Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Amending Section 302.00 of the NYSE Listed Company Manual To Exempt Closed-End Funds Registered Under the Investment Company Act of 1940 From the Requirement To Hold Annual Shareholder Meetings, 56447-56449 [2024-15037]
Download as PDF
<![CDATA[
Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100460; File No. SR–NYSE–
2024–35]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Amending Section 302.00 of the NYSE
Listed Company Manual To Exempt
Closed-End Funds Registered Under
the Investment Company Act of 1940
From the Requirement To Hold Annual
Shareholder Meetings
July 3, 2024.
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 June 21,
2024, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘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 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
Section 302.00 of the NYSE Listed
Company Manual (‘‘Manual’’) to exempt
closed-end funds registered under the
1940 Act from the requirement to hold
annual shareholder meetings. 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.
lotter on DSK11XQN23PROD with NOTICES1
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
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
18:00 Jul 08, 2024
Jkt 262001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Closed-end funds (‘‘CEFs’’) are a
category of investment companies that
are registered under the Investment
Company Act of 1940 (‘‘1940 Act’’) 3
and listed by the NYSE under Section
102.04A of the Manual. Section 302.00
of the Manual provides that companies
listing common stock or voting
preferred stock and their equivalents are
required to hold an annual
shareholders’ meeting for the holders of
such securities during each fiscal year.4
CEFs are presently required to comply
with the annual shareholder meeting
requirement. The Exchange now
proposes to amend Section 302.00 of the
Manual to include CEFs among the
categories of issuers that are exempt
from this requirement.
The Exchange notes that, in addition
to the listing under Section 102.04A of
the Manual of CEFs registered under the
1940 Act, the Exchange also lists under
Section 102.04B of the Manual business
development companies (‘‘BDCs’’). A
BDC is a closed-end management
investment company that is registered
under the Exchange Act and that has
filed an election to be treated as a
business development company under
the 1940 Act. The Exchange does not at
this time propose to provide an
exemption from the annual meeting
requirement of Section 302.00 to BDCs.
The Exchange notes that there are
significant differences between CEFs
and listed operating companies that
justify exempting CEFs from the
Exchange’s annual meeting requirement.
In particular, the Exchange notes that
the 1940 Act includes specific
requirements with respect to the
U.S.C. 80a–1 et seq.
302.00 of the Manual exempts from this
requirement companies whose only securities listed
on the Exchange are non-voting preferred and debt
securities, passive business organizations (such as
royalty trusts), or securities listed pursuant to Rule
5.2(j)(2) (Equity Linked Notes), Rule 5.2(j)(3)
(Investment Company Units), Rule 5.2(j)(4) (IndexLinked Exchangeable Notes), Rule 5.2(j)(5) (Equity
Gold Shares), Rule 5.2(j)(6) (Equity-Index Linked
Securities, Commodity-Linked Securities, CurrencyLinked Securities, Fixed Income Index-Linked
Securities, Futures-Linked Securities and
Multifactor Index-Linked Securities), Rule 5.2(j)(8)
(Exchange-Traded Fund Shares), Rule 8.100
(Portfolio Depositary Receipts), Rule 8.200 (Trust
Issued Receipts), Rule 8.201 (Commodity-Based
Trust Shares), Rule 8.202 (Currency Trust Shares),
Rule 8.203 (Commodity Index Trust Shares), Rule
8.204 (Commodity Futures Trust Shares), Rule
8.300 (Partnership Units), Rule 8.400 (Paired Trust
Shares), Rule 8.600 (Managed Fund Shares), Rule
8.601 (Active Proxy Portfolio Shares), Rule 8.700
(Managed Trust Securities), and 8.900 (Managed
Portfolio Shares).
PO 00000
3 15
4 Section
Frm 00172
Fmt 4703
Sfmt 4703
56447
election of directors by CEF
shareholders, while there is no such
requirement under federal law for listed
operating companies. Specifically,
Section 16(a) of the 1940 Act 5 specifies
the right of CEF shareholders to elect
directors as follows:
No person shall serve as a director of
a registered investment company unless
elected to that office by the holders of
the outstanding voting securities of such
company, at an annual or a special
meeting duly called for that purpose;
except that vacancies occurring between
such meetings may be filled in any
otherwise legal manner if immediately
after filling any such vacancy at least
two-thirds of the directors then holding
office shall have been elected to such
office by the holders of the outstanding
voting securities of the company at such
an annual or special meeting. In the
event that at any time less than a
majority of the directors of such
company holding office at that time
were so elected by the holders of the
outstanding voting securities, the board
of directors or proper officer of such
company shall forthwith cause to be
held as promptly as possible and in any
event within sixty days a meeting of
such holders for the purpose of electing
directors to fill any existing vacancies in
the board of directors unless the
Commission shall by order extend such
period. The foregoing provisions of this
subsection shall not apply to members
of an advisory board.
