Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Approval of a Proposed Rule Change Amending Section 302 of the Listed Company Manual To Provide Exemptions for the Issuers of Certain Categories of Securities From the Obligation To Hold Annual Shareholders' Meetings, 35431-35433 [2019-15637]
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Federal Register / Vol. 84, No. 141 / Tuesday, July 23, 2019 / Notices
6(b)(5) of the Act 15 [sic] in particular, in
that it is designed to provide for the
equitable allocation of reasonable dues,
fees and other charges among its
Members and other persons using its
facilities. The Exchange believes that it
is consistent with the Act to correct the
Fee Schedule so that the Fee Schedule
is accurate, avoiding any potential
confusion among Members. The
Exchange further believes that the
correction to the Fee Schedule is
reasonable, equitable, and not unfairly
discriminatory because all Members
will be subject to the same fee structure.
As described in the Purpose section
above, this proposed rule change does
not change any fees charged by IEX, but
rather corrects inaccurate descriptions
of two Fee Code combinations. Thus,
the proposed fee change will provide
clarity to market participants regarding
the meaning of Fee Codes LSN and
LSQN, therefore making the Exchange’s
Fee Schedule clearer and more
deterministic to the benefit of all market
participants.
determine whether the proposed rule
change should be approved or
disapproved.
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 intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is designed to
correct an inadvertent error rather than
a competitive issue.
All submissions should refer to File No.
SR–IEX–2019–06. 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
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 No.
SR–IEX–2019–06, and should be
submitted on or before August 13, 2019.
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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 foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) 16 of the Act.
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) 17 of the Act to
15 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(3)(A)(ii).
17 15 U.S.C. 78s(b)(2)(B).
16 15
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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 rule-comments@
sec.gov. Please include File No. SR–
IEX–2019–06 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.
PO 00000
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35431
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–15635 Filed 7–22–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86406; File No. SR–NYSE–
2019–20]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Granting Approval of a Proposed Rule
Change Amending Section 302 of the
Listed Company Manual To Provide
Exemptions for the Issuers of Certain
Categories of Securities From the
Obligation To Hold Annual
Shareholders’ Meetings
July 18, 2019.
I. Introduction
On May 6, 2019, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Section 302 of the NYSE Listed
Company Manual (‘‘Manual’’) regarding
the annual shareholder meeting
requirement. The proposed rule change
was published for comment in the
Federal Register on May 23, 2019.3 The
Commission has received no comment
letters on the proposal. On July 3, 2019,
pursuant to Section 19(b)(2) of the Act,4
the Commission designated a longer
period within which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule change.5 This order approves the
proposed rule change.
II. Description of the Proposal
Section 302 of the Manual provides
that listed companies are required to
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 85889
(May 17, 2019), 84 FR 23815 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 86291
(July 3, 2019), 84 FR 32802 (July 9, 2019). The
Commission designated August 21, 2019, as the
date by which the Commission shall approve the
proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine
whether to approve or disapprove the proposed rule
change.
1 15
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35432
Federal Register / Vol. 84, No. 141 / Tuesday, July 23, 2019 / Notices
hold an annual shareholders’ meeting
during each fiscal year. The Exchange
has proposed to amend Section 302 of
the Manual to provide that the annual
meeting requirement does not apply to
companies whose only securities listed
on the Exchange are non-voting
preferred and debt, passive business
organizations (such as royalty trusts), or
securities listed pursuant to Rules
5.2(j)(2) (Equity Linked notes), 5.2(j)(3)
(Investment Company Units), 5.2(j)(4)
(Index-Linked Exchangeable Notes),
5.2(j)(5) (Equity Gold Shares), 5.2(j)(6)
(Equity Index-Linked Securities,
Commodity-Linked Securities,
Currency-Linked Securities, Fixed
Income Index-Linked Securities,
Futures-Linked Securities and
Multifactor Index-Linked Securities),
8.100 (Portfolio Depositary Receipts),
8.200 (Trust Issued Receipts), 8.201
(Commodity-Based Trust Shares), 8.202
(Currency Trust Shares), 8.203
(Commodity Index Trust Shares), 8.204
(Commodity Futures Trust Shares),
8.300 (Partnership Units), 8.400 (Paired
Trust Shares), 8.600 (Managed Fund
Shares) and 8.700 (Managed Trust
Securities). The Exchange also proposed
to amend the rule text to make clear
that, if an issuer also lists common stock
(which the Commission notes can be
either voting or non-voting common
stock), or voting preferred stock, or their
equivalent, such issuer must still hold
an annual meeting for the holders of
that common stock or voting preferred
stock, or their equivalent.6
According to the Exchange, holders of
non-voting preferred and debt
securities, securities of passive business
organizations (such as royalty trusts)
and derivative and special purpose
securities either do not have the right to
elect directors at annual meetings or
have the right to elect directors only in
very limited circumstances.7 For
example, holders of non-voting
preferred securities may have the right
to temporarily elect directors if
dividends on such securities have not
been paid for a specified period of
time.8 The Exchange stated in its
proposal that absent such special
circumstances, in no event do holders of
the securities listed above elect directors
on an annual basis.9 The Exchange
further stated that despite the fact that
there is no matter with respect to which
holders of these securities have an
annual voting right under state law or
their governing documents, NYSE rules
6 See NYSE Arca, Inc. Rule 5.3–E(e) and Rule IM–
5620 of The Nasdaq Stock Market LLC.
