81 FR 9041 - Self-Regulatory Organizations; Boston Stock Exchange Clearing Corporation; Stock Clearing Corporation of Philadelphia; NASDAQ OMX BX, Inc.; The NASDAQ Stock Market LLC; NASDAQ OMX PHLX LLC; Order Approving Proposed Rule Changes, as Modified by Amendments Thereto, To Amend the By-Laws of NASDAQ, Inc.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 35 (February 23, 2016)
Federal Register Volume 81, Issue 35 (February 23, 2016)
| Page Range | 9041-9043 | |
| FR Document | 2016-03669 |
[Federal Register Volume 81, Number 35 (Tuesday, February 23, 2016)] [Notices] [Pages 9041-9043] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-03669] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77165; File Nos. SR-BSECC-2015-002; SR-SCCP-2015-02; SR-BX-2015-085; SR-NASDAQ-2015-160; SR-Phlx-2015-113] Self-Regulatory Organizations; Boston Stock Exchange Clearing Corporation; Stock Clearing Corporation of Philadelphia; NASDAQ OMX BX, Inc.; The NASDAQ Stock Market LLC; NASDAQ OMX PHLX LLC; Order Approving Proposed Rule Changes, as Modified by Amendments Thereto, To Amend the By-Laws of NASDAQ, Inc. February 17, 2016. I. Introduction On December 21, 2015, each of the Boston Stock Exchange Clearing Corporation (``BSECC''), Stock Clearing Corporation of Philadelphia (``SCCP''), NASDAQ OMX BX, Inc. (``BX''), The NASDAQ Stock Market LLC (``NASDAQ''), and NASDAQ OMX PHLX LLC (``Phlx'' and, together with BSECC, SCCP, BX, and NASDAQ, 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 with respect to the By-Laws (``By- Laws'') of NASDAQ, Inc. (``Company''), the parent company of the SROs. The proposed rule changes would revise certain requirements regarding Director \3\ qualifications and Director disqualification procedures for the Company's Board of Directors (``Board''). On December 29, 2015, each SRO filed Amendment No. 1 to its respective proposal.\4\ On December 30, 2015, Phlx filed Amendment No. 2 to its proposal.\5\ The proposed rule changes, as modified by the amendments thereto, were published for comment in the Federal Register on January 7, 2016.\6\ The Commission did not receive any comment letters on the proposals. This order approves the proposed rule changes, as modified by the respective amendments thereto. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ ``Director'' means a member of the Company's Board of Directors. See Article I(j) of the By-Laws. \4\ Amendment No. 1 for each of the proposals amended and replaced the original filing in its entirety. In Amendment No. 1, each SRO, among other things, clarified the operation of the current and proposed provisions of the By-Laws and how the proposed rule change would operate in conjunction with the Listing Rules (as herein defined) of NASDAQ. \5\ On December 30, 2015, Phlx withdrew Amendment No. 1 for technical reasons and, subsequently, filed Amendment No. 2. Amendment No. 2 amended and replaced the original filing in its entirety. \6\ Securities Exchange Act Release Nos. 76806 (December 31, 2015), 81 FR 838 (SR-BSCC-2015-002); 76807 (December 31, 2015), 81 FR 828 (SR-SCCP-2015-02); 76808 (December 31, 2015), 81 FR 831 (SR- BX-2015-085); 76809 (December 31, 2015), 81 FR 817 (SR-NASDAQ-2015- 160); 76810 (December 31, 2015), 81 FR 841 (SR-Phlx-2015-113) (collectively, ``Notices''). --------------------------------------------------------------------------- II. Description of the Proposal The Company proposes to amend certain provisions of the By-Laws that relate to the qualification of Directors. First, the Company proposes to amend Section 4.3 of the By-Laws (Qualifications), which sets forth the compositional requirements of the Board. Currently, Section 4.3 requires that the number of Non- Industry Directors \7\ on the Board equal or exceed [[Page 9042]] the number of Industry Directors,\8\ and that the Board include (1) at least two Public Directors; \9\ (2) at least one, but no more than two, Issuer Directors; \10\ and (3) no more than one Staff Director,\11\ unless the Board consists of ten or more Directors, in which case the Board shall include no more than two Staff Directors. --------------------------------------------------------------------------- \7\ Under the By-Laws, ``Non-Industry Director'' or ``Non- Industry committee member'' means a Director (excluding any Staff Director) or committee member who is (1) a Public Director or Public committee member; (2) an Issuer Director or Issuer committee member; or (3) any other individual who would not be an Industry Director or Industry committee member. See Article I(q) of the By-Laws. \8\ Under the By-Laws, ``Industry Director'' or ``Industry committee member'' means a Director (excluding any