80 FR 47978 - Self-Regulatory Organizations; New York Stock Exchange LLC; Order Instituting Proceedings To Determine Whether To Disapprove Proposed Rule Change Amending Sections 312.03(b) and 312.04 of the NYSE Listed Company Manual To Exempt Early Stage Companies From Having To Obtain Shareholder Approval Before Issuing Shares for Cash to Related Parties, Affiliates of Related Parties or Entities in Which a Related Party Has a Substantial Interest
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 153 (August 10, 2015)
Federal Register Volume 80, Issue 153 (August 10, 2015)
| Page Range | 47978-47980 | |
| FR Document | 2015-19536 |
[Federal Register Volume 80, Number 153 (Monday, August 10, 2015)] [Notices] [Pages 47978-47980] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-19536] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75599; File No. SR-NYSE-2015-02] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Instituting Proceedings To Determine Whether To Disapprove Proposed Rule Change Amending Sections 312.03(b) and 312.04 of the NYSE Listed Company Manual To Exempt Early Stage Companies From Having To Obtain Shareholder Approval Before Issuing Shares for Cash to Related Parties, Affiliates of Related Parties or Entities in Which a Related Party Has a Substantial Interest August 4, 2015. I. Introduction On April 16, 2015, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') 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\ a proposed rule change to exempt early stage companies from having to obtain shareholder approval before issuing shares to related parties, affiliates of related parties or entities in which a related party has a substantial interest. The proposed rule change was published for comment in the Federal Register on May 6, 2015.\3\ The Commission received no comment letters on the proposal. On June 18, 2015, the Commission designated a longer period for Commission action on the proposed rule change, until August 4, 2015.\4\ This order institutes proceedings under Section 19(b)(2)(B) of the Act \5\ to determine whether to disapprove the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 74849 (April 30, 2015), 80 FR 26118 (``Notice''). \4\ See Securities Exchange Act Release No. 75248 (June 18, 2015), 80 FR 36385 (June 24, 2015). \5\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposes to amend Sections 312.03(b) and 312.04 of the NYSE Listed Company Manual (``Manual'') to provide an exemption to an ``early stage company'' listed on the Exchange from having to obtain shareholder approval, under certain circumstances, before issuing shares of common stock, or securities convertible into or exercisable for common stock, to a (1) director, officer \6\ or substantial security holder \7\ of the company (``Related Party'' or ``Related Parties''), (2) subsidiary, affiliate or closely-related person of a Related Party or (3) company or entity in which a Related Party has a substantial direct or indirect interest (together, a ``Proposed Exempted Party'' or '' Proposed Exempted Parties'').\8\ In particular, shareholder approval would no longer be required for an ``early stage company,'' \9\ before the issuance of shares for cash to a Proposed Exempted Party, provided that the company's audit committee or a comparable committee comprised solely of independent directors reviews and approves of all such transactions prior to their completion. Today, shareholder approval would be required prior to the issuance of shares, among other things, where the number of shares to be issued to the Proposed Exempted Party exceeds either 1% of the number of shares of common stock or 1% of the voting power outstanding before the issuance (or 5% of the number of shares or voting power, if the Related Party is classified as such solely because it is a substantial security holder, and the issuance relates to a sale of stock for cash, at a price at least as great as each of the book and market value of the company's common stock).\10\ --------------------------------------------------------------------------- \6\ Section 312.04(h) of the Manual states that the term ``officer'' has the same meaning as defined by the Commission in Rule 16a-1(f) under the Act. \7\ Section 312.04(e) of the Manual states that an interest consisting of less than either 5% percent of the number of shares of common stock or 5% of the voting power outstanding of a company or entity shall not be considered a substantial interest or cause the holder of such an interest to be regarded as a substantial security holder. \8\ The Commission notes that there is an inconsistency between the proposed rule text in Exhibit 5 and the proposed shareholder approval exception discussed in the Notice. The proposed rule text in Exhibit 5 states that the exception only applies to Related Parties, which is defined in Section 312.03(b)(1) of the Manual. However, the Notice clearly states that the proposed rule change is meant to apply to all Proposed Exempted Parties, as set forth in Sections 312.03(b)(1), (2), and (3) of the Manual, not just Related Parties under Section 312.03(b)(1) of the Manual. See Notice, supra note 3, at 26119. \9\ See supra notes 11 through 13 and accompanying text. \10\ The Exchange states that neither The NASDAQ Stock Market LLC (``NASDAQ'') nor NYSE