Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend LTSE Rule 14.501 To Specify the Process for Enforcing Compliance With LTSE Rule 14.425 for Listed Companies, 8243-8246 [2021-02267]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 22 (Thursday, February 4, 2021)]
[Notices]
[Pages 8243-8246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02267]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91019; File No. SR-LTSE-2021-01]


Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Notice of Filing of a Proposed Rule Change To Amend LTSE Rule 14.501 To 
Specify the Process for Enforcing Compliance With LTSE Rule 14.425 for 
Listed Companies

January 29, 2021.
    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 January 19, 2021, Long-Term Stock Exchange, Inc. (``LTSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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

    LTSE proposes to amend LTSE Rule 14.501 to specify the process for 
enforcing compliance with LTSE Rule 14.425 for listed companies.
    The text of the proposed rule change is available at the Exchange's 
website at https://longtermstockexchange.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

[[Page 8244]]

on the proposed rule change. The text of these statements may be 
examined at the places specified in Item IV below. The self-regulatory 
organization has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 14.501(d)(2)(A)(iii) to specify 
the process for enforcing compliance with the Long-Term Policies 
pursuant to LTSE Rule 14.425 under LTSE Rule Series 14.500.\3\ LTSE 
Rule 14.425(a) requires Companies to adopt and publish the following 
policies: A Long-Term Stakeholder Policy; a Long-Term Strategy Policy; 
a Long-Term Compensation Policy; a Long-Term Board Policy; and a Long-
Term Investor Policy (collectively, the ``Policies''). While Companies 
have flexibility to develop appropriate Policies for their businesses, 
each of the Policies must be consistent with the set of principles 
articulated in LTSE Rule 14.425(b) (collectively, the 
``Principles'').\4\ Companies also are required to at least annually 
review their Policies, make them publicly available and free of charge 
on or through their websites, and provide related disclosures in 
certain filings with the Commission, as provided for in LTSE Rule 
14.425(c).
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    \3\ See LTSE Rule 14.001 (``The consequences of a failure to 
meet LTSE's listing standards are contained in the LTSE Rule Series 
14.500.'').
    \4\ See Securities Exchange Act Release No. 86722 (August 21, 
2019), 84 FR 44953 (August 27, 2019) (order approving proposed rule 
change to adopt LTSE Rule 14.425).
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    The Exchange enforces the provisions of LTSE Rule 14.425 by 
ensuring that each LTSE-listed issuer has addressed all of the elements 
enumerated in each of the Policies, consistent with the Principles, and 
has made the Polices publicly available without cost.\5\ A number of 
rules in the Rulebook enable the Exchange to ensure such compliance. 
First, with respect to identification of a deficiency, LTSE Rule 
14.500(a) provides that LTSE staff is responsible for identifying 
deficiencies that may lead to delisting. Additionally, LTSE Rule 14.410 
requires a Company provide the Exchange with prompt notification after 
an Executive Officer of the Company becomes aware of any noncompliance 
by the Company with the LTSE Rule Series 14.400, which includes Rule 
14.425. Second, the Exchange retains the authority to elicit necessary 
information for reaching a deficiency determination, as LTSE Rule 
14.207(a)(1) provides that the Exchange may request any additional 
information or documentation, public or non-public, deemed necessary to 
make a determination regarding a Company's continued listing, and a 
Company may be denied continued listing if it fails to provide such 
information within a reasonable period of time.\6\
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    \5\ Id. at 44954.
    \6\ In addition, the Exchange plans to monitor Company 
compliance with Rule 14.425 annually and on an ad hoc basis.
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    Third, LTSE Rule 14.501 sets forth the provisions regarding the 
Exchange's process for notifying Companies regarding different types of 
deficiencies and their corresponding consequences. There are four types 
of Company deficiency notifications that the Exchange may issue 
pursuant to LTSE Rule 14.501(a): (i) Staff Delisting Determinations, 
which are notifications of deficiencies that, unless appealed, subject 
the Company to immediate suspension and delisting; (ii) notifications 
of deficiencies for which the Company may submit a plan of compliance 
