Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 14.501(a)(4), 14.501(d), and 14.502(b) To Modify the Process IEX Would Follow When a Company Fails To Hold an Annual Meeting of Shareholders, and To Correct Three Nonsubstantive Typographical Errors in Rules 14.502(b) and 14.504(b), 58039-58042 [2017-26447]
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Federal Register / Vol. 82, No. 235 / Friday, December 8, 2017 / Notices
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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEAMER–2017–34 and
should be submitted on or before
December 29, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–26450 Filed 12–7–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82209; File No. SR–IEX–
2017–41]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Rules 14.501(a)(4), 14.501(d), and
14.502(b) To Modify the Process IEX
Would Follow When a Company Fails
To Hold an Annual Meeting of
Shareholders, and To Correct Three
Nonsubstantive Typographical Errors
in Rules 14.502(b) and 14.504(b)
sradovich on DSK3GMQ082PROD with NOTICES
December 4, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
20, 2017, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
Pursuant to the provisions of Section
19(b)(1) under the Securities Exchange
Act of 1934 (‘‘Act’’),3 and Rule 19b–4
thereunder,4 Investors Exchange LLC
(‘‘IEX’’ or ‘‘Exchange’’) is filing with the
Commission proposed rule change to
amend Rules 14.501(a)(4), 14.501(d),
and 14.502(b) to modify the process IEX
would follow when a company fails to
hold an annual meeting of shareholders,
and to correct three nonsubstantive
typographical errors in Rules 14.502(b)
and 14.504(b). The Exchange has
designated this proposal as noncontroversial and provided the
Commission with the notice required by
Rule 19b–4(f)(6)(iii) under the Act.5 The
text of the proposed rule change is
available at the Exchange’s Web site at
www.iextrading.com, at the principal
office of the Exchange, 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
self-regulatory organization 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 statement [sic] may be
examined at the places specified in Item
IV below. The self-regulatory
organization 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
On June 17, 2016, the Commission
granted IEX’s application for registration
as a national securities exchange under
Section 6 of the Act including approval
of rules applicable to the qualification,
listing and delisting of companies on
the Exchange.6 The Exchange plans to
begin listing companies in 2018.
Each company that would list
common stock or voting preferred stock,
3 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
5 17 CFR 240.19b–4(f)(6)(iii).
6 See Securities Exchange Act Release No. 78101
(June 17, 2016), 81 FR 41141 (June 23, 2016) (File
No. 10–222).
4 17
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Sfmt 4703
58039
and their equivalents, on IEX must hold
an annual meeting of shareholders no
later than one year after the end of the
company’s fiscal year and solicit proxies
for that meeting.7 An annual meeting
allows the equity owners of the
company the opportunity to elect
directors and meet with management to
discuss company affairs. Currently,
should a company fail to hold its annual
meetings as required by Rule 14.408,
staff of IEX Regulation (‘‘Staff’’) would
have no discretion to allow additional
time for the company to regain
compliance. Rather, Staff would be
required by Rule 14.501(d)(1) to issue a
Delisting Determination, subjecting the
company to immediate suspension and
delisting unless the company appeals to
the Listings Review Committee.8 IEX
proposes to amend Rules 14.501(a)(4),
14.501(d), and 14.502(b) to provide Staff
with limited discretion to grant a listed
company that failed to hold its annual
meeting of shareholders an extension of
time to comply with the requirement.9
IEX notes that the only other rule
where a company would be subject to
immediate suspension and delisting,
besides when it fails to solicit proxies
and hold an annual meeting, would be
when Staff makes a determination
pursuant to the Rule Series 14.100 that
the company’s continued listing raises a
public interest concern. Such a
determination would generally be made
only following discussion and review of
the facts and circumstances with the
company. For all other deficiencies
under Chapters 14 and 16 of the IEX
rules, a listed company is provided with
either a fixed compliance period within
which to regain compliance,10 or given
7 See Rules 14.408(a) and (b), respectively. Rule
14.407(a)(4)(D) also requires a limited partnership
to hold an annual meeting of limited partners if
required by statute or regulation in the state in
which the limited partnership is formed or doing
business or by the terms of the partnership’s limited
partnership agreement. Rule 14.407(a)(4)(F) requires
the limited partnership to distribute information
statements or proxies when a meeting of limited
partners is required. The proposed process
described herein would apply in the identical
manner to limited partnerships required to hold a
meeting as it does to other companies. See also
Rules 14.407(a)(4)(D) and (F) (partner meetings and
proxy solicitation of limited partnerships).
8 A listed company may request review of a Staff
Delisting Determination by the Listings Review
Committee. A timely request for a hearing will stay
the suspension and delisting pending the issuance
of a written Panel Decision. See Rule 14.502.
