Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend the Listed Company Manual for Acquisition Companies To Reduce the Continued Listing Standards for Public Holders From 300 to 100 and To Enable the Exchange To Exercise Discretion To Allow Acquisition Companies a Reasonable Time Period Following a Business Combination To Demonstrate Compliance With the Applicable Quantitative Listing Standards, 52854-52857 [2018-22682]
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52854
Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices
employee; the issuance, renewal,
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records).
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HISTORY:
April 14, 2006, 71 FR 19556; August
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80 FR 60182; and September 28, 2017,
82 FR 45324.
Dated: October 11, 2018.
Nadine N. Mancini,
General Counsel, Senior Agency Official for
Privacy.
[FR Doc. 2018–22677 Filed 10–17–18; 8:45 am]
BILLING CODE 7600–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84420; File No. SR–NYSE–
2018–46]
Records are maintained in a locked
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Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend the Listed Company Manual for
Acquisition Companies To Reduce the
Continued Listing Standards for Public
Holders From 300 to 100 and To
Enable the Exchange To Exercise
Discretion To Allow Acquisition
Companies a Reasonable Time Period
Following a Business Combination To
Demonstrate Compliance With the
Applicable Quantitative Listing
Standards
RECORD ACCESS PROCEDURES:
October 12, 2018.
Individuals who wish to gain access
to their records should notify: Privacy
Officer, OSHRC, 1120 20th Street NW,
Ninth Floor, Washington, DC 20036–
3457. For an explanation on how such
requests should be drafted, refer to 29
CFR 2400.6 (procedures for requesting
records).
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
1, 2018, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
ADMINISTRATIVE, TECHNICAL, AND PHYSICAL
SAFEGUARDS:
CONTESTING RECORD PROCEDURES:
Individuals who wish to contest their
records should notify: Privacy Officer,
OSHRC, 1120 20th Street NW, Ninth
Floor, Washington, DC 20036–3457. For
an explanation on the specific
procedures for contesting the contents
of a record, refer to 29 CFR 2400.8
(Procedures for requesting amendment),
and 29 CFR 2400.9 (Procedures for
appealing).
NOTIFICATION PROCEDURES:
Individuals interested in inquiring
about their records should notify:
Privacy Officer, OSHRC, 1120 20th
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to proposes to
amend the Listed Company Manual (the
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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‘‘Manual’’) to revise its continued listing
standards for Acquisition
Companies..[sic] The proposed rule
change is available on the Exchange’s
website at www.nyse.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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
Section 102.06 of the Manual sets
forth initial listing requirements
applicable to a company whose business
plan is to complete an initial public
offering and engage in a merger or
acquisition with one or more
unidentified companies within a
specific period of time (an ‘‘Acquisition
Company’’ or ‘‘AC’’).4 Section 102.06
requires, in part, that an Acquisition
Company: (i) Deposit into and retain in
an escrow account at least 90% of the
gross proceeds of its initial public
offering through the date of its Business
Combination; (ii) complete the Business
Combination within 36 months of the
effectiveness of the IPO registration
statement; and (iii) provide the public
shareholders who object to the Business
Combination with the right to convert
their common stock into a pro rata share
of the funds held in escrow.5 Following
the Business Combination, the
combined company must meet the
Exchange’s requirements for initial
listing.
Section 802.01B of the Manual sets
forth the continued listing standards for
ACs. The Exchange proposes to change
4 Section 102.06 provides that an Acquisition
Company must complete one or more business
combinations having an aggregate fair market value
of at least 80% of the value of the deposit account
(the ‘‘Business Combination’’) within 36 months of
the effectiveness of its IPO registration statement.
5 Section 102.06 also requires that each proposed
business combination be approved by a majority of
the company’s independent directors.
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its initial and continued listing
standards for Acquisition Companies as
follows:
• Reduce the 300 total [sic] holders
continued listing requirement to 100
total [sic] holders.
• Amend the rule text in Section
802.01B to enable the Exchange to
exercise discretion to allow companies
a reasonable period of time following
the Business Combination to
demonstrate compliance with all
applicable quantitative listing
standards.
