Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend the NYSE Listed Company Manual To Revise the Shareholder Approval Requirements in Sections 312.03 and 312.04 and the Requirements for Related Party Transactions in Section 314.00, 148-152 [2020-29020]
Download as PDF
<![CDATA[
148
Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices
are available at www.prc.gov, Docket
Nos. MC2021–55 and CP2021–57.
SECURITIES AND EXCHANGE
COMMISSION
Joshua J. Hofer,
Attorney, Federal Compliance.
[Release No. 34–90803; File No. SR–NYSE–
2020–85]
[FR Doc. 2020–29035 Filed 12–31–20; 8:45 am]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend the NYSE Listed Company
Manual To Revise the Shareholder
Approval Requirements in Sections
312.03 and 312.04 and the
Requirements for Related Party
Transactions in Section 314.00
BILLING CODE 7710–12–P
POSTAL SERVICE
International Product Change—
International Priority Airmail,
International Surface Air Lift,
Commercial ePacket, Priority Mail
Express International, Priority Mail
International & First-Class Package
International Service Agreement:
Postal ServiceTM
ACTION:
December 28, 2020.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add an
International Priority Airmail,
International Surface Air Lift,
Commercial ePacket, Priority Mail
Express International, Priority Mail
International & First-Class Package
International Service contract to the list
of Negotiated Service Agreements in the
Competitive Product List in the Mail
Classification Schedule.
SUMMARY:
DATES:
Date of notice: January 4, 2021.
FOR FURTHER INFORMATION CONTACT:
Christopher C. Meyerson, (202) 268–
7820.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on December 28,
2020, it filed with the Postal Regulatory
Commission a USPS Request to Add
International Priority Airmail,
International Surface Air Lift,
Commercial ePacket, Priority Mail
Express International, Priority Mail
International & First-Class Package
International Service Contract 2 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2021–54 and CP2021–56.
SUPPLEMENTARY INFORMATION:
Joshua J. Hofer,
Attorney, Federal Compliance.
[FR Doc. 2020–29032 Filed 12–31–20; 8:45 am]
BILLING CODE 7710–12–P
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 December
16, 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, II, and III below, which Items
have been prepared by the selfregulatory 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
Sections 312.03, 312.04 and 314.00 of
the NYSE Listed Company Manual
(‘‘Manual’’). 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
VerDate Sep<11>2014
17:28 Dec 31, 2020
Jkt 253001
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Paragraphs (b) and (c) of Sections
312.03 of the Manual require listed
companies to obtain shareholder
approval prior to certain kinds of equity
issuances. The Exchange believes that
these requirements can make it
unnecessarily difficult for listed
companies to raise necessary capital in
private placement transactions that are
in the interests of the company and its
shareholders. Consequently, the
Exchange proposes to modify these
provisions, bringing its shareholder
approval requirements into closer
alignment with those of Nasdaq and
NYSE American,4 by providing listed
companies with flexibility that exists
under the rules of those other listing
markets. The Exchange has waived
certain requirements under Section
312.03 to provide listed companies with
greater flexibility to raise capital during
the COVID–19 crisis.5 Among other
things, the current proposal includes
amendments that are identical in effect
to the current waiver. The Exchange has
observed that a significant number of
companies have benefited from the
flexibility provided by the waiver and
has not observed any significant
problems associated with companies’
completion of transactions permitted by
the waiver.
Proposed Amendments to Section
312.03(b)
Subject to an exception for early stage
companies set forth therein, Section
312.03(b) of the Manual requires
shareholder approval of certain
issuances of common stock, or securities
convertible into or exercisable for
common stock, to:
• A director, officer or substantial
security holder 6 of the company (each
4 See Nasdaq Marketplace Rule 5635 and NYSE
American Company Guide Sections 712 and 713.
5 See Securities Exchange Act Release No. 34–
88572 (April 6, 2020); 85 FR 20323 (April 10, 2020)
(SR–NYSE–2020–30). (waiving certain requirements
of Section 312.03 through June 30, 2020). See also
Securities Exchange Act Release No. 89219 (July 2,
2020); 85 FR 41640 (July 10, 2020) (SR–NYSE–
2020–58) (extending the waiver through September
30, 2020). See also Securities Exchange Act Release
No. 90020 (September 28, 2020); 85 FR 62357
(October 2, 2020) (SR–NYSE–2020–79) (extending
the waiver through December 31, 2020).
6 For purposes of Section 312.03, Section
312.04(e) provides that: ‘‘[a]n 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.’’
E:\FR\FM\04JAN1.SGM
04JAN1
Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices
a ‘‘Related Party’’ for purposes of
Section 312.03(b));
• a subsidiary, affiliate, or other
closely related person of a Related Party;
or
• Any company or entity in which a
Related Party has a substantial direct or
indirect interest.
This prior shareholder approval is
required 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
to these shareholder approval
requirements permits cash sales relating
to no more than 5% of the number of
shares of common stock or voting power
outstanding that meet a Minimum Price
test set forth in the rule (the ‘‘Minimum
Price’’).7 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.
The Exchange proposes to amend
Section 312.03(b) in several respects.
