Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Order Approving Proposed Rule Change To Adopt Rule 14.425, Which Would Require Companies Listed on the Exchange To Develop and Publish Certain Long-Term Policies, 44952-44954 [2019-18381]
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44952
Federal Register / Vol. 84, No. 166 / Tuesday, August 27, 2019 / Notices
capital of at least $2 million.42 Based on
the most recent financial information
reported by Clearing Members, which
OCC has included in confidential
Exhibit 3h, OCC believes that 98% of
Clearing Members could absorb the
maximum amount of the Operational
Loss Fee without breaching their
minimum net capital requirements or
the SEC’s ‘‘early warning’’ threshold.43
OCC is comfortable with Clearing
Members’ ability to pay the Operational
Loss Fee because the amount of the
maximum Operational Loss Fee that
would be charged per Clearing Member
is approximately the same as the
contingent obligations under the OCC
clearing fund assessment requirements
for a Clearing Member operating at the
minimum clearing fund deposit—$1
million. Consequently, OCC does not
believe the Operational Loss Fee
obligation poses a significant barrier to
entry for smaller Clearing Members. By
adding the Operational Loss Fee to
OCC’s schedule of fees, the fee would be
a transparent obligation of membership
based upon which Clearing Members
can independently assess their rights
and obligations.
In addition, the Capital Management
Policy would help address the relative
impact that charging the Operational
Loss Fee in equal shares would have on
smaller Clearing Members by providing
that should OCC charge the fee and
thereafter return to a position where the
Board may approve tools to lower costs
for Clearing Members, such as refunds,
OCC would employ such tools to lower
costs for Clearing Members on an equal
basis, up to the amount of the
Operational Loss Fee charged. Thus, all
Clearing Members shall share equally in
the cost and recovery of the Operational
Loss Fee amounts charged.
Moreover, any barrier to entry that the
Operational Loss Fee may impose is not
unnecessary in furtherance of the
Exchange Act, and the rules the SEC has
promulgated thereunder. Pursuant to
those rules, OCC must hold minimum
LNAFBE and have a viable plan to
replenish equity should OCC’s equity
fall close to or below those minimums.
It is entirely appropriate that the
Clearing Members that benefit equally
from OCC’s services share the burden
equally should OCC experience an
operational loss that threatens its ability
to continue providing those services and
comply with its regulatory obligations.
42 OCC
Rule 302.
43 17 CFR 240.15c3–1.
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C. Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments were not and are
not intended to be solicited with respect
to the proposed rule change, and none
have been received.
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 within such longer period
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 Exchange
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–
OCC–2019–007 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–OCC–2019–007. 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
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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 such
filing also will be available for
inspection and copying at the principal
office of OCC and on OCC’s website at
https://www.theocc.com/about/
publications/bylaws.jsp.
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–OCC–2019–007 and should
be submitted on or before September 17,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.44
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18385 Filed 8–26–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86722; File No. SR–LTSE–
2019–01]
Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Order
Approving Proposed Rule Change To
Adopt Rule 14.425, Which Would
Require Companies Listed on the
Exchange To Develop and Publish
Certain Long-Term Policies
August 21, 2019.
I. Introduction
On June 25, 2019, the Long-Term
Stock Exchange, Inc. (‘‘LTSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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
adopt new Rule 14.425 (Long-Term
Policies), which would require
companies listed on the Exchange to
develop and publish certain policies
that the Exchange believes will facilitate
long-term focus and value creation. The
proposed rule change was published for
44 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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comment in the Federal Register on July
12, 2019.3 The Commission received
one comment letter, which supported
the proposed rule change.4 This order
approves the proposed rule change.
II. Description of the Proposal
On May 10, 2019, the Commission
granted the Exchange’s application for
registration as a national securities
exchange under Section 6 of the Act,5
including approval of rules applicable
to the qualification, listing and delisting
of companies on the Exchange.6 The
Exchange is proposing to enhance its
listing requirements by adopting
proposed Rule 14.425, which would
require companies listed on the
Exchange (‘‘LTSE-Listed Issuers’’) to
adopt and publish the following
policies: A Long-Term Stakeholder
Policy, a Long-Term Strategy Policy, a
Long-Term Compensation Policy, a
Long-Term Board Policy and a LongTerm Investor Policy, as described
further below (collectively, the
‘‘Policies’’).7 These Policies must be
consistent with the set of principles
articulated in proposed Rule 14.425(b),
as described further below.
