delinquent
Report and all Subsequent Reports by the end of such additional period,
suspension and delisting procedures would commence immediately in
accordance with the procedures set out in Section 1010.\36\ In no event
would the Exchange continue to trade a company's securities if: (i) It
has failed to cure its Filing Delinquency; or (ii) it is not current
with all Subsequent Reports, on the date that is twelve months after
its initial Filing Delinquency.\37\
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\36\ Id.
\37\ Id.
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The Exchange also proposed to include a cross-reference to proposed
Section 1007 in Section 1101 of the Company Guide, which discusses
general Commission filing obligations of listed companies. In addition,
the Exchange proposed to remove a reference to a company's Listing
Qualifications analyst in Section 1101 and replace it with a reference
to Exchange staff, as the Exchange no longer has a department under the
Listings Qualification title.
C. Amendment to Semi-Annual Reporting by Foreign Private Issuers
The Exchange has proposed to amend Section 110 (Securities of
Foreign Companies) by adding new paragraph (e), which provides that
each listed foreign private issuer will be required, at a minimum, to
submit to the Commission a Form 6-K that includes (i) an interim
balance sheet as of the end of its second fiscal quarter and (ii) a
semi-annual income statement that covers its first two fiscal
quarters.\38\ This Form 6-K must be submitted no later than six months
following the end of the company's second fiscal quarter.\39\
Additionally, the financial information included in the Form 6-K must
be presented in English, but does not have to be reconciled to U.S.
GAAP.\40\ The Exchange has stated that new Section 110(e) would provide
a more specific interim reporting requirement for listed foreign
private issuers and harmonize such rules with Section 203.03 of the
NYSE Manual.\41\
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\38\ The Exchange proposes to renumber existing Section 110(e)
to Section 110(f).
\39\ See proposed Section 110(e) of the Company Guide.
\40\ See proposed Section 110(e) of the Company Guide.
\41\ See Notice, supra note 3, at 22170.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Exchange Act and the
rules and regulations thereunder applicable to a national securities
exchange.\42\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Exchange Act,\43\
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; and are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\42\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\43\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the goal of ensuring that listed
companies have filed accurate, up-to-date reports under the Exchange
Act is of critical importance so that investors have reliable
information upon which they can make informed investment decisions. For
the same reason, it is also important that companies with stale or
defective publicly filed financial information do not remain listed on
a national securities exchange if such information is not brought up-
to-date or the deficiency cured in a timely manner. As noted above,
under the existing provisions of the Company Guide, a delinquent filer
of Commission required periodic reports could receive up to 18 months
to become up to date in its filings. While the Company Guide suggests a
time period of less than 18 months to achieve compliance may be
appropriate for late filers, there is no specific guidance in the
Company Guide on how such a determination is made and for what time
period. The Commission has also previously noted the importance of
ensuring that companies listed on a national securities exchange are up
to date in
[[Page 29596]]
their filings so accurate and timely information is available to
investors.\44\ The Commission believes that the proposed rule change
should help to prevent an undue amount of time from passing without the
company's annual, quarterly or semi-annual reports, as applicable,\45\
being provided to the marketplace. In addition, the Commission believes
that harmonizing the requirements of the Company Guide with respect to
periodic reporting with those of the NYSE Manual are reasonably
designed to help investors and companies avoid confusion and achieve
consistent results for the applicable rules.
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\44\ See, e.g., Securities and Exchange Act Release No. 51777
(June 2, 2005), 70 FR 33573 (June 8, 2005).
\45\ Hereinafter, quarterly and semi-annual reports shall be
referred to as ``interim reports.''