MKT LLC has a rule comparable to Section 312.03(b) requiring listed companies to obtain shareholder approval prior to 1% (or in certain cases 5%) share issuances in cash sales to a Proposed Exempted Party. See Notice, supra note 3, at 26120. Thus, the Exchange believes the proposed rule change is necessary to enable the Exchange to compete with NASDAQ for the listing of early stage companies. See id. --------------------------------------------------------------------------- [[Page 47979]] The Exchange also proposes to amend Section 312.04 to include a definition of the term ``early stage company.'' \11\ The Exchange proposes to define an early stage company as a company that has not reported revenues greater than $20 million in any two consecutive fiscal years since its incorporation. Further, an early stage company would lose that designation at any time after listing on the Exchange that the company files an annual report with the Commission in which the company reports two consecutive fiscal years with revenues greater than $20 million in each year.\12\ The Exchange represents that a company's annual financial statements prior to listing on the Exchange would also be considered when determining if the company should lose its early stage company designation.\13\ --------------------------------------------------------------------------- \11\ See proposed Section 312.04(k) of the Manual. \12\ The Exchange believes that only a small number of currently listed companies would qualify under the proposed exemption from shareholder approval. See Notice, supra note 3, at 26120. \13\ See Notice, supra note 3, at 26119, n.6. As an example, the Exchanges states that if a company files an annual report with the Commission one year after listing on the Exchange and such annual report shows that the company has had revenues greater than $20 million in each of two consecutive years (even if one of those years was prior to listing on the Exchange), the company would lose its early stage company designation at that time. See id. Moreover, once the early stage company designation is lost, it cannot be regained if the subject company later reports reduced revenues. See id. at 26120. --------------------------------------------------------------------------- The Exchange also states that any issuance of shares that is not a sale for cash, including any issuance in connection with the acquisition of stock or assets of another company, would remain subject to the shareholder approval provisions of Section 312.03(b) of the Manual.\14\ Additionally, the Exchange highlights that under Section 312.04(a) of the Manual, an exemption from one provision of Section 312.03 is not a general exemption from all of Section 312.03. Therefore, notwithstanding that a transaction by an early stage company may have an exemption under the proposed amendments to Sections 312.03(b) of the Manual, the Exchange states that shareholder approval requirements of Sections 312.03(c) \15\ and 312.03(d) \16\ would still be applicable.\17\ --------------------------------------------------------------------------- \14\ See Notice, supra note 3, at 26119. \15\ Section 312.03(c) of the Manual, with certain exceptions, requires shareholder approval of any issuance of securities in any transaction or related transactions relating to 20% of more of a listed company's stock before the issuance. When applying Section 312.03(c), the Exchange states that it reviews issuances to determine whether they are related and should be aggregated for purposes of the rule. See Notice, supra note 3, at 26120. The Exchange analyzes the relationship between separate stock issuances if they occur within a short period of time, are made to the same or related parties, or if there is a common use of proceeds. See id. The Exchange represents that it would engage in this analysis with respect to any series of sales made by an early stage company to a Related Party. See id. Moreover, should the Exchange determine that it is necessary to aggregate the series of sales and, as aggregated, the total number of shares sold exceeds 19.9% of the shares outstanding, shareholder approval would be required pursuant to Section 312.03(c). See id. \16\ Section 312.03(d) of the Manual requires shareholder approval prior to an issuance giving rise to a change of control. \17\ See Notice, supra note 3, at 26119-20. The Commission notes, however, that Section 312.03(c)(2) of the Manual contains an exception for sales of common stock (or securities convertible into common stock) for cash in a ``bona fide private financing,'' as defined in Section 312.04(g), if certain requirements are met. --------------------------------------------------------------------------- Lastly, the Exchange also proposes to delete obsolete text from Section 312.03 of the Manual related to a limited transition period that is no longer relevant. III. Proceedings To Determine Whether To Approve or Disapprove SR-NYSE- 2015-02 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act \18\ to determine whether the proposed rule change should be disapproved. Institution of such proceedings appears appropriate at this time in view of the legal and policy issues raised by the proposal, as discussed below. Institution of disapproval proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described in greater detail below, the Commission seeks and encourages interested persons to comment on the proposed rule change to inform the Commission's analysis whether to approve or disapprove the proposed rule change. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2) of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. See id. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding. See id. --------------------------------------------------------------------------- Pursuant to Section 19(b)(2)(B) of the Act,\19\ the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of, and input from commenters with respect to, the consistency of the proposed rule change with Section 6(b)(5) of the Act,\20\ which requires that the rules of a national securities exchange be designed, among other things, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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. --------------------------------------------------------------------------- \19\ Id. \20\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- As discussed above, the Exchange proposes to amend Sections 312.03(b) and 312.04 of the Manual, in order to exempt early stage companies from having to obtain shareholder approval before issuing a substantial amount of shares for cash, even at a discount from book and market value, to Related Parties, namely officers, directors and substantial security holders, as well as the other Proposed Exempted Parties.\21\ Although the Exchange conditions its proposed exemption on the company obtaining the approval of the transaction by its audit committee (or comparable committee comprised solely of independent directors), the Commission is concerned that audit committee approval may not be an effective substitute for the approval of shareholders, whose interests would be directly impacted by the potentially dilutive effect of such a transaction. In addition, while the Exchange believes that the proposal would benefit shareholders of early stage companies because it could allow those companies to raise additional capital quickly and inexpensively, any such benefit must be weighed against the potentially detrimental impact of a dilutive transaction on shareholders who would no longer have the right to approve it.\22\ --------------------------------------------------------------------------- \21\ See supra notes 6 and 7. \22\ The Commission also notes that the Exchange has not addressed how the proposal is consistent with the shareholder approval requirements of Section 303A.08 of the Manual that generally requires that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions. Under Section 303A.08, an equity- compensation plan is defined as a plan or other arrangement that provides for the delivery of equity securities of the listed company to any employee, director or other service provider as compensation for services. The definition specifically states ``[E]ven a compensatory grant of options or other equity securities that is not made under a plan is, nonetheless, an `equity-compensation plan''' for purposes of the rule. Section 303A.08 also lists certain plans that would not be considered equity compensation plans under its definition, for example, plans that are made available to shareholders generally, such as a typical dividend reinvestment plan, and plans that merely allow employees, directors or other service providers to elect to buy shares on the open market or from the listed company for their current fair market value. The Commission notes that, in approving the equity compensation rules, it stated that the rules should have the effect of safeguarding the interests of shareholders, while placing certain restrictions on listed companies, and provide shareholders with greater protection from the potential dilutive effect of equity compensation plans. See Securities Exchange Act Release No. 48108 (June 30, 2003), 68 FR 39995 (July 3, 2003) (SR-NYSE-2002-46 and SR-NASD-2002-140). --------------------------------------------------------------------------- [[Page 47980]] The Commission therefore believes that questions are raised as to whether the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, including whether it would be designed to promote just and equitable principles of trade, and protect investors and the public interest. IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the concerns identified above, as well as any others they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change is inconsistent with Section 6(b)(5) \23\ or any other provision of the Act, or the rules and regulation thereunder. Although there do not appear to be any issues relevant to approval or disapproval which would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4, any request for an opportunity to make an oral presentation.\24\ --------------------------------------------------------------------------- \23\ 15 U.S.C. 78f(b)(5). \24\ Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding--either oral or notice and opportunity for written comments--is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). --------------------------------------------------------------------------- Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be disapproved by August 31, 2015. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by September 14, 2015. The Commission asks that commenters address the sufficiency and merit of the Exchange's statements in support of the proposed rule change, in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission seeks comment on the statements of the Exchange contained in the Notice,\25\ and any other issues raised by the proposed rule change. --------------------------------------------------------------------------- \25\ See Notice, supra note 3. --------------------------------------------------------------------------- Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-NYSE-2015-02 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2015-02. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2015-02 and should be submitted on or before August 31, 2015. Rebuttal comments should be submitted by September 14, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\26\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \26\ 17 CFR 200.30-3(a)(57). --------------------------------------------------------------------------- [FR Doc. 2015-19536 Filed 8-7-15; 8:45 am] BILLING CODE 8011-01-P
![47978 Federal Register / Vol. 80, No. 153 / Monday, August 10, 2015 / Notices
public interest, for the protection of For the Commission, pursuant to delegated an ‘‘early stage company’’ listed on the
investors, or otherwise in furtherance of authority.9 Exchange from having to obtain
the purposes of the Act. Robert W. Errett, shareholder approval, under certain
Deputy Secretary. circumstances, before issuing shares of
IV. Solicitation of Comments [FR Doc. 2015–19539 Filed 8–7–15; 8:45 am] common stock, or securities convertible
Interested persons are invited to BILLING CODE 8011–01–P into or exercisable for common stock, to
submit written data, views, and a (1) director, officer 6 or substantial
security holder 7 of the company
arguments concerning the foregoing,
SECURITIES AND EXCHANGE (‘‘Related Party’’ or ‘‘Related Parties’’),
including whether the proposed rule
COMMISSION (2) subsidiary, affiliate or closely-related
change is consistent with the Act. person of a Related Party or (3) company
Comments may be submitted by any of [Release No. 34–75599; File No. SR–NYSE–
2015–02] or entity in which a Related Party has
the following methods: a substantial direct or indirect interest
Electronic Comments Self-Regulatory Organizations; New (together, a ‘‘Proposed Exempted Party’’
York Stock Exchange LLC; Order or ’’ Proposed Exempted Parties’’).8 In
• Use the Commission’s Internet Instituting Proceedings To Determine particular, shareholder approval would
comment form (http://www.sec.gov/ Whether To Disapprove Proposed Rule no longer be required for an ‘‘early stage
rules/sro.shtml); or Change Amending Sections 312.03(b) company,’’ 9 before the issuance of
• Send an email to rule-comments@ and 312.04 of the NYSE Listed shares for cash to a Proposed Exempted
sec.gov. Please include File Number SR– Company Manual To Exempt Early Party, provided that the company’s
Stage Companies From Having To audit committee or a comparable
MSRB–2015–06 on the subject line.
Obtain Shareholder Approval Before committee comprised solely of
Paper Comments Issuing Shares for Cash to Related independent directors reviews and
Parties, Affiliates of Related Parties or approves of all such transactions prior
• Send paper comments in triplicate Entities in Which a Related Party Has to their completion. Today, shareholder
to Secretary, Securities and Exchange a Substantial Interest approval would be required prior to the
Commission, 100 F Street NE., issuance of shares, among other things,
Washington, DC 20549. August 4, 2015. where the number of shares to be issued
I. Introduction to the Proposed Exempted Party exceeds
All submissions should refer to File
either 1% of the number of shares of
Number SR–MSRB–2015–06. This file On April 16, 2015, New York Stock common stock or 1% of the voting
number should be included on the Exchange LLC (‘‘NYSE’’ or the power outstanding before the issuance
subject line if email is used. To help the ‘‘Exchange’’) filed with the Securities (or 5% of the number of shares or voting
Commission process and review your and Exchange Commission power, if the Related Party is classified
comments more efficiently, please use (‘‘Commission’’), pursuant to Section as such solely because it is a substantial
only one method. The Commission will 19(b)(1) of the Securities Exchange Act security holder, and the issuance relates
post all comments on the Commission’s of 1934 (‘‘Act’’) 1 and Rule 19b–4 to a sale of stock for cash, at a price at
Internet Web site (http://www.sec.gov/ thereunder,2 a proposed rule change to least as great as each of the book and
rules/sro.shtml). Copies of the exempt early stage companies from market value of the company’s common
submission, all subsequent having to obtain shareholder approval stock).10
amendments, all written statements before issuing shares to related parties,
with respect to the proposed rule affiliates of related parties or entities in 6 Section 312.04(h) of the Manual states that the
change that are filed with the which a related party has a substantial term ‘‘officer’’ has the same meaning as defined by
interest. The proposed rule change was the Commission in Rule 16a–1(f) under the Act.