• The Exchange proposes to modify
the class of persons with respect to
which an issuance of common stock
would require a listed company to seek
shareholder approval. Specifically,
Section 312.03(b) as amended would
require prior shareholder approval for
issuances of common stock to directors,
officers, and substantial securityholders
(‘‘Related Party’’) and would no longer
require such approval for issuances to
such Related Parties’ subsidiaries,
affiliates or other closely related persons
or to entities in which a Related Party
has a substantial interest (except where
a Related Party has a 5% or greater
interest in the counterparty, as
described below). In making this
change, the Exchange is harmonizing its
approach to the regulation of issuances
to related parties with that of Nasdaq
7 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 of the regular session on Tuesday,
then Monday’s official closing price is used.
VerDate Sep<11>2014
17:28 Dec 31, 2020
Jkt 253001
and NYSE American, as both of those
markets focus their shareholder
approval requirements solely on the
regulation of the Related Parties
themselves and not on closely related
persons of Related Parties.
• As proposed to be amended,
Section 312.03(b) would require
shareholder approval of cash sales to
Related Parties (as such term is defined
in Section 312.03(b)) only if the price is
less than the Minimum Price.
Accordingly, Section 312.03(b) would
no longer require shareholder approval
of issuances in a cash sale that meet the
Minimum Price requirement to a
Related Party where the number of
shares of common stock to be issued, or
the number of shares of common stock
into which the securities may be
convertible or exercisable, exceeds
either 5% of the number of shares of
common stock or 5% of the voting
power outstanding before the issuance.
However, cash sales to Related Parties
that meet the Minimum Price
requirement would be subject to the
same limitations as cash sales to all
other investors under the proposed
amended Section 312.03(c), as described
below. In addition, cash sales relating to
more than 1% of the issuer’s common
stock or voting power prior to the
issuance to a Related Party for prices
below the Minimum Price will continue
to be subject to shareholder approval
under Section 312.03(b) (this
requirement is not included in the
Nasdaq or NYSE American rules).
• The Exchange proposes to require
shareholder approval of any transaction
or series of related transactions in which
any Related Party 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 and the
present or potential issuance of common
stock, or securities convertible into
common stock, could result in an
increase in outstanding common shares
of 5% or more. This proposed provision
is substantively identical to the only
limitation placed specifically on
issuances to related parties in the
Nasdaq and NYSE American rules. The
Exchange would also continue to
require shareholder approval of any sale
of securities by a listed company to a
Related Party 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
Related Party has a direct or indirect
interest in the company or assets to be
acquired or in the consideration to be
paid for such acquisition.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
149
• The Exchange proposes to delete
from Section 312.03(b) two provisions
that will no longer be relevant as they
relate to transactions that benefit from
exemptions from shareholder approval
under current Section 312.03(b), but
would be exempt from shareholder
approval under the general application
of Section 312.03(b) as proposed to be
amended. These provisions relate to: (i)
Cash sales meeting the Minimum Price
test and relating to no more than 5% of
the number of shares of common stock
or 5% of the voting power outstanding
before the issuance to a Related Party
where the Related Party involved in the
transaction is classified as such solely
because such person is a substantial
security holder; and (ii) the Early Stage
Company exemption, to which the
Exchange proposes to remove the
reference from Section 312.04 as it will
no longer be needed. For the same
reason, the Exchange proposes to delete
from Section 312.03(b) a sentence that
provides that the Early Stage Company
exemption is not applicable to a sale of
securities by the 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 Exchange notes that Section
312.03(b) would continue to include
text stating that any sale of stock to an
employee, director or service provider is
also subject to the equity compensation
rules in Section 303A.08 of the Manual
and stating that shareholder approval is
required if any of the subparagraphs of
Section 312.03 require such approval,
notwithstanding that the transaction
does not require approval under Section
312.03(b) or one or more of the other
subparagraphs.
There would continue to be other
significant protections for shareholders
with respect to a company’s sales of
securities. Firstly, Section 314.00 of the
Manual in its proposed amended form
will provide that transactions with
related parties, such as those in which
a director, officer or substantial
securityholder has an interest, must be
reviewed and approved by the
company’s audit committee or another
body of independent directors.
Furthermore, there are other significant
protections under other paragraphs of
Section 312.03, including a requirement
of shareholder approval for any sale for
less than the Minimum Price relating to
20% or more of the issuer’s outstanding
E:\FR\FM\04JAN1.SGM
04JAN1
150
Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices
common stock or voting power prior to
such issuance. This requirement means
that any economically dilutive
transaction would be subject to
shareholder approval. In addition, any
related party sale that gives rise to a
change of control would be subject to
shareholder approval under Section
312.03(d).
The Exchange believes that the
continuation of the important
limitations with respect to related party
issuances as described above (including
the review of such transactions under
Section 314.00 and the continued
application of the shareholder approval
requirements with respect to equity
compensation set forth in Section
303A.08) would continue to provide
shareholders of NYSE listed companies
with protections in relation to issuances
to related parties (including Related
Parties as such term is defined in
Section 312.03(b) In particular, the
Exchange notes that the continued
shareholder approval requirement for
cash sales to Related Parties relating to
more than 1% of the company’s
outstanding common stock that do not
meet the Minimum Price requirement is
an important protection not provided by
the Nasdaq or NYSE American rules.