Proposal To Reduce Continued Listing
Requirement With Respect to Number of
Holders
Acquisition Companies often have
difficulty demonstrating compliance
with the 300 total [sic] shareholder
requirement for continued listing. The
shareholder requirement is designed to
help ensure that a security has a
sufficient number of investors to
provide a liquid trading market.6 Based
on conversations with marketplace
participants, including the sponsors of
Acquisition Companies and lawyers and
bankers that advise these companies,
the Exchange believes that the
difficulties Acquisition Companies have
in demonstrating compliance with the
shareholder requirement are due to
intrinsic features of Acquisition
Companies, which limit the number of
retail investors interested in the vehicle
and encourage owners to hold their
shares until a transaction is announced,
which can be as long as three years after
the initial public offering. These same
intrinsic features of Acquisition
Companies also limit the benefit to
investors of a shareholder requirement.
In addition, because the price of an
Acquisition Company is based primarily
on the value of the funds it holds in
trust, and the Acquisition Company’s
shareholders have the right to redeem
their shares for a pro rata share of that
trust in conjunction with the Business
Combination, the impact of the number
of shareholders on an Acquisition
Company security’s price is less
relevant than is the case for operating
company common stocks. For this
reason, Acquisition Companies,
historically, trade close to the value in
the trust, even when they have had few
shareholders. These trading patterns
suggest that Acquisition Companies’
low number of shareholders has not
resulted in distorted prices.
The Exchange believes that an
Exchange Traded Fund (‘‘ETF’’) is
6 See, e.g., Rocky Mountain Power Company,
Securities Exchange Act Release No, 40648
(November 9, 1998) (text at footnote 11).
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somewhat similar to an Acquisition
Company in this regard in that an
arbitrage mechanism keeps the ETF’s
price close to the value of its underlying
securities, even when trading in the
ETF’s shares is relatively illiquid. The
initial listing requirements for ETFs do
not include a shareholder requirement
and only 50 shareholders are required
for continued listing after the ETF has
been listed for one year.
Accordingly, given the short life of an
Acquisition Company, the trading
characteristics of Acquisition
Companies, and the requirement to meet
the initial listing standards at the time
of the Business Combination, the
Exchange proposes to reduce from 300
holders to 100 holders the minimum
total number of [sic] holders required on
a continued listing basis for Acquisition
Companies.7
Period for Company To Demonstrate
That It Satisfies Initial Listing
Requirements
Section 802.01B of the Manual
currently states that:
After consummation of its Business
Combination, a company that had
originally listed as an AC will be subject
to Section 801 and Section 802.01 in its
entirety and will be required
immediately upon consummation of the
Business Combination to meet the
following requirements:
(i) A price per share of at least $4.00;
(ii) a global market capitalization of at
least $150,000,000;
(iii) an aggregate market value of
publicly-held shares of at least
$40,000,000 *; and
(iv) the requirements with respect to
shareholders and publicly-held shares
set forth in Section 102.01A for
companies listing in connection with an
initial public offering.8
* Shares held by directors, officers, or
their immediate families and other
concentrated holding of 10 percent or
more are excluded in calculating the
number of publicly-held shares.
Section 802.01B also provides that an
Acquisition Company failing to meet
these requirements will be promptly
subject to suspension and delisting
proceedings.
The Exchange notes that it can be
difficult for a company, once listed, to
obtain evidence demonstrating the
number of its shareholders because
7 The Exchange notes that any Acquisition
Company listed on the NYSE will be allocated to
a Designated Market Maker. As a result, the
Exchange does not expect that the proposed change
will result in illiquidity or other problems trading
the securities of Acquisition Companies.
8 The applicable requirement is 400 holders of
round lots (i.e., 100 shares).
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many accounts are held in street name
and shareholders may object to being
identified to the company. As a result,
companies must seek information from
broker-dealers and from third-parties
that distribute information such as
proxy materials for the broker-dealers.
This process is especially burdensome
for Acquisition Companies at the time of
their Business Combinations, because
Acquisition Company shareholders
typically have the right to request
redemption of their securities until
immediately before consummation and
it is therefore impracticable for
companies to identify the number of
round-lot holders immediately to
demonstrate their qualification for
initial listing.
The Exchange proposes to amend
Section 802.01B to provide that
‘‘[f]ollowing consummation of its
Business Combination, a company that
had originally listed as an [Acquisition
Company] will be subject to’’ the
quantitative listing standards set forth
above. This change is consistent with
rule text in Nasdaq’s IM–5101–2 and is
intended in particular to address the
delays described above associated with
obtaining information about the number
of shareholders holding shares in ‘‘street
name’’ accounts. By amending Section
802.01B, an Acquisition Company
would not need to meet the shareholder
distribution requirements immediately
upon consummation of it Business
Combination, but may do so at some
point following closing of that
transaction. The purpose of the
proposed amendment is to allow the
Exchange to exercise discretion to allow
companies a reasonable period of time
following the Business Combination to
demonstrate compliance with the
applicable quantitative listing
standards, including the shareholders
requirement. If the company is unable to
demonstrate that it meets the applicable
quantitative requirements after such
reasonable time period, the Exchange
would commence delisting proceedings
and immediately suspend trading in the
company’s securities.