Commission, and all written 7 Section 312.04(e) of the Manual states that an
communications relating to the published for comment in the Federal
interest consisting of less than either 5% percent of
proposed rule change between the Register on May 6, 2015.3 The the number of shares of common stock or 5% of the
Commission and any person, other than Commission received no comment voting power outstanding of a company or entity
letters on the proposal. On June 18, shall not be considered a substantial interest or
those that may be withheld from the cause the holder of such an interest to be regarded
public in accordance with the 2015, the Commission designated a as a substantial security holder.
provisions of 5 U.S.C. 552, will be longer period for Commission action on 8 The Commission notes that there is an
available for Web site viewing and the proposed rule change, until August inconsistency between the proposed rule text in
printing in the Commission’s Public 4, 2015.4 This order institutes Exhibit 5 and the proposed shareholder approval
proceedings under Section 19(b)(2)(B) of exception discussed in the Notice. The proposed
Reference Room, 100 F Street NE., rule text in Exhibit 5 states that the exception only
Washington, DC 20549 on official the Act 5 to determine whether to applies to Related Parties, which is defined in
business days between the hours of disapprove the proposed rule change. Section 312.03(b)(1) of the Manual. However, the
Notice clearly states that the proposed rule change
10:00 a.m. and 3:00 p.m. Copies of the II. Description of the Proposal is meant to apply to all Proposed Exempted Parties,
filing also will be available for The Exchange proposes to amend as set forth in Sections 312.03(b)(1), (2), and (3) of
inspection and copying at the principal the Manual, not just Related Parties under Section
Sections 312.03(b) and 312.04 of the 312.03(b)(1) of the Manual. See Notice, supra note
office of the MSRB. All comments NYSE Listed Company Manual 3, at 26119.
received will be posted without change; (‘‘Manual’’) to provide an exemption to 9 See supra notes 11 through 13 and
the Commission does not edit personal accompanying text.
identifying information from 10 The Exchange states that neither The NASDAQ
tkelley on DSK3SPTVN1PROD with NOTICES
9 17 CFR 200.30–3(a)(12).
submissions. You should submit only 1 15 Stock Market LLC (‘‘NASDAQ’’) nor NYSE MKT
U.S.C. 78s(b)(1).
LLC has a rule comparable to Section 312.03(b)
information that you wish to make 2 17 CFR 240.19b–4.
requiring listed companies to obtain shareholder
available publicly. All submissions 3 See Securities Exchange Act Release No. 74849
approval prior to 1% (or in certain cases 5%) share
(April 30, 2015), 80 FR 26118 (‘‘Notice’’). issuances in cash sales to a Proposed Exempted
should refer to File Number SR–MSRB– 4 See Securities Exchange Act Release No. 75248
Party. See Notice, supra note 3, at 26120. Thus, the
2015–06 and should be submitted on or (June 18, 2015), 80 FR 36385 (June 24, 2015). Exchange believes the proposed rule change is
before August 31, 2015. 5 15 U.S.C. 78s(b)(2)(B). necessary to enable the Exchange to compete with
VerDate Sep<11>2014 18:16 Aug 07, 2015 Jkt 235001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\10AUN1.SGM 10AUN1](https://thefederalregister.org/doc/80_FR_48131/page/1.svg)
![Federal Register / Vol. 80, No. 153 / Monday, August 10, 2015 / Notices 47979
The Exchange also proposes to amend Sections 312.03(c) 15 and 312.03(d) 16 Pursuant to Section 19(b)(2)(B) of the
Section 312.04 to include a definition of would still be applicable.17 Act,19 the Commission is providing
the term ‘‘early stage company.’’ 11 The Lastly, the Exchange also proposes to notice of the grounds for disapproval
Exchange proposes to define an early delete obsolete text from Section 312.03 under consideration. The Commission is
stage company as a company that has of the Manual related to a limited instituting proceedings to allow for
not reported revenues greater than $20 transition period that is no longer additional analysis of, and input from
million in any two consecutive fiscal commenters with respect to, the
relevant.