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Long-Term Principles
The Exchange proposes that LTSEListed Issuers will have flexibility in
developing what they believe to be
appropriate Policies for their businesses;
however, each of the Policies would be
required to be consistent with the
following long-term principles
(collectively, the ‘‘Principles’’):
• Long-term focused companies
should consider a broader group of
stakeholders and the critical role they
play in one another’s success;
• Long-term focused companies
should measure success in years and
decades and prioritize long-term
decision-making;
• Long-term focused companies
should align executive compensation
and board compensation with long-term
performance;
• Boards of directors of long-term
focused companies should be engaged
in and have explicit oversight of longterm strategy; and
• Long-term focused companies
should engage with their long-term
shareholders.
3 See Securities Exchange Act Release No. 86327
(July 8, 2019), 84 FR 33293 (July 12, 2019)
(‘‘Notice’’).
4 See Letter from Joe Caputo, Council of
Institutional Investors (‘‘CII’’), to Vanessa
Countryman, Secretary, Commission, dated August
1, 2019 (‘‘CII Letter’’).
5 15 U.S.C. 78f.
6 See Securities Exchange Act Release No. 85828
(May 10, 2019), 84 FR 21841 (May 15, 2019).
7 See proposed Rule 14.425(a).
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Long-Term Policies
In addition to requiring the Policies to
be consistent with the Principles, the
Exchange would require each of the
required Policies to include certain
minimum elements, as described further
below.
(A) Long-Term Stakeholder Policy
Proposed Rule 14.425(a)(1) would
require that each LTSE-Listed Issuer
adopt and publish a Long-Term
Stakeholder policy explaining how the
issuer operates its business to consider
all of the stakeholders critical to its
long-term success. At a minimum, this
policy would be required to include a
discussion of (i) the stakeholder groups
the LTSE-Listed Issuer considers critical
to long-term success, (ii) the LTSEListed Issuer’s impact on the
environment and its community, (iii)
the LTSE-Listed Issuer’s approach to
diversity and inclusion, (iv) the LTSEListed Issuer’s approach to investing in
its employees, and (v) the LTSE-Listed
Issuer’s approach to rewarding its
employees and other stakeholders for
contributing to the LTSE-Listed Issuer’s
long-term success.
(B) Long-Term Strategy Policy
Proposed Rule 14.425(a)(2) would
require that each LTSE-Listed Issuer
adopt and publish a Long-Term Strategy
Policy explaining how the LTSE-Listed
Issuer prioritizes long-term strategic
decision-making and long-term success.
The Long-Term Strategy Policy would
be required to define the LTSE-Listed
Issuer’s long-term time horizon and
include a discussion of how this time
horizon relates to the LTSE-Listed
Issuer’s strategic plans, how the LTSEListed Issuer aligns success metrics with
that horizon, and how it implements
long-term prioritization throughout the
organization. According to the
Exchange, the disclosure of this policy
is designed to increase transparency for
shareholders on the strategic goals of the
company’s managers and to provide for
greater alignment and accountability
between a company’s long-term vision
and investor expectations.
(C) Long-Term Compensation Policy
Proposed 14.425(a)(3) would require
that each LTSE-Listed Issuer adopt and
publish a policy explaining the LTSEListed Issuer’s alignment of executive
financial and non-financial
compensation and of board
compensation with the LTSE-Listed
Issuer’s long-term success and long-term
success metrics. According to the
Exchange, long-term focused companies
seek to align the compensation of their
executive officers with the long-term
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44953
performance of the company. In
addition, the Exchange believes that
since the boards of such companies play
an active role in long-term strategy, such
companies seek to align the
compensation of their boards to longterm performance as well. The Exchange
notes that much of the information that
the company would need to disclose
under proposed Rule 14.425(a)(3) also
would be required by Rule 402 of the
Commission’s Regulation S–K.8
Nonetheless, the Exchange believes that
requiring LTSE-Listed Issuers to publish
a Long-Term Compensation Policy
would still be helpful to long-term
investors.
(D) Long-Term Board Policy
Proposed 14.425(a)(4) would require
that each LTSE-Listed Issuer adopt and
publish a policy explaining the
engagement of the LTSE-Listed Issuer’s
board of directors in the LTSE-Listed
Issuer’s long-term focus, including
discussion of whether the board and/or
which board committee(s), if any, have
explicit oversight of and responsibility
for long-term strategy and success
metrics. The Exchange believes that the
board of directors should be engaged
with the LTSE-Listed Issuer’s forwardlooking long-term strategy and that
investors would find this information
useful.
(E) Long-Term Investor Policy
Proposed 14.425(a)(5) would require
that each LTSE-Listed Issuer adopt and
publish a policy explaining how the
LTSE-Listed Issuer engages with longterm investors. The Exchange believes
that forward-thinking companies value
long-term investor input and consider
their perspective on company
governance as important to the
development of the company’s longterm strategy.
