Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Waive the Application of Certain of the Shareholder Approval Requirements in Section 312.03 of the NYSE Listed Company Manual Through June 30, 2020 Subject to Certain Conditions, 20323-20326 [2020-07557]
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Federal Register / Vol. 85, No. 70 / Friday, April 10, 2020 / Notices
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeBZX–2019–097, and
should be submitted on or before May
1, 2020.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 2, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 2 in the Federal
Register. In Amendment No. 2, the
Exchange (among other things): (1)
Modified the circumstances in which it
will consider suspending trading in a
series of ETF Shares; (2) broadened its
undertakings with respect to ensuring
compliance with the proposed generic
listing standard; (3) clarified that ETF
Shares would be subject to all Exchange
rules applicable to equities trading,
including rules governing Exchange
member disclosure obligations; and (4)
clarified the applicability of certain
current listing rules in light of proposed
BZX Rule 14.11(l). Amendment No. 2
also provides other clarifications and
additional information in support of the
proposed rule change. These changes, as
well as additional information in
Amendment No. 2, assisted the
Commission in finding that the proposal
is consistent with the Act. Accordingly,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Exchange Act,78 to approve the
proposed rule change, as modified by
Amendment No. 2, on an accelerated
basis.
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VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 79 that the
proposed rule change (SR–CboeBZX–
2019–097), as modified by Amendment
No. 2, be, and it hereby is, approved on
an accelerated basis.
78 15
U.S.C. 78s(b)(2).
[FR Doc. 2020–07550 Filed 4–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88572; File No. SR–NYSE–
2020–30]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Waive the
Application of Certain of the
Shareholder Approval Requirements in
Section 312.03 of the NYSE Listed
Company Manual Through June 30,
2020 Subject to Certain Conditions
April 6, 2020.
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 April 3,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘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 waive
through and including June 30, 2020 the
application of certain of the shareholder
approval requirements set forth in
Section 312.03 of the NYSE Listed
Company Manual (‘‘Manual’’) subject to
certain conditions. 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
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
79 Id.
80 17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.80
J. Matthew DeLesDernier,
Assistant Secretary.
2 15
CFR 200.30–3(a)(12).
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20323
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The U.S. and global economies have
experienced unprecedented disruption
as a result of the ongoing spread of
COVID–19, including severe limitations
on companies’ ability to operate their
businesses, dramatic market declines
and volatility in the U.S. and global
equity markets, and severe disruption in
the credit markets. The Exchange
believes that it is likely that many listed
companies will have urgent liquidity
needs in the coming months due to lost
revenues and maturing debt obligations.
In those circumstances, listed
companies will need to access
additional capital that may not be
available in the public equity or credit
markets. When similar conditions
existed after the financial crisis of 2008–
09, the Exchange observed that many
companies sought capital by selling
significant amounts of equity in private
placement transactions to a single
investor or small group of investors, in
many cases limited to or including
existing major shareholders in the
company. The Exchange notes that
companies raising capital in that
manner at that time were often limited
by the NYSE’s shareholder approval
requirements with respect to the size
and structure of the transactions they
were able to undertake.
Section 312.03 of the Manual, which
requires listed companies to acquire
shareholder approval prior to certain
kinds of equity issuances, imposes
significant limitations on the ability of
a listed company to engage in the sort
of large private placement transaction
described above. The most important
limitations are as follows:
• Issuance to a Related Party. Subject
to an exception for early stage
companies set forth therein, Section
312.03(b) of the Manual requires
shareholder approval of any issuance to
a director, officer or substantial security
holder 4 of the company (each a
4 For purposes of Section 312.03(b), Section
312.04(e) provides that: ‘‘An interest consisting of
less than either five percent of the number of shares
of common stock or five percent of the voting power
Continued
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‘‘Related Party’’) or to an affiliate of a
Related Party 5 if the number of shares
of common stock to be issued, or if the
number of shares of common stock into
which the securities may be convertible
or exercisable, exceeds either 1% of the
number of shares of common stock or
1% of the voting power outstanding
before the issuance. A limited exception
permits cash sales to Related Parties and
their affiliates that meet a market price
test set forth in the rule (the ‘‘Minimum
Price’’) 6 and that relate to no more than
5% of the company’s outstanding
common stock. However, this exception
may only be used if the Related Party in
question has Related Party status solely
because it is a substantial security
holder of the company.