years since its incorporation. Further, an consistency of the proposed rule change
early stage company would lose that III. Proceedings To Determine Whether with Section 6(b)(5) of the Act,20 which
designation at any time after listing on To Approve or Disapprove SR–NYSE– requires that the rules of a national
2015–02 and Grounds for Disapproval securities exchange be designed, among
the Exchange that the company files an
Under Consideration other things, to prevent fraudulent and
annual report with the Commission in manipulative acts and practices, to
which the company reports two The Commission is instituting promote just and equitable principles of
consecutive fiscal years with revenues proceedings pursuant to Section trade, to remove impediments to and
greater than $20 million in each year.12 19(b)(2)(B) of the Act 18 to determine perfect the mechanism of a free and
The Exchange represents that a whether the proposed rule change open market and a national market
company’s annual financial statements should be disapproved. Institution of system and, in general, to protect
prior to listing on the Exchange would such proceedings appears appropriate at investors and the public interest.
also be considered when determining if this time in view of the legal and policy As discussed above, the Exchange
the company should lose its early stage issues raised by the proposal, as proposes to amend Sections 312.03(b)
company designation.13 discussed below. Institution of and 312.04 of the Manual, in order to
The Exchange also states that any disapproval proceedings does not exempt early stage companies from
indicate that the Commission has having to obtain shareholder approval
issuance of shares that is not a sale for
reached any conclusions with respect to before issuing a substantial amount of
cash, including any issuance in
any of the issues involved. Rather, as shares for cash, even at a discount from
connection with the acquisition of stock book and market value, to Related
or assets of another company, would described in greater detail below, the
Commission seeks and encourages Parties, namely officers, directors and
remain subject to the shareholder substantial security holders, as well as
approval provisions of Section 312.03(b) interested persons to comment on the
proposed rule change to inform the the other Proposed Exempted Parties.21
of the Manual.14 Additionally, the Although the Exchange conditions its
Commission’s analysis whether to
Exchange highlights that under Section proposed exemption on the company
approve or disapprove the proposed
312.04(a) of the Manual, an exemption obtaining the approval of the transaction
rule change.
from one provision of Section 312.03 is by its audit committee (or comparable
not a general exemption from all of 15 Section 312.03(c) of the Manual, with certain
committee comprised solely of
Section 312.03. Therefore, exceptions, requires shareholder approval of any independent directors), the Commission
notwithstanding that a transaction by an issuance of securities in any transaction or related is concerned that audit committee
early stage company may have an transactions relating to 20% of more of a listed approval may not be an effective
company’s stock before the issuance. When substitute for the approval of
exemption under the proposed applying Section 312.03(c), the Exchange states that
amendments to Sections 312.03(b) of the it reviews issuances to determine whether they are shareholders, whose interests would be
Manual, the Exchange states that related and should be aggregated for purposes of the directly impacted by the potentially
shareholder approval requirements of rule. See Notice, supra note 3, at 26120. The dilutive effect of such a transaction. In
Exchange analyzes the relationship between addition, while the Exchange believes
separate stock issuances if they occur within a short
period of time, are made to the same or related that the proposal would benefit
parties, or if there is a common use of proceeds. See shareholders of early stage companies
id. The Exchange represents that it would engage because it could allow those companies
in this analysis with respect to any series of sales to raise additional capital quickly and
made by an early stage company to a Related Party.
See id. Moreover, should the Exchange determine inexpensively, any such benefit must be
that it is necessary to aggregate the series of sales weighed against the potentially
and, as aggregated, the total number of shares sold detrimental impact of a dilutive
NASDAQ for the listing of early stage companies. exceeds 19.9% of the shares outstanding, transaction on shareholders who would
See id. shareholder approval would be required pursuant
11 See proposed Section 312.04(k) of the Manual. to Section 312.03(c). See id. no longer have the right to approve it.22
16 Section 312.03(d) of the Manual requires
12 The Exchange believes that only a small
19 Id.
number of currently listed companies would qualify shareholder approval prior to an issuance giving
rise to a change of control. 20 15 U.S.C. 78f(b)(5).
under the proposed exemption from shareholder 17 See Notice, supra note 3, at 26119–20. The 21 See supra notes 6 and 7.
approval. See Notice, supra note 3, at 26120.