Disclosure of Policies and Enforcement
Proposed Rule 14.425(c) would
require that each LTSE-Listed Issuer
review the policies required by
proposed Rule 14.425(a) at least
annually and make such policies
available publicly and free of charge on
or through its website. In addition, each
LTSE-Listed Issuer would be required to
disclose in its annual proxy statement
or, if it does not file an annual proxy
statement, in its annual report on Form
10–K (or if a foreign private issuer, Form
20–F) filed with the Commission, that
these policies are available on or
through its website, and to provide the
website address. According to the
Exchange, these requirements are
8 17
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27AUN1
44954
Federal Register / Vol. 84, No. 166 / Tuesday, August 27, 2019 / Notices
intended to ensure that investors are
aware of and have access to the Policies
required by the proposed rule.
The Exchange has represented that it
will enforce the provisions of proposed
Rule 14.425 by ensuring that each LTSEListed Issuer has addressed all of the
elements enumerated in each of the
Policies, consistent with the Principles,
and has made the Policies publicly
available without cost.
As noted above, the Commission
received one comment letter received
regarding the proposal.9 The commenter
supported the Exchange’s focus on a
long-term vision for its listed companies
and stated that ‘‘. . . the long-term
policies described in the filing are
thoughtful, well-structured, and
generally aligned with CII’s membership
approved corporate governance
policies.’’10
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III. Discussion and Commission
Findings
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act 11 and the rules
and regulations thereunder applicable to
a national securities exchange.12 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,13 which
requires, among other things, that 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
that those rules are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission notes that the
Exchange’s proposal would impose
additional requirements for its listed
issuers, beyond those contained in its
existing listing rules. Specifically, the
proposal would require issuers to adopt
and publish certain Policies that are
consistent with the Principles
articulated in the proposed rule. The
Exchange has represented that it will
enforce the provisions of the proposed
rule by ensuring that each LTSE-Listed
Issuer has addressed all of the elements
enumerated in each of the Policies,
9 See
note 4, supra.
CII Letter at 2.
11 15 U.S.C. 78f.
12 15 U.S.C. 78f(b). In approving this proposal, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
13 15 U.S.C. 78f(b)(5).
10 See
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consistent with the Principles, and has
made the Policies publicly available
without cost.
Based on the foregoing, the
Commission finds that the proposed
rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (SR–LTSE–2019–
01) is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18381 Filed 8–26–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86723; File No. SR–BOX–
2019–24]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing of
Proposed Rule Change To Amend Rule
7600
August 21, 2019.
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 August
19, 2019, BOX Exchange LLC (‘‘BOX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7600 to extend split-price
functionality to Complex QOO Orders
on the BOX Trading Floor. The text of
the proposed rule change is available
from the principal office of the
Exchange, at the Commission’s Public
Reference Room and also on the
Exchange’s internet website at https://
boxoptions.com.
14 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.
15 17
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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 statements 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
In March 2018, the Exchange adopted
rules that allowed for split-price
transactions for Qualified Open Outcry
(‘‘QOO’’) Orders on the BOX Trading
Floor.3 The Exchange now proposes to
extend this functionality to Complex
QOO Orders on the BOX Trading Floor.
The Exchange believes the proposed
change is reasonable as split-price
functionality applies to complex orders
at another exchange with a physical
trading floor.4
Background
The industry first recognized the
complexity of the split-price order in
2005 when Nasdaq Phlx, LLC (‘‘Phlx’’)
filed to create an exception from
existing priority rules for spit-price
orders.5 The purpose behind the split3 See Securities Exchange Act Release No. 82891
(March 16, 2018), 83 FR 12627 (March 22,
2018)(Notice of Filing of Amendment No. 1 and
Order Granting Accelerated Approval of a Proposed
Rule Change, as Modified by Amendment No. 1, To
Adopt Rule 7600(i) To Allow Split-Price
Transactions on the BOX Trading Floor)(‘‘Approval
Order’’).
4 See Nasdaq PHLX LLC (‘‘Phlx’’) Floor Trading
Rules Section 22(a)(2)(D)(ii). On Phlx, split price
functionality for complex and multi-leg orders are
allowed on the trading floor, but due to Phlx system
limitations, require manual calculation. Under this
proposal, BOX is not requiring split price complex
orders and multi-leg orders to be manually
calculated, as the BOX system has the functionality
to process these orders. Further, on Phlx, complex
and multi-leg orders that qualify for the exception
in Phlx Section 22(a)(2)(D) are afforded the priority
provision in Phlx Floor Allocation Section 25(a)(2).