• Transactions of 20% or More.
Section 312.03(c) of the Manual requires
shareholder approval of any transaction
relating to 20% or more of the
company’s outstanding common stock
or 20% of the voting power outstanding
before such issuance other than a public
offering for cash. Section 312.03(c)
includes an exception for transactions
involving a cash sale of the company’s
securities that comply with the
Minimum Price requirement and also
meet the following definition of a ‘‘bona
fide private financing,’’ as set forth in
Section 312.04(g): ‘‘Bona fide private
financing’’ refers to a sale in which
either:
Æ A registered broker-dealer
purchases the securities from the issuer
with a view to the private sale of such
securities to one or more purchasers; or
Æ the issuer sells the securities to
multiple purchasers, and no one such
outstanding of a company or entity shall not be
considered a substantial interest or cause the holder
of such an interest to be regarded as a substantial
security holder.’’
5 Under Section 312.03 of the Manual, a ‘‘Related
Party’’ includes ‘‘(1) a director, officer or substantial
security holder of the company (each a ‘‘Related
Party’’); (2) a subsidiary, affiliate or other closelyrelated person of a Related Party; or (3) any
company or entity in which a Related Party has a
substantial direct or indirect interest;’’
6 Section 312.04(i) Defines the ‘‘Minimum Price’’
as follows: ‘‘Minimum Price’’ means a price that is
the lower of: (i) The Official Closing Price
immediately preceding the signing of the binding
agreement; or (ii) the average Official Closing Price
for the five trading days immediately preceding the
signing of the binding agreement.
Section 312.04(j) defines ‘‘Official Closing Price’’
as follows: ‘‘Official Closing Price’’ of the issuer’s
common stock means the official closing price on
the Exchange as reported to the Consolidated Tape
immediately preceding the signing of a binding
agreement to issue the securities. For example, if
the transaction is signed after the close of the
regular session at 4:00 p.m. Eastern Standard Time
on a Tuesday, then Tuesday’s official closing price
is used. If the transaction is signed at any time
between the close of the regular session on Monday
and the close if the regular session on Tuesday,
then Monday’s official closing price is used.
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purchaser, or group of related
purchasers, acquires, or has the right to
acquire upon exercise or conversion of
the securities, more than five percent of
the shares of the issuer’s common stock
or more than five percent of the issuer’s
voting power before the sale.’’
The Exchange expects that certain
companies during the course of the
current unusual economic and market
conditions will urgently need to obtain
new capital by selling equity securities
in private placements.
In many cases, such transactions may
involve sales to existing investors in the
company or their affiliates that would
exceed the applicable 1% and 5% limits
of Section 312.03(b). Given the
extraordinary nature of the current
circumstances, the Exchange proposes a
partial waiver of the application of
Section 312.03(b) for the period as of the
date of this filing through and including
June 30, 2020, with the waiver
specifically limited to transactions that
involve the sale of the company’s
securities for cash at a price that meets
the Minimum Price requirement as set
forth in Section 312.04.7 In addition, to
qualify for this waiver, a transaction
must be reviewed and approved by the
company’s audit committee or a
comparable committee comprised solely
of independent directors.
