Self-Regulatory Organizations; Cboe Exchange, Inc.; Cboe C2 Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Order Approving Proposed Rule Changes To Amend the Bylaws of Cboe Global Markets, Inc., 96696-96698 [2024-28427]
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96696
Federal Register / Vol. 89, No. 234 / Thursday, December 5, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101781; File Nos. SR–
CBOE–2024–041; SR–C2–2024–016; SR–
CboeBZX–2024–087; SR–CboeBYX–2024–
034; SR–CboeEDGA–2024–037; SR–
CboeEDGX–2024–059]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Cboe C2 Exchange,
Inc.; Cboe BYX Exchange, Inc.; Cboe
BZX Exchange, Inc.; Cboe EDGA
Exchange, Inc.; Cboe EDGX Exchange,
Inc.; Order Approving Proposed Rule
Changes To Amend the Bylaws of
Cboe Global Markets, Inc.
November 29, 2024.
I. Introduction
On October 11, 2024, each of the Cboe
Exchange, Inc.; Cboe C2 Exchange, Inc.;
Cboe BYX Exchange, Inc.; Cboe BZX
Exchange, Inc.; Cboe EDGA Exchange,
Inc.; Cboe EDGX Exchange, Inc.
(collectively, the ‘‘SROs’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 proposed rule changes (the
‘‘Proposals’’) with respect to the bylaws
of Cboe Global Markets, Inc. (‘‘CGM’’),
the parent company of the SROs (the
‘‘CGM Bylaws’’). The Proposals amend
the CGM Bylaws to provide
stockholders owning a combined 25%
or more of CGM’s outstanding stock
with the right to request a special
meeting of the stockholders, to refine
CGM’s current advance notice bylaws
for annual stockholder meetings, and to
make other miscellaneous changes to
the CGM Bylaws. The Proposals were
published for comment in the Federal
Register on October 29, 2024.3 The
Commission did not receive any
comment letters on the Proposals. This
order approves the Proposals.
II. Description of the Proposal
First, The SROs propose to amend
certain provisions of the CGM Bylaws
that relate to the power of stockholders
to call a special meeting. Specifically,
the SROs propose to amend Section 2.3
of the CGM Bylaws, which sets forth
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release Nos. 101415
(October 23, 2024), 89 FR 86019 (SR–CBOE–2024–
041) (‘‘CBOE Notice’’), 101421 (October 23, 2024),
89 FR 86016 (SR–C2–2024–016) (‘‘C2 Notice’’),
101420 (October 23, 2024), 89 FR 85999 (SR–
CboeBYX–2024–034) (‘‘CboeBYX Notice’’), 101419
(October 23, 2024), 89 FR 86051 (SR–CboeBZX–
2024–087) (‘‘CboeBZX Notice’’), 101416 (October
23, 2024), 89 FR 86046 (SR–CboeEDGA–2024–037)
(‘‘CboeEDGA Notice’’); 101417 (October 23, 2024),
89 FR 86065 (SR–CboeEDGX–2024–059)
(‘‘CboeEDGX Notice,’’ and, collectively, ‘‘Notices’’).
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how a special meeting of the
stockholders can be called. Currently,
Section 2.3 of the CGM Bylaws provides
that only the Chair of the CGM Board,
the Chief Executive Officer or the CGM
Board itself may call a special meeting
of the stockholders. The SROs propose
to amend Section 2.3(a) to state that a
special meeting of stockholders may be
called: (i) at any time by the CGM Board
pursuant to a resolution adopted by the
affirmative vote of a majority of the total
number of CGM directors then in office;
or (ii) by CGM’s Corporate Secretary
following the receipt of a written
request in proper form for a special
meeting (a ‘‘Special Meeting Request’’)
by one or more stockholders.4 In order
to call a special meeting, the
stockholders must hold, in the
aggregate, at least 25% of CGM’s
outstanding shares of common stock
entitled to vote on matters brought
before the special meeting (the
‘‘Requisite Percentage’’).5 As such, in
addition to allowing stockholders with
the Requisite Percentage to call a special
meeting, the SROs also propose to
remove the Chair of the CGM Board, the
Chief Executive Officer, and the
President of CGM from Section 2.3(a) so
that they may not individually call a
special meeting of the stockholders.