The proposed amendments would make
the Exchange’s rules for cash sales to
related parties substantively identical to
those of Nasdaq and NYSE American for
issuances that meet the Minimum Price
test and the Exchange believes that the
long experience of those other markets
in applying those substantially identical
rules provides evidence that they
provide an appropriate level of investor
protection.
Proposed Amendments to Section
312.03(c)
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, but
provides the following exceptions: (1)
Any public offering for cash; (2) any
bona fide private financing involving a
cash sale of the company’s securities
that comply with the Minimum Price
requirement. As set forth in Section
312.04(g), a ‘‘bona fide private
financing’’ (‘‘Bona Fide Private
Financing’’) refers to a sale in which
either:
• 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
• the issuer sells the securities to
multiple purchasers, and no one such
purchaser, or group of related
VerDate Sep<11>2014
17:28 Dec 31, 2020
Jkt 253001
purchasers, acquires, or has the right to
acquire upon exercise or conversion of
the securities, more than 5% 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 proposes to replace the
reference to ‘‘bona fide private
financing’’ in Section 312.03(c) with
‘‘other financing (that is not a public
offering for cash) in which the company
is selling securities for cash.’’ This
change would eliminate the 5% limit for
any single purchaser participating in a
transaction relying on the exemption.8
In addition, as any sale to a brokerdealer under the current Bona Fide
Private Financing exception would also
qualify for an exception to shareholder
approval under the proposed amended
exemption, there is no need to retain a
separate provision for sales made to
broker-dealers. The Exchange also
proposes to amend Section 312.03(c) to
provide that, if any of the proceeds of
such a financing will be paid in an
acquisition and the securities generating
such proceeds when combined with any
securities issued in connection with
such acquisition exceed either 20% of
the number of shares of common stock
or 20% of the voting power outstanding
before the issuance, then shareholder
approval is required. Finally, as the
Bona Fide Private Financing term will
no longer be used in Section 312.03(c),
the Exchange proposes to delete the
definition of that term in Section
312.04(g).
The Exchange notes that the proposed
amendments to Section 312.03(c) do not
change the rule as it relates to issuances
in non-cash transactions or in cash
transactions for a price below the
Minimum Price. Instead, in replacing
the Bona Fide Private Financing
exception with the revised exemption
described in the immediately preceding
paragraph, the proposed amendment
would only remove a limitation in the
Bona Fide Private Financing exception
that limits the participation of any
single investor in a Minimum Price cash
sale of more than 5% of the shares or
voting power. The Exchange believes
that this change is consistent with the
protection of investors because the
Minimum Price requirement protects
against a sale using the exception
resulting in economic dilution. Further,
the separately applicable requirements
of Section 312.03(d) require that the
shareholders approve any transaction
that would result in a change of control.
8 While the proposed amended exemption would
not limit the size of any transaction that meets the
Minimum Price test, any such transaction giving
rise to a change of control will be subject to
shareholder approval under Section 312.03(d).
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
The proposed amendments would
make the Exchange’s rules for cash sales
of securities that meet the Minimum
Price test substantively identical to
those of Nasdaq and NYSE American
and the Exchange believes that the long
experience of those other markets in
applying those substantially identical
rules provides evidence that they
provide an appropriate level of investor
protection.
Deletion of Section 312.03T
Section 312.03T was adopted to
provide temporary relief from certain of
the requirements of Section 312.03
during the COVID–19 pandemic.
Section 312.03T was applicable by its
terms through June 30, 2020. As that
date has passed, the Exchange now
proposes to delete Section 312.03T in its
entirety, as it is no longer applicable.
Amendment to Section 314.00
In its current form, Section 314.00
provides that related party transactions
normally include transactions between
officers, directors, and principal
shareholders and the company and that
each related party transaction is to be
reviewed and evaluated by an
appropriate group within the listed
company involved. The current rule
further states that, while the Exchange
does not specify who should review
related party transactions, the Exchange
believes that the Audit Committee or
another comparable body might be
considered as an appropriate forum for
this task.
The Exchange proposes to amend the
first paragraph of Section 314.00.9 The
proposed new rule text strengthens the
rule in two important respects:
• For purposes of Section 314.00, the
term ‘‘related party transaction’’ refers
to transactions required to be disclosed
pursuant to Item 404 of Regulation S–
K under the Securities Exchange Act. In
the case of foreign private issuers, the
term ‘‘related party transactions’’ refers
to transactions required to be disclosed
pursuant to Form 20–F, Item 7.B.
• Related party transactions under the
rule as amended must be reviewed by
either the company’s audit committee or
another independent body of the board
of directors and the audit committee or
such other body may prohibit such a
transaction if it determines it to be
9 The Second paragraph of Section 314.00 will be
retained in its entirety. It reads as follows:
The Exchange will continue to review proxy
statements and other SEC filings disclosing related
party transactions and where such situations
continue year after year, the Exchange will remind
the listed company of its obligation, on a continuing
basis, to evaluate each related party transaction and
determine whether or not it should be permitted to
continue.
E:\FR\FM\04JAN1.SGM
04JAN1
Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices
inconsistent with the interests of the
company.10
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,11 in general, and furthers the
objectives of Section 6(b)(5) of the Act,12
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.
The Exchange believes that the
proposed amendments to Section
312.03(b) are designed to protect the
public interest and the interests of
investors because there would continue
to be other significant protections for
shareholders with respect to sales of
securities to related parties. Firstly,
Section 314.00 of the Manual, as
proposed to be amended, will provide
that related party transactions, such as
those in which a director, officer or
substantial securityholder has an
interest, are required to be reviewed and
approved by the issuer’s audit
committee or another group of
independent directors. Furthermore,
there are other significant protections
under other paragraphs of Section
312.03, including any sale relating to
20% or more of the issuer’s common
stock or voting power immediately
preceding this issuance for less than the
Minimum Price. This requirement
means that any economically dilutive
transaction would be subject to
shareholder approval. The Exchange
notes that Section 312.03(c) applies to
any transaction or series of related
transactions, which provides
shareholders with further protection by
ensuring that a company cannot avoid
the shareholder approval requirement
by separating an overall transaction into
10 The Exchange proposes to delete from Section
314.00 a sentence that reads as follows: ‘‘Following
the review, the company should determine whether
or not a particular relationship serves the best
interests of the company and its shareholders and
whether the relationship should be continued or
eliminated.’’ This sentence is no longer necessary,
as the proposed amended rule gives the audit
committee or other independent body of the board
the authority to prohibit any related party
transaction it reviews.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
17:28 Dec 31, 2020
Jkt 253001
smaller separate transactions that would
not individually require shareholder
approval. In addition, any related party
sale that gives rise to a change of control
will be subject to shareholder approval
under Section 312.03(d). The Exchange
believes that the continuation of the
important limitations with respect to
related party issuances as described
above (including the review of such
transactions under Section 314.00 and
the continued application of the
shareholder approval requirements with
respect to equity compensation set forth
in Section 303A.08) would continue to
provide shareholders of NYSE listed
companies with protections in relation
to issuances to related parties (including
Related Parties as such term is defined
in Section 312.03(b)). In particular, the
Exchange notes that the continued
shareholder approval requirement for
cash sales to Related Parties that relate
to more than 1% of the company’s
outstanding common stock or voting
power and do not meet the Minimum
Price requirement is an important
protection not provided by the Nasdaq
or NYSE American rules. The proposed
amendments would make the
Exchange’s rules for cash sales to related
parties substantively identical to those
of Nasdaq and NYSE American for
issuances that meet the Minimum Price
test and the Exchange believes that the
long experience of those other markets
in applying those substantially identical
rules provides evidence that they
provide an appropriate level of investor
protection.
The Exchange believes that the
proposed amendments to Section
312.03(c) are also designed to protect
the public interest and the interests of
investors. The Exchange notes that the
proposed amendments to Section
312.03(c) do not change the rule as it
relates to issuances in non-cash
transactions or to cash transactions for
a price below the Minimum Price. The
sole purpose of the amendment is to
remove an arbitrary limitation in the
Bona Fide Private Financing exception
that limits the participation of any
single investor in a Minimum Price cash
sale to 5%. The Exchange believes that
this change is consistent with the
protection of investors because the
Minimum Price requirement provides
protection against economic dilution,
while the separately applicable
requirements of Section 312.03(d)
provide that shareholders will have a
vote on any transaction that would
result in a change of control. The
proposed amendments would also make
the Exchange’s rules for cash sales of
securities that meet the Minimum Price
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
151
test substantively identical to those of
Nasdaq and NYSE American and the
Exchange believes that the long
experience of those other markets in
applying those substantially identical
rules provides evidence that they
provide an appropriate level of investor
protection.
The Exchange believes that the
proposed amendments to Section 314.00
are also designed to protect the public
interest and the interests of investors.
By proposing to use the definition of a
related party transaction in SEC
disclosure rules, the Exchange is
providing greater clarity to both issuers
and investors as to when the rule must
be applied. By proposing to require that
transactions subject to the rule must be
reviewed and approved by either the
audit committee or another body of
independent directors, the Exchange is
making the requirement more explicit
and preventing any listed issuer from
giving that role to any group that is not
entirely made up of independent
directors.
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 changes will conform the
shareholder approval requirements of
the NYSE to those of Nasdaq and NYSE
American in certain respects and
therefore enhances competition among
listing exchanges. As all listed
companies will be subject to the same
shareholder approval and related party
transaction approval requirements, the
proposal does not impose any burden
on competition among listed issuers.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
E:\FR\FM\04JAN1.SGM
04JAN1
152
Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Assistant Secretary.
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:
[FR Doc. 2020–29020 Filed 12–31–20; 8:45 am]
Electronic Comments
[Release No. 34–90808; File No. SR–MEMX–
2020–16]
• 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–2020–85 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–2020–85. 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–2020–85 and should
be submitted on or before January 25,
2021.