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The Commission also believes that proposed Section 1007 should help
to ensure that companies cannot continue to trade for extended periods
of time without making their annual and interim reports publicly
available. In this regard, the Commission notes that the proposed rule
change should help reduce those situations in which investors
continuously have outdated or stale financial information upon which to
base their investment decisions. As is discussed above, a company that
has an uncured Filing Delinquency would not be able to cure the Filing
Delinquency until all subsequent annual or interim reports that are
delinquent have been filed.\46\ In other words, once it is a delinquent
filer, a company can only become current in its filings if all of its
annual and interim filings have been submitted to the Commission within
12 months of the first Filing Delinquency. Furthermore, a listed
company that demonstrates a history of delinquent filings could still
be subject to delisting under the proposed rule change without the
Exchange affording it any cure period at all (or at any time during an
initial or additional cure period) as a result of the Exchange's
ability to commence suspension and delisting procedures based on a
company's ``past history of late filings.'' \47\ The Commission
believes these provisions will enable the Exchange to delist those
companies that have demonstrated a history of providing outdated or
stale financial information to investors and help the Exchange address
the situation where a company becomes current within 12 months and then
a short while later, such as by the next Commission filing date, incurs
another Filing Delinquency. In such a case, the Commission would be
concerned that investors continue to rely on outdated information and
do not have current financial information on a timely basis in which to
make their trading and investment decisions. The Commission believes
that the proposal is reasonably designed to further these goals of
investor protection and therefore is consistent with the Exchange Act
and Section 6(b)(5) thereunder.
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\46\ See supra note 28.
\47\ See supra note 33 and accompanying text.
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Additionally, by clearly stating that the Exchange's Late Filer
Rule applies to companies that file late or defective annual and
interim reports, the Commission believes that the proposal should
benefit the public interest and protect investors by helping to assure
that a larger segment of the financial information investors may rely
upon when deciding whether to invest in a company listed on the
Exchange is up-do-date and accurate. Further, by detailing what the
Exchange considers to be a defective annual or interim report and how
the Exchange treats listed companies whose filed reports suffer from a
deficiency, the Commission believes that the proposed rule change
promotes just and equitable principles of trade by providing additional
transparency to listed companies as to what could cause them to become
subject to proposed Section 1007 for a late or deficient filing. For
example, as noted above, Exchange rules will be clear that a company
that files a Form 8-K pursuant to Item 4.02(b) thereof and has a
Required Audit Report Withdrawal Delinquency will be subject to the
procedures in proposed Section 1007 and can only be extended a maximum
of 12 months to cure the delinquency. Moreover, and importantly, this
additional transparency, as well as the more stringent requirements set
forth in the proposed rule, could encourage listed companies to take
extra care to ensure that their filed reports are timely and accurate,
which would protect investors and the public interest. To the extent
this occurs, the Commission believes that the proposal also has the
potential to enhance the reliability of reports filed by companies
listed on the Exchange as well as investor confidence in such reports,
which should help to perfect the mechanism of a free and open market.
Proposed Section 1007 also gives the Exchange discretion in certain
areas when a filing fails to include an element required by the
applicable Commission form and the Exchange determines in its sole
discretion that such deficiency is material in nature. Proposed Section
1007 provides a non-exclusive list of elements that, if missing from a
filing, would cause the Exchange to deem the company to have incurred a
Filing Delinquency. The Commission notes that any determination by the
Exchange that a missing element is not material for purposes of a
Filing Delinquency has no effect on the company's compliance with
Commission rules. The Commission further notes that while there is a
provision in the new rules concerning a listed company that files a
Form 8-K or Form 6-K announcing a Non-Reliance Disclosure having 60
days to correct its financial statements, the proposal makes clear that
the Filing Delinquency will date from the original announcement of the
Non-Reliance Disclosure if it is not cured within 60 days. This will
ensure that the period for curing a Non-Reliance Disclosure will not
extend past the 12 month period given to listed companies that have had
another type of Filing Delinquency.
The Commission notes that the time periods allowed to cure a Filing
Delinquency are maximums for purposes of continued listing. The new
provisions being adopted provide additional transparency to investors
and the marketplace but also give the Exchange discretion to analyze
the particular case and consider whether it is appropriate to commence
suspension and delisting procedures immediately based on the particular
facts, as well giving the Exchange discretion to grant an additional
six month cure period, or shorten any time periods previously given.