These proposed changes will be
effective upon approval of this rule by
the Commission.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Exchange Act,9 in
general, and furthers the objectives of
Section 6(b)(5) of the Exchange Act,10 in
particular in that it is designed to
promote just and equitable principles of
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15
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trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
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.
While the change would allow
Acquisition Companies to maintain
their continued listing status with fewer
shareholders, this proposed change is
consistent with the investor protection
provisions of the Act because other
protections help assure that market
prices will not be distorted by any
potential resulting lack of liquidity,
which is the underlying purpose of the
shareholder requirement. In particular,
the ability of a shareholder to redeem
shares for a pro rata share of the trust
helps assure that the Acquisition
Company will trade close to the value
of the assets held in trust.
Thus, this change will remove
impediments to and perfect the
mechanism of a free and open market by
removing listing requirements that
prohibit certain companies from
remaining listed without any
concomitant investor protection
benefits.
The proposal to allow Acquisition
Companies to demonstrate that they
meet the applicable quantitative
requirements following a Business
Combination is intended in particular to
address the difficulty companies have in
identifying the number of holders they
have immediately upon consummation
of their Business Combination.
Acquisition Company shareholders
typically have the right to request
redemption of their securities until
immediately before consummation and
it is therefore impracticable for
companies to identify the number of
round-lot holders immediately to
demonstrate their qualification for
initial listing. This proposed change is
consistent with the protection of
investors and the public interest, as it
does not alter the substantive
quantitative requirements a company
must meet to remain listed.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The purpose
of the proposed rule is to adopt
continued listing standards for
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Acquisition Companies that better
reflect the characteristics and trading
market for Acquisition Companies.
While the rule may permit more
Acquisition Companies to list, or remain
listed, on the Exchange, other exchanges
could adopt similar rules to compete for
such listings. As such, the Exchange
does not believe it imposes any burden
on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2018–46 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–NYSE–2018–46. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
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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 website 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–NYSE–2018–46 and should
be submitted on or before November 8,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–22682 Filed 10–17–18; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving a
Proposed Rule Change To Amend the
Arbitrator Payment Rule To Pay Each
Arbitrator a $200 Honorarium To
Decide Without a Hearing Session a
Contested Subpoena Request or a
Contested Order for Production or
Appearance
October 12, 2018.
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I. Introduction
On July 13, 2018, 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 (‘‘Exchange
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17:28 Oct 17, 2018
Jkt 247001
Background
Parties to an arbitration typically
exchange documents and information
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Act Release No. 83699 (Jul. 24,
2018), 83 FR 36647 (Jul. 30, 2018) (File No. SR–
FINRA–2018–026) (‘‘Notice’’).
4 See Letter from Steven B. Caruso, Maddox
Hargett Caruso, P.C., dated July 25, 2018 (‘‘Caruso
Letter’’); letter from Ryan K. Bakhtiari, Aidikoff, Uhl
and Bakhtiari, dated July 31, 2018 (‘‘Bakhtiari
Letter’’); letter from Glenn S. Gitomer, McCausland,
Keen and Buckman, dated August 1, 2018
(‘‘Gitomer Letter’’); and letter from Andrew
Stoltmann, President, Public Investors Arbitration
Bar Association (‘‘PIABA’’), dated August 15, 2018
(‘‘PIABA Letter’’). Comment letters are available on
the Commission’s website at https://www.sec.gov.
5 See Letter from Mignon McLemore, Assistant
Chief Counsel, FINRA, to Mr. Brent J. Fields,
Secretary, U.S. Securities and Exchange
Commission, dated October 5, 2018 (‘‘FINRA
Letter’’). The FINRA Letter is available on FINRA’s
website at https://www.finra.org, at the principal
office of FINRA, at the Commission’s website at
https://www.finra.org/sites/default/files/rule_filing_
file/SR-FINRA-2018-026-response-to-comments.pdf,
and at the Commission’s Public Reference Room.
6 See Letter from Mignon McLemore, Assistant
Chief Counsel, FINRA, to Lourdes Gonzalez,
Assistant Chief Counsel—Sales Practices, Division
of Trading and Markets, Securities and Exchange
Commission, dated August 23, 2018.