for staff review; (iii) notifications of deficiencies for which a 
Company is entitled to an automatic cure or compliance period; and (iv) 
Public Reprimand Letters. LTSE Rule 14.501(d) identifies the 
deficiencies that fall within each of these four categories.\7\
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    \7\ LTSE Rule 14.501(d) provides that in case of a deficiency 
not specified in subparagraphs (1)-(4), LTSE staff will issue either 
a Staff Delisting Determination or a Public Reprimand Letter.
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    The proposed rule change would amend LTSE Rule 14.501(d)(2)(A)(iii) 
to specify that deficiencies relating to LTSE Rule 14.425 would include 
those for which a Company may submit a plan of compliance (``Plan of 
Compliance'') for staff review, similar to how other corporate 
governance rules are handled generally in LTSE Rule 
14.501(d)(2)(A)(iii).\8\ The timeline for such a Plan of Compliance is 
governed by LTSE Rule 14.501(d)(2)(C), which establishes that a Company 
has 45 calendar days to submit a plan to regain compliance. LTSE staff 
may extend this deadline for up to an additional 5 calendar days upon 
good cause shown and may request such additional information from the 
Company as is necessary to make a determination regarding whether to 
grant such an extension. The Exchange believes that this time period 
appropriately balances the interests of the Exchange in ensuring 
compliance with its listing standards with the application of 
principles-based listing standards by the Company.\9\
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    \8\ See, e.g., LTSE Rules 14.408(a) (Meetings of Shareholders), 
14.408(c) (Quorum), 14.411(Review of Related Party Transactions), 
14.412 (Shareholder Approval), 14.406 (Code of Conduct), 
14.407(a)(4)(D) (Partner Meetings of Limited Partners), 
14.407(a)(4)(E) (Quorum of Limited Partnerships), 14.407(a)(4)(G) 
(Related Party Transactions of Limited Partnerships), 14.413 (Voting 
Rights), or 14.414 (Internal Audit Function). The proposed rule 
change also would remove two erroneous ``or''s in LTSE Rule 
14.501(d)(2)(A)(iii).
    \9\ Notwithstanding the mandated period to submit a Plan of 
Compliance and regain compliance under LTSE Rule 14.501(d)(2), as 
set forth in LTSE Rule 14.501(c) and repeated in LTSE Rule 
14.207(b)(2), ``a listed Company that receives a notification of 
deficiency from the Exchange is required to make a public 
announcement by filing a Form 8-K, where required by SEC rules, or 
by issuing a press release disclosing receipt of the notification 
and the Rule(s) upon which the deficiency is based, and describing 
each specific basis and concern identified by the Exchange in 
reaching its determination that the Company does not meet the 
listing standard.'' For avoidance of doubt, a request for 
information by LTSE staff pursuant to LTSE Rule 14.207(a)(1), absent 
a notification of deficiency, will not require a public announcement 
by the subject Company pursuant to LTSE Rules 14.501(c) or 
14.207(b)(2).
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    The process for reviewing such a Plan of Compliance is set forth in 
LTSE Rule 14.501(d)(2)(B) and would be unchanged. Under this 
subparagraph (B), LTSE may provide the Company with up to 180 days to 
regain compliance (with certain exceptions), issue a Staff Delisting 
Determination letter, or issue a Public Reprimand Letter in accordance 
with LTSE Rule 14.501(d)(4). As set forth in LTSE Rule 14.500(a), a 
Public Reprimand Letter or Staff Delisting Determination, upon timely 
request by a Company, is subject to review by a Listings Review 
Committee, which will adjudicate the request in accordance with 
procedures and timelines set forth in LTSE Rules 14.502, 14.504 and 
14.505.
    LTSE Rule 14.425 provides Companies flexibility in developing what 
they believe to be appropriate Policies for their businesses; however, 
each of the required Policies must include certain minimum elements, 
and must be consistent with the Principles. The Exchange has 
represented to the Commission that it will enforce the provisions of 
LTSE Rule 14.425 by ensuring that each Company has addressed all of the 
requirements enumerated for each of the prescribed Policies, that the 
Company's Policies are consistent with the Principles, and it has made 
the Policies publicly available without cost.\10\ Additionally, LTSE 
Rule 14.425(c) mandates that Companies annually review their Policies 
because the Exchange has anticipated that, over time, Companies may 
choose to or need to recalibrate their Policies with new objectives or 
initiatives, provided that the amended Policies continue to align with 
the Principles noted in LTSE Rule