Staff Directors) or committee member who (1) is, or within the last year was, or has an immediate family member who is, or within the last year was, a member of a Self-Regulatory Subsidiary; (2) is, or within the last year was, employed by a member or a member organization of a Self- Regulatory Subsidiary; (3) has an immediate family member who is, or within the last year was, an executive officer of a member or a member organization of a Self-Regulatory Subsidiary; (4) has within the last year received from any member or member organization of a Self-Regulatory Subsidiary more than $100,000 per year in direct compensation, or received from such members or member organizations in the aggregate an amount of direct compensation that in any one year is more than 10 percent of the Director's annual gross compensation for such year, excluding in each case director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); or (5) is affiliated, directly or indirectly, with a member or member organization of a Self- Regulatory Subsidiary. See Article I(m) of the By-Laws. A ``Self- Regulatory Subsidiary'' is any subsidiary of the Company that is a self-regulatory organization as defined under Section 3(a)(26) of the Act. See Article I(s) of the By-Laws. \9\ Under the By-Laws, ``Public Director'' or ``Public committee member'' means a Director or committee member who (1) is not an Industry Director or Industry committee member, (2) is not an Issuer Director or Issuer committee member, and (3) has no material business relationship with a member or member organization of a Self-Regulatory Subsidiary, the Company or its affiliates, or the Financial Industry Regulatory Authority, Inc. See Article I(r) of the By-Laws. \10\ Under the By-Laws, ``Issuer Director'' or ``Issuer committee member'' means a Director (excluding any Staff Director) or committee member who is an officer or employee of an issuer of securities listed on a national securities exchange operated by any Self-Regulatory Subsidiary, excluding any Director or committee member who is a director of such an issuer but is not also an officer or employee of such an issuer. See Article I(o) of the By- Laws. \11\ Under the By-Laws, ``Staff Director'' means an officer of the Company that is serving as a Director. See Article I(t) of the By-Laws. --------------------------------------------------------------------------- The Company proposes to amend Section 4.3 to state that the Board may, rather than shall, include at least one, but no more than two, Issuer Directors. Thus, the proposal would allow, but no longer would mandate, that the Board include an Issuer Director. The SROs state that, while the Company highly values the views of its listed companies, the Company does not believe that it is necessary to have an Issuer Director on its own Board to represent those views.\12\ The SROs state that issues relating to listed companies are generally the province of NASDAQ and its board of directors, rather than the Company and its Directors, and that NASDAQ's board includes issuer representation, as mandated by NASDAQ's by-laws.\13\ Additionally, the SROs state that the Company's Directors are experienced and capable enough to handle issues relating to listed companies that may arise without specifically having an Issuer Director on the Board.\14\ --------------------------------------------------------------------------- \12\ See Notices, supra note 6. \13\ See Notices, supra note 6, citing to Article III, Section 2 of NASDAQ's by-laws. \14\ See Notices, supra note 6. The SROs represent that currently three of the Company's eleven Directors are also directors of companies listed on NASDAQ or another national securities exchange. See Notices, supra note 6. The SROs state that these Directors do not qualify as Issuer Directors because they are not specifically officers or employees of listed companies. However, as directors of such companies, the SROs believe that the Directors are familiar with corporate governance topics and other issues confronted by listed companies. See Notices, supra note 6. --------------------------------------------------------------------------- Second, the Company proposes to amend Section 4.7 of the By-Laws (Disqualification), which addresses the disqualification of a Director due to a change in that Director's classification. Specifically, Section 4.7 provides that the term of office of a Director shall terminate immediately upon a determination by the Board, by a majority vote of the remaining Directors, that: (a) The Director no longer satisfies the classification for which the Director was elected; and (b) the Director's continued service as such would violate the compositional requirements of the Board set forth in Section 4.3 of the By-Laws.