7 The subsequent description of the proposed rule
change is substantially excerpted from FINRA’s
description in the Notice. See Notice, 83 FR at
36648–36649.
2 17
[Release No. 34–84418; File No. SR–FINRA–
2018–026]
CFR 200.30–3(a)(12).
II. Description of the Proposed Rule
Change 7
1 15
SECURITIES AND EXCHANGE
COMMISSION
11 17
Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend FINRA
Rule 12214(c) of the Code of Arbitration
Procedure for Customer Disputes
(‘‘Customer Code’’) and FINRA Rule
13214(c) through (e) of the Code of
Arbitration Procedure for Industry
Disputes (‘‘Industry Code’’ and together,
‘‘Codes’’), to provide that FINRA will
pay each arbitrator a $200 honorarium
to decide without a hearing session a
contested subpoena request or a
contested order for production or
appearance.
The proposed rule change was
published for comment in the Federal
Register on July 30, 2018.3 The public
comment period closed on August 20,
2018. The Commission received four
comment letters in response to the
Notice, all supporting the proposed rule
change.4 On October 5, 2018, FINRA
responded to the comment letters
received in response to the Notice.5 On
August 23, 2018, FINRA extended the
time period in which the Commission
must approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change to October 26,
2018.6 This order approves the
proposed rule change.
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52857
with each other to prepare for the
arbitration through the discovery
process.8 If one party objects to a
discovery request, the party seeking the
documents or information, or
appearance may file a motion requesting
that the arbitrator issue a subpoena 9 or
an order compelling discovery.10 The
opposing party may oppose the filing
party’s motion, contesting the request
for a subpoena 11 or order compelling
discovery.
Subpoena for Appearance
Currently, under FINRA Rule
12214(d),12 each arbitrator who decides
one or more contested subpoenas
without a hearing session receives a
one-time honorarium of $250 during the
life of the arbitration case.13 The rule
caps the total amount that the parties
could pay the arbitrators to decide
contested subpoena requests without a
hearing in any one case at $750.14 The
panel allocates the cost of the
honorarium to the parties in the
award.15 Arbitrators do not receive an
honorarium for deciding unopposed
requests to issue a subpoena.16
Order for Production or Appearance
The Codes do not expressly provide
an honorarium for arbitrators who
decide requests for orders for
production or appearance without a
hearing session. FINRA does, however,
provide arbitrators a $200 honorarium
to decide discovery-related motions
without a hearing. 17 Accordingly,
FINRA categorizes requests to issue
orders for production as discoveryrelated motions and pays $200
honorarium for each arbitrator deciding
8 See
FINRA Rules 12505 and 13505.
FINRA Rules 12512 and 13512.
10 See FINRA Rules 12513 and 13513.
11 See FINRA Rules 12512(c) and 13512(c).
12 See also FINRA Rule 13214(d).
13 See FINRA Rules 12214(d)(1) and 13214(d)(1).
If a hearing session is required to decide the
motion, each arbitrator who participates in the
hearing session will receive a $300 honorarium
instead. See FINRA Rules 12214(a) and 13214(a).
14 See FINRA Rules 12214(d)(1) and 13214(d)(1).
The chairperson of a three-person panel will decide
the contested subpoena request without a hearing
session, for which the chairperson would be paid
$250. The honorarium for contested subpoena
requests could increase in $250 increments, if, for
example, the chairperson recuses or withdraws
from the panel and the replacement chairperson
must decide another contested subpoena request
without a hearing session. In this instance, the
replacement chairperson would receive a $250
honorarium for this work. In no event would the
parties be charged more than $750 per case. See
Notice at 36648, note 14.
15 See FINRA Rules 12214(d)(3) and 13214(d)(3).
16 See Notice at 36648.
17 FINRA Rules 12214(c) and 13214(c) provide
that FINRA will pay each arbitrator an honorarium
of $200 to decide a discovery-related motion
without a hearing session.