The SROs also propose to add new
Sections 2.3(b), 2.3(c), 2.3(d), 2.3(e),
2.3(f), 2.3(g) and 2.3(h) of the CGM
Bylaws to set forth the procedures to
implement the Proposals to allow a
stockholder to call a special meeting of
stockholders (a ‘‘Stockholder Requested
Special Meeting’’). In summation, the
SRO’s proposal for these sections
includes instructions to properly submit
a written request to call a Stockholder
Requested Special Meeting,
explanations of the detailed information
required for a Special Meeting Request
to have been properly delivered, and
explanations for how the CGM Board
shall review and process a Special
Meeting Request. The SROs state that
the proposed amendments are designed
to help ensure that the SROs are able to
comply with their disclosure and other
requirements under applicable law and
to help ensure that that the CGM Board
and its stockholders are able to assess
the proposed business and meeting
request adequately.6
Second, the SROs propose to amend
Section 2.9 of the CGM Bylaws, which
govern proxy representation. The SROs
propose to add language to clarify that
white colored proxy cards are reserved
4 Id.
5 Id.
6 See, e.g., CboeEDGX Notice, supra note 3, at
86067.
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Fmt 4703
Sfmt 4703
for exclusive use by the CGM Board,
and that stockholders soliciting proxies
from other stockholders of the CGM may
use any other color proxy card.
Third, the SROs propose to amend
Section 2.11 of the CGM Bylaws, which
are the advance notice bylaws, to reflect
what the SROs assess and represent are
recent developments in Delaware Law.7
Section 2.11 sets forth that stockholders
must notify CGM, during a specified
period in advance of an annual meeting
or special meeting called by the CGM
Board, of an intention to nominate
persons to the CGM Board or to present
a business proposal at the meeting. The
SROs state that while designing the
proposed requirements for stockholders
to call a special meeting, they evaluated
the existing requirements and
determined that the advance notice
bylaws could be enhanced to help
achieve more fulsome disclosure and
explanations from stockholders bringing
business or potential nominees before a
stockholder meeting.8 Thus, the SROs
propose to amend Sections
2.11(a)(iii)(C), 2.11(a)(iii)(D),
2.11(a)(iii)(F), 2.11(c)(ii), 2.11(c)(iii),
2.11(c)(vi) and 2.11(a)(iii)(B).
The SROs propose to amend Section
2.11(a)(iii)(C) to clarify the information
a stockholder is required to disclose
relating to arrangements between the
stockholder, a Stockholder Associated
Person, and any other stockholder, and
to eliminate disclosures on performance
related fees to which such stockholder
or Stockholder Associated Person may
be entitled as a result of any increase or
decrease in the stock of the CGM, and
the prospectus or similar document of
the stockholder providing notice or any
Stockholder Associated Person. The
SROs state that while the current
provisions in Section 2.11(a)(iii)(C)
provide valuable information, the
proposal should help ensure the
objectives of the provisions are met
without burdening stockholders with
potentially overbroad requests for
information.9
Section 2.11(a)(iii)(D) of the CGM
Bylaws currently sets forth
representations to be made by a
stockholder regarding whether such
stockholder is part of a group which
intends to deliver or solicit proxies from
stockholders when bringing business or
a Stockholder Nominee before a
stockholder meeting. The SROs state
they are proposing changes to make this
provision more consistent with the
universal proxy rules provided for in
7 See, e.g., CboeBZX Notice, supra note 3, at
86053–54.
8 Id.
9 See, e.g. C2 Notice, supra note 3, at 86063.
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05DEN1
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Federal Register / Vol. 89, No. 234 / Thursday, December 5, 2024 / Notices
Rule 14a–19 of the Act.10 The SROs also
propose requiring the stockholder to
confirm whether it intends, or is part of
a group which intends, to engage in a
solicitation (within the meaning of Rule
14a–1(1) of the Act) with respect to the
nomination of any proposed nominee or
proposed business to be considered at
the meeting. The SROs state that any
stockholder providing notice that they
intend to solicit proxies in support of a
proposed nominee must do so in
accordance with Rule 14a–19 of the
Exchange Act.11
Section 2.11(a)(iii)(F) of the CGM
Bylaws currently requires that a
Stockholder Nominee provide any
information that is required to
determine the qualifications of such
Stockholder Nominee to serve as a
director of CGM. The SROs propose to
add language clarifying that any
required information must be consistent
with the parameters set forth in CGM’s
Corporate Governance Guidelines or the
CGM Board’s past practice for assessing
potential director nominees.
Existing Section 2.11(c)(ii) of the CGM
Bylaws requires a stockholder providing
notice to notify the CGM Secretary of
any inaccuracy or change in any
information submitted pursuant to
Section 2.11. The SROs propose to
modify this requirement by narrowing
the scope to require the stockholder to
provide notice of any material
inaccuracies or changes to information
that they previously provided.
For Section 2.11(c)(iii) of the CGM
Bylaws, the SROs propose that any
stockholder or Stockholder Associated
Person providing notice with respect to
any Stockholder Nominee is required to
do so in a manner consistent with the
requirements for universal proxy rules
pursuant to Rule 14a–19 of the
Exchange Act.
The SROs propose to amend Section
2.11(c)(vi) of the CGM Bylaws to add
specificity to the definition of
‘‘Stockholder Associated Person,’’ limit
which individuals may be determined
to be a Stockholder Associated Person
and make other clarifying changes. The
SROs state that these changes to reflect
recent developments in Delaware law
and to provide clarifications should
help prevent confusion.12
The SROs further propose to add a
note to Section 2.11(a)(ii) that any
proposed business for a stockholder
meeting must be a proper matter for
stockholder action. Additionally, the
SROs propose to amend Section
10 See, e.g. CboeEDGA Notice, supra note 3, at
86049.
11 See, e.g. id.
12 Id.
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16:31 Dec 04, 2024
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2.11(a)(iii)(B) to state that a Stockholder
Nominee’s written consent must be
included in the CGM’s proxy statement
before they may be brought before a
meeting, and that a Stockholder
Nominee will not enter into any
commitment to vote in a certain manner
if nominated to the CGM Board. The
SROs state that these proposals add
specificity with regard to the CGM.13
The SROs also propose to amend this
section to require that a Stockholder
Nominee not omit facts that are
necessary to ensure statements made are
not misleading in any material respect,
which adds a materiality threshold to
the current provision.
Fourth, the SROs propose to make
changes to Section 3.10 of the CGM
Bylaws. Current Section 3.10 allows,
among other things, for the Chair of the
Board or the Chief Executive Officer to
call a special meeting of the CGM Board.
The proposal would additionally allow
the Lead Director of CGM to call a
special meeting of the CGM Board. The
SROs state that revising this section to
allow the Lead Director to call a special
meeting of the CGM Board addresses a
potential scenario in which the Chair of
the Board and the Chief Executive
Officer positions are jointly held by one
individual and a special meeting of the
CGM Board is not able to be called by
individual independent directors.14
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the Proposals are consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.15 In particular, the
Commission finds that the Proposals are
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.16 Specifically, the
Commission believes that the Proposals
are consistent with Section 6(b) of the
Act 17 in general, and with Section
6(b)(1) 18 in particular, in that it enables
the SROs to be so organized as to have
the capacity to be able to carry out the
13 Id.
14 See,
e.g., CBOE Notice, supra note 3, at 86022.
in approving the Proposals, the
Commission has considered the proposed rules’
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
16 Certain provisions of the CGM Bylaws are
considered rules of the SROs if they are stated
policies, practices, or interpretations, as defined in
Rule 19b–4 under the Act, and therefore, must be
filed with the Commission pursuant to Section
19(b) of the Act and Rule 19b–4 thereunder. 15
U.S.C. 78s(b); 17 CFR 240.19b–4.
17 15 U.S.C. 78f(b).
18 15 U.S.C. 78f(b)(1).
15 Additionally,
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96697
purposes of the Act and to comply, and
to enforce compliance by its exchange
members and persons associated with
its exchange members, with the
provisions of the Act, the rules and
regulations thereunder, and the rules of
the SROs.
The SROs assert that the Proposals
would strengthen the corporate
governance of CGM by now permitting
stockholders to bring business or
Stockholder Nominees before CGM via
a special meeting of the stockholders.19
Under the current text of Section 2.3(a)
of the CGM Bylaws, special meetings of
CGM stockholders may only be called
by the Chairman of the CGM Board, the
Chief Executive Officer of CGM, the
President of CGM or the CGM Board of
Directors. Under the Proposals, only the
CGM Board of Directors or a group of
stockholders that meets the Requisite
Percentage may call a special meeting of
stockholders pursuant to revised
Section 2.3(a).