\15\ --------------------------------------------------------------------------- \15\ Section 4.7 of the By-Laws further provides that, if a Director's term of office terminates because of such disqualification and the remaining term of office for that Director at the time of termination is not more than six months, during the period of vacancy, the Board shall not be deemed to be in violation of Section 4.3 of the By-Laws by virtue of such vacancy. See Section 4.7 of the By-Laws. --------------------------------------------------------------------------- The Company proposes to amend Section 4.7 to allow the Board to elect to defer determinations under Section 4.7 regarding Director disqualification until the next annual meeting of stockholders. In addition, the proposals would amend Section 4.7 to provide that, if the Board elects to defer such determinations, neither the Board nor any committee of the Board would be deemed to be in violation of Section 4.3 or 4.13 \16\ of the By-Laws as a result of such deferral. The SROs state that the nominee selection process for Directors is long and complex and the Board cannot act quickly to replace a Director whose classification has changed.\17\ The SROs state that the proposed amendment to Section 4.7 would allow the Board to continue to make informed, deliberate decisions regarding Director nominees, rather than require it to act quickly in a way that is not in the best interest of the Company's stockholders.\18\ In addition, the SROs state that the proposed rule changes would provide the Board with the option to retain Directors whose classification has changed but whose continued service is otherwise beneficial to the Board, the Company, and its stockholders.\19\ Further, the SROs state that the proposed amendment to Section 4.7 is designed to prevent the significant disruption that the SROs believe would occur if the Board had to replace a Director between annual meetings of stockholders.\20\ --------------------------------------------------------------------------- \16\ Section 4.13(h)(iii) of the By-Laws requires the Company's Corporate Secretary to certify to the Nominating & Governance Committee of the Company's Board the classification of each Director after collecting from each nominee for Director information as is reasonably necessary to serve as the basis for a determination of the nominee's classifications. See Section 4.13(h)(iii) of the By- Laws. \17\ See Notices, supra note 6. \18\ Id. \19\ Id. \20\ Id. --------------------------------------------------------------------------- The SROs represent that the provisions of the Company's By-Laws that relate to Director classifications are completely distinct from the listing rules of NASDAQ (``Listing Rules'') and that the proposed rule changes do not affect in any way the Company's obligation, as an issuer listed on NASDAQ, to comply with the Listing Rules, and that the Company will continue to comply with the Listing Rules, including provisions relating to corporate governance, following the effectiveness of the proposed By-Law amendments.\21\ --------------------------------------------------------------------------- \21\ Id. --------------------------------------------------------------------------- III. Discussion and Commission's Findings After careful review, the Commission finds that the proposed rule changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, in the case of the proposals by BX, NASDAQ, and Phlx (collectively, the ``Exchanges''), and to a clearing agency, in the case of the proposals by BSECC and SCCP.\22\ --------------------------------------------------------------------------- \22\ Additionally, in approving these proposed rule changes, the Commission has considered the proposed rules' impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- The Commission finds that the proposed rule changes by the Exchanges to amend the By-Laws are consistent with the requirements of Section 6 of the Act and the rules and regulations thereunder applicable to a national [[Page 9043]] securities exchange.\23\ In particular, the Commission finds that the proposed rule changes by the Exchanges are consistent with the requirements of Section 6(b)(5) of the Act, which requires, among other things, that an exchange's rules be designed 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.