VerDate Sep<11>2014
17:28 Dec 31, 2020
Jkt 253001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Rules 4.5 and 4.7
Regarding the National Market System
Plan Governing the Consolidated Audit
Trail
December 28, 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 December
18, 2020, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the 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
The Exchange is filing with the
Commission a proposed rule change to
amend Exchange Rules 4.5 and 4.7, each
a part of the Exchange’s compliance rule
(‘‘Compliance Rule’’) regarding the
National Market System Plan Governing
the Consolidated Audit Trail (the ‘‘CAT
NMS Plan’’ or ‘‘Plan’’),3 to be consistent
with a conditional exemption granted
by the Commission from certain
allocation reporting requirements set
forth in Sections 6.4(d)(ii)(A)(1) and (2)
of the CAT NMS Plan (‘‘Allocation
Exemption’’).4 The text of the proposed
rule change is provided in Exhibit 5.
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Unless otherwise specified, capitalized terms
used in this rule filing are defined as set forth in
the Compliance Rule.
4 See Securities Exchange Act Release No. 90223
(October 19, 2020), 85 FR 67576 (October 23, 2020)
(‘‘Allocation Exemptive Order’’).
1 15
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to amend Exchange Rules 4.5
and 4.7, each a part of the Exchange’s
Compliance Rule, to be consistent with
the Allocation Exemption. The
Commission granted the relief
conditioned upon the Participants’
adoption of Compliance Rules that
implement the alternative approach to
reporting allocations to the Central
Repository described in the Allocation
Exemption (referred to as the
‘‘Allocation Alternative’’).
(1) Request for Exemptive Relief
Pursuant to Section 6.4(d)(ii)(A) of the
CAT NMS Plan, each Participant must,
through its Compliance Rule, require its
Industry Members to record and report
to the Central Repository, if the order is
executed, in whole or in part: (1) An
Allocation Report; 5 (2) the SROAssigned Market Participant Identifier
of the clearing broker or prime broker,
if applicable; and the (3) CAT-Order-ID
of any contra-side order(s). Accordingly,
the Exchange and the other Participants
implemented Compliance Rules that
require their Industry Members that are
executing brokers to submit to the
Central Repository, among other things,
Allocation Reports and the SROAssigned Market Participant Identifier
5 Section 1.1 of the CAT NMS Plan defines an
‘‘Allocation Report’’ as ‘‘a report made to the
Central Repository by an Industry Member that
identifies the Firm Designated ID for any account(s),
including subaccount(s), to which executed shares
are allocated and provides the security that has
been allocated, the identifier of the firm reporting
the allocation, the price per share of shares
allocated, the side of shares allocated, the number
of shares allocated to each account, and the time of
the allocation; provided for the avoidance of doubt,
any such Allocation Report shall not be required to
be linked to particular orders or executions.’’
E:\FR\FM\04JAN1.SGM
04JAN1
]]>Agencies
[Federal Register Volume 86, Number 1 (Monday, January 4, 2021)]
[Notices]
[Pages 148-152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29020]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90803; File No. SR-NYSE-2020-85]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Amend the NYSE Listed
Company Manual To Revise the Shareholder Approval Requirements in
Sections 312.03 and 312.04 and the Requirements for Related Party
Transactions in Section 314.00
December 28, 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 December 16, 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,
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Sections 312.03, 312.04 and 314.00
of the NYSE Listed Company Manual (``Manual''). 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
Paragraphs (b) and (c) of Sections 312.03 of the Manual require
listed companies to obtain shareholder approval prior to certain kinds
of equity issuances. The Exchange believes that these requirements can
make it unnecessarily difficult for listed companies to raise necessary
capital in private placement transactions that are in the interests of
the company and its shareholders. Consequently, the Exchange proposes
to modify these provisions, bringing its shareholder approval
requirements into closer alignment with those of Nasdaq and NYSE
American,\4\ by providing listed companies with flexibility that exists
under the rules of those other listing markets. The Exchange has waived
certain requirements under Section 312.03 to provide listed companies
with greater flexibility to raise capital during the COVID-19
crisis.\5\ Among other things, the current proposal includes amendments
that are identical in effect to the current waiver. The Exchange has
observed that a significant number of companies have benefited from the
flexibility provided by the waiver and has not observed any significant
problems associated with companies' completion of transactions
permitted by the waiver.
---------------------------------------------------------------------------
\4\ See Nasdaq Marketplace Rule 5635 and NYSE American Company
Guide Sections 712 and 713.
\5\ See Securities Exchange Act Release No. 34-88572 (April 6,
2020); 85 FR 20323 (April 10, 2020) (SR-NYSE-2020-30). (waiving
certain requirements of Section 312.03 through June 30, 2020). See
also Securities Exchange Act Release No. 89219 (July 2, 2020); 85 FR
41640 (July 10, 2020) (SR-NYSE-2020-58) (extending the waiver
through September 30, 2020). See also Securities Exchange Act
Release No. 90020 (September 28, 2020); 85 FR 62357 (October 2,
2020) (SR-NYSE-2020-79) (extending the waiver through December 31,
2020).