Commission notes, however, that Section 22 The Commission also notes that the Exchange
13 See Notice, supra note 3, at 26119, n.6. As an
312.03(c)(2) of the Manual contains an exception for has not addressed how the proposal is consistent
example, the Exchanges states that if a company sales of common stock (or securities convertible with the shareholder approval requirements of
files an annual report with the Commission one into common stock) for cash in a ‘‘bona fide private Section 303A.08 of the Manual that generally
year after listing on the Exchange and such annual financing,’’ as defined in Section 312.04(g), if requires that shareholders must be given the
report shows that the company has had revenues certain requirements are met. opportunity to vote on all equity-compensation
18 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2) of the plans and material revisions thereto, with limited
greater than $20 million in each of two consecutive
Act also provides that proceedings to determine exemptions. Under Section 303A.08, an equity-
tkelley on DSK3SPTVN1PROD with NOTICES
years (even if one of those years was prior to listing
on the Exchange), the company would lose its early whether to disapprove a proposed rule change must compensation plan is defined as a plan or other
stage company designation at that time. See id. be concluded within 180 days of the date of arrangement that provides for the delivery of equity
publication of notice of the filing of the proposed securities of the listed company to any employee,
Moreover, once the early stage company
rule change. See id. The time for conclusion of the director or other service provider as compensation
designation is lost, it cannot be regained if the proceedings may be extended for up to 60 days if for services. The definition specifically states
subject company later reports reduced revenues. the Commission finds good cause for such ‘‘[E]ven a compensatory grant of options or other
See id. at 26120. extension and publishes its reasons for so finding. equity securities that is not made under a plan is,
14 See Notice, supra note 3, at 26119. See id. Continued
VerDate Sep<11>2014 18:16 Aug 07, 2015 Jkt 235001 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\10AUN1.SGM 10AUN1](https://thefederalregister.org/doc/80_FR_48131/page/2.svg)
![47980 Federal Register / Vol. 80, No. 153 / Monday, August 10, 2015 / Notices
The Commission therefore believes proposed rule change, in addition to any For the Commission, by the Division of
that questions are raised as to whether other comments they may wish to Trading and Markets, pursuant to delegated
the proposed rule change is consistent submit about the proposed rule change. authority.26
with the requirements of Section 6(b)(5) In particular, the Commission seeks Robert W. Errett,
of the Act, including whether it would comment on the statements of the Deputy Secretary.
be designed to promote just and Exchange contained in the Notice,25 and [FR Doc. 2015–19536 Filed 8–7–15; 8:45 am]
equitable principles of trade, and any other issues raised by the proposed BILLING CODE 8011–01–P
protect investors and the public interest. rule change.
IV. Procedure: Request for Written Comments may be submitted by any
of the following methods: SECURITIES AND EXCHANGE
Comments
COMMISSION
The Commission requests that Electronic Comments
interested persons provide written [Release No. 34–75603; File No. SR–MIAX–
submissions of their views, data, and • Use the Commission’s Internet 2015–49]
arguments with respect to the concerns comment form (http://www.sec.gov/
rules/sro.shtml); or Self-Regulatory Organizations; Miami
identified above, as well as any others International Securities Exchange LLC;
they may have with the proposal. In • Send an email to rule-comments@
Notice of Filing and Immediate
particular, the Commission invites the sec.gov. Please include File Number SR–
Effectiveness of a Proposed Rule
written views of interested persons NYSE–2015–02 on the subject line.
Change To Amend Its Fee Schedule
concerning whether the proposed rule Paper Comments
change is inconsistent with Section August 4, 2015.
6(b)(5) 23 or any other provision of the • Send paper comments in triplicate Pursuant to the provisions of section
Act, or the rules and regulation to Brent J. Fields, Secretary, Securities 19(b)(1) of the Securities Exchange Act
thereunder. Although there do not and Exchange Commission, 100 F Street of 1934 (‘‘Act’’),1 and Rule 19b-4
appear to be any issues relevant to NE., Washington, DC 20549–1090. thereunder,2 notice is hereby given that
approval or disapproval which would on July 30, 2015, Miami International
All submissions should refer to File
be facilitated by an oral presentation of Securities Exchange LLC (‘‘MIAX’’ or
Number SR–NYSE–2015–02. This file
views, data, and arguments, the ‘‘Exchange’’) filed with the Securities
Commission will consider, pursuant to number should be included on the
subject line if email is used. To help the and Exchange Commission
Rule 19b-4, any request for an (‘‘Commission’’) a proposed rule change
opportunity to make an oral Commission process and review your
comments more efficiently, please use as described in Items I, II, and III below,
presentation.24 which Items have been prepared by the
Interested persons are invited to only one method. The Commission will
post all comments on the Commission’s Exchange. The Commission is
submit written data, views, and publishing this notice to solicit
arguments regarding whether the Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the comments on the proposed rule change
proposed rule change should be from interested persons.