9 See
E:\FR\FM\18OCN1.SGM
18OCN1
]]>Agencies
[Federal Register Volume 83, Number 202 (Thursday, October 18, 2018)]
[Notices]
[Pages 52854-52857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22682]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84420; File No. SR-NYSE-2018-46]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Amend the Listed Company
Manual for Acquisition Companies To Reduce the Continued Listing
Standards for Public Holders From 300 to 100 and To Enable the Exchange
To Exercise Discretion To Allow Acquisition Companies a Reasonable Time
Period Following a Business Combination To Demonstrate Compliance With
the Applicable Quantitative Listing Standards
October 12, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on October 1, 2018, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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
The Exchange proposes to proposes to amend the Listed Company
Manual (the
[[Page 52855]]
``Manual'') to revise its continued listing standards for Acquisition
Companies..[sic] The proposed rule change is available on the
Exchange's website at www.nyse.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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 102.06 of the Manual sets forth initial listing
requirements applicable to a company whose business plan is to complete
an initial public offering and engage in a merger or acquisition with
one or more unidentified companies within a specific period of time (an
``Acquisition Company'' or ``AC'').\4\ Section 102.06 requires, in
part, that an Acquisition Company: (i) Deposit into and retain in an
escrow account at least 90% of the gross proceeds of its initial public
offering through the date of its Business Combination; (ii) complete
the Business Combination within 36 months of the effectiveness of the
IPO registration statement; and (iii) provide the public shareholders
who object to the Business Combination with the right to convert their
common stock into a pro rata share of the funds held in escrow.\5\
Following the Business Combination, the combined company must meet the
Exchange's requirements for initial listing.
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\4\ Section 102.06 provides that an Acquisition Company must
complete one or more business combinations having an aggregate fair
market value of at least 80% of the value of the deposit account
(the ``Business Combination'') within 36 months of the effectiveness
of its IPO registration statement.
\5\ Section 102.06 also requires that each proposed business
combination be approved by a majority of the company's independent
directors.
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Section 802.01B of the Manual sets forth the continued listing
standards for ACs. The Exchange proposes to change its initial and
continued listing standards for Acquisition Companies as follows:
Reduce the 300 total [sic] holders continued listing
requirement to 100 total [sic] holders.
Amend the rule text in Section 802.01B to enable the
Exchange to exercise discretion to allow companies a reasonable period
of time following the Business Combination to demonstrate compliance
with all applicable quantitative listing standards.
Proposal To Reduce Continued Listing Requirement With Respect to Number
of Holders
Acquisition Companies often have difficulty demonstrating
compliance with the 300 total [sic] shareholder requirement for
continued listing. The shareholder requirement is designed to help
ensure that a security has a sufficient number of investors to provide
a liquid trading market.\6\ Based on conversations with marketplace
participants, including the sponsors of Acquisition Companies and
lawyers and bankers that advise these companies, the Exchange believes
that the difficulties Acquisition Companies have in demonstrating
compliance with the shareholder requirement are due to intrinsic
features of Acquisition Companies, which limit the number of retail
investors interested in the vehicle and encourage owners to hold their
shares until a transaction is announced, which can be as long as three
years after the initial public offering. These same intrinsic features
of Acquisition Companies also limit the benefit to investors of a
shareholder requirement.
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\6\ See, e.g., Rocky Mountain Power Company, Securities Exchange
Act Release No, 40648 (November 9, 1998) (text at footnote 11).
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In addition, because the price of an Acquisition Company is based
primarily on the value of the funds it holds in trust, and the
Acquisition Company's shareholders have the right to redeem their
shares for a pro rata share of that trust in conjunction with the
Business Combination, the impact of the number of shareholders on an
Acquisition Company security's price is less relevant than is the case
for operating company common stocks. For this reason, Acquisition
Companies, historically, trade close to the value in the trust, even
when they have had few shareholders. These trading patterns suggest
that Acquisition Companies' low number of shareholders has not resulted
in distorted prices.
The Exchange believes that an Exchange Traded Fund (``ETF'') is
somewhat similar to an Acquisition Company in this regard in that an
arbitrage mechanism keeps the ETF's price close to the value of its
underlying securities, even when trading in the ETF's shares is
relatively illiquid. The initial listing requirements for ETFs do not
include a shareholder requirement and only 50 shareholders are required
for continued listing after the ETF has been listed for one year.
Accordingly, given the short life of an Acquisition Company, the
trading characteristics of Acquisition Companies, and the requirement
to meet the initial listing standards at the time of the Business
Combination, the Exchange proposes to reduce from 300 holders to 100
holders the minimum total number of [sic] holders required on a
continued listing basis for Acquisition Companies.\7\
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\7\ The Exchange notes that any Acquisition Company listed on
the NYSE will be allocated to a Designated Market Maker. As a
result, the Exchange does not expect that the proposed change will
result in illiquidity or other problems trading the securities of
Acquisition Companies.