This waiver will not be applicable to
any transaction involving the stock or
assets of another company where any
director, officer or substantial security
holder of the company has a 5% or
greater interest (or such persons
collectively have a 10% or greater
interest), directly or indirectly, in the
company or assets to be acquired or in
the consideration to be paid in the
transaction or series of related
transactions and the present or potential
issuance of common stock, or securities
convertible into or exercisable for
common stock, could result in an
increase in outstanding common shares
or voting power of 5% or more (i.e., a
transaction which would require
shareholder approval under NASDAQ
Marketplace Rule 5635(a)). Specifically,
the proposed waiver will not be
applicable to a sale of securities by a
listed company to any person subject to
the provisions of Section 312.03(b) in a
transaction, or series of transactions,
whose proceeds will be used to fund an
acquisition of stock or assets of another
company where such person has a
direct or indirect interest in the
company or assets to be acquired or in
the consideration to be paid for such
acquisition.
7 See
PO 00000
supra note 6.
Frm 00086
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The effect of the above-described
proposed waiver would be to allow
companies to sell their securities to
Related Parties and other persons
subject to Section 312.03(b) 8 without
complying with the numerical
limitations of that rule, as long as the
sale is in a cash transaction that meets
the Minimum Price requirement and
also meets the other requirements noted
above. As provided by Section
312.03(a), any transaction benefitting
from the proposed waiver will still be
subject to shareholder approval if
required under any other applicable
rule, including the equity compensation
requirements of Section 303A.08 and
the change of control requirements of
Section 312.03(d).
Existing large investors are often the
only willing providers of much-needed
capital to companies undergoing
difficulties and the Exchange believes
that it is appropriate to increase
companies’ flexibility to access this
source of capital for a limited period.
The Exchange notes that, as a result of
the proposed waiver, the Exchange’s
application of Section 312.03(b) will be
consistent with the application of
NASDAQ Marketplace Rule 5635(a) 9 to
sales of a listed company’s securities to
related parties.
Many private placement transactions
under the current market conditions
may also exceed the 20% threshold
established by Section 312.03(c).
Therefore, given the extraordinary
nature of the current circumstances, the
Exchange also proposes to waive
through and including June 30, 2020, for
purposes of the bona fide financing
exception to the 20% requirement, the
5% limitation for any sale to an
individual investor in a bona fide
private financing pursuant to Section
312.03(c) and to permit companies to
undertake a bona fide private financing
during that period in which there is
only a single purchaser. As provided by
Section 312.03(a), any transaction
benefitting from the proposed waiver
will still be subject to shareholder
approval if required under any other
applicable rule, including the equity
compensation requirements of Section
303A.08 and the change of control
requirements of Section 312.03(d). Any
transaction benefitting from this waiver
must be a sale of the company’s
securities for cash at a price that meets
the Minimum Price requirement.
The effect of this proposed waiver
would be that a listed company would
8 See
supra note 5.
a company is raising capital through a
transaction, or series of transaction, via the waiver,
they cannot use such capital to fund an acquisition.
9 If
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be exempt from the shareholder
approval requirement of Section
312.03(c) in relation to a private
placement transaction regardless of its
size or the number of participating
investors or the amount of securities
purchased by any single investor,
provided that the transaction is a sale of
the company’s securities for cash at a
price that meets the Minimum Price
requirement. If any purchaser in a
transaction benefiting from this waiver
is a Related Party or other person
subject to Section 312.03(b), such
transaction must be reviewed and
approved by the company’s audit
committee or a comparable committee
comprised solely of independent
directors. The Exchange notes that, as a
result of the proposed waiver, the
Exchange’s application of Section
312.03(c) will be consistent with the
application of NASDAQ Marketplace
Rule 5635(c) with respect to private
placements relating to 20% or more of
a company’s common stock or voting
power outstanding before such
transaction.10
The Exchange notes that these
temporary emergency waivers would
simply provide NYSE listed companies
with the flexibility on a temporary
emergency basis to consummate
transactions without shareholder
approval that would not require
shareholder approval under the rules of
the NASDAQ Stock Market, as the
specific limitations the Exchange is
proposing to waive do not exist in the
applicable NASDAQ rules.11
2. Statutory Basis
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The proposed rule change is
consistent with Section 6(b) of the
Act,12 in general, and furthers the
objectives of Section 6(b)(5) of the Act,13
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect the public interest
and the interests of investors, and
because it is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
10 See supra note 9 which also applies to the
waivers available under Section 312.03(c).