disapproved by August 31, 2015. Any submission, all subsequent
person who wishes to file a rebuttal to amendments, all written statements I. Self-Regulatory Organization’s
any other person’s submission must file with respect to the proposed rule Statement of the Terms of Substance of
that rebuttal by September 14, 2015. The change that are filed with the the Proposed Rule Change
Commission asks that commenters Commission, and all written
The Exchange is filing a proposal to
address the sufficiency and merit of the communications relating to the
amend the MIAX Options Fee Schedule.
Exchange’s statements in support of the proposed rule change between the
The text of the proposed rule change
Commission and any person, other than
is available on the Exchange’s Web site
nonetheless, an ‘equity-compensation plan’’’ for those that may be withheld from the
at http://www.miaxoptions.com/filter/
purposes of the rule. Section 303A.08 also lists public in accordance with the
certain plans that would not be considered equity wotitle/rule_filing, at MIAX’s principal
provisions of 5 U.S.C. 552, will be
compensation plans under its definition, for office, and at the Commission’s Public
available for Web site viewing and
example, plans that are made available to Reference Room.
shareholders generally, such as a typical dividend printing in the Commission’s Public
reinvestment plan, and plans that merely allow Reference Room, 100 F Street NE., II. Self-Regulatory Organization’s
employees, directors or other service providers to Washington, DC 20549, on official Statement of the Purpose of, and
elect to buy shares on the open market or from the
listed company for their current fair market value. business days between the hours of Statutory Basis for, the Proposed Rule
The Commission notes that, in approving the equity 10:00 a.m. and 3:00 p.m. Copies of such Change
compensation rules, it stated that the rules should filing also will be available for In its filing with the Commission, the
have the effect of safeguarding the interests of inspection and copying at the principal
shareholders, while placing certain restrictions on Exchange included statements
listed companies, and provide shareholders with office of the Exchange. All comments concerning the purpose of and basis for
greater protection from the potential dilutive effect received will be posted without change; the proposed rule change and discussed
of equity compensation plans. See Securities the Commission does not edit personal
Exchange Act Release No. 48108 (June 30, 2003), 68 any comments it received on the
FR 39995 (July 3, 2003) (SR–NYSE–2002–46 and
identifying information from proposed rule change. The text of these
SR–NASD–2002–140). submissions. You should submit only statements may be examined at the
23 15 U.S.C. 78f(b)(5). information that you wish to make places specified in Item IV below. The
24 Section 19(b)(2) of the Act, as amended by the available publicly. All submissions Exchange has prepared summaries, set
Securities Act Amendments of 1975, Pub. L. 94–29
tkelley on DSK3SPTVN1PROD with NOTICES
should refer to File Number SR–NYSE– forth in sections A, B, and C below, of
(June 4, 1975), grants the Commission flexibility to
determine what type of proceeding—either oral or 2015–02 and should be submitted on or the most significant aspects of such
notice and opportunity for written comments—is before August 31, 2015. Rebuttal statements.
appropriate for consideration of a particular comments should be submitted by
proposal by a self-regulatory organization. See September 14, 2015. 26 17 CFR 200.30–3(a)(57).
Securities Act Amendments of 1975, Senate Comm.
1 15 U.S.C. 78s(b)(1).
on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975). 25 See Notice, supra note 3. 2 17 CFR 240.19b-4.
VerDate Sep<11>2014 18:16 Aug 07, 2015 Jkt 235001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\10AUN1.SGM 10AUN1](https://thefederalregister.org/doc/80_FR_48131/page/3.svg)
Document Created: 2015-12-15 12:12:07
Document Modified: 2015-12-15 12:12:07
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 47978 |
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR