Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Instituting Proceedings To Determine Whether To Disapprove Proposed Rule Change To Amend the Definition of Family Member in Listing Rule 5605(a)(2) for Purposes of the Definition of Independent Director, 49353-49356 [2019-20220]
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Federal Register / Vol. 84, No. 182 / Thursday, September 19, 2019 / Notices
comment period was extended through
November 17, 2014 (79 FR 52374). The
NRC then considered the public
comments on the draft ISG in preparing
the final report (ADAMS Accession No.
ML19212A753). The responses to the
comments can be found in the comment
response appendix (Appendix B of the
ISG; ADAMS Accession No.
ML19212A752).
This ISG is not a rule as defined in the
Congressional Review Act (5 U.S.C.
801–808).
Dated at Rockville, Maryland, this 13th day
of September, 2019.
For the Nuclear Regulatory Commission.
Cinthya I. Roma´n,
Acting Director, Division of Fuel Cycle Safety,
Safeguards, and Environmental Reviews,
Office of Nuclear Material Safety, and
Safeguards.
[FR Doc. 2019–20228 Filed 9–18–19; 8:45 am]
BILLING CODE 7590–01–P
POSTAL REGULATORY COMMISSION
[Docket Nos. MC2019–197 and CP2019–220;
MC2019–198 and CP2019–221; MC2019–199
and CP2019–222]
New Postal Products
Postal Regulatory Commission.
Notice.
AGENCY:
ACTION:
The Commission is noticing a
recent Postal Service filing for the
Commission’s consideration concerning
negotiated service agreements. This
notice informs the public of the filing,
invites public comment, and takes other
administrative steps.
DATES: Comments are due: September
20, 2019.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Table of Contents
jbell on DSK3GLQ082PROD with NOTICES
I. Introduction
II. Docketed Proceeding(s)
I. Introduction
The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
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17:30 Sep 18, 2019
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removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3007.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3010, and 39
CFR part 3020, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3015, and
39 CFR part 3020, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: MC2019–197 and
CP2019–220; Filing Title: USPS Request
to Add Priority Mail Contract 550 to
Competitive Product List and Notice of
Filing Materials Under Seal; Filing
Acceptance Date: September 12, 2019;
Filing Authority: 39 U.S.C. 3642, 39 CFR
3020.30 et seq., and 39 CFR 3015.5;
Public Representative: Christopher C.
Mohr; Comments Due: September 20,
2019.
2. Docket No(s).: MC2019–198 and
CP2019–221; Filing Title: USPS Request
to Add Priority Mail & First-Class
Package Service Contract 118 to
Competitive Product List and Notice of
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
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49353
Filing Materials Under Seal; Filing
Acceptance Date: September 12, 2019;
Filing Authority: 39 U.S.C. 3642, 39 CFR
3020.30 et seq., and 39 CFR 3015.5;
Public Representative: Christopher C.
Mohr; Comments Due: September 20,
2019.
3. Docket No(s).: MC2019–199 and
CP2019–222; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & First-Class Package Service
Contract 65 to Competitive Product List
and Notice of Filing Materials Under
Seal; Filing Acceptance Date: September
12, 2019; Filing Authority: 39 U.S.C.
3642, 39 CFR 3020.30 et seq., and 39
CFR 3015.5; Public Representative:
Christopher C. Mohr; Comments Due:
September 20, 2019.
This Notice will be published in the
Federal Register.
Darcie S. Tokioka,
Acting Secretary.
[FR Doc. 2019–20219 Filed 9–18–19; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86969; File No. SR–
NASDAQ–2019–049]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Instituting Proceedings To Determine
Whether To Disapprove Proposed Rule
Change To Amend the Definition of
Family Member in Listing Rule
5605(a)(2) for Purposes of the
Definition of Independent Director
September 13, 2019.
I. Introduction
On May 29, 2019, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ 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
amend the definition of ‘‘Family
Member’’ for purposes of determining
the independence of directors under
Exchange Listing Rule 5605(a)(2). The
proposed rule change was published for
comment in the Federal Register on
June 18, 2019.3 On August 1, 2019, the
Commission extended the time period
within which to either approve the
proposed rule change, disapprove the
proposed rule change, or institute
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86095
(June 12, 2019), 84 FR 28379 (‘‘Notice’’).
2 17
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Federal Register / Vol. 84, No. 182 / Thursday, September 19, 2019 / Notices
proceedings to determine whether to
approve or disapprove the proposed
rule change, to September 16, 2019.4
The Commission has received no
comment letters on the proposal. This
order institutes proceedings under
Section 19(b)(2)(B) of the Act to
determine whether to approve or
disapprove the proposed rule change.
II. Background and Description of the
Proposal
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Nasdaq has proposed to amend the
definition of Family Member in Nasdaq
Rule 5605(a)(2), which is used for
purposes of determining whether a
director of a listed company qualifies as
an Independent Director, to exclude
stepchildren of directors from the
Family Member definition.
Nasdaq listing rules have certain
requirements for Independent Directors,
including that a majority of the board of
the directors of the company (the
‘‘Board’’) be Independent Directors, and
that the company’s audit, compensation
and nominating committees 5 be
comprised solely of Independent
Directors.6 ‘‘Independent Director’’ is
defined in Nasdaq Rule 5605(a)(2) to
mean a person other than an executive
officer or employee of the company or
any other individual having a
relationship which, in the opinion of
the company’s Board, would interfere
with the exercise of independent
judgment in carrying out the
responsibilities of a director. Rule
5605(a)(2) also provides a list of certain
relationships that preclude a Board
finding of independence, including the
following:
• A director who accepted or who has
a Family Member who accepted any
compensation from the company in
excess of $120,000 during any period of
twelve consecutive months within the
three years preceding the determination
of independence (with certain
exceptions, including a Family Member
who is an employee other than an
executive officer); 7
• A director who is a Family Member
of an individual who is, or at any time
during the past three years was,
4 See Securities Exchange Act Release No. 86545
(August 1, 2019), 84 FR 38704 (August 7, 2019).
5 If the company does not have a nominating
committee, under Nasdaq Rule 5605(e)(1) nominees
for directors must be selected or recommended by
Independent Directors constituting a majority of the
Board’s Independent Directors in a vote in which
only Independent Directors participate.
6 See Nasdaq Rule 5605(b)–(e).
7 Nasdaq states in its rules that this criterion is
generally intended to capture situations where a
compensation is made directly to (or for the benefit
of) the director or a Family Member of the director.
See Nasdaq Rule IM–5605.
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employed by the company as an
executive officer;
• A director who is, or has a Family
Member who is, a partner in, or a
controlling shareholder or an executive
officer of, any organization to which the
company made, or from which the
company received, payments for
property or services in the current or
any of the past three fiscal years that
exceed 5% of the recipient’s
consolidated gross revenues for that
year, or $200,000, whichever is more
(with certain exceptions);
• A director of the company who is,
or has a Family Member who is,
employed as an executive officer of
another entity where at any time during
the past three years any of the executive
officers of the company serve on the
compensation committee of such other
entity; and
• A director who is, or has a Family
Member who is, a current partner of the
company’s outside auditor, or was a
partner or employee of the company’s
outside auditor who worked on the
company’s audit at any time during any
of the past three years.8
Nasdaq Rule 5605(a)(2) currently
defines Family Member as ‘‘a person’s
spouse, parents, children and siblings,
whether by blood, marriage or adoption,
or anyone residing in such person’s
home.’’ As Nasdaq noted in its proposal,
this definition includes stepchildren, as
they are ‘‘children by . . . marriage.’’ 9
Nasdaq proposes to re-define Family
Member as ‘‘a person’s spouse, parents,
children, siblings, mothers and fathersin-law, sons and daughters-in-law,
brothers and sisters-in-law, and anyone
(other than domestic employees) who
shares such person’s home.’’ The same
definition is used in the corresponding
listing rules of the New York Stock
Exchange (‘‘NYSE’’).10 Nasdaq assumes,
without elaboration, that the term
‘‘children’’ excludes stepchildren.11
8 Additional criteria of independence apply with
respect to Board members and members of the audit
and compensation committees, but are not relevant
here. See Nasdaq Rule 5605.
9 See Notice, supra note 3, at 28379.
10 See Section 303A.02 of the NYSE Listed
Company Manual. For clarity, note that NYSE
Section 303A.02 uses, and defines, the term
‘‘immediate family member’’, which corresponds to
Nasdaq’s term ‘‘Family Member’’. See also
Securities Exchange Act Release No. 48745
(November 4, 2003), 68 FR 64154 (November 12,
2003) (File Numbers SR–NYSE–2002–33 and SR–
NASD–2002–141) (Commission order approving the
current texts of the NYSE and Nasdaq definitions
(‘‘2003 Approval Order’’)).
11 Nasdaq stated in its proposal that the category
of ‘‘children . . . by marriage’’ was added to the
definition of a Family Member inadvertently in the
context of changes it adopted in 2003. See Notice,
supra note 3, at 28379. See also 2003 Approval
Order. According to Nasdaq, those changes were
meant to simplify the existing definition of Family
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Nasdaq also proposes to exclude
domestic employees who share a
director’s home, on the ground that the
term is intended to capture familial, not
commercial, relationships.12
Nasdaq acknowledges that
Independent Directors over time have
become a linchpin in American
corporate governance and that it is
important for investors to have
confidence that individuals serving as
Independent Directors do not have a
relationship with the listed company
that would impair their independence.
In support of its proposal, Nasdaq
indicates that including stepchildren
within the definition of Family Member
could capture attenuated relationships,
such as where a director marries a
person who has an adult child, and so
has never acted in any capacity as a
parent of that child. Nasdaq believes
that, rather than prohibiting all
stepchildren from being deemed
independent, it would be appropriate
for the Board to review these
relationships on a facts and
circumstances basis as contemplated by
general provisions of the Independent
Director definition. Nasdaq also states
that it has heard from listed companies
and their legal counsel that it can be
burdensome to analyze potential
differences in the meaning of the
Nasdaq and NYSE definitions. Finally,
Nasdaq asserts that its proposal is
consistent with SEC Rule 10A–3, which
addresses director independence for
audit committee service, and which
focuses only on payments to minor
children or stepchildren, or
stepchildren sharing a home with the
director.
III. Proceedings To Determine Whether
To Disapprove SR–NASDAQ–2019–049
and Grounds for Disapproval Under
Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act to determine
whether the proposed rule change
should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposal, as discussed below.
Institution of disapproval proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
Pursuant to Section 19(b)(2)(B), the
Commission is providing notice of the
grounds for disapproval under
Member while not introducing any substantive
differences, but did not succeed in doing so and
resulted in an unwarranted expansion of the
definition. See Notice at 28380.
12 See id.
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Federal Register / Vol. 84, No. 182 / Thursday, September 19, 2019 / Notices
consideration. The Commission is
instituting proceedings to allow for
additional analysis and input
concerning the proposed rule change’s
consistency with the Act, and, in
particular, with Section 6(b)(5) of the
Act,13 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.
Nasdaq is proposing to define a
Family Member, for purposes of
determining whether a director of a
listed company qualifies as an
Independent Director, as ‘‘a person’s
spouse, parents, children, siblings,
mothers and fathers-in-law, sons and
daughters-in-law, brothers and sistersin-law, and anyone (other than domestic
employees) who shares such person’s
home,’’ and to interpret the term
‘‘children’’ as excluding stepchildren.
Nasdaq provides an example where the
stepchild relationship could be
attenuated, namely where a person has
become a stepchild of a director as an
adult. In such cases, where there has
never been a parental relationship,
Nasdaq believes the blanket exclusion
from a finding of independence is
unwarranted. Nasdaq, however, does
not address other scenarios captured by
its proposal where the relationship
between a director and the stepchild
may be less attenuated, such as where
the stepchild has been raised by the
director from a young age but no longer
shares the same home, or explain why
those closer relationships no longer
continue to be appropriate for the
blanket exclusion.
Nasdaq also expresses concern that
the differences between the Nasdaq and
NYSE rules create unnecessary burdens
on listed companies attempting to
analyze potential differences in their
meaning. Accordingly, Nasdaq is
proposing to make the language of its
definition of Family Member identical
to the corresponding definition in NYSE
rules. Nasdaq notes that, prior to the
time it proposed its current definition of
Family Member in 2003, the Nasdaq
definition of Family Member and its
NYSE counterpart were nearly identical.
Nasdaq states that its current rule was
intended to simplify the prior definition
of Family Member without introducing
13 15
U.S.C. 78f(b)(5).
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any substantive changes from the prior
rule.14
Nasdaq further takes the position that
the inclusion of stepchildren in its
current rule was inadvertent and
unwarranted, and this is the basis for its
proposed interpretation that the term
‘‘children’’ excludes stepchildren. As
noted above, however, Nasdaq also
affirms the fact that the current Nasdaq
rule (which includes stepchildren in the
definition of Family Member) was not
intended to differ substantively from the
NYSE rule, which uses the same
language Nasdaq is proposing to adopt.
This would appear to lead to the
conclusion that the term ‘‘children’’
should be interpreted as including
stepchildren, rather than excluding
them. Nasdaq does not explain this
apparent contradiction, or the basis for
its view that the express inclusion of
stepchildren in its current rule was
inadvertent. Nasdaq also does not
address why its proposal that the term
‘‘children’’ be interpreted as excluding
stepchildren, which potentially would
create a situation where the Nasdaq and
NYSE rules use identical language but
have different interpretations, would
not increase confusion and burdens on
listed companies seeking to assess
potential differences in the meanings of
the Nasdaq and NYSE rules, rather than
alleviate those burdens.
Finally, as noted above, Nasdaq
asserts that its proposal is consistent
with SEC Rule 10A–3, which addresses
director independence for audit
committee service, and which focuses
only on payments to minor children or
stepchildren, or stepchildren sharing a
home with the director. The
Commission notes that Nasdaq’s
proposal in fact is more permissive than
SEC Rule 10A–3, as it would permit a
finding of independence if there is a
company relationship with a minor
stepchild of a director who is not
sharing his or her home.
The Commission notes that, under the
Commission’s Rules of Practice, the
‘‘burden to demonstrate that a proposed
rule change is consistent with the
Exchange Act and the rules and
regulations issued thereunder . . . is on
the self-regulatory organization [‘SRO’]
that proposed the rule change.’’ 15 The
description of a proposed rule change,
14 In approving the current NYSE and Nasdaq
rules in 2003, the Commission noted that they were
intended to ‘‘conform the Nasdaq and NYSE
proposals more closely’’ and ‘‘harmonize more
closely various provisions of their proposals to
reduce the possibility of differing regulatory
treatment.’’ See 2003 Approval Order, supra note
10, at 64176.
15 Rule 700(b)(3), Commission Rules of Practice,
17 CFR 201.700(b)(3).
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49355
its purpose and operation, its effect, and
a legal analysis of its consistency with
applicable requirements must all be
sufficiently detailed and specific to
support an affirmative Commission
finding,16 and any failure of an SRO to
provide this information may result in
the Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Exchange Act and the
applicable rules and regulations.17
For the reasons discussed above, the
Commission believes it is appropriate to
institute proceedings pursuant to
Section 19(b)(2)(B) of the Act to
determine whether the proposal should
be approved or disapproved.
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the concerns
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposed rule change is inconsistent
with Section 6(b)(5) or any other
provision of the Act, or the rules and
regulation thereunder. Although there
do not appear to be any issues relevant
to approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.18
Interested persons are invited to
submit written data, views and
arguments regarding whether the
proposed rule change should be
disapproved by November 4, 2019. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by November 18, 2019.
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
16 See
id.
id.
18 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
17 See
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Federal Register / Vol. 84, No. 182 / Thursday, September 19, 2019 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2019–049 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–86961; File No. SR–
NYSEArca–2019–64]
• 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–NASDAQ–2019–049. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet 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 such
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–NASDAQ–2019–049 and
should be submitted on or before
October 10, 2019. Rebuttal comments
should be submitted by October 24,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Jill M. Peterson,
Assistant Secretary.
jbell on DSK3GLQ082PROD with NOTICES
[FR Doc. 2019–20220 Filed 9–18–19; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Options Fee Schedule
September 13, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
30, 2019, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) 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 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 the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) by revising the Options
Regulatory Fee (‘‘ORF’’) and notice
language related to the ORF, effective
August 30, 2019. 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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
19 17
CFR 200.30–3(a)(57).
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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 the
Fee Schedule to revise the ORF charged
solely for the August 30, 3019 trading
day and to modify language regarding
notice requirements for any changes to
the ORF, effective August 30, 2019.
Background Regarding the ORF
As a general matter, the Exchange
may only use regulatory funds such as
ORF ‘‘to fund the legal, regulatory, and
surveillance operations’’ of the
Exchange.4 More specifically, the ORF
is designed to recover a material
portion, but not all, of the Exchange’s
regulatory costs for the supervision and
regulation of OTP Holders and OTP
Firms (the ‘‘OTP Regulatory Costs’’).
The majority of the OTP Regulatory
Costs are direct expenses, such as the
costs related to in-house staff, thirdparty service providers, and technology.
The direct expenses support the day-today regulatory work relating to the OTP
Holders or OTP Firms, including
surveillance, investigation,
examinations and enforcement. Such
direct expenses represent approximately
91% of the Exchange’s total OTP
Regulatory Costs. The indirect expenses
include human resources and other
administrative costs.
The ORF is assessed on OTP Holders
or OTP Firms for options transactions
that are cleared by the OTP Holder or
OTP Firm through the Options Clearing
Corporation (‘‘OCC’’) in the Customer
range regardless of the exchange on
which the transaction occurs.5 All
options transactions must clear via a
clearing firm and such clearing firms
can then choose to pass through all, a
portion, or none of the cost of the ORF
to its customers, i.e., the entering firms.
Because the ORF is collected from OTP
Holder or OTP Firm clearing firms by
the OCC on behalf of NYSE Arca,6 the
4 The Exchange considers surveillance operations
part of regulatory operations. The limitation on the
use of regulatory funds also provides that they shall
not be distributed. See Bylaws of NYSE Arca, Inc.,
Art. II, Sec. 2.06.
5 See Fee Schedule, NYSE Arca GENERAL
OPTIONS and TRADING PERMIT (OTP) FEES,
Regulatory Fees, Options Regulatory Fee (‘‘ORF’’),
available here, https://www.nyse.com/publicdocs/
nyse/markets/arca-options/NYSE_Arca_Options_
Fee_Schedule.pdf.
6 See id. The Exchange uses reports from OCC
when assessing and collecting the ORF. The ORF
is not assessed on outbound linkage trades. An OTP
Holder or OTP Firm is not assessed the fee until it
has satisfied applicable technological requirements
necessary to commence operations on NYSE Arca.
See id.
E:\FR\FM\19SEN1.SGM
19SEN1
]]>Agencies
[Federal Register Volume 84, Number 182 (Thursday, September 19, 2019)]
[Notices]
[Pages 49353-49356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20220]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86969; File No. SR-NASDAQ-2019-049]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Instituting Proceedings To Determine Whether To Disapprove Proposed
Rule Change To Amend the Definition of Family Member in Listing Rule
5605(a)(2) for Purposes of the Definition of Independent Director
September 13, 2019.