11 See NASDAQ Marketplace Rule 5635,
including specifically subsections (a) and (c)
thereof.
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
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As a result of market and general
economic disruption related to the
ongoing spread of the COVID–19 virus,
certain listed companies may
experience urgent liquidity needs that
they are unable to meet by raising funds
in the public equity or credit markets.
The proposed rule change is designed to
provide temporary relief from certain of
the NYSE’s shareholder approval
requirements in relation to stock
issuances to provide companies with
additional flexibility to raise funds by
selling equity in private placement
transactions during the current
extraordinary market and economic
conditions provided such transactions
meet certain conditions, such as the
Minimum Price as defined in Section
312.04(i). The proposed waivers are
consistent with the protection of
investors because any transaction
benefiting from the waivers will not, in
the Exchange’s view, be dilutive to the
company’s existing shareholders as it
will be subject to a minimum market
price requirement and because the audit
committee or a comparable committee
comprised solely of independent
directors will review and approve any
transaction benefitting from a waiver
that involves a Related Party or affiliates
of a Related Party. In addition, as
provided by Section 312.03(a), any
transaction benefitting from the
proposed waiver will still be subject to
shareholder approval if required under
any other applicable rule, including the
equity compensation requirements of
Section 303A.08 and the change of
control requirements of Section
312.03(d). All companies listed on the
Exchange would be eligible to take
advantage of the proposed temporary
waivers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather is designed to provide temporary
relief from certain of the NYSE’s
shareholder approval requirements in
relation to stock issuances to provide
companies with additional flexibility to
raise funds by selling equity in private
placement transactions during the
current extraordinary market and
general economic conditions. In
addition, the proposed waivers will
simply temporarily conform the
treatment of transactions benefitting
from the waivers to their treatment
under the comparable NASDAQ rules.
PO 00000
Frm 00087
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20325
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 14 and Rule
19b–4(f)(6) thereunder.15 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 16 and Rule 19b–4(f)(6)(iii)
thereunder.17
A proposed rule change filed under
Rule 19b–4(f)(6) 18 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),19 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing.
The Exchange believes that waiver of
the operative delay would be consistent
with the protection of investors and the
public interest because, in the
Exchange’s view, the market and general
economic disruption caused by the
global spread of the COVID–19 virus
may give rise to companies experiencing
urgent liquidity needs which they may
need to meet by undertaking
transactions that would benefit from the
proposed relief. In support of its request
to waive the 30-day operative delay, the
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
16 15 U.S.C. 78s(b)(3)(A).
17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
has waived the five business day notification
requirement for this proposed rule change.
18 17 CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6)(iii).
15 17
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Federal Register / Vol. 85, No. 70 / Friday, April 10, 2020 / Notices
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Exchange stated its belief that the
proposed waiver does not give rise to
any novel investor protection concerns,
as the proposed rule change conforms
the NYSE’s shareholder approval
requirements temporarily to those of
NASDAQ and would not permit any
transactions without shareholder
approval that are not permitted on
another exchange. In addition, the
Exchange stated that all transactions
utilizing the waiver would have to
satisfy the Minimum Price requirement
contained in the rule 20 and be reviewed
and approved by the issuer’s audit
committee or comparable committee of
the board comprised entirely of
independent directors if any
transactions benefitting from the waiver
involve a Related Party or affiliates of a
Related Party, as described above.21
Furthermore, the Exchange has stated
that, as provided by Section 312.04(a) of
the Manual, any transaction benefitting
from the proposed waiver will still be
subject to shareholder approval if
required under any other applicable
rule, including the equity compensation
requirements of Section 303A.08 of the
Manual and the change of control
requirements of Section 312.03(d) of the
Manual. The Exchange also noted that
the proposed waivers are temporary in
nature and will only be applied through
and including June 30, 2020. For these
reasons, the Commission believes that
waiver of the 30-day operative delay is
consistent with the protections of
investors and the public interest.