---------------------------------------------------------------------------
Proposed Amendments to Section 312.03(b)
Subject to an exception for early stage companies set forth
therein, Section 312.03(b) of the Manual requires shareholder approval
of certain issuances of common stock, or securities convertible into or
exercisable for common stock, to:
A director, officer or substantial security holder \6\ of
the company (each
[[Page 149]]
a ``Related Party'' for purposes of Section 312.03(b));
---------------------------------------------------------------------------
\6\ For purposes of Section 312.03, Section 312.04(e) provides
that: ``[a]n 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.''
---------------------------------------------------------------------------
a subsidiary, affiliate, or other closely related person
of a Related Party; or
Any company or entity in which a Related Party has a
substantial direct or indirect interest.
This prior shareholder approval is required 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 to
these shareholder approval requirements permits cash sales relating to
no more than 5% of the number of shares of common stock or voting power
outstanding that meet a Minimum Price test set forth in the rule (the
``Minimum Price'').\7\ 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.
---------------------------------------------------------------------------
\7\ 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 of the regular
session on Tuesday, then Monday's official closing price is used.
---------------------------------------------------------------------------
The Exchange proposes to amend Section 312.03(b) in several
respects.
The Exchange proposes to modify the class of persons with
respect to which an issuance of common stock would require a listed
company to seek shareholder approval. Specifically, Section 312.03(b)
as amended would require prior shareholder approval for issuances of
common stock to directors, officers, and substantial securityholders
(``Related Party'') and would no longer require such approval for
issuances to such Related Parties' subsidiaries, affiliates or other
closely related persons or to entities in which a Related Party has a
substantial interest (except where a Related Party has a 5% or greater
interest in the counterparty, as described below). In making this
change, the Exchange is harmonizing its approach to the regulation of
issuances to related parties with that of Nasdaq and NYSE American, as
both of those markets focus their shareholder approval requirements
solely on the regulation of the Related Parties themselves and not on
closely related persons of Related Parties.
As proposed to be amended, Section 312.03(b) would require
shareholder approval of cash sales to Related Parties (as such term is
defined in Section 312.03(b)) only if the price is less than the
Minimum Price. Accordingly, Section 312.03(b) would no longer require
shareholder approval of issuances in a cash sale that meet the Minimum
Price requirement to a Related Party where the number of shares of
common stock to be issued, or the number of shares of common stock into
which the securities may be convertible or exercisable, exceeds either
5% of the number of shares of common stock or 5% of the voting power
outstanding before the issuance. However, cash sales to Related Parties
that meet the Minimum Price requirement would be subject to the same
limitations as cash sales to all other investors under the proposed
amended Section 312.03(c), as described below. In addition, cash sales
relating to more than 1% of the issuer's common stock or voting power
prior to the issuance to a Related Party for prices below the Minimum
Price will continue to be subject to shareholder approval under Section
312.03(b) (this requirement is not included in the Nasdaq or NYSE
American rules).
The Exchange proposes to require shareholder approval of
any transaction or series of related transactions in which any Related
Party 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 and the present or potential issuance of common stock, or
securities convertible into common stock, could result in an increase
in outstanding common shares of 5% or more. This proposed provision is
substantively identical to the only limitation placed specifically on
issuances to related parties in the Nasdaq and NYSE American rules. The
Exchange would also continue to require shareholder approval of any
sale of securities by a listed company to a Related Party 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
Related Party 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 Exchange proposes to delete from Section 312.03(b) two
provisions that will no longer be relevant as they relate to
transactions that benefit from exemptions from shareholder approval
under current Section 312.03(b), but would be exempt from shareholder
approval under the general application of Section 312.03(b) as proposed
to be amended. These provisions relate to: (i) Cash sales meeting the
Minimum Price test and relating to no more than 5% of the number of
shares of common stock or 5% of the voting power outstanding before the
issuance to a Related Party where the Related Party involved in the
transaction is classified as such solely because such person is a
substantial security holder; and (ii) the Early Stage Company
exemption, to which the Exchange proposes to remove the reference from
Section 312.04 as it will no longer be needed. For the same reason, the
Exchange proposes to delete from Section 312.03(b) a sentence that
provides that the Early Stage Company exemption is not applicable to a
sale of securities by the 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 Exchange notes that Section 312.03(b) would continue to include
text stating that any sale of stock to an employee, director or service
provider is also subject to the equity compensation rules in Section
303A.08 of the Manual and stating that shareholder approval is required
if any of the subparagraphs of Section 312.03 require such approval,
notwithstanding that the transaction does not require approval under
Section 312.03(b) or one or more of the other subparagraphs.