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Period for Company To Demonstrate That It Satisfies Initial Listing
Requirements
Section 802.01B of the Manual currently states that:
After consummation of its Business Combination, a company that had
originally listed as an AC will be subject to Section 801 and Section
802.01 in its entirety and will be required immediately upon
consummation of the Business Combination to meet the following
requirements:
(i) A price per share of at least $4.00;
(ii) a global market capitalization of at least $150,000,000;
(iii) an aggregate market value of publicly-held shares of at least
$40,000,000 *; and
(iv) the requirements with respect to shareholders and publicly-
held shares set forth in Section 102.01A for companies listing in
connection with an initial public offering.\8\
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\8\ The applicable requirement is 400 holders of round lots
(i.e., 100 shares).
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* Shares held by directors, officers, or their immediate families
and other concentrated holding of 10 percent or more are excluded in
calculating the number of publicly-held shares.
Section 802.01B also provides that an Acquisition Company failing
to meet these requirements will be promptly subject to suspension and
delisting proceedings.
The Exchange notes that it can be difficult for a company, once
listed, to obtain evidence demonstrating the number of its shareholders
because
[[Page 52856]]
many accounts are held in street name and shareholders may object to
being identified to the company. As a result, companies must seek
information from broker-dealers and from third-parties that distribute
information such as proxy materials for the broker-dealers. This
process is especially burdensome for Acquisition Companies at the time
of their Business Combinations, because Acquisition Company
shareholders typically have the right to request redemption of their
securities until immediately before consummation and it is therefore
impracticable for companies to identify the number of round-lot holders
immediately to demonstrate their qualification for initial listing.
The Exchange proposes to amend Section 802.01B to provide that
``[f]ollowing consummation of its Business Combination, a company that
had originally listed as an [Acquisition Company] will be subject to''
the quantitative listing standards set forth above. This change is
consistent with rule text in Nasdaq's IM-5101-2 and is intended in
particular to address the delays described above associated with
obtaining information about the number of shareholders holding shares
in ``street name'' accounts. By amending Section 802.01B, an
Acquisition Company would not need to meet the shareholder distribution
requirements immediately upon consummation of it Business Combination,
but may do so at some point following closing of that transaction. The
purpose of the proposed amendment is to allow the Exchange to exercise
discretion to allow companies a reasonable period of time following the
Business Combination to demonstrate compliance with the applicable
quantitative listing standards, including the shareholders requirement.
If the company is unable to demonstrate that it meets the applicable
quantitative requirements after such reasonable time period, the
Exchange would commence delisting proceedings and immediately suspend
trading in the company's securities.
These proposed changes will be effective upon approval of this rule
by the Commission.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Exchange Act,\10\ in particular in
that it is designed to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and 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. While the change would allow
Acquisition Companies to maintain their continued listing status with
fewer shareholders, this proposed change is consistent with the
investor protection provisions of the Act because other protections
help assure that market prices will not be distorted by any potential
resulting lack of liquidity, which is the underlying purpose of the
shareholder requirement. In particular, the ability of a shareholder to
redeem shares for a pro rata share of the trust helps assure that the
Acquisition Company will trade close to the value of the assets held in
trust.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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Thus, this change will remove impediments to and perfect the
mechanism of a free and open market by removing listing requirements
that prohibit certain companies from remaining listed without any
concomitant investor protection benefits.
The proposal to allow Acquisition Companies to demonstrate that
they meet the applicable quantitative requirements following a Business
Combination is intended in particular to address the difficulty
companies have in identifying the number of holders they have
immediately upon consummation of their Business Combination.
Acquisition Company shareholders typically have the right to request
redemption of their securities until immediately before consummation
and it is therefore impracticable for companies to identify the number
of round-lot holders immediately to demonstrate their qualification for
initial listing. This proposed change is consistent with the protection
of investors and the public interest, as it does not alter the
substantive quantitative requirements a company must meet to remain
listed.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The purpose of the proposed
rule is to adopt continued listing standards for Acquisition Companies
that better reflect the characteristics and trading market for
Acquisition Companies. While the rule may permit more Acquisition
Companies to list, or remain listed, on the Exchange, other exchanges
could adopt similar rules to compete for such listings. As such, the
Exchange does not believe it imposes any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2018-46 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-NYSE-2018-46. 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 website (https://www.sec.gov/rules/sro.shtml).
Copies of the
[[Page 52857]]
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 website 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-NYSE-2018-46 and should be submitted on
or before November 8, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22682 Filed 10-17-18; 8:45 am]
BILLING CODE 8011-01-P