I. Introduction
On May 29, 2019, The NASDAQ Stock Market LLC (``Nasdaq'' 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 amend the definition of ``Family Member'' for
purposes of determining the independence of directors under Exchange
Listing Rule 5605(a)(2). The proposed rule change was published for
comment in the Federal Register on June 18, 2019.\3\ On August 1, 2019,
the Commission extended the time period within which to either approve
the proposed rule change, disapprove the proposed rule change, or
institute
[[Page 49354]]
proceedings to determine whether to approve or disapprove the proposed
rule change, to September 16, 2019.\4\ The Commission has received no
comment letters on the proposal. This order institutes proceedings
under Section 19(b)(2)(B) of the Act to determine whether to approve or
disapprove the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 86095 (June 12,
2019), 84 FR 28379 (``Notice'').
\4\ See Securities Exchange Act Release No. 86545 (August 1,
2019), 84 FR 38704 (August 7, 2019).
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II. Background and Description of the Proposal
Nasdaq has proposed to amend the definition of Family Member in
Nasdaq Rule 5605(a)(2), which is used for purposes of determining
whether a director of a listed company qualifies as an Independent
Director, to exclude stepchildren of directors from the Family Member
definition.
Nasdaq listing rules have certain requirements for Independent
Directors, including that a majority of the board of the directors of
the company (the ``Board'') be Independent Directors, and that the
company's audit, compensation and nominating committees \5\ be
comprised solely of Independent Directors.\6\ ``Independent Director''
is defined in Nasdaq Rule 5605(a)(2) to mean a person other than an
executive officer or employee of the company or any other individual
having a relationship which, in the opinion of the company's Board,
would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. Rule 5605(a)(2) also provides a
list of certain relationships that preclude a Board finding of
independence, including the following:
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\5\ If the company does not have a nominating committee, under
Nasdaq Rule 5605(e)(1) nominees for directors must be selected or
recommended by Independent Directors constituting a majority of the
Board's Independent Directors in a vote in which only Independent
Directors participate.
\6\ See Nasdaq Rule 5605(b)-(e).
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A director who accepted or who has a Family Member who
accepted any compensation from the company in excess of $120,000 during
any period of twelve consecutive months within the three years
preceding the determination of independence (with certain exceptions,
including a Family Member who is an employee other than an executive
officer); \7\
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\7\ Nasdaq states in its rules that this criterion is generally
intended to capture situations where a compensation is made directly
to (or for the benefit of) the director or a Family Member of the
director. See Nasdaq Rule IM-5605.
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A director who is a Family Member of an individual who is,
or at any time during the past three years was, employed by the company
as an executive officer;
A director who is, or has a Family Member who is, a
partner in, or a controlling shareholder or an executive officer of,
any organization to which the company made, or from which the company
received, payments for property or services in the current or any of
the past three fiscal years that exceed 5% of the recipient's
consolidated gross revenues for that year, or $200,000, whichever is
more (with certain exceptions);
A director of the company who is, or has a Family Member
who is, employed as an executive officer of another entity where at any
time during the past three years any of the executive officers of the
company serve on the compensation committee of such other entity; and
A director who is, or has a Family Member who is, a
current partner of the company's outside auditor, or was a partner or
employee of the company's outside auditor who worked on the company's
audit at any time during any of the past three years.\8\
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\8\ Additional criteria of independence apply with respect to
Board members and members of the audit and compensation committees,
but are not relevant here. See Nasdaq Rule 5605.
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Nasdaq Rule 5605(a)(2) currently defines Family Member as ``a
person's spouse, parents, children and siblings, whether by blood,
marriage or adoption, or anyone residing in such person's home.'' As
Nasdaq noted in its proposal, this definition includes stepchildren, as
they are ``children by . . . marriage.'' \9\ Nasdaq proposes to re-
define Family Member as ``a person's spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law,
brothers and sisters-in-law, and anyone (other than domestic employees)
who shares such person's home.'' The same definition is used in the
corresponding listing rules of the New York Stock Exchange
(``NYSE'').\10\ Nasdaq assumes, without elaboration, that the term
``children'' excludes stepchildren.\11\ Nasdaq also proposes to exclude
domestic employees who share a director's home, on the ground that the
term is intended to capture familial, not commercial,
relationships.\12\
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\9\ See Notice, supra note 3, at 28379.
\10\ See Section 303A.02 of the NYSE Listed Company Manual. For
clarity, note that NYSE Section 303A.02 uses, and defines, the term
``immediate family member'', which corresponds to Nasdaq's term
``Family Member''. See also Securities Exchange Act Release No.
48745 (November 4, 2003), 68 FR 64154 (November 12, 2003) (File
Numbers SR-NYSE-2002-33 and SR-NASD-2002-141) (Commission order
approving the current texts of the NYSE and Nasdaq definitions
(``2003 Approval Order'')).
\11\ Nasdaq stated in its proposal that the category of
``children . . . by marriage'' was added to the definition of a
Family Member inadvertently in the context of changes it adopted in
2003. See Notice, supra note 3, at 28379. See also 2003 Approval
Order. According to Nasdaq, those changes were meant to simplify the
existing definition of Family Member while not introducing any
substantive differences, but did not succeed in doing so and
resulted in an unwarranted expansion of the definition. See Notice
at 28380.
\12\ See id.
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Nasdaq acknowledges that Independent Directors over time have
become a linchpin in American corporate governance and that it is
important for investors to have confidence that individuals serving as
Independent Directors do not have a relationship with the listed
company that would impair their independence. In support of its
proposal, Nasdaq indicates that including stepchildren within the
definition of Family Member could capture attenuated relationships,
such as where a director marries a person who has an adult child, and
so has never acted in any capacity as a parent of that child. Nasdaq
believes that, rather than prohibiting all stepchildren from being
deemed independent, it would be appropriate for the Board to review
these relationships on a facts and circumstances basis as contemplated
by general provisions of the Independent Director definition. Nasdaq
also states that it has heard from listed companies and their legal
counsel that it can be burdensome to analyze potential differences in
the meaning of the Nasdaq and NYSE definitions. Finally, Nasdaq asserts
that its proposal is consistent with SEC Rule 10A-3, which addresses
director independence for audit committee service, and which focuses
only on payments to minor children or stepchildren, or stepchildren
sharing a home with the director.
III. Proceedings To Determine Whether To Disapprove SR-NASDAQ-2019-049
and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act to determine whether the proposed rule change
should be approved or disapproved. Institution of such proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposal, as discussed below. Institution of disapproval
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved.
Pursuant to Section 19(b)(2)(B), the Commission is providing notice
of the grounds for disapproval under
[[Page 49355]]
consideration. The Commission is instituting proceedings to allow for
additional analysis and input concerning the proposed rule change's
consistency with the Act, and, in particular, with Section 6(b)(5) of
the Act,\13\ 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.
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\13\ 15 U.S.C. 78f(b)(5).
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Nasdaq is proposing to define a Family Member, for purposes of
determining whether a director of a listed company qualifies as an
Independent Director, as ``a person's spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law,
brothers and sisters-in-law, and anyone (other than domestic employees)
who shares such person's home,'' and to interpret the term ``children''
as excluding stepchildren. Nasdaq provides an example where the
stepchild relationship could be attenuated, namely where a person has
become a stepchild of a director as an adult. In such cases, where
there has never been a parental relationship, Nasdaq believes the
blanket exclusion from a finding of independence is unwarranted.
Nasdaq, however, does not address other scenarios captured by its
proposal where the relationship between a director and the stepchild
may be less attenuated, such as where the stepchild has been raised by
the director from a young age but no longer shares the same home, or
explain why those closer relationships no longer continue to be
appropriate for the blanket exclusion.
Nasdaq also expresses concern that the differences between the
Nasdaq and NYSE rules create unnecessary burdens on listed companies
attempting to analyze potential differences in their meaning.
Accordingly, Nasdaq is proposing to make the language of its definition
of Family Member identical to the corresponding definition in NYSE
rules. Nasdaq notes that, prior to the time it proposed its current
definition of Family Member in 2003, the Nasdaq definition of Family
Member and its NYSE counterpart were nearly identical. Nasdaq states
that its current rule was intended to simplify the prior definition of
Family Member without introducing any substantive changes from the
prior rule.\14\
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\14\ In approving the current NYSE and Nasdaq rules in 2003, the
Commission noted that they were intended to ``conform the Nasdaq and
NYSE proposals more closely'' and ``harmonize more closely various
provisions of their proposals to reduce the possibility of differing
regulatory treatment.'' See 2003 Approval Order, supra note 10, at
64176.
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Nasdaq further takes the position that the inclusion of
stepchildren in its current rule was inadvertent and unwarranted, and
this is the basis for its proposed interpretation that the term
``children'' excludes stepchildren. As noted above, however, Nasdaq
also affirms the fact that the current Nasdaq rule (which includes
stepchildren in the definition of Family Member) was not intended to
differ substantively from the NYSE rule, which uses the same language
Nasdaq is proposing to adopt. This would appear to lead to the
conclusion that the term ``children'' should be interpreted as
including stepchildren, rather than excluding them. Nasdaq does not
explain this apparent contradiction, or the basis for its view that the
express inclusion of stepchildren in its current rule was inadvertent.
Nasdaq also does not address why its proposal that the term
``children'' be interpreted as excluding stepchildren, which
potentially would create a situation where the Nasdaq and NYSE rules
use identical language but have different interpretations, would not
increase confusion and burdens on listed companies seeking to assess
potential differences in the meanings of the Nasdaq and NYSE rules,
rather than alleviate those burdens.
Finally, as noted above, Nasdaq asserts that its proposal is
consistent with SEC Rule 10A-3, which addresses director independence
for audit committee service, and which focuses only on payments to
minor children or stepchildren, or stepchildren sharing a home with the
director. The Commission notes that Nasdaq's proposal in fact is more
permissive than SEC Rule 10A-3, as it would permit a finding of
independence if there is a company relationship with a minor stepchild
of a director who is not sharing his or her home.
The Commission notes that, under the Commission's Rules of
Practice, the ``burden to demonstrate that a proposed rule change is
consistent with the Exchange Act and the rules and regulations issued
thereunder . . . is on the self-regulatory organization [`SRO'] that
proposed the rule change.'' \15\ The description of a proposed rule
change, its purpose and operation, its effect, and a legal analysis of
its consistency with applicable requirements must all be sufficiently
detailed and specific to support an affirmative Commission finding,\16\
and any failure of an SRO to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Exchange Act and the
applicable rules and regulations.\17\
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\15\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\16\ See id.
\17\ See id.
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For the reasons discussed above, the Commission believes it is
appropriate to institute proceedings pursuant to Section 19(b)(2)(B) of
the Act to determine whether the proposal should be approved or
disapproved.
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is inconsistent with Section 6(b)(5) or any other provision of the Act,
or the rules and regulation thereunder. Although there do not appear to
be any issues relevant to approval or disapproval which would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\18\
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\18\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views and
arguments regarding whether the proposed rule change should be
disapproved by November 4, 2019. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
November 18, 2019.
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
[[Page 49356]]
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2019-049 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2019-049. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet 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 such 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-NASDAQ-2019-049 and should be submitted
on or before October 10, 2019. Rebuttal comments should be submitted by
October 24, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20220 Filed 9-18-19; 8:45 am]
BILLING CODE 8011-01-P