7 See Notice, supra note 3, at 23815.
8 See id.
9 See id.
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16:43 Jul 22, 2019
Jkt 247001
currently do not exclude the issuers of
such securities from the requirement
that they hold an annual meeting of
shareholders.10
The Exchange further stated that
shareholders of ETFs and derivative
securities products listed on the
Exchange receive regular disclosure
documents describing the pricing
mechanism for their securities and
detailing how they can value their
holdings.11 In addition, the Exchange
noted that the net asset value of the
categories of ETFs and other derivative
securities products listed above is
determined by the market price of each
fund’s underlying securities or other
reference asset.12 The Exchange stated
that it believes that there is less need for
shareholders to engage management at
an annual meeting because shareholders
can value their investments on an
ongoing basis.13 The Exchange further
stated that, while holders of such
securities may have the right to vote in
certain limited circumstances, they do
not have the right to vote on the annual
election of a board of directors, further
eliminating the need for an annual
meeting.14
The Exchange stated in its proposal
that, notwithstanding the existence of
an exemption from the Exchange’s
annual shareholder meeting
requirement as proposed to be amended,
issuers of listed securities will remain
subject to any applicable state and
federal securities laws with respect to
the holding of annual meetings and any
other types of shareholder meetings.15
For example, the Exchange noted that
ETFs are registered under, and remain
subject to, the Investment Company Act
of 1940 (‘‘Investment Company Act’’),
which imposes various shareholdervoting requirements that may be
applicable to such funds.16 The
Exchange further noted that any security
listed under Section 703.19 of the
Manual that has the attributes of
common stock or voting preferred stock,
or their equivalents, would still be
subject to the Exchange’s annual
meeting requirements.17
Notice, supra note 3, at 23815–16.
Notice, supra note 3, at 23816.
12 See id.
13 See id.
14 See id.
15 See id.
16 See, e.g., Section 16 of the Investment
Company Act, which requires, among other things,
an investment company’s initial board of directors
to be elected by the shareholders at an annual or
special meeting. 15 U.S.C. 80a–16(a).
17 See Notice, supra note 3, at 23816.
PO 00000
10 See
11 See
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Fmt 4703
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III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.18 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,19 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, and
are not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission believes that the
Exchange’s proposal to exclude issuers
of certain categories of securities from
the obligation to hold annual
shareholders’ meetings is consistent
with the Act. The Commission believes
the right of shareholders to vote at an
annual meeting is an essential and
important one. The Commission,
however, believes that the requirement
to hold an annual shareholder meeting
may not be necessary for certain issuers
of specific types of securities because
the holders of such securities do not
directly participate as equity holders
and vote in the annual election of
directors or generally on the operations
or policies of the listed company.
The Commission notes that NYSE’s
amended annual shareholder meeting
requirement remains subject to any
applicable state and federal securities
laws that relate to such annual
meetings. As a result, a company that
lists one or more of the types of
securities set forth in amended Section
302 of the Manual may still be required
to hold annual shareholder meetings in
accordance with such state and federal
securities laws. In addition, the
Commission notes that issuers of NYSE
listed securities, including the types of
securities set forth in amended Section
302 of the Manual, remain subject to
state and federal securities laws that
may require other types of shareholder
meetings, such as special meetings of
shareholders. For example, exchange
traded funds, that are open-ended
18 15 U.S.C. 78f(b). In approving this proposed
rule change, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
19 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 84, No. 141 / Tuesday, July 23, 2019 / Notices
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management investment companies, are
registered under, and remain subject to,
the Investment Company Act, which
imposes various shareholder-voting
requirements that may be applicable to
such funds.20
The proposal also clarifies that the
right not to hold an annual shareholder
meeting, as set forth in amended Section
302 of the Manual, applies only with
respect to the particular securities
specified in amended Section 302.