The Exchange notes that this priority provision on
Phlx is similar to BOX’s split price priority
provision detailed in BOX Rule 7600(i)(2). As such,
the Exchange believes that the proposed change to
expand split price priority to Complex QOO Orders
and multi-leg QOO Orders on the Exchange is
appropriate as another options exchange currently
has a similar offering in place.
5 See Securities Exchange Act Release No. 51820
(June 10, 2005), 70 FR 35759 (June 21, 2005) (SR–
Phlx–2005–028) (pilot approval). See also
E:\FR\FM\27AUN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 166 (Tuesday, August 27, 2019)]
[Notices]
[Pages 44952-44954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18381]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86722; File No. SR-LTSE-2019-01]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Order Approving Proposed Rule Change To Adopt Rule 14.425, Which Would
Require Companies Listed on the Exchange To Develop and Publish Certain
Long-Term Policies
August 21, 2019.
I. Introduction
On June 25, 2019, the Long-Term Stock Exchange, Inc. (``LTSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 adopt new Rule 14.425 (Long-Term Policies),
which would require companies listed on the Exchange to develop and
publish certain policies that the Exchange believes will facilitate
long-term focus and value creation. The proposed rule change was
published for
[[Page 44953]]
comment in the Federal Register on July 12, 2019.\3\ The Commission
received one comment letter, which supported the proposed rule
change.\4\ 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. 86327 (July 8,
2019), 84 FR 33293 (July 12, 2019) (``Notice'').
\4\ See Letter from Joe Caputo, Council of Institutional
Investors (``CII''), to Vanessa Countryman, Secretary, Commission,
dated August 1, 2019 (``CII Letter'').
---------------------------------------------------------------------------
II. Description of the Proposal
On May 10, 2019, the Commission granted the Exchange's application
for registration as a national securities exchange under Section 6 of
the Act,\5\ including approval of rules applicable to the
qualification, listing and delisting of companies on the Exchange.\6\
The Exchange is proposing to enhance its listing requirements by
adopting proposed Rule 14.425, which would require companies listed on
the Exchange (``LTSE-Listed Issuers'') to adopt and publish the
following policies: A Long-Term Stakeholder Policy, a Long-Term
Strategy Policy, a Long-Term Compensation Policy, a Long-Term Board
Policy and a Long-Term Investor Policy, as described further below
(collectively, the ``Policies'').\7\ These Policies must be consistent
with the set of principles articulated in proposed Rule 14.425(b), as
described further below.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f.
\6\ See Securities Exchange Act Release No. 85828 (May 10,
2019), 84 FR 21841 (May 15, 2019).
\7\ See proposed Rule 14.425(a).
---------------------------------------------------------------------------
Long-Term Principles
The Exchange proposes that LTSE-Listed Issuers will have
flexibility in developing what they believe to be appropriate Policies
for their businesses; however, each of the Policies would be required
to be consistent with the following long-term principles (collectively,
the ``Principles''):
Long-term focused companies should consider a broader
group of stakeholders and the critical role they play in one another's
success;
Long-term focused companies should measure success in
years and decades and prioritize long-term decision-making;
Long-term focused companies should align executive
compensation and board compensation with long-term performance;
Boards of directors of long-term focused companies should
be engaged in and have explicit oversight of long-term strategy; and
Long-term focused companies should engage with their long-
term shareholders.
Long-Term Policies
In addition to requiring the Policies to be consistent with the
Principles, the Exchange would require each of the required Policies to
include certain minimum elements, as described further below.
(A) Long-Term Stakeholder Policy
Proposed Rule 14.425(a)(1) would require that each LTSE-Listed
Issuer adopt and publish a Long-Term Stakeholder policy explaining how
the issuer operates its business to consider all of the stakeholders
critical to its long-term success. At a minimum, this policy would be
required to include a discussion of (i) the stakeholder groups the
LTSE-Listed Issuer considers critical to long-term success, (ii) the
LTSE-Listed Issuer's impact on the environment and its community, (iii)
the LTSE-Listed Issuer's approach to diversity and inclusion, (iv) the
LTSE-Listed Issuer's approach to investing in its employees, and (v)
the LTSE-Listed Issuer's approach to rewarding its employees and other
stakeholders for contributing to the LTSE-Listed Issuer's long-term
success.