According, the Commission hereby
waives the 30-day operative delay and
designates the proposal operative upon
filing.22
At any time within 60 days of the
filing of such 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
20 The Commission notes that the Minimum Price
is related to minimum market price requirements as
defined above. See supra note 6.
21 The Commission notes that, as described in the
purpose section above, all transactions utilizing the
waiver for purposes of Section 312.03(b) would be
subject to review and approval by an audit
committee or comparable body of independent
directors. As to transactions utilizing the temporary
waiver under Section 312.03(c) all transactions
involving Related Parties or other persons subject
to Section 312.03(b), as described above, must be
reviewed and approved by the company’s audit
committee or a comparable committee comprised
solely of independent directors.
22 For purposed only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 23 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2020–30 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2020–30. 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
23 15
PO 00000
U.S.C. 78s(b)(2)(B).
Frm 00088
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Number SR–NYSE–2020–30 and should
be submitted on or before May 1, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–07557 Filed 4–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88570; File No. SR–
CboeBYX–2020–011]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Expand the
Trading Hours Applicable to Managed
Portfolio Shares To Include All Trading
Sessions
April 6, 2020.
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 March 31,
2020, Cboe BYX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BYX’’) 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 Exchange. 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 BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) proposes to
expand the trading hours applicable to
Managed Portfolio Shares to include all
trading sessions instead of just Regular
Trading Hours.3 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://markets.cboe.com/us/
equities/regulation/rule_filings/byx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 As defined in Rule 1.5(w), the term ‘‘Regular
Trading Hours’’ means the time between 9:30 a.m.
and 4:00 p.m. Eastern Time.
1 15
E:\FR\FM\10APN1.SGM
10APN1
]]>Agencies
[Federal Register Volume 85, Number 70 (Friday, April 10, 2020)]
[Notices]
[Pages 20323-20326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07557]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88572; File No. SR-NYSE-2020-30]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Waive the Application of Certain of the Shareholder Approval
Requirements in Section 312.03 of the NYSE Listed Company Manual
Through June 30, 2020 Subject to Certain Conditions
April 6, 2020.
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 April 3, 2020, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to waive through and including June 30, 2020
the application of certain of the shareholder approval requirements set
forth in Section 312.03 of the NYSE Listed Company Manual (``Manual'')
subject to certain conditions. The proposed rule change is available on
the Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The U.S. and global economies have experienced unprecedented
disruption as a result of the ongoing spread of COVID-19, including
severe limitations on companies' ability to operate their businesses,
dramatic market declines and volatility in the U.S. and global equity
markets, and severe disruption in the credit markets. The Exchange
believes that it is likely that many listed companies will have urgent
liquidity needs in the coming months due to lost revenues and maturing
debt obligations. In those circumstances, listed companies will need to
access additional capital that may not be available in the public
equity or credit markets. When similar conditions existed after the
financial crisis of 2008-09, the Exchange observed that many companies
sought capital by selling significant amounts of equity in private
placement transactions to a single investor or small group of
investors, in many cases limited to or including existing major
shareholders in the company. The Exchange notes that companies raising
capital in that manner at that time were often limited by the NYSE's
shareholder approval requirements with respect to the size and
structure of the transactions they were able to undertake.
Section 312.03 of the Manual, which requires listed companies to
acquire shareholder approval prior to certain kinds of equity
issuances, imposes significant limitations on the ability of a listed
company to engage in the sort of large private placement transaction
described above. The most important limitations are as follows:
Issuance to a Related Party. Subject to an exception for
early stage companies set forth therein, Section 312.03(b) of the
Manual requires shareholder approval of any issuance to a director,
officer or substantial security holder \4\ of the company (each a
[[Page 20324]]
``Related Party'') or to an affiliate of a Related Party \5\ if the
number of shares of common stock to be issued, or if the number of
shares of common stock into which the securities may be convertible or
exercisable, exceeds either 1% of the number of shares of common stock
or 1% of the voting power outstanding before the issuance. A limited
exception permits cash sales to Related Parties and their affiliates
that meet a market price test set forth in the rule (the ``Minimum
Price'') \6\ and that relate to no more than 5% of the company's
outstanding common stock. However, this exception may only be used if
the Related Party in question has Related Party status solely because
it is a substantial security holder of the company.