Thus, although the proposed rule
change excludes a particular NYSE
listed company from holding an annual
shareholder meeting with respect to,
and as a result of listing, the specific
type of security specified in amended
Section 302 of the Manual, if such
company also lists other common stock
or voting preferred stock, or their
equivalent, such company must
nevertheless hold an annual meeting for
the holders of such securities during
each fiscal year.21
The proposed changes to Section 302
of the Manual will also continue to
require companies listing common stock
to hold an annual meeting irrespective
of whether the listed class of common
stock is voting or non-voting stock. This
is consistent with the rules of other
national securities exchanges and will
ensure that all common stock
shareholders, whether holders of voting
or non-voting common stock, have an
opportunity at a shareholder meeting to
engage with management to discuss
company affairs as well as, if required
by a listed company’s governing
documents, to elect directors.22
Given the limited rights and other
interests of the holders of those
securities specified in amended Section
302 of the Manual and the applicability
of federal and state securities laws that
govern shareholder meetings, the
Commission believes that the proposed
rule change reasonably sets forth the
scope of the annual shareholder meeting
requirement and will ensure that the
20 See e.g., Section 16 of the Investment Company
Act, which requires, among others, an investment
company’s initial board of directors to be elected by
the shareholders at an annual or special meeting.
15 U.S.C. 80a–16(a). The Commission notes that
closed-end management investment companies are
still required to hold annual meetings under
Section 302 of the Manual.
21 The Commission notes, for example, that some
of the companies issuing one of the enumerated
listed securities excluded from the annual meeting
requirement may also have their common stock
listed on the NYSE and in that case would, as noted
above, be subject to the annual meeting requirement
in Section 302 of the Manual.
22 See Securities Exchange Act Release Nos.
57268 (February 4, 2008), 73 FR 7614, 7616
(February 8, 2008) (SR–Amex–2006–31) and 53578
(March 30, 2006), 66 FR 17532, 17533 (April 6,
2006) (SR–NASD–2005–073).
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16:43 Jul 22, 2019
Jkt 247001
appropriate NYSE listed companies are
required to hold annual shareholder
meetings under NYSE rules, for the
benefit of investors and the public
interest.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
proposed rule change (SR–NYSE–2019–
20), be, and it hereby is, approved.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.24
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–15637 Filed 7–22–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86401; File No. SR–CBOE–
2019–036]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Rules
Governing the Give Up of a Clearing
Trading Permit Holder by a Trading
Permit Holder on Exchange
Transactions
July 17, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 3,
2019, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
its rules governing the give up of a
Clearing Trading Permit Holder by a
PO 00000
23 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
24 17
Frm 00065
Fmt 4703
Sfmt 4703
35433
Trading Permit Holder on exchange
transactions. The text of the proposed
rule change is provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 6.21, which governs the give up of
a Clearing Trading Permit Holder
(‘‘Clearing TPH’’) by a Trading Permit
Holder (‘‘TPH’’) on Exchange
transactions.
Background
By way of background, Cboe Options
Rule 6.21 provides that when a TPH
executes a transaction on the Exchange,
it must give up the name of the Clearing
TPH (the ‘‘Give Up’’) through which the
transaction will be cleared. Rule 6.21
also provides that a TPH may only give
up a ‘‘Designated Give Up’’ or its
‘‘Guarantor.’’ This limitation is enforced
by the Exchange’s trading systems.
A ‘‘Designated Give Up’’ is currently
defined as any Clearing TPH that a TPH
(other than a Market-Maker 5) identifies
to the Exchange, in writing, as a
Clearing TPH that the TPH would like
to have the ability to give up. To
designate a ‘‘Designated Give Up’’ a
TPH must submit written notification,
in a form and manner determined by the
Exchange, to the Membership Services
Department (‘‘MSD’’). Specifically, the
5 For purposes of this rule, references to ‘‘MarketMaker’’ shall refer to Trading Permit Holders acting
in the capacity of a Market-Maker and shall include
all Exchange Market-Maker capacities (e.g.,
Designated Primary Market-Makers and Lead
Market-Makers).
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]]>Agencies
[Federal Register Volume 84, Number 141 (Tuesday, July 23, 2019)]
[Notices]
[Pages 35431-35433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15637]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86406; File No. SR-NYSE-2019-20]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval of a Proposed Rule Change Amending Section 302 of the
Listed Company Manual To Provide Exemptions for the Issuers of Certain
Categories of Securities From the Obligation To Hold Annual
Shareholders' Meetings
July 18, 2019.