\24\ --------------------------------------------------------------------------- \23\ Certain provisions of the Company's By-Laws are considered rules of BX, NASDAQ, and Phlx if they are stated policies, practices, or interpretations, as defined in Rule 19b-4 under the Act, of BX, NASDAQ, and Phlx, and 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. \24\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The proposed amendment to Section 4.3 of the By-Laws would allow, but no longer require, that the Board include an Issuer Director. The Exchanges state that the Company's Directors are sufficiently experienced and capable to handle issues relating to listed companies without requiring the explicit participation of an Issuer Director.\25\ Further, the Exchanges state that issues relating to listed companies are generally the province of NASDAQ, as NASDAQ is the Company subsidiary that provides listing services.\26\ The Exchanges represent that NASDAQ's board includes issuer representation, as mandated by NASDAQ's by-laws.\27\ Under the proposals, the Company would still retain the option to include one or more Issuer Director on the Board. --------------------------------------------------------------------------- \25\ See Notices, supra note 6. \26\ Id. \27\ Id. --------------------------------------------------------------------------- The proposed amendment to Section 4.7 of the By-Laws would allow the Board to elect to defer determinations under Section 4.7 regarding Director disqualification until the next annual meeting of stockholders, and to do so without being in violation of the By-Laws. The By-Laws currently are silent regarding the required timeframe within which the Board must make Director disqualification determinations under Section 4.7. The Exchanges represent that the proposal would aid the Board to act in the best interests of the Company and its stockholders as it would allow the Board to continue to make informed, deliberate decisions regarding Director nominees and prevent the significant disruption that the SROs believe would occur if the Board were forced to replace a Director between annual meetings.\28\ --------------------------------------------------------------------------- \28\ Id. --------------------------------------------------------------------------- Based on the foregoing, the Commission finds that the proposed rule changes filed by BX, NASDAQ, and Phlx are consistent with the Act. The Commission also finds that the proposed rule changes by BSECC and SCCP are consistent with the requirements of the Act and the rules and regulations thereunder applicable to clearing agencies. Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency be designed to protect investors and the public interest.\29\ In addition, Rule 17Ad-22(d)(8) under the Act requires registered clearing agencies to establish, implement, maintain, and enforce written policies and procedures reasonably designed to have governance arrangements that are clear and transparent.\30\ Here, BSECC and SCCP filed proposed rule changes to highlight changes being made to the By-Laws of the Company,\31\ which indirectly owns BSECC and SCCP. Therefore, the proposed rule changes by BSECC and SCCP help make clear and transparent the governance arrangements of the Company and, thus, BSECC and SCCP, which helps ensure investor protection and the public interest. --------------------------------------------------------------------------- \29\ 15 U.S.C. 78q-1(b)(3)(F). \30\ 17 CFR 240.17Ad-22(d)(8). \31\ Certain provisions of the Company's By-Laws are considered rules of BSECC and SCCP if they are stated policies, practices, or interpretations, as defined in Rule 19b-4 under the Act, of BSECC and SCCP, and must be filed with the Commission pursuant to Section 19(b) of the Act and Rule 19b-4 thereunder. 15 U.S.C. 78q-1(b); 17 CFR 240.19b-4. See supra note 23. --------------------------------------------------------------------------- The Commission notes that the Company, as an issuer listed on NASDAQ, will continue to be required to comply with NASDAQ's Listing Rules, including the provisions in the Listing Rules relating to Corporate Governance Requirements, which requirements may differ from the By-Laws. The SROs have represented that the Company will continue to comply with the Listing Rules following the effectiveness of the proposed By-Law amendments.