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\4\ For purposes of Section 312.03(b), Section 312.04(e)
provides that: ``An interest consisting of less than either five
percent of the number of shares of common stock or five percent of
the voting power outstanding of a company or entity shall not be
considered a substantial interest or cause the holder of such an
interest to be regarded as a substantial security holder.''
\5\ Under Section 312.03 of the Manual, a ``Related Party''
includes ``(1) a director, officer or substantial security holder of
the company (each a ``Related Party''); (2) a subsidiary, affiliate
or other closely-related person of a Related Party; or (3) any
company or entity in which a Related Party has a substantial direct
or indirect interest;''
\6\ Section 312.04(i) Defines the ``Minimum Price'' as follows:
``Minimum Price'' means a price that is the lower of: (i) The
Official Closing Price immediately preceding the signing of the
binding agreement; or (ii) the average Official Closing Price for
the five trading days immediately preceding the signing of the
binding agreement.
Section 312.04(j) defines ``Official Closing Price'' as follows:
``Official Closing Price'' of the issuer's common stock means the
official closing price on the Exchange as reported to the
Consolidated Tape immediately preceding the signing of a binding
agreement to issue the securities. For example, if the transaction
is signed after the close of the regular session at 4:00 p.m.
Eastern Standard Time on a Tuesday, then Tuesday's official closing
price is used. If the transaction is signed at any time between the
close of the regular session on Monday and the close if the regular
session on Tuesday, then Monday's official closing price is used.
---------------------------------------------------------------------------
Transactions of 20% or More. Section 312.03(c) of the
Manual requires shareholder approval of any transaction relating to 20%
or more of the company's outstanding common stock or 20% of the voting
power outstanding before such issuance other than a public offering for
cash. Section 312.03(c) includes an exception for transactions
involving a cash sale of the company's securities that comply with the
Minimum Price requirement and also meet the following definition of a
``bona fide private financing,'' as set forth in Section 312.04(g):
``Bona fide private financing'' refers to a sale in which either:
[cir] A registered broker-dealer purchases the securities from the
issuer with a view to the private sale of such securities to one or
more purchasers; or
[cir] the issuer sells the securities to multiple purchasers, and
no one such purchaser, or group of related purchasers, acquires, or has
the right to acquire upon exercise or conversion of the securities,
more than five percent of the shares of the issuer's common stock or
more than five percent of the issuer's voting power before the sale.''
The Exchange expects that certain companies during the course of
the current unusual economic and market conditions will urgently need
to obtain new capital by selling equity securities in private
placements.
In many cases, such transactions may involve sales to existing
investors in the company or their affiliates that would exceed the
applicable 1% and 5% limits of Section 312.03(b). Given the
extraordinary nature of the current circumstances, the Exchange
proposes a partial waiver of the application of Section 312.03(b) for
the period as of the date of this filing through and including June 30,
2020, with the waiver specifically limited to transactions that involve
the sale of the company's securities for cash at a price that meets the
Minimum Price requirement as set forth in Section 312.04.\7\ In
addition, to qualify for this waiver, a transaction must be reviewed
and approved by the company's audit committee or a comparable committee
comprised solely of independent directors.
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\7\ See supra note 6.
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This waiver will not be applicable to any transaction involving the
stock or assets of another company where any director, officer or
substantial security holder of the company has a 5% or greater interest
(or such persons collectively have a 10% or greater interest), directly
or indirectly, in the company or assets to be acquired or in the
consideration to be paid in the transaction or series of related
transactions and the present or potential issuance of common stock, or
securities convertible into or exercisable for common stock, could
result in an increase in outstanding common shares or voting power of
5% or more (i.e., a transaction which would require shareholder
approval under NASDAQ Marketplace Rule 5635(a)). Specifically, the
proposed waiver will not be applicable to a sale of securities by a
listed company to any person subject to the provisions of Section
312.03(b) in a transaction, or series of transactions, whose proceeds
will be used to fund an acquisition of stock or assets of another
company where such person has a direct or indirect interest in the
company or assets to be acquired or in the consideration to be paid for
such acquisition.