[[Page 8245]]

14.425. The Exchange believes the ability to tailor Policies, if 
necessary, to changing circumstances, while remaining anchored to the 
Principles, is essential for ensuring that the Policies are effective 
and meaningful tools for supporting long-term value creation for 
Companies and their investors.
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    \10\ See supra note 4.
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    The Exchange holds that, in case of a deficiency, Companies may 
achieve compliance by changing Policies or practices \11\ related to 
the deficiency, amending the applicable Policies or some combination of 
both, provided that the changes are consistent with the Principles 
discussed in LTSE Rule 14.425. The Exchange's objective is to help 
foster long-term value creation for each Company and the Exchange 
believes that providing an opportunity for remediation to Companies 
that face a deficiency with respect to LTSE Rule 14.425 will aid in 
achieving that goal by allowing Companies to formulate effective 
Policies tailored to Company-specific needs. At all times, the Exchange 
may exercise its broad discretionary authority under LTSE Rule 14.101 
to suspend or delist Companies based on any event, condition, or 
circumstance that exists or occurs that makes initial or continued 
listing of the securities on the Exchange inadvisable or unwarranted in 
the opinion of the Exchange to protect investors and the public 
interest, among other objectives.
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    \11\ For the avoidance of doubt, each Company shall be solely 
responsible for ensuring any changes in its practices to conform to 
its Policies do not violate any legal, regulatory, contractual, or 
other requirements applicable to the Company.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(5) of the Act,\13\ in 
particular, because 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 investors and the 
public interest, particularly those investors with a long-term focus. 
Further, the Exchange believes the proposal is not designed to permit 
unfair discrimination between issuers or to regulate by virtue of any 
authority conferred by the Act matters not related to the purposes of 
the Act or the administration of the Exchange, for the reasons set 
forth below.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change brings 
deficiencies with respect to LTSE Rule 14.425 in alignment with other 
LTSE rules pertaining to corporate governance that allow a Company to 
submit a Plan of Compliance in the case of a deficiency. The proposed 
rule change furthers the Exchange's objective to promote long-term 
value creation while retaining effective enforcement mechanisms for 
deficiencies with respect to LTSE Rule 14.425. Pursuant to the proposed 
amendment, Companies will be provided an opportunity to regain 
compliance with LTSE Rule 14.425 by formulating appropriate Policies 
that remain anchored to the Principles enumerated in LTSE Rule 14.425 
through an existing process that has already been determined to be 
consistent with the Act in that it removes impediments to and perfects 
the mechanism of a free and open market and a national market system, 
consistent with the protection of investors and the public 
interest.\14\
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    \14\ See Securities Exchange Act Release No. 85828 (May 10, 
2019), 84 FR 21841 (May 15, 2019) (order approving the application 
of Long Term Stock Exchange, Inc. for registration as a National 
Securities Exchange).
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    The Exchange believes that its proposed rule change is fair and not 
unfairly discriminatory because it is applicable to all listed 
Companies that experience a deficiency with respect to LTSE Rule 14.425 
and is part of the adjudicatory process set forth in the LTSE Rule 
Series 14.500.\15\
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    \15\ See supra note 3.
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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 competing venues that is not necessary or 
appropriate in furtherance of the purposes of the Act. The degree to 
which the proposed amendment could impose any burden on intermarket 
competition is extremely limited because other national securities 
exchanges may propose similar listing standards with appropriate 
remediation mechanisms and issuers are able to list on other national 
securities exchanges. Further, issuers that do not wish to meet the 
Exchange's listing standards also are able to list on other national 
securities exchanges.
    LTSE also does not believe that the proposed rule change will 
result in any burden on intramarket competition since it is applicable 
to all listed Companies without differentiation. Consequently, LTSE 
does not believe that the proposed change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the 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-LTSE-2021-01 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-LTSE-2021-01. 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

[[Page 8246]]

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-
LTSE-2021-01, and should be submitted on or before February 25, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02267 Filed 2-3-21; 8:45 am]
BILLING CODE 8011-01-P