\32\ The Commission further notes that the Listing Rules provide generally that a majority of the directors of a listed issuer must be ``independent'' as defined in those rules and that a listed issuer's audit, compensation, and nominations committees must be composed solely of directors who are ``independent.'' \33\ Because the Company's securities are listed on NASDAQ, the Commission notes that, when deferring determinations regarding Director disqualification pursuant to revised Section 4.7 of the By-Laws, the Company also must take into account the Listing Rules, including the ``cure periods'' contained therein, if the Director is serving in the capacity of an ``independent director'' within the meaning of the Listing Rules. --------------------------------------------------------------------------- \32\ See Notices, supra note 6. \33\ See NASDAQ Rules 5605(b)(1), (c)(2), (d)(2), and (e). --------------------------------------------------------------------------- IV. Conclusion For the foregoing reasons, the Commission finds that the proposed rule changes, as modified by the amendments thereto, are consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, in the case of BX, NASDAQ, and Phlx, and to a registered clearing agency, in the case of BSECC and SCCP. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\34\ that the proposed rule changes (SR-BSECC-2015-002; SR-SCCP- 2015-02; SR-BX-2015-085; SR-NASDAQ-2015-160; SR-Phlx-2015-113), as modified by the amendments thereto, be, and hereby are, approved. --------------------------------------------------------------------------- \34\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\35\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \35\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2016-03669 Filed 2-22-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 35 / Tuesday, February 23, 2016 / Notices 9041
public in accordance with the change, or within such longer period up BSECC, SCCP, BX, and NASDAQ, the
provisions of 5 U.S.C. 552, will be to 90 days as the Commission may ‘‘SROs’’), filed with the Securities and
available for Web site viewing and designate if it finds such longer period Exchange Commission (‘‘Commission’’),
printing in the Commission’s Public to be appropriate and publishes its pursuant to Section 19(b)(1) of the
Reference Room, 100 F Street NE., reasons for so finding, or as to which the Securities Exchange Act of 1934
Washington, DC 20549 on official self-regulatory organization consents, (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
business days between the hours of the Commission shall either approve the proposed rule changes with respect to
10:00 a.m. and 3:00 p.m. Copies of such proposed rule change, disapprove the the By-Laws (‘‘By-Laws’’) of NASDAQ,
filing also will be available for proposed rule change, or institute Inc. (‘‘Company’’), the parent company
inspection and copying at the principal proceedings to determine whether the of the SROs. The proposed rule changes
office of the Exchange. All comments proposed rule change should be would revise certain requirements
received will be posted without change; disapproved. The 45th day after regarding Director 3 qualifications and
the Commission does not edit personal publication of the notice for this Director disqualification procedures for
identifying information from proposed rule change is February 18, the Company’s Board of Directors
submissions. You should submit only 2016. The Commission is extending this (‘‘Board’’). On December 29, 2015, each
information that you wish to make 45-day time period. SRO filed Amendment No. 1 to its
available publicly. All submissions The Commission finds it appropriate respective proposal.4 On December 30,
should refer to File Number SR–Phlx– to designate a longer period within 2015, Phlx filed Amendment No. 2 to its
2016–19, and should be submitted on or which to take action on the proposed proposal.5 The proposed rule changes,
before March 15, 2016. rule change so that it has sufficient time as modified by the amendments thereto,
For the Commission, by the Division of to consider this proposed rule change. were published for comment in the
Trading and Markets, pursuant to delegated Accordingly, the Commission, pursuant Federal Register on January 7, 2016.6
authority.17 to Section 19(b)(2) of the Act,5 The Commission did not receive any
Robert W. Errett, designates April 1, 2016, as the date by comment letters on the proposals. This
Deputy Secretary. which the Commission shall either order approves the proposed rule
[FR Doc. 2016–03661 Filed 2–22–16; 8:45 am]
approve or disapprove, or institute changes, as modified by the respective
proceedings to determine whether to amendments thereto.
BILLING CODE 8011–01–P
disapprove, the proposed rule change
(File No. SR–BATS–2015–105). II. Description of the Proposal
SECURITIES AND EXCHANGE For the Commission, by the Division of The Company proposes to amend
COMMISSION Trading and Markets, pursuant to delegated
authority.6 certain provisions of the By-Laws that
[Release No. 34–77159; File No. SR–BATS– relate to the qualification of Directors.
Robert W. Errett,
2015–105] First, the Company proposes to
Deputy Secretary.