The Exchange also notes that the 1940
Act requires that directors who are not
‘‘interested persons’’ 6 (‘‘1940 Act
Interested Persons’’) must comprise at
least 40% of an investment company’s
board.7 In the Exchange’s experience, a
large majority of listed CEFs exceed this
requirement by having boards on which
more than 50% of members are not 1940
Act Interested Persons.
In addition to the director election
provisions described above, the 1940
Act requires that a majority of directors
who are not 1940 Act Interested Persons
approve significant actions, such as
approval of the investment advisory
agreement between a CEF and its
investment advisor.8 Specifically, the
following types of actions require
approval of a majority of a CEF’s
directors who are not 1940 Act
Interested Persons: approval of advisory
agreements; 9 approval of underwriting
5 15
U.S.C. 80a–16(a).
term ‘‘interested person’’ is defined in
Section 2(a)(19) of the 1940 Act.
7 15 U.S.C. 80a–2(a)(19).
8 See Section 15 of the 1940 Act. 15 U.S.C. 80a–
15.
9 Ibid.
6 The
E:\FR\FM\09JYN1.SGM
09JYN1
56448
Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Notices
agreements; 10 selection of independent
public accountant; 11 acquisition of
securities by a CEF from an
underwriting syndicate of which the
CEF’s advisor or certain other affiliates
are members; 12 the purchase or sale of
securities between CEFs that have the
same investment advisor; 13 mergers or
asset acquisitions involving CEFs that
have the same investment advisor; 14 use
of an affiliate broker-dealer to effect
portfolio transactions on a national
securities exchange; 15 and approval of
the CEF’s fidelity bond coverage.16
There are also a number of material
matters with respect to which the 1940
Act requires registered investment
companies, including CEFs, to obtain
shareholder approval. These matters
include: a new investment management
agreement or a material amendment to
an investment management
agreement; 17 a change from closed-end
to open-end status or vice versa; 18 a
change from diversified company to
non-diversified company; 19 a change in
a policy with respect to borrowing
money, issuing senior securities;
underwriting securities that other
persons issue, purchasing or selling real
estate or commodities or making loans
to other persons, except in each case in
accordance with the recitals of policy
contained in its registration statement in
respect thereto; 20 a deviation from a
policy in respect of concentration of
investments in any particular industry
or fundamental investment policy; 21
and a change in the nature of the
investment company’s business so as to
cease to be an investment company.22
In light of the above-described
significant statutory protections under
the 1940 Act provided to the
shareholders of CEFs, for which there
are no parallel legal protections for the
shareholders of public operating
companies, the Exchange believes that it
is appropriate to exempt CEFs from the
annual shareholder meeting
requirements of Section 302.00 of the
Manual. The Exchange notes that all of
the categories of investment companies
for which the Exchange has listing
standards other than CEFs are already
10 Ibid.
11 See
Section 32 of the 1940 Act. 15 U.S.C. 80a–
32.