9 The Exchange notes that listed companies and
certain limited partnerships are also required to
solicit proxies and provide proxy statements for all
meetings of shareholders or partners. See Rules
14.408(b) and 14.407(a)(4)(F), respectively. A listed
company or limited partnership that has not timely
held an annual meeting has not violated the proxy
solicitation rule because no meeting has been held.
10 See Rule 14.501(d)(3).
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the opportunity to submit a plan to
regain compliance, which Staff would
review and determine whether to grant
the company a limited time to
implement.11 Generally, a company
would be allowed 45 days to submit the
plan of compliance 12 and, upon review
of the plan, Staff could grant the
company up to 180 days from the date
of Staff’s initial notification of the
company’s non-compliance to regain
compliance.13 If upon review of the
company’s plan Staff determines that an
extension is not warranted, Staff would
issue a Delisting Determination,14
which triggers the company’s right to
request review by the Listings Review
Committee.15
There are a variety of reasons a
company may fail to timely hold an
annual meeting. In many of these cases,
the circumstances that precipitated the
delay may arise just before a planned
meeting. These can include, for
example, situations where a company
was required to adjourn and reschedule
its annual meeting to allow its
shareholders more time to review proxy
materials in connection with a
shareholder proxy contest. In other
cases, a company could be unable to
hold an annual meeting because it was
delinquent in filing periodic reports and
therefore could not include the required
financial information in its proxy
statement. In that case, under current
listing rules, the company could receive
an extension of time to regain
compliance with the filing requirement.
However, if during any such compliance
period the company fails to hold an
annual meeting of shareholders, Staff
would be required to issue a delist
determination at that time for both the
filing delinquency and the annual
meeting deficiency, even if the
compliance period for the filing
delinquency had not expired.16 Under
these circumstances, as required by the
Listing Rules, Staff would notify the
company in writing of the annual
meeting deficiency 17 and the company
would be required to publicly disclose
such notification.18 The annual meeting
deficiency would then be considered at
the same time and together with the
11 See
Rule 14.501(d)(2).
deficient with the filing
requirement for periodic reports are provided up to
60 days to submit a plan of compliance. See Rule
14.501(d)(2)(F). Staff can shorten these deadlines
where deemed appropriate.
13 See Rule 14.501(d)(2)(B)(i).
14 See Rule 14.501(d)(2)(B)(ii).
15 See Rule 14.502.
16 See Rule 14.501(d)(2)(A).
17 See Rule 14.501(b).
18 See Rule 14.501(c).
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12 Companies
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filing delinquency in any subsequent
delisting proceeding.19
For these reasons, IEX is proposing to
amend Rules 14.501(a)(4), 14.501(d),
and 14.502(b) to afford those companies
and limited partnerships that fail to
hold an annual meeting in accordance
with the listing rules an opportunity to
submit a plan of compliance for Staff’s
review.20 As proposed, Rule
14.501(d)(2)(G) is entitled ‘‘Annual
Meeting’’ and specifies the process
applicable to deficiencies from the
standards of Rules 14.408(a) and
14.407(a)(4)(D), which relate to Annual
Meetings and Partner Meetings
respectively. Subparagraph (i) provides
that the Staff’s notice shall provide the
Company with 45 calendar days to
submit a plan to regain compliance with
the listing standard; provided, however,
that the Company shall not be provided
with an opportunity to submit such a
plan if review under the Rule Series
14.500 of a prior Staff Delisting
Determination with respect to the
Company is already pending. Staff may
extend this deadline for up to an
additional 15 calendar days upon good
cause shown and may request such
additional information from the
Company as is necessary to make a
determination regarding whether to
grant such an extension. Subparagraph
(ii) provides that the maximum
additional time provided by all
exceptions granted by Staff is 180
calendar days from the deadline to hold
the annual meeting (one year after the
end of the Company’s fiscal year). In
determining whether to grant an
exception, and the length of any such
exception, Staff will consider, and the
Company should address in its plan of
compliance, the Company’s specific
circumstances, including the likelihood
that the Company would be able to hold
an annual meeting within the exception
period, the Company’s past compliance
history, the reasons for the failure to
hold the annual meeting timely,
corporate events that may occur within
the exception period, the Company’s
general financial status, and the
Company’s disclosures to the market.
This review will be based on
information provided by a variety of
sources, which may include the
Company, its audit committee, its
outside auditors, the staff of the SEC
and any other regulatory body.
Additionally, proposed Rule
14.502(b)(1)(F) provides that the
19 See
Rule 14.501(e).
noted above, the company or limited
partnership generally would have 45 days to submit
a plan to regain compliance, although Staff could
shorten that period where it believes appropriate.