I. Introduction
On May 6, 2019, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Section 302 of the NYSE Listed Company
Manual (``Manual'') regarding the annual shareholder meeting
requirement. The proposed rule change was published for comment in the
Federal Register on May 23, 2019.\3\ The Commission has received no
comment letters on the proposal. On July 3, 2019, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed rule change.\5\ This order approves
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 85889 (May 17,
2019), 84 FR 23815 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 86291 (July 3,
2019), 84 FR 32802 (July 9, 2019). The Commission designated August
21, 2019, as the date by which the Commission shall approve the
proposed rule change, disapprove the proposed rule change, or
institute proceedings to determine whether to approve or disapprove
the proposed rule change.
---------------------------------------------------------------------------
II. Description of the Proposal
Section 302 of the Manual provides that listed companies are
required to
[[Page 35432]]
hold an annual shareholders' meeting during each fiscal year. The
Exchange has proposed to amend Section 302 of the Manual to provide
that the annual meeting requirement does not apply to companies whose
only securities listed on the Exchange are non-voting preferred and
debt, passive business organizations (such as royalty trusts), or
securities listed pursuant to Rules 5.2(j)(2) (Equity Linked notes),
5.2(j)(3) (Investment Company Units), 5.2(j)(4) (Index-Linked
Exchangeable Notes), 5.2(j)(5) (Equity Gold Shares), 5.2(j)(6) (Equity
Index-Linked Securities, Commodity-Linked Securities, Currency-Linked
Securities, Fixed Income Index-Linked Securities, Futures-Linked
Securities and Multifactor Index-Linked Securities), 8.100 (Portfolio
Depositary Receipts), 8.200 (Trust Issued Receipts), 8.201 (Commodity-
Based Trust Shares), 8.202 (Currency Trust Shares), 8.203 (Commodity
Index Trust Shares), 8.204 (Commodity Futures Trust Shares), 8.300
(Partnership Units), 8.400 (Paired Trust Shares), 8.600 (Managed Fund
Shares) and 8.700 (Managed Trust Securities). The Exchange also
proposed to amend the rule text to make clear that, if an issuer also
lists common stock (which the Commission notes can be either voting or
non-voting common stock), or voting preferred stock, or their
equivalent, such issuer must still hold an annual meeting for the
holders of that common stock or voting preferred stock, or their
equivalent.\6\
---------------------------------------------------------------------------
\6\ See NYSE Arca, Inc. Rule 5.3-E(e) and Rule IM-5620 of The
Nasdaq Stock Market LLC.
---------------------------------------------------------------------------
According to the Exchange, holders of non-voting preferred and debt
securities, securities of passive business organizations (such as
royalty trusts) and derivative and special purpose securities either do
not have the right to elect directors at annual meetings or have the
right to elect directors only in very limited circumstances.\7\ For
example, holders of non-voting preferred securities may have the right
to temporarily elect directors if dividends on such securities have not
been paid for a specified period of time.\8\ The Exchange stated in its
proposal that absent such special circumstances, in no event do holders
of the securities listed above elect directors on an annual basis.\9\
The Exchange further stated that despite the fact that there is no
matter with respect to which holders of these securities have an annual
voting right under state law or their governing documents, NYSE rules
currently do not exclude the issuers of such securities from the
requirement that they hold an annual meeting of shareholders.\10\
---------------------------------------------------------------------------
\7\ See Notice, supra note 3, at 23815.
\8\ See id.
\9\ See id.
\10\ See Notice, supra note 3, at 23815-16.
---------------------------------------------------------------------------
The Exchange further stated that shareholders of ETFs and
derivative securities products listed on the Exchange receive regular
disclosure documents describing the pricing mechanism for their
securities and detailing how they can value their holdings.\11\ In
addition, the Exchange noted that the net asset value of the categories
of ETFs and other derivative securities products listed above is
determined by the market price of each fund's underlying securities or
other reference asset.\12\ The Exchange stated that it believes that
there is less need for shareholders to engage management at an annual
meeting because shareholders can value their investments on an ongoing
basis.\13\ The Exchange further stated that, while holders of such
securities may have the right to vote in certain limited circumstances,
they do not have the right to vote on the annual election of a board of
directors, further eliminating the need for an annual meeting.\14\
---------------------------------------------------------------------------
\11\ See Notice, supra note 3, at 23816.
\12\ See id.
\13\ See id.
\14\ See id.