Furthermore, the SROs propose to
expand the provisions of Section 2.3 of
the CGM Bylaws to set forth detailed
provisions regarding, among other
things, the procedural requirements for
CGM stockholders to call a special
meeting of stockholders, the duties and
deadlines of the CGM Secretary upon
receiving a request for a special meeting
of stockholders, and a process for
cancelling a special meeting called by
the Requisite Percentage of stockholders
should those stockholder subsequently
call below the requisite percentage. The
SROs assert that these provisions will
ensure both timely notices of special
meeting requests and the ability of
stockholders to adequately assess the
proposed business for a given special
meeting of stockholders.20 The
Commission believes that the proposed
changes to Section 2.3(a)—coupled with
the aforementioned procedural
requirements and limitations set forth in
new subsections (b)–(h) of Section 2.3 of
the CGM Bylaws—are reasonably
designed to comply with the
requirements under Section 6(b)(1) 21 of
Act in that they allow the Exchange to
carry out the purposes of the Exchange
Act and to comply, and to enforce
compliance by its exchange members
and persons associated with its
exchange members, with the provisions
of the Act, the rules and regulations
thereunder, and the rules of the SROs.
19 See, e.g., CboeBYX Notice, supra note 3, at
6002.
20 See, e.g., CBOE Notice, supra note 3, at 86020.
21 15 U.S.C. 78f(b)(1).
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Federal Register / Vol. 89, No. 234 / Thursday, December 5, 2024 / Notices
As outlined above,22 the SROs also
propose to amend Section 2.11 of the
CGM Bylaws, which are the advance
notice bylaws, to reflect what the SROs
assess and represent are recent
developments in Delaware Law.23
Among other things, the SROs aim to
ensure the objectives of the advance
notice bylaws are met without
burdening stockholders with potentially
overbroad requests for information in a
manner that is consistent with what the
SROs represent and assess are recent
developments in Delaware Law.24 The
Commission believes that these
proposed changes are also reasonably
designed to comply with the
requirements under Section 6(b)(1) 25 of
Act in that they allow the Exchange to
carry out the purposes of the Exchange
Act and to comply, and to enforce
compliance by its exchange members
and persons associated with its
exchange members, with the provisions
of the Act, the rules and regulations
thereunder, and the rules of the SROs.
Finally, SROs proposed to revise
revisions to Sections 2.9 and 3.10 of the
CGM Bylaws to address proxy card
color categorization and to allow the
Lead Director to call a special meeting
of the board in order to mitigate
circumstances in which the CGM
Bylaws would not otherwise empower a
second Independent Director to call a
special meeting, respectively. The
Commission believes that these changes
are reasonably designed to facilitate
more efficient and effective corporate
governance of CGM in accordance with
the requirements of Section 6(b)(1) 26 of
Act.
IV. Conclusion
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For the foregoing reasons, the
Commission finds that the Proposals are
consistent with the Act and the rules
and regulations thereunder applicable to
a national securities exchange.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,27 that the
Proposals (SR–CBOE–2024–041; SR–
C2–2024–016; SR–CboeBZX–2024–087;
SR–CboeBYX–2024–034; SR–
CboeEDGX–2024–059; SR–CboeEDGA–
2024–037) be, and hereby are, approved.
22 See
supra notes 9–14 and accompanying text.
e.g., CboeBZX Notice, supra note 3, at
86053–54.
24 Id.
25 15 U.S.C. 78f(b)(1).
26 15 U.S.C. 78f(b)(1).
27 15 U.S.C. 78s(b)(2).
23 See,
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16:31 Dec 04, 2024
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–28427 Filed 12–4–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101779; File No. SR–IEX–
2024–26]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend IEX
Rule 2.160(a) To Better Reflect the
Process for a Broker-Dealer To
Become a Member (or Continue as a
Member) of the Exchange
Notwithstanding the Member (or a
Person Associated With the Member)
Being Subject to a Statutory
Disqualification
November 29, 2024.
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
November 19, 2024, the Investors
Exchange LLC (‘‘IEX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
4 thereunder,5 the Exchange is filing
with the Commission a proposed rule
change to amend IEX Rule 2.160(a) to
better reflect the process for a brokerdealer to become a Member (or continue
as a Member) of the Exchange
notwithstanding the Member (or a
person associated with the Member)
being subject to a statutory
disqualification. The Exchange has
designated this proposed rule change as
‘‘non-controversial’’ under Section
19(b)(3)(A) of the Act 6 and provided the
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(1).
5 17 CFR 240.19b–4.
6 15 U.S.C. 78s(b)(3)(A).
1 15
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Fmt 4703
Sfmt 4703
Commission with the notice required by
Rule 19b–4(f)(6) thereunder.7
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.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 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend IEX
Rule 2.160(a) to better reflect the
process for a broker-dealer firm to
become a Member 8 (or continue as a
Member) of the Exchange
notwithstanding the Member (or a
person associated with the Member)
being subject to a statutory
disqualification.9
Section 3(a)(39) of the Act defines the
term ‘‘statutory disqualification’’ and
the circumstances that can cause a
person (either a Member, or a person
associated with a Member) to be subject
to a statutory disqualification.10 For
example, a broker-dealer is subject to a
statutory disqualification if the
Commission finds that the firm
‘‘willfully aided, abetted, counseled,
commanded, induced, or procured the
violation of another person of the
[Exchange Act] . . . or failed to
reasonably supervise another person
who commits such a violation.’’ 11 As
discussed below, absent relief, a
statutory disqualification would
7 17
CFR 240.19b–4.
IEX Rule 1.160(s).
9 Additionally, and as discussed further below,
IEX is proposing this rule change to address a
situation of first impression for the Exchange in
which it is evaluating a firm’s application for
membership on the Exchange while that firm is in
the process of eligibility proceedings related to a
statutory disqualification with FINRA and other
SROs of which the firm is already a member.
10 15 U.S.C. 78c(a)(39).
11 15 U.S.C. 78o(b)(4)(E), which is cited in 15
U.S.C. 78c(a)(39)(F).
8 See
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]]>Agencies
[Federal Register Volume 89, Number 234 (Thursday, December 5, 2024)]
[Notices]
[Pages 96696-96698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28427]
[[Page 96696]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101781; File Nos. SR-CBOE-2024-041; SR-C2-2024-016; SR-
CboeBZX-2024-087; SR-CboeBYX-2024-034; SR-CboeEDGA-2024-037; SR-
CboeEDGX-2024-059]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Cboe C2
Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe
EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Order Approving Proposed
Rule Changes To Amend the Bylaws of Cboe Global Markets, Inc.
November 29, 2024.
I. Introduction
On October 11, 2024, each of the Cboe Exchange, Inc.; Cboe C2
Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe
EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc. (collectively, the
``SROs''), filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
proposed rule changes (the ``Proposals'') with respect to the bylaws of
Cboe Global Markets, Inc. (``CGM''), the parent company of the SROs
(the ``CGM Bylaws''). The Proposals amend the CGM Bylaws to provide
stockholders owning a combined 25% or more of CGM's outstanding stock
with the right to request a special meeting of the stockholders, to
refine CGM's current advance notice bylaws for annual stockholder
meetings, and to make other miscellaneous changes to the CGM Bylaws.
The Proposals were published for comment in the Federal Register on
October 29, 2024.\3\ The Commission did not receive any comment letters
on the Proposals. This order approves the Proposals.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release Nos. 101415 (October 23,
2024), 89 FR 86019 (SR-CBOE-2024-041) (``CBOE Notice''), 101421
(October 23, 2024), 89 FR 86016 (SR-C2-2024-016) (``C2 Notice''),
101420 (October 23, 2024), 89 FR 85999 (SR-CboeBYX-2024-034)
(``CboeBYX Notice''), 101419 (October 23, 2024), 89 FR 86051 (SR-
CboeBZX-2024-087) (``CboeBZX Notice''), 101416 (October 23, 2024),
89 FR 86046 (SR-CboeEDGA-2024-037) (``CboeEDGA Notice''); 101417
(October 23, 2024), 89 FR 86065 (SR-CboeEDGX-2024-059) (``CboeEDGX
Notice,'' and, collectively, ``Notices'').
---------------------------------------------------------------------------
II. Description of the Proposal
First, The SROs propose to amend certain provisions of the CGM
Bylaws that relate to the power of stockholders to call a special
meeting. Specifically, the SROs propose to amend Section 2.3 of the CGM
Bylaws, which sets forth how a special meeting of the stockholders can
be called. Currently, Section 2.3 of the CGM Bylaws provides that only
the Chair of the CGM Board, the Chief Executive Officer or the CGM
Board itself may call a special meeting of the stockholders. The SROs
propose to amend Section 2.3(a) to state that a special meeting of
stockholders may be called: (i) at any time by the CGM Board pursuant
to a resolution adopted by the affirmative vote of a majority of the
total number of CGM directors then in office; or (ii) by CGM's
Corporate Secretary following the receipt of a written request in
proper form for a special meeting (a ``Special Meeting Request'') by
one or more stockholders.\4\ In order to call a special meeting, the
stockholders must hold, in the aggregate, at least 25% of CGM's
outstanding shares of common stock entitled to vote on matters brought
before the special meeting (the ``Requisite Percentage'').\5\ As such,
in addition to allowing stockholders with the Requisite Percentage to
call a special meeting, the SROs also propose to remove the Chair of
the CGM Board, the Chief Executive Officer, and the President of CGM
from Section 2.3(a) so that they may not individually call a special
meeting of the stockholders.
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\4\ Id.
\5\ Id.
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The SROs also propose to add new Sections 2.3(b), 2.3(c), 2.3(d),
2.3(e), 2.3(f), 2.3(g) and 2.3(h) of the CGM Bylaws to set forth the
procedures to implement the Proposals to allow a stockholder to call a
special meeting of stockholders (a ``Stockholder Requested Special
Meeting''). In summation, the SRO's proposal for these sections
includes instructions to properly submit a written request to call a
Stockholder Requested Special Meeting, explanations of the detailed
information required for a Special Meeting Request to have been
properly delivered, and explanations for how the CGM Board shall review
and process a Special Meeting Request. The SROs state that the proposed
amendments are designed to help ensure that the SROs are able to comply
with their disclosure and other requirements under applicable law and
to help ensure that that the CGM Board and its stockholders are able to
assess the proposed business and meeting request adequately.\6\
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\6\ See, e.g., CboeEDGX Notice, supra note 3, at 86067.
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Second, the SROs propose to amend Section 2.9 of the CGM Bylaws,
which govern proxy representation. The SROs propose to add language to
clarify that white colored proxy cards are reserved for exclusive use
by the CGM Board, and that stockholders soliciting proxies from other
stockholders of the CGM may use any other color proxy card.
Third, the SROs propose to amend Section 2.11 of the CGM Bylaws,
which are the advance notice bylaws, to reflect what the SROs assess
and represent are recent developments in Delaware Law.\7\ Section 2.11
sets forth that stockholders must notify CGM, during a specified period
in advance of an annual meeting or special meeting called by the CGM
Board, of an intention to nominate persons to the CGM Board or to
present a business proposal at the meeting. The SROs state that while
designing the proposed requirements for stockholders to call a special
meeting, they evaluated the existing requirements and determined that
the advance notice bylaws could be enhanced to help achieve more
fulsome disclosure and explanations from stockholders bringing business
or potential nominees before a stockholder meeting.\8\ Thus, the SROs
propose to amend Sections 2.11(a)(iii)(C), 2.11(a)(iii)(D),
2.11(a)(iii)(F), 2.11(c)(ii), 2.11(c)(iii), 2.11(c)(vi) and
2.11(a)(iii)(B).
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\7\ See, e.g., CboeBZX Notice, supra note 3, at 86053-54.
\8\ Id.
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The SROs propose to amend Section 2.11(a)(iii)(C) to clarify the
information a stockholder is required to disclose relating to
arrangements between the stockholder, a Stockholder Associated Person,
and any other stockholder, and to eliminate disclosures on performance
related fees to which such stockholder or Stockholder Associated Person
may be entitled as a result of any increase or decrease in the stock of
the CGM, and the prospectus or similar document of the stockholder
providing notice or any Stockholder Associated Person. The SROs state
that while the current provisions in Section 2.11(a)(iii)(C) provide
valuable information, the proposal should help ensure the objectives of
the provisions are met without burdening stockholders with potentially
overbroad requests for information.\9\
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\9\ See, e.g. C2 Notice, supra note 3, at 86063.
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Section 2.11(a)(iii)(D) of the CGM Bylaws currently sets forth
representations to be made by a stockholder regarding whether such
stockholder is part of a group which intends to deliver or solicit
proxies from stockholders when bringing business or a Stockholder
Nominee before a stockholder meeting. The SROs state they are proposing
changes to make this provision more consistent with the universal proxy
rules provided for in
[[Page 96697]]
Rule 14a-19 of the Act.\10\ The SROs also propose requiring the
stockholder to confirm whether it intends, or is part of a group which
intends, to engage in a solicitation (within the meaning of Rule 14a-
1(1) of the Act) with respect to the nomination of any proposed nominee
or proposed business to be considered at the meeting. The SROs state
that any stockholder providing notice that they intend to solicit
proxies in support of a proposed nominee must do so in accordance with
Rule 14a-19 of the Exchange Act.\11\
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\10\ See, e.g. CboeEDGA Notice, supra note 3, at 86049.
\11\ See, e.g. id.
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Section 2.11(a)(iii)(F) of the CGM Bylaws currently requires that a
Stockholder Nominee provide any information that is required to
determine the qualifications of such Stockholder Nominee to serve as a
director of CGM. The SROs propose to add language clarifying that any
required information must be consistent with the parameters set forth
in CGM's Corporate Governance Guidelines or the CGM Board's past
practice for assessing potential director nominees.
Existing Section 2.11(c)(ii) of the CGM Bylaws requires a
stockholder providing notice to notify the CGM Secretary of any
inaccuracy or change in any information submitted pursuant to Section
2.11. The SROs propose to modify this requirement by narrowing the
scope to require the stockholder to provide notice of any material
inaccuracies or changes to information that they previously provided.
For Section 2.11(c)(iii) of the CGM Bylaws, the SROs propose that
any stockholder or Stockholder Associated Person providing notice with
respect to any Stockholder Nominee is required to do so in a manner
consistent with the requirements for universal proxy rules pursuant to
Rule 14a-19 of the Exchange Act.
The SROs propose to amend Section 2.11(c)(vi) of the CGM Bylaws to
add specificity to the definition of ``Stockholder Associated Person,''
limit which individuals may be determined to be a Stockholder
Associated Person and make other clarifying changes. The SROs state
that these changes to reflect recent developments in Delaware law and
to provide clarifications should help prevent confusion.\12\
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\12\ Id.
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The SROs further propose to add a note to Section 2.11(a)(ii) that
any proposed business for a stockholder meeting must be a proper matter
for stockholder action. Additionally, the SROs propose to amend Section
2.11(a)(iii)(B) to state that a Stockholder Nominee's written consent
must be included in the CGM's proxy statement before they may be
brought before a meeting, and that a Stockholder Nominee will not enter
into any commitment to vote in a certain manner if nominated to the CGM
Board. The SROs state that these proposals add specificity with regard
to the CGM.\13\ The SROs also propose to amend this section to require
that a Stockholder Nominee not omit facts that are necessary to ensure
statements made are not misleading in any material respect, which adds
a materiality threshold to the current provision.
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\13\ Id.
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Fourth, the SROs propose to make changes to Section 3.10 of the CGM
Bylaws. Current Section 3.10 allows, among other things, for the Chair
of the Board or the Chief Executive Officer to call a special meeting
of the CGM Board. The proposal would additionally allow the Lead
Director of CGM to call a special meeting of the CGM Board. The SROs
state that revising this section to allow the Lead Director to call a
special meeting of the CGM Board addresses a potential scenario in
which the Chair of the Board and the Chief Executive Officer positions
are jointly held by one individual and a special meeting of the CGM
Board is not able to be called by individual independent directors.\14\
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\14\ See, e.g., CBOE Notice, supra note 3, at 86022.
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III. Discussion and Commission's Findings
After careful review, the Commission finds that the Proposals are
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\15\ In particular, the Commission finds that the Proposals
are consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\16\ Specifically, the Commission believes that the Proposals
are consistent with Section 6(b) of the Act \17\ in general, and with
Section 6(b)(1) \18\ in particular, in that it enables the SROs to be
so organized as to have the capacity to be able to carry out the
purposes of the Act and to comply, and to enforce compliance by its
exchange members and persons associated with its exchange members, with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the SROs.
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\15\ Additionally, in approving the Proposals, the Commission
has considered the proposed rules' impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\16\ Certain provisions of the CGM Bylaws are considered rules
of the SROs if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, and
therefore, must be filed with the Commission pursuant to Section
19(b) of the Act and Rule 19b-4 thereunder. 15 U.S.C. 78s(b); 17 CFR
240.19b-4.
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(1).
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The SROs assert that the Proposals would strengthen the corporate
governance of CGM by now permitting stockholders to bring business or
Stockholder Nominees before CGM via a special meeting of the
stockholders.\19\ Under the current text of Section 2.3(a) of the CGM
Bylaws, special meetings of CGM stockholders may only be called by the
Chairman of the CGM Board, the Chief Executive Officer of CGM, the
President of CGM or the CGM Board of Directors. Under the Proposals,
only the CGM Board of Directors or a group of stockholders that meets
the Requisite Percentage may call a special meeting of stockholders
pursuant to revised Section 2.3(a).
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\19\ See, e.g., CboeBYX Notice, supra note 3, at 6002.
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Furthermore, the SROs propose to expand the provisions of Section
2.3 of the CGM Bylaws to set forth detailed provisions regarding, among
other things, the procedural requirements for CGM stockholders to call
a special meeting of stockholders, the duties and deadlines of the CGM
Secretary upon receiving a request for a special meeting of
stockholders, and a process for cancelling a special meeting called by
the Requisite Percentage of stockholders should those stockholder
subsequently call below the requisite percentage. The SROs assert that
these provisions will ensure both timely notices of special meeting
requests and the ability of stockholders to adequately assess the
proposed business for a given special meeting of stockholders.\20\ The
Commission believes that the proposed changes to Section 2.3(a)--
coupled with the aforementioned procedural requirements and limitations
set forth in new subsections (b)-(h) of Section 2.3 of the CGM Bylaws--
are reasonably designed to comply with the requirements under Section
6(b)(1) \21\ of Act in that they allow the Exchange to carry out the
purposes of the Exchange Act and to comply, and to enforce compliance
by its exchange members and persons associated with its exchange
members, with the provisions of the Act, the rules and regulations
thereunder, and the rules of the SROs.
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\20\ See, e.g., CBOE Notice, supra note 3, at 86020.
\21\ 15 U.S.C. 78f(b)(1).
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[[Page 96698]]
As outlined above,\22\ the SROs also propose to amend Section 2.11
of the CGM Bylaws, which are the advance notice bylaws, to reflect what
the SROs assess and represent are recent developments in Delaware
Law.\23\ Among other things, the SROs aim to ensure the objectives of
the advance notice bylaws are met without burdening stockholders with
potentially overbroad requests for information in a manner that is
consistent with what the SROs represent and assess are recent
developments in Delaware Law.\24\ The Commission believes that these
proposed changes are also reasonably designed to comply with the
requirements under Section 6(b)(1) \25\ of Act in that they allow the
Exchange to carry out the purposes of the Exchange Act and to comply,
and to enforce compliance by its exchange members and persons
associated with its exchange members, with the provisions of the Act,
the rules and regulations thereunder, and the rules of the SROs.
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\22\ See supra notes 9-14 and accompanying text.
\23\ See, e.g., CboeBZX Notice, supra note 3, at 86053-54.
\24\ Id.
\25\ 15 U.S.C. 78f(b)(1).
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Finally, SROs proposed to revise revisions to Sections 2.9 and 3.10
of the CGM Bylaws to address proxy card color categorization and to
allow the Lead Director to call a special meeting of the board in order
to mitigate circumstances in which the CGM Bylaws would not otherwise
empower a second Independent Director to call a special meeting,
respectively. The Commission believes that these changes are reasonably
designed to facilitate more efficient and effective corporate
governance of CGM in accordance with the requirements of Section
6(b)(1) \26\ of Act.
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\26\ 15 U.S.C. 78f(b)(1).
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IV. Conclusion
For the foregoing reasons, the Commission finds that the Proposals
are consistent with the Act and the rules and regulations thereunder
applicable to a national securities exchange.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\27\ that the Proposals (SR-CBOE-2024-041; SR-C2-2024-016; SR-
CboeBZX-2024-087; SR-CboeBYX-2024-034; SR-CboeEDGX-2024-059; SR-
CboeEDGA-2024-037) be, and hereby are, approved.
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\27\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-28427 Filed 12-4-24; 8:45 am]
BILLING CODE 8011-01-P