20 As
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Fmt 4703
Sfmt 4703
Listings Review Committee may grant
an exception for a period not to exceed
360 days from the deadline to hold the
annual meeting (one year after the end
of the Company’s fiscal year).21 This
time frame is consistent with the limit
on extensions that Nasdaq provides for
its listed companies that fail to timely
hold an annual meeting,22 and would
incorporate any extension of time
previously provided by the Staff, and is
not cumulative with the 180 calendar
day extension that the Staff can provide.
IEX believes that the proposed rule
change would provide consistency with
the administration of other continued
listing standards without undermining
the requirement that IEX-listed
companies hold annual meetings.
Specifically, under existing IEX listing
rules, a company that becomes deficient
with the continued listing standards
identified in IEX Rule 14.501(d)(2) and
(3) is provided with either an
opportunity to submit a plan to regain
compliance or a specified cure period
(as applicable) after it becomes deficient
of up to 180 calendar days. Thereafter,
if such company has not regained
compliance it will receive a Staff
Delisting Determination, but can appeal
to the Listings Review Committee which
has authority to grant an exception to
the continued listing standards for an
additional period not to exceed 180
days from the date of the Staff Delisting
Determination with respect to the
deficiency for which the exception is
granted.23
A non-compliant company would
have to publicly disclose, under both
Commission and IEX rules, that it had
21 It is IEX’s understanding that a substantial
majority of Nasdaq-listed companies that received
delisting notices for failing to solicit proxies and
hold their annual meetings regain compliance
within a six-month period. See Securities Exchange
Act Release No. 77137 (February 12, 2016), 81 FR
8582 (February 19, 2016) (SR–NASDAQ–2015–144).
22 See Nasdaq Rule 5815(c)(1)(G).
23 As proposed, the 360 calendar day limit on
extensions for annual meeting deficiencies would
be several weeks less than the total amount of time
that can be granted under current rules for the other
continued listing deficiencies. As proposed, for
annual meeting deficiencies, the maximum amount
of time that can be granted is 360 days from
deadline to hold an annual meeting (i.e., one year
after the end of the Company’s fiscal year end). In
contrast, for other continued listing deficiencies
that allow for a cure period or opportunity to
submit a plan to regain compliance (except for
number of market makers) the cure period or
compliance plan extension can extend for 180 days,
and then the Listings Review Committee can
provide an additional 180 calendar days to regain
compliance through an appeal. These 180 calendar
day measurement periods include the time for Staff
notification to the company plus the 15 calendar
day appeal deadline and so in total would be
greater 360 calendar days from the date of
deficiency. See Rules 14.501(d)(2) and (3) and
14.502(b)(1)(A).
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Federal Register / Vol. 82, No. 235 / Friday, December 8, 2017 / Notices
received notification of non-compliance
with the annual meeting rule.24
IEX is also proposing to modify Rule
14.501(a)(4) to make clear that a Public
Reprimand Letter 25 is not an available
notification type for unresolved
deficiencies from the standards of Rules
14.207(c) (obligation to file periodic
financial reports), 14.407(a)(4)(D)
(partner meetings of limited
partnerships), and 14.408(a) (meetings
of shareholders). This proposed change
is substantially identical to Nasdaq Rule
5810(4). IEX Rule 14.500(b)(5) provides
that a ‘‘Public Reprimand Letter’’ may
be issued by the Staff or a Decision of
the Listings Review Committee in cases
where the Company has violated an
Exchange corporate governance or
notification listing standard (other than
one required by Rule 10A–3 of the Act)
and Staff or the Listings Review
Committee determines that delisting is
an inappropriate sanction. While the
Exchange does not believe that the
obligation to file periodic financial
reports or hold an annual meeting fall
within the coverage of Rule 14.500(b)(5),
in view of Nasdaq’s amendment to its
comparable rule, the Exchange believes
that the added clarity is appropriate to
avoid any confusion among listed
companies on a going forward basis.
In addition, IEX is proposing
conforming amendments to Rules
14.501(d)(2)(A)(iii) and 14.501(d)(2)(B)
to reflect that listed companies that are
deficient with respect to the standards
requiring annual meetings of
shareholders or partner meetings of
limited partners, pursuant to Rules
14.408(a) and 14.407(a)(4)(D)
respectively, are included in the
deficiencies for which a listed company
may submit a Plan of Compliance for
Staff review.
Finally, IEX is proposing to correct
three nonsubstantive typographical
errors in Rules 14.502(b) and 14.504
which incorrectly refer to the Listing
Review Committee rather than the
Listings Review Committee.
The Exchange does not propose to
charge any fees in connection with the
proposed rule change.
sradovich on DSK3GMQ082PROD with NOTICES
2. Statutory Basis
IEX believes that the proposed rule
change is consistent with Section 6(b) 26
of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act,27
in particular, in that it is designed to
prevent fraudulent and manipulative
24 See Rule 14.501(c) and Supplementary Material
.01. See also Item 3.01 of SEC Form 8–K.
25 See Rule 14.500(b)(5).
26 15 U.S.C. 78f.
27 15 U.S.C. 78f(b)(5).
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acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, 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 is not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
Specifically, the proposed changes are
consistent with these requirements
because they would provide a more
efficient process to address annual
meeting deficiencies by permitting staff
to grant additional time to a company to
comply with the annual meeting
requirement in limited situations after
Staff review of a compliance plan. The
proposed changes, are consistent with
the time frames available to Nasdaq
companies that fail to hold an annual
meeting, as well as the time frames
available to IEX listed companies that
become noncompliant with other
continued listing standards, as
described in the Purpose section.
Furthermore, as is the case under the
current rule, a company notified that it
is deficient in the annual meeting
requirement is required to publicly
disclose such notice and the rules basis
for it. IEX will also separately publicly
disclose a list of noncompliant
companies and the listing standards
with which they do not comply.
Accordingly, the Exchange believes that
the proposed rule would protect
investors and the public interest.
As described in the Purpose section,
there are various reasons why a
company may not be able to hold an
annual meeting and for which
immediate delisting is an inappropriate
outcome under the circumstances. In
lieu of the current requirement, which
would require that Staff send an
immediate Delisting Determination in
such circumstances, the proposal vests
Staff with discretion to determine
whether the reason for the deficiency
and the plan to regain compliance merit
an extension. The listing rules allow
Staff such discretion for other
deficiencies, and the only case where
Staff would be required to send an
immediate Delisting Determination is
where Staff concludes, after review of
the facts and circumstances, that
continued listing is contrary to the
public interest. IEX believes that it is
consistent with the Act to provide Staff
with discretion to grant an extension for
an annual meeting deficiency based on
a plan of compliance, consistent with
the process that would be applicable for
the majority of deficiencies under
PO 00000
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Sfmt 4703
58041
existing IEX listing rules. Accordingly,
the Exchange believes that the proposal
promotes the requirements of the Act by
providing Staff with such limited
discretion while maintaining Staff
authority to initiate delisting of a
company when warranted.
The Exchange also notes that the
proposed rule change is substantially
identical to existing Nasdaq rules that
were approved by the Commission, with
differences only to account for the IEX
streamlined delisting appeal structure
(compared to the multiple levels of
appeal provided for in Nasdaq rules)
and terminology.28
In its approval of the Nasdaq rule
filing adopting comparable rules, the
Commission stresses that ‘‘[t]he
development and enforcement of
meaningful corporate governance listing
standards for a national securities
exchange is of substantial importance to
financial markets and the investing
public’’ as well as the critical
importance of annual meetings of
shareholders to allow shareholders the
ability to exercise their rights to
participate in corporate governance
matters. The Commission also
emphasized that under the Nasdaq
proposal, ‘‘Staff retains discretion not to
grant an exception from the continued
listing requirements to a company that
has failed to hold its annual meeting on
time’’ and that ‘‘[t]he Commission
expects Staff to exercise this discretion
carefully and discerningly. . . and
based on the specified rule factors.’’ 29
In approving the Nasdaq rule filing the
Commission thus found that such rule
change was reasonably designed to
further the goals of Section 6(b)(5) of the
Act. As discussed in the Purpose
section, the Exchange will retain the
same discretion, subject to the same
standards, pursuant to proposed Rule
14.501(d)(2)(G).
The Exchange believes that the same
factors and analysis that led to the
Commission’s approval of the
comparable Nasdaq rule change are
applicable to IEX’s proposed rule
change. Consequently, the Exchange
does not believe that the proposed rule
change raises any new or novel issues.
The Exchange also believes that it is
consistent with the protection of
investors and the public interest to
make clear in IEX rules that a Public
Reprimand Letter does not apply to
deficiencies from the obligation to file
periodic financial reports or the
requirement to hold an annual meeting
28 See Securities Exchange Act Release No. 77137
(February 12, 2016), 81 FR 8582 (February 19, 2016)
(SR–NASDAQ–2015–144).
29 See supra note 28.
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in order to provide transparency that the
only cure under Exchange rules is for
the company to file the periodic
financial report or hold its annual
meeting.
Finally, the Exchange believes that it
is consistent with the protection of
investors and the public interest to
correct the three nonsubstantive
typographical errors in Rules 14.502(b)
and 14.504 to avoid any confusion
among potential listed companies.
change should be approved or
disapproved.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is designed to
promote consistent and fair regulation,
rather than for any competitive purpose.
Moreover, as a new listing exchange,
IEX has extremely limited ability to
impose any burden on competition.
• 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–
IEX–2017–41 on the subject line.
sradovich on DSK3GMQ082PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 30 of the Act and
Rule 19b–4(f)(6) 31 thereunder. Because
the proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.
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
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 shall institute proceedings
under Section 19(b)(2)(B) 32 of the Act to
determine whether the proposed rule
30 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
32 15 U.S.C. 78s(b)(2)(B).
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
20:38 Dec 07, 2017
[FR Doc. 2017–26447 Filed 12–7–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82210; File No. SR–BX–
2017–052]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 4759
Paper Comments
December 4, 2017.
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–IEX–2017–41. 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–IEX–2017–41 and should
be submitted on or before December 29,
2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
28, 2017, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
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.
31 17
VerDate Sep<11>2014
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Eduardo A. Aleman,
Assistant Secretary.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add
additional detail about the purposes for
which the Exchange uses securities
information processor data pursuant to
Rule 4759, and to make other technical
corrections to that rule.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqbx.cchwallstreet.com/,
at the principal office of the Exchange,
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
1 15
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U.S.C. 78s(b)(1).
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]]>Agencies
[Federal Register Volume 82, Number 235 (Friday, December 8, 2017)]
[Notices]
[Pages 58039-58042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26447]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82209; File No. SR-IEX-2017-41]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rules 14.501(a)(4), 14.501(d), and 14.502(b) To Modify the Process IEX
Would Follow When a Company Fails To Hold an Annual Meeting of
Shareholders, and To Correct Three Nonsubstantive Typographical Errors
in Rules 14.502(b) and 14.504(b)
December 4, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 20, 2017, the Investors Exchange LLC (``IEX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III, below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Securities
Exchange Act of 1934 (``Act''),\3\ and Rule 19b-4 thereunder,\4\
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the
Commission proposed rule change to amend Rules 14.501(a)(4), 14.501(d),
and 14.502(b) to modify the process IEX would follow when a company
fails to hold an annual meeting of shareholders, and to correct three
nonsubstantive typographical errors in Rules 14.502(b) and 14.504(b).
The Exchange has designated this proposal as non-controversial and
provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\5\ The text of the proposed rule change is
available at the Exchange's Web site at www.iextrading.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
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\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ 17 CFR 240.19b-4(f)(6)(iii).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 statement [sic] may be examined
at the places specified in Item IV below. The self-regulatory
organization 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
On June 17, 2016, the Commission granted IEX's application for
registration as a national securities exchange under Section 6 of the
Act including approval of rules applicable to the qualification,
listing and delisting of companies on the Exchange.\6\ The Exchange
plans to begin listing companies in 2018.
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\6\ See Securities Exchange Act Release No. 78101 (June 17,
2016), 81 FR 41141 (June 23, 2016) (File No. 10-222).
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Each company that would list common stock or voting preferred
stock, and their equivalents, on IEX must hold an annual meeting of
shareholders no later than one year after the end of the company's
fiscal year and solicit proxies for that meeting.\7\ An annual meeting
allows the equity owners of the company the opportunity to elect
directors and meet with management to discuss company affairs.
Currently, should a company fail to hold its annual meetings as
required by Rule 14.408, staff of IEX Regulation (``Staff'') would have
no discretion to allow additional time for the company to regain
compliance. Rather, Staff would be required by Rule 14.501(d)(1) to
issue a Delisting Determination, subjecting the company to immediate
suspension and delisting unless the company appeals to the Listings
Review Committee.\8\ IEX proposes to amend Rules 14.501(a)(4),
14.501(d), and 14.502(b) to provide Staff with limited discretion to
grant a listed company that failed to hold its annual meeting of
shareholders an extension of time to comply with the requirement.\9\
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\7\ See Rules 14.408(a) and (b), respectively. Rule
14.407(a)(4)(D) also requires a limited partnership to hold an
annual meeting of limited partners if required by statute or
regulation in the state in which the limited partnership is formed
or doing business or by the terms of the partnership's limited
partnership agreement. Rule 14.407(a)(4)(F) requires the limited
partnership to distribute information statements or proxies when a
meeting of limited partners is required. The proposed process
described herein would apply in the identical manner to limited
partnerships required to hold a meeting as it does to other
companies. See also Rules 14.407(a)(4)(D) and (F) (partner meetings
and proxy solicitation of limited partnerships).
\8\ A listed company may request review of a Staff Delisting
Determination by the Listings Review Committee. A timely request for
a hearing will stay the suspension and delisting pending the
issuance of a written Panel Decision. See Rule 14.502.
\9\ The Exchange notes that listed companies and certain limited
partnerships are also required to solicit proxies and provide proxy
statements for all meetings of shareholders or partners. See Rules
14.408(b) and 14.407(a)(4)(F), respectively. A listed company or
limited partnership that has not timely held an annual meeting has
not violated the proxy solicitation rule because no meeting has been
held.
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IEX notes that the only other rule where a company would be subject
to immediate suspension and delisting, besides when it fails to solicit
proxies and hold an annual meeting, would be when Staff makes a
determination pursuant to the Rule Series 14.100 that the company's
continued listing raises a public interest concern. Such a
determination would generally be made only following discussion and
review of the facts and circumstances with the company. For all other
deficiencies under Chapters 14 and 16 of the IEX rules, a listed
company is provided with either a fixed compliance period within which
to regain compliance,\10\ or given
[[Page 58040]]
the opportunity to submit a plan to regain compliance, which Staff
would review and determine whether to grant the company a limited time
to implement.\11\ Generally, a company would be allowed 45 days to
submit the plan of compliance \12\ and, upon review of the plan, Staff
could grant the company up to 180 days from the date of Staff's initial
notification of the company's non-compliance to regain compliance.\13\
If upon review of the company's plan Staff determines that an extension
is not warranted, Staff would issue a Delisting Determination,\14\
which triggers the company's right to request review by the Listings
Review Committee.\15\
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\10\ See Rule 14.501(d)(3).
\11\ See Rule 14.501(d)(2).
\12\ Companies deficient with the filing requirement for
periodic reports are provided up to 60 days to submit a plan of
compliance. See Rule 14.501(d)(2)(F). Staff can shorten these
deadlines where deemed appropriate.
\13\ See Rule 14.501(d)(2)(B)(i).
\14\ See Rule 14.501(d)(2)(B)(ii).
\15\ See Rule 14.502.
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There are a variety of reasons a company may fail to timely hold an
annual meeting. In many of these cases, the circumstances that
precipitated the delay may arise just before a planned meeting. These
can include, for example, situations where a company was required to
adjourn and reschedule its annual meeting to allow its shareholders
more time to review proxy materials in connection with a shareholder
proxy contest. In other cases, a company could be unable to hold an
annual meeting because it was delinquent in filing periodic reports and
therefore could not include the required financial information in its
proxy statement. In that case, under current listing rules, the company
could receive an extension of time to regain compliance with the filing
requirement. However, if during any such compliance period the company
fails to hold an annual meeting of shareholders, Staff would be
required to issue a delist determination at that time for both the
filing delinquency and the annual meeting deficiency, even if the
compliance period for the filing delinquency had not expired.\16\ Under
these circumstances, as required by the Listing Rules, Staff would
notify the company in writing of the annual meeting deficiency \17\ and
the company would be required to publicly disclose such
notification.\18\ The annual meeting deficiency would then be
considered at the same time and together with the filing delinquency in
any subsequent delisting proceeding.\19\
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\16\ See Rule 14.501(d)(2)(A).
\17\ See Rule 14.501(b).
\18\ See Rule 14.501(c).
\19\ See Rule 14.501(e).
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For these reasons, IEX is proposing to amend Rules 14.501(a)(4),
14.501(d), and 14.502(b) to afford those companies and limited
partnerships that fail to hold an annual meeting in accordance with the
listing rules an opportunity to submit a plan of compliance for Staff's
review.\20\ As proposed, Rule 14.501(d)(2)(G) is entitled ``Annual
Meeting'' and specifies the process applicable to deficiencies from the
standards of Rules 14.408(a) and 14.407(a)(4)(D), which relate to
Annual Meetings and Partner Meetings respectively. Subparagraph (i)
provides that the Staff's notice shall provide the Company with 45
calendar days to submit a plan to regain compliance with the listing
standard; provided, however, that the Company shall not be provided
with an opportunity to submit such a plan if review under the Rule
Series 14.500 of a prior Staff Delisting Determination with respect to
the Company is already pending. Staff may extend this deadline for up
to an additional 15 calendar days upon good cause shown and may request
such additional information from the Company as is necessary to make a
determination regarding whether to grant such an extension.
Subparagraph (ii) provides that the maximum additional time provided by
all exceptions granted by Staff is 180 calendar days from the deadline
to hold the annual meeting (one year after the end of the Company's
fiscal year). In determining whether to grant an exception, and the
length of any such exception, Staff will consider, and the Company
should address in its plan of compliance, the Company's specific
circumstances, including the likelihood that the Company would be able
to hold an annual meeting within the exception period, the Company's
past compliance history, the reasons for the failure to hold the annual
meeting timely, corporate events that may occur within the exception
period, the Company's general financial status, and the Company's
disclosures to the market. This review will be based on information
provided by a variety of sources, which may include the Company, its
audit committee, its outside auditors, the staff of the SEC and any
other regulatory body.
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\20\ As noted above, the company or limited partnership
generally would have 45 days to submit a plan to regain compliance,
although Staff could shorten that period where it believes
appropriate.
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Additionally, proposed Rule 14.502(b)(1)(F) provides that the
Listings Review Committee may grant an exception for a period not to
exceed 360 days from the deadline to hold the annual meeting (one year
after the end of the Company's fiscal year).\21\ This time frame is
consistent with the limit on extensions that Nasdaq provides for its
listed companies that fail to timely hold an annual meeting,\22\ and
would incorporate any extension of time previously provided by the
Staff, and is not cumulative with the 180 calendar day extension that
the Staff can provide. IEX believes that the proposed rule change would
provide consistency with the administration of other continued listing
standards without undermining the requirement that IEX-listed companies
hold annual meetings. Specifically, under existing IEX listing rules, a
company that becomes deficient with the continued listing standards
identified in IEX Rule 14.501(d)(2) and (3) is provided with either an
opportunity to submit a plan to regain compliance or a specified cure
period (as applicable) after it becomes deficient of up to 180 calendar
days. Thereafter, if such company has not regained compliance it will
receive a Staff Delisting Determination, but can appeal to the Listings
Review Committee which has authority to grant an exception to the
continued listing standards for an additional period not to exceed 180
days from the date of the Staff Delisting Determination with respect to
the deficiency for which the exception is granted.\23\
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\21\ It is IEX's understanding that a substantial majority of
Nasdaq-listed companies that received delisting notices for failing
to solicit proxies and hold their annual meetings regain compliance
within a six-month period. See Securities Exchange Act Release No.
77137 (February 12, 2016), 81 FR 8582 (February 19, 2016) (SR-
NASDAQ-2015-144).
\22\ See Nasdaq Rule 5815(c)(1)(G).
\23\ As proposed, the 360 calendar day limit on extensions for
annual meeting deficiencies would be several weeks less than the
total amount of time that can be granted under current rules for the
other continued listing deficiencies. As proposed, for annual
meeting deficiencies, the maximum amount of time that can be granted
is 360 days from deadline to hold an annual meeting (i.e., one year
after the end of the Company's fiscal year end). In contrast, for
other continued listing deficiencies that allow for a cure period or
opportunity to submit a plan to regain compliance (except for number
of market makers) the cure period or compliance plan extension can
extend for 180 days, and then the Listings Review Committee can
provide an additional 180 calendar days to regain compliance through
an appeal. These 180 calendar day measurement periods include the
time for Staff notification to the company plus the 15 calendar day
appeal deadline and so in total would be greater 360 calendar days
from the date of deficiency. See Rules 14.501(d)(2) and (3) and
14.502(b)(1)(A).
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A non-compliant company would have to publicly disclose, under both
Commission and IEX rules, that it had
[[Page 58041]]
received notification of non-compliance with the annual meeting
rule.\24\
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\24\ See Rule 14.501(c) and Supplementary Material .01. See also
Item 3.01 of SEC Form 8-K.
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IEX is also proposing to modify Rule 14.501(a)(4) to make clear
that a Public Reprimand Letter \25\ is not an available notification
type for unresolved deficiencies from the standards of Rules 14.207(c)
(obligation to file periodic financial reports), 14.407(a)(4)(D)
(partner meetings of limited partnerships), and 14.408(a) (meetings of
shareholders). This proposed change is substantially identical to
Nasdaq Rule 5810(4). IEX Rule 14.500(b)(5) provides that a ``Public
Reprimand Letter'' may be issued by the Staff or a Decision of the
Listings Review Committee in cases where the Company has violated an
Exchange corporate governance or notification listing standard (other
than one required by Rule 10A-3 of the Act) and Staff or the Listings
Review Committee determines that delisting is an inappropriate
sanction. While the Exchange does not believe that the obligation to
file periodic financial reports or hold an annual meeting fall within
the coverage of Rule 14.500(b)(5), in view of Nasdaq's amendment to its
comparable rule, the Exchange believes that the added clarity is
appropriate to avoid any confusion among listed companies on a going
forward basis.
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\25\ See Rule 14.500(b)(5).
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In addition, IEX is proposing conforming amendments to Rules
14.501(d)(2)(A)(iii) and 14.501(d)(2)(B) to reflect that listed
companies that are deficient with respect to the standards requiring
annual meetings of shareholders or partner meetings of limited
partners, pursuant to Rules 14.408(a) and 14.407(a)(4)(D) respectively,
are included in the deficiencies for which a listed company may submit
a Plan of Compliance for Staff review.
Finally, IEX is proposing to correct three nonsubstantive
typographical errors in Rules 14.502(b) and 14.504 which incorrectly
refer to the Listing Review Committee rather than the Listings Review
Committee.
The Exchange does not propose to charge any fees in connection with
the proposed rule change.
2. Statutory Basis
IEX believes that the proposed rule change is consistent with
Section 6(b) \26\ of the Act in general, and furthers the objectives of
Section 6(b)(5) of the Act,\27\ in particular, in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, 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 is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\26\ 15 U.S.C. 78f.
\27\ 15 U.S.C. 78f(b)(5).
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Specifically, the proposed changes are consistent with these
requirements because they would provide a more efficient process to
address annual meeting deficiencies by permitting staff to grant
additional time to a company to comply with the annual meeting
requirement in limited situations after Staff review of a compliance
plan. The proposed changes, are consistent with the time frames
available to Nasdaq companies that fail to hold an annual meeting, as
well as the time frames available to IEX listed companies that become
noncompliant with other continued listing standards, as described in
the Purpose section. Furthermore, as is the case under the current
rule, a company notified that it is deficient in the annual meeting
requirement is required to publicly disclose such notice and the rules
basis for it. IEX will also separately publicly disclose a list of
noncompliant companies and the listing standards with which they do not
comply. Accordingly, the Exchange believes that the proposed rule would
protect investors and the public interest.
As described in the Purpose section, there are various reasons why
a company may not be able to hold an annual meeting and for which
immediate delisting is an inappropriate outcome under the
circumstances. In lieu of the current requirement, which would require
that Staff send an immediate Delisting Determination in such
circumstances, the proposal vests Staff with discretion to determine
whether the reason for the deficiency and the plan to regain compliance
merit an extension. The listing rules allow Staff such discretion for
other deficiencies, and the only case where Staff would be required to
send an immediate Delisting Determination is where Staff concludes,
after review of the facts and circumstances, that continued listing is
contrary to the public interest. IEX believes that it is consistent
with the Act to provide Staff with discretion to grant an extension for
an annual meeting deficiency based on a plan of compliance, consistent
with the process that would be applicable for the majority of
deficiencies under existing IEX listing rules. Accordingly, the
Exchange believes that the proposal promotes the requirements of the
Act by providing Staff with such limited discretion while maintaining
Staff authority to initiate delisting of a company when warranted.
The Exchange also notes that the proposed rule change is
substantially identical to existing Nasdaq rules that were approved by
the Commission, with differences only to account for the IEX
streamlined delisting appeal structure (compared to the multiple levels
of appeal provided for in Nasdaq rules) and terminology.\28\
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\28\ See Securities Exchange Act Release No. 77137 (February 12,
2016), 81 FR 8582 (February 19, 2016) (SR-NASDAQ-2015-144).
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In its approval of the Nasdaq rule filing adopting comparable
rules, the Commission stresses that ``[t]he development and enforcement
of meaningful corporate governance listing standards for a national
securities exchange is of substantial importance to financial markets
and the investing public'' as well as the critical importance of annual
meetings of shareholders to allow shareholders the ability to exercise
their rights to participate in corporate governance matters. The
Commission also emphasized that under the Nasdaq proposal, ``Staff
retains discretion not to grant an exception from the continued listing
requirements to a company that has failed to hold its annual meeting on
time'' and that ``[t]he Commission expects Staff to exercise this
discretion carefully and discerningly. . . and based on the specified
rule factors.'' \29\ In approving the Nasdaq rule filing the Commission
thus found that such rule change was reasonably designed to further the
goals of Section 6(b)(5) of the Act. As discussed in the Purpose
section, the Exchange will retain the same discretion, subject to the
same standards, pursuant to proposed Rule 14.501(d)(2)(G).
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\29\ See supra note 28.
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The Exchange believes that the same factors and analysis that led
to the Commission's approval of the comparable Nasdaq rule change are
applicable to IEX's proposed rule change. Consequently, the Exchange
does not believe that the proposed rule change raises any new or novel
issues.
The Exchange also believes that it is consistent with the
protection of investors and the public interest to make clear in IEX
rules that a Public Reprimand Letter does not apply to deficiencies
from the obligation to file periodic financial reports or the
requirement to hold an annual meeting
[[Page 58042]]
in order to provide transparency that the only cure under Exchange
rules is for the company to file the periodic financial report or hold
its annual meeting.
Finally, the Exchange believes that it is consistent with the
protection of investors and the public interest to correct the three
nonsubstantive typographical errors in Rules 14.502(b) and 14.504 to
avoid any confusion among potential listed companies.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is
designed to promote consistent and fair regulation, rather than for any
competitive purpose. Moreover, as a new listing exchange, IEX has
extremely limited ability to impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \30\ of the Act and Rule 19b-4(f)(6) \31\
thereunder. Because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 17 CFR 240.19b-4(f)(6).
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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 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 shall institute proceedings under
Section 19(b)(2)(B) \32\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\32\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please include
File Number SR-IEX-2017-41 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-IEX-2017-41. 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. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-IEX-2017-41 and should be
submitted on or before December 29, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26447 Filed 12-7-17; 8:45 am]
BILLING CODE 8011-01-P