12 See
1940 Act Rule 10f–3(h).
1940 Act Rule 17a–7(e).
14 See 1940 Act Rule 17a–8(e).
15 See 1940 Act Rule 17e–1(b).
16 See 1940 Act Rule 17g–1(d).
17 See U.S.C. 80a–15.
18 See U.S.C. 80a–13.
19 Ibid.
20 Ibid.
21 Ibid.
22 Ibid.
lotter on DSK11XQN23PROD with NOTICES1
13 See
VerDate Sep<11>2014
18:00 Jul 08, 2024
explicitly exempt from the annual
shareholder meeting requirement of
Section 302.00 of the Manual.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,23 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,24 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
regulating, clearing, settling, processing
information with respect to, and
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 and because it is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange believes that the
proposed exemption of CEFs from the
annual shareholder meeting
requirement of Section 302.00 of the
Manual is consistent with the protection
of investors and the public interest
because of the provisions in the 1940
Act providing significant protection of
CEF shareholders, including by
requiring: (i) the election of directors by
the CEF’s shareholders when the
number of 1940 Act Interested Persons
on the board exceed specified levels; (ii)
the approval of certain specified
material matters by a majority of the
directors who are not 1940 Act
Interested Persons ; and (ii) the approval
of certain specified material matters by
the shareholders.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposal will not impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
The Exchange believes that the
proposal will not impose a burden on
either intramarket or intermarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. The proposed rule
change is designed to permit CEFs to
rely on the shareholder voting
requirements under the 1940 Act rather
than complying with the annual
meeting requirement of Section 302.00
of the Manual. As all CEFs listed on the
NYSE would be treated the same under
23 15
24 15
Jkt 262001
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00173
Fmt 4703
Sfmt 4703
the proposed amended rule, the
Exchange does not believe that the
proposal would impose any burden on
intramarket competition. Any other
market that lists CEFs could seek to
amend its own annual meeting
requirements applicable to CEFs and, as
such, the Exchange does not believe that
the proposal places any undue burden
on intermarket competition.
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 within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the 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–2024–35 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–2024–35. 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
E:\FR\FM\09JYN1.SGM
09JYN1
Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSE–2024–35 and should be
submitted on or before July 30, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–15037 Filed 7–8–24; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–100456; File No. SR–
NYSEARCA–2024–57]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Options Fee Schedule
July 2, 2024.
lotter on DSK11XQN23PROD with NOTICES1
Pursuant to Section
of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 17,
2024, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
18:00 Jul 08, 2024
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
Background
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. The
Commission has repeatedly expressed
its preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. In Regulation NMS,
the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
4 On June 3, 2024, the Exchange originally filed
to amend the Fee Schedule (NYSEARCA–2024–51)
and, on June 14, 2024, the Exchange withdrew that
filing and submitted NYSEARCA–2024–56. On June
17, 2024, the Exchange withdrew NYSEARCA–
2024–56.
25 17
VerDate Sep<11>2014
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) to modify the Customer
Take Fee Discount Tiers. The Exchange
proposes to implement the fee change
effective June 17, 2024.4 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.
1. Purpose
The purpose of this filing is to amend
the Fee Schedule to modify the
Customer Take Fee Discount Tiers. The
Exchange proposes to implement the
rule change on June 17, 2024.
SECURITIES AND EXCHANGE
COMMISSION
19(b)(1) 1
solicit comments on the proposed rule
change from interested persons.
Jkt 262001
PO 00000
Frm 00174
Fmt 4703
Sfmt 4703
56449
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 5
There are currently 17 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than 16% of the market share of
executed volume of multiply-listed
equity and ETF options trades.6
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity &
ETF options order flow. More
specifically, in April of 2024, the
Exchange had 13.71% market share of
executed volume of multiply-listed
equity & ETF options trades.7 Thus, in
such a low-concentrated and highly
competitive market, no single options
exchange possesses significant pricing
power in the execution of option order
flow.
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue use
of certain categories of products, in
response to fee changes. Accordingly,
competitive forces constrain the
Exchange’s transaction fees (and
credits), and market participants can
readily trade on competing venues if
they deem pricing levels at those other
venues to be more favorable. In response
to the competitive environment, the
Exchange offers specific rates and
credits in its Fees Schedule, as do other
competing options exchanges, which
the Exchange believes provide incentive
to OTP Holder and OTP Firms
(collectively, ‘‘OTP Holders’’) to
increase order flow of certain qualifying
orders.
Proposal
In response to these competitive
forces, the Exchange has established
various pricing incentives designed to
encourage increased volume executed
on the Exchange, including volume that
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
6 The OCC publishes options and futures volume
in a variety of formats, including daily and monthly
volume by exchange, available here: https://
www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics.
7 Based on a compilation of OCC data for monthly
volume of equity-based options and monthly
volume of equity-based ETF options, see id., the
Exchanges market share in equity-based options
increased from 12.54% for the month of April 2023
to 13.71% for the month of April 2024.
E:\FR\FM\09JYN1.SGM
09JYN1
]]>Agencies
[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Notices]
[Pages 56447-56449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15037]
[[Page 56447]]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100460; File No. SR-NYSE-2024-35]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending Section 302.00 of the
NYSE Listed Company Manual To Exempt Closed-End Funds Registered Under
the Investment Company Act of 1940 From the Requirement To Hold Annual
Shareholder Meetings
July 3, 2024.
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 June 21, 2024, New York Stock Exchange LLC (``NYSE'' or the
``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 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\ 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 Section 302.00 of the NYSE Listed
Company Manual (``Manual'') to exempt closed-end funds registered under
the 1940 Act from the requirement to hold annual shareholder meetings.