There would continue to be other significant protections for
shareholders with respect to a company's sales of securities. Firstly,
Section 314.00 of the Manual in its proposed amended form will provide
that transactions with related parties, such as those in which a
director, officer or substantial securityholder has an interest, must
be reviewed and approved by the company's audit committee or another
body of independent directors. Furthermore, there are other significant
protections under other paragraphs of Section 312.03, including a
requirement of shareholder approval for any sale for less than the
Minimum Price relating to 20% or more of the issuer's outstanding
[[Page 150]]
common stock or voting power prior to such issuance. This requirement
means that any economically dilutive transaction would be subject to
shareholder approval. In addition, any related party sale that gives
rise to a change of control would be subject to shareholder approval
under Section 312.03(d).
The Exchange believes that the continuation of the important
limitations with respect to related party issuances as described above
(including the review of such transactions under Section 314.00 and the
continued application of the shareholder approval requirements with
respect to equity compensation set forth in Section 303A.08) would
continue to provide shareholders of NYSE listed companies with
protections in relation to issuances to related parties (including
Related Parties as such term is defined in Section 312.03(b) In
particular, the Exchange notes that the continued shareholder approval
requirement for cash sales to Related Parties relating to more than 1%
of the company's outstanding common stock that do not meet the Minimum
Price requirement is an important protection not provided by the Nasdaq
or NYSE American rules. The proposed amendments would make the
Exchange's rules for cash sales to related parties substantively
identical to those of Nasdaq and NYSE American for issuances that meet
the Minimum Price test and the Exchange believes that the long
experience of those other markets in applying those substantially
identical rules provides evidence that they provide an appropriate
level of investor protection.
Proposed Amendments to Section 312.03(c)
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, but provides the following exceptions: (1) Any public
offering for cash; (2) any bona fide private financing involving a cash
sale of the company's securities that comply with the Minimum Price
requirement. As set forth in Section 312.04(g), a ``bona fide private
financing'' (``Bona Fide Private Financing'') refers to a sale in which
either:
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
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 5% 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 proposes to replace the reference to ``bona fide
private financing'' in Section 312.03(c) with ``other financing (that
is not a public offering for cash) in which the company is selling
securities for cash.'' This change would eliminate the 5% limit for any
single purchaser participating in a transaction relying on the
exemption.\8\ In addition, as any sale to a broker-dealer under the
current Bona Fide Private Financing exception would also qualify for an
exception to shareholder approval under the proposed amended exemption,
there is no need to retain a separate provision for sales made to
broker-dealers. The Exchange also proposes to amend Section 312.03(c)
to provide that, if any of the proceeds of such a financing will be
paid in an acquisition and the securities generating such proceeds when
combined with any securities issued in connection with such acquisition
exceed either 20% of the number of shares of common stock or 20% of the
voting power outstanding before the issuance, then shareholder approval
is required. Finally, as the Bona Fide Private Financing term will no
longer be used in Section 312.03(c), the Exchange proposes to delete
the definition of that term in Section 312.04(g).
---------------------------------------------------------------------------
\8\ While the proposed amended exemption would not limit the
size of any transaction that meets the Minimum Price test, any such
transaction giving rise to a change of control will be subject to
shareholder approval under Section 312.03(d).
---------------------------------------------------------------------------
The Exchange notes that the proposed amendments to Section
312.03(c) do not change the rule as it relates to issuances in non-cash
transactions or in cash transactions for a price below the Minimum
Price. Instead, in replacing the Bona Fide Private Financing exception
with the revised exemption described in the immediately preceding
paragraph, the proposed amendment would only remove a limitation in the
Bona Fide Private Financing exception that limits the participation of
any single investor in a Minimum Price cash sale of more than 5% of the
shares or voting power. The Exchange believes that this change is
consistent with the protection of investors because the Minimum Price
requirement protects against a sale using the exception resulting in
economic dilution. Further, the separately applicable requirements of
Section 312.03(d) require that the shareholders approve any transaction
that would result in a change of control.
The proposed amendments would make the Exchange's rules for cash
sales of securities that meet the Minimum Price test substantively
identical to those of Nasdaq and NYSE American and the Exchange
believes that the long experience of those other markets in applying
those substantially identical rules provides evidence that they provide
an appropriate level of investor protection.
Deletion of Section 312.03T
Section 312.03T was adopted to provide temporary relief from
certain of the requirements of Section 312.03 during the COVID-19
pandemic. Section 312.03T was applicable by its terms through June 30,
2020. As that date has passed, the Exchange now proposes to delete
Section 312.03T in its entirety, as it is no longer applicable.
Amendment to Section 314.00
In its current form, Section 314.00 provides that related party
transactions normally include transactions between officers, directors,
and principal shareholders and the company and that each related party
transaction is to be reviewed and evaluated by an appropriate group
within the listed company involved. The current rule further states
that, while the Exchange does not specify who should review related
party transactions, the Exchange believes that the Audit Committee or
another comparable body might be considered as an appropriate forum for
this task.
The Exchange proposes to amend the first paragraph of Section
314.00.\9\ The proposed new rule text strengthens the rule in two
important respects:
---------------------------------------------------------------------------
\9\ The Second paragraph of Section 314.00 will be retained in
its entirety. It reads as follows:
The Exchange will continue to review proxy statements and other
SEC filings disclosing related party transactions and where such
situations continue year after year, the Exchange will remind the
listed company of its obligation, on a continuing basis, to evaluate
each related party transaction and determine whether or not it
should be permitted to continue.