---------------------------------------------------------------------------
The Exchange stated in its proposal that, notwithstanding the
existence of an exemption from the Exchange's annual shareholder
meeting requirement as proposed to be amended, issuers of listed
securities will remain subject to any applicable state and federal
securities laws with respect to the holding of annual meetings and any
other types of shareholder meetings.\15\ For example, the Exchange
noted that ETFs are registered under, and remain subject to, the
Investment Company Act of 1940 (``Investment Company Act''), which
imposes various shareholder-voting requirements that may be applicable
to such funds.\16\ The Exchange further noted that any security listed
under Section 703.19 of the Manual that has the attributes of common
stock or voting preferred stock, or their equivalents, would still be
subject to the Exchange's annual meeting requirements.\17\
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\15\ See id.
\16\ See, e.g., Section 16 of the Investment Company Act, which
requires, among other things, an investment company's initial board
of directors to be elected by the shareholders at an annual or
special meeting. 15 U.S.C. 80a-16(a).
\17\ See Notice, supra note 3, at 23816.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\18\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\19\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest, and are not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\18\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\19\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the Exchange's proposal to exclude
issuers of certain categories of securities from the obligation to hold
annual shareholders' meetings is consistent with the Act. The
Commission believes the right of shareholders to vote at an annual
meeting is an essential and important one. The Commission, however,
believes that the requirement to hold an annual shareholder meeting may
not be necessary for certain issuers of specific types of securities
because the holders of such securities do not directly participate as
equity holders and vote in the annual election of directors or
generally on the operations or policies of the listed company.
The Commission notes that NYSE's amended annual shareholder meeting
requirement remains subject to any applicable state and federal
securities laws that relate to such annual meetings. As a result, a
company that lists one or more of the types of securities set forth in
amended Section 302 of the Manual may still be required to hold annual
shareholder meetings in accordance with such state and federal
securities laws. In addition, the Commission notes that issuers of NYSE
listed securities, including the types of securities set forth in
amended Section 302 of the Manual, remain subject to state and federal
securities laws that may require other types of shareholder meetings,
such as special meetings of shareholders. For example, exchange traded
funds, that are open-ended
[[Page 35433]]
management investment companies, are registered under, and remain
subject to, the Investment Company Act, which imposes various
shareholder-voting requirements that may be applicable to such
funds.\20\
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\20\ See e.g., Section 16 of the Investment Company Act, which
requires, among others, an investment company's initial board of
directors to be elected by the shareholders at an annual or special
meeting. 15 U.S.C. 80a-16(a). The Commission notes that closed-end
management investment companies are still required to hold annual
meetings under Section 302 of the Manual.
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The proposal also clarifies that the right not to hold an annual
shareholder meeting, as set forth in amended Section 302 of the Manual,
applies only with respect to the particular securities specified in
amended Section 302. Thus, although the proposed rule change excludes a
particular NYSE listed company from holding an annual shareholder
meeting with respect to, and as a result of listing, the specific type
of security specified in amended Section 302 of the Manual, if such
company also lists other common stock or voting preferred stock, or
their equivalent, such company must nevertheless hold an annual meeting
for the holders of such securities during each fiscal year.\21\
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\21\ The Commission notes, for example, that some of the
companies issuing one of the enumerated listed securities excluded
from the annual meeting requirement may also have their common stock
listed on the NYSE and in that case would, as noted above, be
subject to the annual meeting requirement in Section 302 of the
Manual.
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The proposed changes to Section 302 of the Manual will also
continue to require companies listing common stock to hold an annual
meeting irrespective of whether the listed class of common stock is
voting or non-voting stock. This is consistent with the rules of other
national securities exchanges and will ensure that all common stock
shareholders, whether holders of voting or non-voting common stock,
have an opportunity at a shareholder meeting to engage with management
to discuss company affairs as well as, if required by a listed
company's governing documents, to elect directors.\22\
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\22\ See Securities Exchange Act Release Nos. 57268 (February 4,
2008), 73 FR 7614, 7616 (February 8, 2008) (SR-Amex-2006-31) and
53578 (March 30, 2006), 66 FR 17532, 17533 (April 6, 2006) (SR-NASD-
2005-073).
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Given the limited rights and other interests of the holders of
those securities specified in amended Section 302 of the Manual and the
applicability of federal and state securities laws that govern
shareholder meetings, the Commission believes that the proposed rule
change reasonably sets forth the scope of the annual shareholder
meeting requirement and will ensure that the appropriate NYSE listed
companies are required to hold annual shareholder meetings under NYSE
rules, for the benefit of investors and the public interest.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\23\ that the proposed rule change (SR-NYSE-2019-20), be, and it
hereby is, approved.
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\23\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15637 Filed 7-22-19; 8:45 am]
BILLING CODE 8011-01-P