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
Closed-end funds (``CEFs'') are a category of investment companies
that are registered under the Investment Company Act of 1940 (``1940
Act'') \3\ and listed by the NYSE under Section 102.04A of the Manual.
Section 302.00 of the Manual provides that companies listing common
stock or voting preferred stock and their equivalents are required to
hold an annual shareholders' meeting for the holders of such securities
during each fiscal year.\4\ CEFs are presently required to comply with
the annual shareholder meeting requirement. The Exchange now proposes
to amend Section 302.00 of the Manual to include CEFs among the
categories of issuers that are exempt from this requirement.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 80a-1 et seq.
\4\ Section 302.00 of the Manual exempts from this requirement
companies whose only securities listed on the Exchange are non-
voting preferred and debt securities, passive business organizations
(such as royalty trusts), or securities listed pursuant to Rule
5.2(j)(2) (Equity Linked Notes), Rule 5.2(j)(3) (Investment Company
Units), Rule 5.2(j)(4) (Index-Linked Exchangeable Notes), Rule
5.2(j)(5) (Equity Gold Shares), Rule 5.2(j)(6) (Equity-Index Linked
Securities, Commodity-Linked Securities, Currency-Linked Securities,
Fixed Income Index-Linked Securities, Futures-Linked Securities and
Multifactor Index-Linked Securities), Rule 5.2(j)(8) (Exchange-
Traded Fund Shares), Rule 8.100 (Portfolio Depositary Receipts),
Rule 8.200 (Trust Issued Receipts), Rule 8.201 (Commodity-Based
Trust Shares), Rule 8.202 (Currency Trust Shares), Rule 8.203
(Commodity Index Trust Shares), Rule 8.204 (Commodity Futures Trust
Shares), Rule 8.300 (Partnership Units), Rule 8.400 (Paired Trust
Shares), Rule 8.600 (Managed Fund Shares), Rule 8.601 (Active Proxy
Portfolio Shares), Rule 8.700 (Managed Trust Securities), and 8.900
(Managed Portfolio Shares).
---------------------------------------------------------------------------
The Exchange notes that, in addition to the listing under Section
102.04A of the Manual of CEFs registered under the 1940 Act, the
Exchange also lists under Section 102.04B of the Manual business
development companies (``BDCs''). A BDC is a closed-end management
investment company that is registered under the Exchange Act and that
has filed an election to be treated as a business development company
under the 1940 Act. The Exchange does not at this time propose to
provide an exemption from the annual meeting requirement of Section
302.00 to BDCs.
The Exchange notes that there are significant differences between
CEFs and listed operating companies that justify exempting CEFs from
the Exchange's annual meeting requirement. In particular, the Exchange
notes that the 1940 Act includes specific requirements with respect to
the election of directors by CEF shareholders, while there is no such
requirement under federal law for listed operating companies.
Specifically, Section 16(a) of the 1940 Act \5\ specifies the right of
CEF shareholders to elect directors as follows:
---------------------------------------------------------------------------
\5\ 15 U.S.C. 80a-16(a).
---------------------------------------------------------------------------
No person shall serve as a director of a registered investment
company unless elected to that office by the holders of the outstanding
voting securities of such company, at an annual or a special meeting
duly called for that purpose; except that vacancies occurring between
such meetings may be filled in any otherwise legal manner if
immediately after filling any such vacancy at least two-thirds of the
directors then holding office shall have been elected to such office by
the holders of the outstanding voting securities of the company at such
an annual or special meeting. In the event that at any time less than a
majority of the directors of such company holding office at that time
were so elected by the holders of the outstanding voting securities,
the board of directors or proper officer of such company shall
forthwith cause to be held as promptly as possible and in any event
within sixty days a meeting of such holders for the purpose of electing
directors to fill any existing vacancies in the board of directors
unless the Commission shall by order extend such period. The foregoing
provisions of this subsection shall not apply to members of an advisory
board.
The Exchange also notes that the 1940 Act requires that directors
who are not ``interested persons'' \6\ (``1940 Act Interested
Persons'') must comprise at least 40% of an investment company's
board.\7\ In the Exchange's experience, a large majority of listed CEFs
exceed this requirement by having boards on which more than 50% of
members are not 1940 Act Interested Persons.
---------------------------------------------------------------------------
\6\ The term ``interested person'' is defined in Section
2(a)(19) of the 1940 Act.
\7\ 15 U.S.C. 80a-2(a)(19).