(B) Long-Term Strategy Policy
Proposed Rule 14.425(a)(2) would require that each LTSE-Listed
Issuer adopt and publish a Long-Term Strategy Policy explaining how the
LTSE-Listed Issuer prioritizes long-term strategic decision-making and
long-term success. The Long-Term Strategy Policy would be required to
define the LTSE-Listed Issuer's long-term time horizon and include a
discussion of how this time horizon relates to the LTSE-Listed Issuer's
strategic plans, how the LTSE-Listed Issuer aligns success metrics with
that horizon, and how it implements long-term prioritization throughout
the organization. According to the Exchange, the disclosure of this
policy is designed to increase transparency for shareholders on the
strategic goals of the company's managers and to provide for greater
alignment and accountability between a company's long-term vision and
investor expectations.
(C) Long-Term Compensation Policy
Proposed 14.425(a)(3) would require that each LTSE-Listed Issuer
adopt and publish a policy explaining the LTSE-Listed Issuer's
alignment of executive financial and non-financial compensation and of
board compensation with the LTSE-Listed Issuer's long-term success and
long-term success metrics. According to the Exchange, long-term focused
companies seek to align the compensation of their executive officers
with the long-term performance of the company. In addition, the
Exchange believes that since the boards of such companies play an
active role in long-term strategy, such companies seek to align the
compensation of their boards to long-term performance as well. The
Exchange notes that much of the information that the company would need
to disclose under proposed Rule 14.425(a)(3) also would be required by
Rule 402 of the Commission's Regulation S-K.\8\ Nonetheless, the
Exchange believes that requiring LTSE-Listed Issuers to publish a Long-
Term Compensation Policy would still be helpful to long-term investors.
---------------------------------------------------------------------------
\8\ 17 CFR 229.
---------------------------------------------------------------------------
(D) Long-Term Board Policy
Proposed 14.425(a)(4) would require that each LTSE-Listed Issuer
adopt and publish a policy explaining the engagement of the LTSE-Listed
Issuer's board of directors in the LTSE-Listed Issuer's long-term
focus, including discussion of whether the board and/or which board
committee(s), if any, have explicit oversight of and responsibility for
long-term strategy and success metrics. The Exchange believes that the
board of directors should be engaged with the LTSE-Listed Issuer's
forward-looking long-term strategy and that investors would find this
information useful.
(E) Long-Term Investor Policy
Proposed 14.425(a)(5) would require that each LTSE-Listed Issuer
adopt and publish a policy explaining how the LTSE-Listed Issuer
engages with long-term investors. The Exchange believes that forward-
thinking companies value long-term investor input and consider their
perspective on company governance as important to the development of
the company's long-term strategy.
Disclosure of Policies and Enforcement
Proposed Rule 14.425(c) would require that each LTSE-Listed Issuer
review the policies required by proposed Rule 14.425(a) at least
annually and make such policies available publicly and free of charge
on or through its website. In addition, each LTSE-Listed Issuer would
be required to disclose in its annual proxy statement or, if it does
not file an annual proxy statement, in its annual report on Form 10-K
(or if a foreign private issuer, Form 20-F) filed with the Commission,
that these policies are available on or through its website, and to
provide the website address. According to the Exchange, these
requirements are
[[Page 44954]]
intended to ensure that investors are aware of and have access to the
Policies required by the proposed rule.
The Exchange has represented that it will enforce the provisions of
proposed Rule 14.425 by ensuring that each LTSE-Listed Issuer has
addressed all of the elements enumerated in each of the Policies,
consistent with the Principles, and has made the Policies publicly
available without cost.
As noted above, the Commission received one comment letter received
regarding the proposal.\9\ The commenter supported the Exchange's focus
on a long-term vision for its listed companies and stated that ``. . .
the long-term policies described in the filing are thoughtful, well-
structured, and generally aligned with CII's membership approved
corporate governance policies.''\10\
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\9\ See note 4, supra.
\10\ See CII Letter at 2.
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III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act \11\ and the
rules and regulations thereunder applicable to a national securities
exchange.\12\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\13\ which
requires, among other things, that 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 that those rules are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers. The
Commission notes that the Exchange's proposal would impose additional
requirements for its listed issuers, beyond those contained in its
existing listing rules. Specifically, the proposal would require
issuers to adopt and publish certain Policies that are consistent with
the Principles articulated in the proposed rule. The Exchange has
represented that it will enforce the provisions of the proposed rule by
ensuring that each LTSE-Listed Issuer has addressed all of the elements
enumerated in each of the Policies, consistent with the Principles, and
has made the Policies publicly available without cost.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b). In approving this proposal, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78f(b)(5).
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Based on the foregoing, the Commission finds that the proposed rule
change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-LTSE-2019-01) is approved.
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\14\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18381 Filed 8-26-19; 8:45 am]
BILLING CODE 8011-01-P