The effect of the above-described proposed waiver would be to allow
companies to sell their securities to Related Parties and other persons
subject to Section 312.03(b) \8\ without complying with the numerical
limitations of that rule, as long as the sale is in a cash transaction
that meets the Minimum Price requirement and also meets the other
requirements noted above. As provided by Section 312.03(a), any
transaction benefitting from the proposed waiver will still be subject
to shareholder approval if required under any other applicable rule,
including the equity compensation requirements of Section 303A.08 and
the change of control requirements of Section 312.03(d).
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\8\ See supra note 5.
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Existing large investors are often the only willing providers of
much-needed capital to companies undergoing difficulties and the
Exchange believes that it is appropriate to increase companies'
flexibility to access this source of capital for a limited period. The
Exchange notes that, as a result of the proposed waiver, the Exchange's
application of Section 312.03(b) will be consistent with the
application of NASDAQ Marketplace Rule 5635(a) \9\ to sales of a listed
company's securities to related parties.
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\9\ If a company is raising capital through a transaction, or
series of transaction, via the waiver, they cannot use such capital
to fund an acquisition.
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Many private placement transactions under the current market
conditions may also exceed the 20% threshold established by Section
312.03(c). Therefore, given the extraordinary nature of the current
circumstances, the Exchange also proposes to waive through and
including June 30, 2020, for purposes of the bona fide financing
exception to the 20% requirement, the 5% limitation for any sale to an
individual investor in a bona fide private financing pursuant to
Section 312.03(c) and to permit companies to undertake a bona fide
private financing during that period in which there is only a single
purchaser. As provided by Section 312.03(a), any transaction
benefitting from the proposed waiver will still be subject to
shareholder approval if required under any other applicable rule,
including the equity compensation requirements of Section 303A.08 and
the change of control requirements of Section 312.03(d). Any
transaction benefitting from this waiver must be a sale of the
company's securities for cash at a price that meets the Minimum Price
requirement.
The effect of this proposed waiver would be that a listed company
would
[[Page 20325]]
be exempt from the shareholder approval requirement of Section
312.03(c) in relation to a private placement transaction regardless of
its size or the number of participating investors or the amount of
securities purchased by any single investor, provided that the
transaction is a sale of the company's securities for cash at a price
that meets the Minimum Price requirement. If any purchaser in a
transaction benefiting from this waiver is a Related Party or other
person subject to Section 312.03(b), such transaction must be reviewed
and approved by the company's audit committee or a comparable committee
comprised solely of independent directors. The Exchange notes that, as
a result of the proposed waiver, the Exchange's application of Section
312.03(c) will be consistent with the application of NASDAQ Marketplace
Rule 5635(c) with respect to private placements relating to 20% or more
of a company's common stock or voting power outstanding before such
transaction.\10\
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\10\ See supra note 9 which also applies to the waivers
available under Section 312.03(c).