---------------------------------------------------------------------------
In addition to the director election provisions described above,
the 1940 Act requires that a majority of directors who are not 1940 Act
Interested Persons approve significant actions, such as approval of the
investment advisory agreement between a CEF and its investment
advisor.\8\ Specifically, the following types of actions require
approval of a majority of a CEF's directors who are not 1940 Act
Interested Persons: approval of advisory agreements; \9\ approval of
underwriting
[[Page 56448]]
agreements; \10\ selection of independent public accountant; \11\
acquisition of securities by a CEF from an underwriting syndicate of
which the CEF's advisor or certain other affiliates are members; \12\
the purchase or sale of securities between CEFs that have the same
investment advisor; \13\ mergers or asset acquisitions involving CEFs
that have the same investment advisor; \14\ use of an affiliate broker-
dealer to effect portfolio transactions on a national securities
exchange; \15\ and approval of the CEF's fidelity bond coverage.\16\
---------------------------------------------------------------------------
\8\ See Section 15 of the 1940 Act. 15 U.S.C. 80a-15.
\9\ Ibid.
\10\ Ibid.
\11\ See Section 32 of the 1940 Act. 15 U.S.C. 80a-32.
\12\ See 1940 Act Rule 10f-3(h).
\13\ See 1940 Act Rule 17a-7(e).
\14\ See 1940 Act Rule 17a-8(e).
\15\ See 1940 Act Rule 17e-1(b).
\16\ See 1940 Act Rule 17g-1(d).
---------------------------------------------------------------------------
There are also a number of material matters with respect to which
the 1940 Act requires registered investment companies, including CEFs,
to obtain shareholder approval. These matters include: a new investment
management agreement or a material amendment to an investment
management agreement; \17\ a change from closed-end to open-end status
or vice versa; \18\ a change from diversified company to non-
diversified company; \19\ a change in a policy with respect to
borrowing money, issuing senior securities; underwriting securities
that other persons issue, purchasing or selling real estate or
commodities or making loans to other persons, except in each case in
accordance with the recitals of policy contained in its registration
statement in respect thereto; \20\ a deviation from a policy in respect
of concentration of investments in any particular industry or
fundamental investment policy; \21\ and a change in the nature of the
investment company's business so as to cease to be an investment
company.\22\
---------------------------------------------------------------------------
\17\ See U.S.C. 80a-15.
\18\ See U.S.C. 80a-13.
\19\ Ibid.
\20\ Ibid.
\21\ Ibid.
\22\ Ibid.
---------------------------------------------------------------------------
In light of the above-described significant statutory protections
under the 1940 Act provided to the shareholders of CEFs, for which
there are no parallel legal protections for the shareholders of public
operating companies, the Exchange believes that it is appropriate to
exempt CEFs from the annual shareholder meeting requirements of Section
302.00 of the Manual. The Exchange notes that all of the categories of
investment companies for which the Exchange has listing standards other
than CEFs are already explicitly exempt from the annual shareholder
meeting requirement of Section 302.00 of the Manual.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\23\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\24\ 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 regulating,
clearing, settling, processing information with respect to, and
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
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed exemption of CEFs from the
annual shareholder meeting requirement of Section 302.00 of the Manual
is consistent with the protection of investors and the public interest
because of the provisions in the 1940 Act providing significant
protection of CEF shareholders, including by requiring: (i) the
election of directors by the CEF's shareholders when the number of 1940
Act Interested Persons on the board exceed specified levels; (ii) the
approval of certain specified material matters by a majority of the
directors who are not 1940 Act Interested Persons ; and (ii) the
approval of certain specified material matters by the shareholders.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal will not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.
The Exchange believes that the proposal will not impose a burden on
either intramarket or intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
rule change is designed to permit CEFs to rely on the shareholder
voting requirements under the 1940 Act rather than complying with the
annual meeting requirement of Section 302.00 of the Manual. As all CEFs
listed on the NYSE would be treated the same under the proposed amended
rule, the Exchange does not believe that the proposal would impose any
burden on intramarket competition. Any other market that lists CEFs
could seek to amend its own annual meeting requirements applicable to
CEFs and, as such, the Exchange does not believe that the proposal
places any undue burden on intermarket competition.
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 within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the 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-2024-35 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-2024-35. 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
[[Page 56449]]
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 a.m. and 3
p.m. Copies of the filing also will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NYSE-2024-35 and should be submitted on
or before July 30, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-15037 Filed 7-8-24; 8:45 am]
BILLING CODE 8011-01-P