---------------------------------------------------------------------------
For purposes of Section 314.00, the term ``related party
transaction'' refers to transactions required to be disclosed pursuant
to Item 404 of Regulation S-K under the Securities Exchange Act. In the
case of foreign private issuers, the term ``related party
transactions'' refers to transactions required to be disclosed pursuant
to Form 20-F, Item 7.B.
Related party transactions under the rule as amended must
be reviewed by either the company's audit committee or another
independent body of the board of directors and the audit committee or
such other body may prohibit such a transaction if it determines it to
be
[[Page 151]]
inconsistent with the interests of the company.\10\
---------------------------------------------------------------------------
\10\ The Exchange proposes to delete from Section 314.00 a
sentence that reads as follows: ``Following the review, the company
should determine whether or not a particular relationship serves the
best interests of the company and its shareholders and whether the
relationship should be continued or eliminated.'' This sentence is
no longer necessary, as the proposed amended rule gives the audit
committee or other independent body of the board the authority to
prohibit any related party transaction it reviews.
---------------------------------------------------------------------------
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\11\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\12\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed amendments to Section
312.03(b) are designed to protect the public interest and the interests
of investors because there would continue to be other significant
protections for shareholders with respect to sales of securities to
related parties. Firstly, Section 314.00 of the Manual, as proposed to
be amended, will provide that related party transactions, such as those
in which a director, officer or substantial securityholder has an
interest, are required to be reviewed and approved by the issuer's
audit committee or another group of independent directors. Furthermore,
there are other significant protections under other paragraphs of
Section 312.03, including any sale relating to 20% or more of the
issuer's common stock or voting power immediately preceding this
issuance for less than the Minimum Price. This requirement means that
any economically dilutive transaction would be subject to shareholder
approval. The Exchange notes that Section 312.03(c) applies to any
transaction or series of related transactions, which provides
shareholders with further protection by ensuring that a company cannot
avoid the shareholder approval requirement by separating an overall
transaction into smaller separate transactions that would not
individually require shareholder approval. In addition, any related
party sale that gives rise to a change of control will be subject to
shareholder approval under Section 312.03(d). The Exchange believes
that the continuation of the important limitations with respect to
related party issuances as described above (including the review of
such transactions under Section 314.00 and the continued application of
the shareholder approval requirements with respect to equity
compensation set forth in Section 303A.08) would continue to provide
shareholders of NYSE listed companies with protections in relation to
issuances to related parties (including Related Parties as such term is
defined in Section 312.03(b)). In particular, the Exchange notes that
the continued shareholder approval requirement for cash sales to
Related Parties that relate to more than 1% of the company's
outstanding common stock or voting power and do not meet the Minimum
Price requirement is an important protection not provided by the Nasdaq
or NYSE American rules. The proposed amendments would make the
Exchange's rules for cash sales to related parties substantively
identical to those of Nasdaq and NYSE American for issuances that meet
the Minimum Price test and the Exchange believes that the long
experience of those other markets in applying those substantially
identical rules provides evidence that they provide an appropriate
level of investor protection.
The Exchange believes that the proposed amendments to Section
312.03(c) are also designed to protect the public interest and the
interests of investors. The Exchange notes that the proposed amendments
to Section 312.03(c) do not change the rule as it relates to issuances
in non-cash transactions or to cash transactions for a price below the
Minimum Price. The sole purpose of the amendment is to remove an
arbitrary limitation in the Bona Fide Private Financing exception that
limits the participation of any single investor in a Minimum Price cash
sale to 5%. The Exchange believes that this change is consistent with
the protection of investors because the Minimum Price requirement
provides protection against economic dilution, while the separately
applicable requirements of Section 312.03(d) provide that shareholders
will have a vote on any transaction that would result in a change of
control. The proposed amendments would also make the Exchange's rules
for cash sales of securities that meet the Minimum Price test
substantively identical to those of Nasdaq and NYSE American and the
Exchange believes that the long experience of those other markets in
applying those substantially identical rules provides evidence that
they provide an appropriate level of investor protection.
The Exchange believes that the proposed amendments to Section
314.00 are also designed to protect the public interest and the
interests of investors. By proposing to use the definition of a related
party transaction in SEC disclosure rules, the Exchange is providing
greater clarity to both issuers and investors as to when the rule must
be applied. By proposing to require that transactions subject to the
rule must be reviewed and approved by either the audit committee or
another body of independent directors, the Exchange is making the
requirement more explicit and preventing any listed issuer from giving
that role to any group that is not entirely made up of independent
directors.
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 changes
will conform the shareholder approval requirements of the NYSE to those
of Nasdaq and NYSE American in certain respects and therefore enhances
competition among listing exchanges. As all listed companies will be
subject to the same shareholder approval and related party transaction
approval requirements, the proposal does not impose any burden on
competition among listed issuers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
[[Page 152]]
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-85 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-2020-85. 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-2020-85 and should be submitted on
or before January 25, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-29020 Filed 12-31-20; 8:45 am]
BILLING CODE 8011-01-P