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The Exchange notes that these temporary emergency waivers would
simply provide NYSE listed companies with the flexibility on a
temporary emergency basis to consummate transactions without
shareholder approval that would not require shareholder approval under
the rules of the NASDAQ Stock Market, as the specific limitations the
Exchange is proposing to waive do not exist in the applicable NASDAQ
rules.\11\
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\11\ See NASDAQ Marketplace Rule 5635, including specifically
subsections (a) and (c) thereof.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\12\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\13\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect the
public interest and the interests of investors, and because it is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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As a result of market and general economic disruption related to
the ongoing spread of the COVID-19 virus, certain listed companies may
experience urgent liquidity needs that they are unable to meet by
raising funds in the public equity or credit markets. The proposed rule
change is designed to provide temporary relief from certain of the
NYSE's shareholder approval requirements in relation to stock issuances
to provide companies with additional flexibility to raise funds by
selling equity in private placement transactions during the current
extraordinary market and economic conditions provided such transactions
meet certain conditions, such as the Minimum Price as defined in
Section 312.04(i). The proposed waivers are consistent with the
protection of investors because any transaction benefiting from the
waivers will not, in the Exchange's view, be dilutive to the company's
existing shareholders as it will be subject to a minimum market price
requirement and because the audit committee or a comparable committee
comprised solely of independent directors will review and approve any
transaction benefitting from a waiver that involves a Related Party or
affiliates of a Related Party. In addition, as provided by Section
312.03(a), any transaction benefitting from the proposed waiver will
still be subject to shareholder approval if required under any other
applicable rule, including the equity compensation requirements of
Section 303A.08 and the change of control requirements of Section
312.03(d). All companies listed on the Exchange would be eligible to
take advantage of the proposed temporary waivers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to provide temporary relief from certain of the NYSE's shareholder
approval requirements in relation to stock issuances to provide
companies with additional flexibility to raise funds by selling equity
in private placement transactions during the current extraordinary
market and general economic conditions. In addition, the proposed
waivers will simply temporarily conform the treatment of transactions
benefitting from the waivers to their treatment under the comparable
NASDAQ rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6)(iii) thereunder.\17\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Commission has waived the five business day notification requirement
for this proposed rule change.
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A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Exchange believes that waiver of the operative delay would be
consistent with the protection of investors and the public interest
because, in the Exchange's view, the market and general economic
disruption caused by the global spread of the COVID-19 virus may give
rise to companies experiencing urgent liquidity needs which they may
need to meet by undertaking transactions that would benefit from the
proposed relief. In support of its request to waive the 30-day
operative delay, the
[[Page 20326]]
Exchange stated its belief that the proposed waiver does not give rise
to any novel investor protection concerns, as the proposed rule change
conforms the NYSE's shareholder approval requirements temporarily to
those of NASDAQ and would not permit any transactions without
shareholder approval that are not permitted on another exchange. In
addition, the Exchange stated that all transactions utilizing the
waiver would have to satisfy the Minimum Price requirement contained in
the rule \20\ and be reviewed and approved by the issuer's audit
committee or comparable committee of the board comprised entirely of
independent directors if any transactions benefitting from the waiver
involve a Related Party or affiliates of a Related Party, as described
above.\21\ Furthermore, the Exchange has stated that, as provided by
Section 312.04(a) of the Manual, any transaction benefitting from the
proposed waiver will still be subject to shareholder approval if
required under any other applicable rule, including the equity
compensation requirements of Section 303A.08 of the Manual and the
change of control requirements of Section 312.03(d) of the Manual. The
Exchange also noted that the proposed waivers are temporary in nature
and will only be applied through and including June 30, 2020. For these
reasons, the Commission believes that waiver of the 30-day operative
delay is consistent with the protections of investors and the public
interest. According, the Commission hereby waives the 30-day operative
delay and designates the proposal operative upon filing.\22\
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\20\ The Commission notes that the Minimum Price is related to
minimum market price requirements as defined above. See supra note
6.
\21\ The Commission notes that, as described in the purpose
section above, all transactions utilizing the waiver for purposes of
Section 312.03(b) would be subject to review and approval by an
audit committee or comparable body of independent directors. As to
transactions utilizing the temporary waiver under Section 312.03(c)
all transactions involving Related Parties or other persons subject
to Section 312.03(b), as described above, must be reviewed and
approved by the company's audit committee or a comparable committee
comprised solely of independent directors.
\22\ For purposed only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such 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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-30 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2020-30. 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 Number SR-NYSE-2020-30 and should be submitted on
or before May 1, 2020.
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).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07557 Filed 4-9-20; 8:45 am]
BILLING CODE 8011-01-P