The new rules provide additional transparency by setting forth certain
factors that may cause immediate delisting or shortened periods, such
as resignation of a company's chief executive officer, financial
officer or members of the audit committee; allegations of fraud or
other illegality in relation to financial reporting; and past history
of late filings. We expect the Exchange to carefully review each Filing
Deficiency and ensure that the public interest is being served by
continued trading. As noted above, the importance of timely and
complete Commission filings to ensure that investors and the
marketplace have accurate and up-to-date information about publicly
traded companies is of extreme importance for confidence in our public
markets.\48\
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\48\ As noted above, the Exchange strongly encourages companies
to provide ongoing disclosure on the status of the Delinquent Report
and any Subsequent Reports to the market through press releases, and
would also take the frequency and detail of such information into
account in determining whether an Additional Cure Period is
appropriate. The Commission believes such disclosures are very
important to the marketplace during the delinquency period.
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[[Page 29597]]
The Commission believes that the amendments to Chapter Six of the
Company Guide will add clarity to the periodic reporting requirements
in connection with proposed Section 1007. For example, as noted above,
the deletion and replacement in Section 610(a) of a reference to
Section 1002(d) regarding delisting procedures with proposed Section
1007 will avoid confusion among investors and companies about the
applicable rules for failure to timely file an annual report with the
Commission. In addition, the Commission believes the proposed
modifications to delete Sections 611 through 613 of the Company Guide
are reasonably designed to protect investors and the public interest by
removing obsolete language that will be replaced with a more detailed
compliance regime in proposed Section 1007.
The Commission further believes the Exchange's deletion of the
specific enumerated disclosures with regard to outstanding options in
Section 610(a) of the Company Guide is consistent with the Exchange Act
since listed companies are already required to comply with the
Commission's disclosure regime for options in the companies' Form 10-K.
In this regard the Commission believes it is reasonable for the
Exchange to determine it will defer to Commission disclosure
requirements as to options, some of which are similar to the NYSE
requirements.\49\ Similarly, the deletion of outdated references to the
Exchange's StockWatch and Listing Qualifications Departments in Section
610(b) of the Company Guide and their replacement with a statement that
companies should comply with the Exchange's material news policies set
forth in Sections 401 and 402 would provide additional transparency to
a listed company on the disclosure steps that it must take when it
receives an audit opinion that contains a going concern emphasis.\50\
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\49\ See supra note 5 and accompanying text.
\50\ The Commission further believes that the Exchange's
proposal to update the reference to a going concern
``qualification'' with a reference to a going concern ``emphasis''
would align the Exchange's rules more accurately with general
accounting characterizations.
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Additionally, the Commission believes that the amendment to require
the public announcement of the existence of a going concern in an audit
opinion be made contemporaneously with the filing of such audit opinion
with the Commission furthers investor protection by ensuring that
investors are made aware, as soon as possible, of material information
that may impact their investment decisions. The Commission also notes
that eliminating the possibility that a company can delay the public
announcement of a going concern opinion for up to seven days, as
currently permitted under the Company Guide, will help to further
investor protection consistent with Section 6(b)(5) of the Exchange
Act.
Finally, the Commission believes the proposed amendment to
harmonize the semi-annual reporting requirement by foreign private
issuers in new Section 110(e) with the applicable rule in the NYSE
Manual would provide a more precise compliance guideline and establish
a minimum interim reporting regime applicable to all listed foreign
private issuers.\51\ Additionally, the Commission believes the proposed
amendment is consistent with the investor protection objectives of
Section 6(b)(5) because it is reasonably designed to ensure that
foreign private issuers provide timely financial information that is
necessary to enable investors to make informed investment decisions.
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\51\ See, e.g., Section 203.03 of the NYSE Manual.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\52\ that the proposed rule change (SR-NYSEMKT-2017-23)
be, and hereby is, approved.
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\52\ 15 U.S.C. 78f(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
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\53\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13590 Filed 6-28-17; 8:45 am]
BILLING CODE 8011-01-P