Self-Regulatory Organizations; BATS [FR Doc. 2016–03666 Filed 2–22–16; 8:45 am] amend Section 4.3 of the By-Laws
Exchange, Inc.; Notice of Designation BILLING CODE 8011–01–P
(Qualifications), which sets forth the
of a Longer Period for Commission compositional requirements of the
Action on Proposed Rule Change to Board. Currently, Section 4.3 requires
Rule 14.11(i), Managed Fund Shares, SECURITIES AND EXCHANGE that the number of Non-Industry
To List and Trade the Shares of the COMMISSION Directors 7 on the Board equal or exceed
Elkhorn S&P GSCI Dynamic Roll [Release No. 34–77165; File Nos. SR– 1 15 U.S.C. 78s(b)(1).
Commodity ETF of Elkhorn ETF Trust BSECC–2015–002; SR–SCCP–2015–02; SR– 2 17 CFR 240.19b–4.
BX–2015–085; SR–NASDAQ–2015–160; SR– 3 ‘‘Director’’ means a member of the Company’s
February 17, 2016. Phlx–2015–113]
On December 18, 2015, BATS Board of Directors. See Article I(j) of the By-Laws.
4 Amendment No. 1 for each of the proposals
Exchange, Inc. (‘‘BATS’’) filed with the Self-Regulatory Organizations; Boston amended and replaced the original filing in its
Securities and Exchange Commission Stock Exchange Clearing Corporation; entirety. In Amendment No. 1, each SRO, among
(‘‘Commission’’), pursuant to Section Stock Clearing Corporation of other things, clarified the operation of the current
19(b)(1) of the Securities Exchange Act Philadelphia; NASDAQ OMX BX, Inc.; and proposed provisions of the By-Laws and how
the proposed rule change would operate in
of 1934 (‘‘Act’’) 1 and Rule 19b–4 The NASDAQ Stock Market LLC; conjunction with the Listing Rules (as herein
thereunder,2 a proposed rule change to NASDAQ OMX PHLX LLC; Order defined) of NASDAQ.
list and trade the shares of the Elkhorn Approving Proposed Rule Changes, as 5 On December 30, 2015, Phlx withdrew
S&P GSCI Dynamic Roll Commodity Modified by Amendments Thereto, To Amendment No. 1 for technical reasons and,
ETF of Elkhorn ETF Trust under BATS subsequently, filed Amendment No. 2. Amendment
Amend the By-Laws of NASDAQ, Inc. No. 2 amended and replaced the original filing in
Rule 14.11(i). The proposed rule change its entirety.
was published for comment in the February 17, 2016. 6 Securities Exchange Act Release Nos. 76806
Federal Register on January 4, 2016.3 I. Introduction (December 31, 2015), 81 FR 838 (SR–BSCC–2015–
The Commission has not received any 002); 76807 (December 31, 2015), 81 FR 828 (SR–
On December 21, 2015, each of the SCCP–2015–02); 76808 (December 31, 2015), 81 FR
comments on the proposal. Boston Stock Exchange Clearing 831 (SR–BX–2015–085); 76809 (December 31,
Section 19(b)(2) of the Act 4 provides 2015), 81 FR 817 (SR–NASDAQ–2015–160); 76810
Corporation (‘‘BSECC’’), Stock Clearing
that within 45 days of the publication of (December 31, 2015), 81 FR 841 (SR–Phlx–2015–
mstockstill on DSK4VPTVN1PROD with NOTICES
Corporation of Philadelphia (‘‘SCCP’’), 113) (collectively, ‘‘Notices’’).
notice of the filing of a proposed rule
NASDAQ OMX BX, Inc. (‘‘BX’’), The 7 Under the By-Laws, ‘‘Non-Industry Director’’ or
17 17 CFR 200.30–3(a)(12).
NASDAQ Stock Market LLC ‘‘Non-Industry committee member’’ means a
1 15 (‘‘NASDAQ’’), and NASDAQ OMX Director (excluding any Staff Director) or committee
U.S.C. 78s(b)(1). member who is (1) a Public Director or Public
2 17 CFR 240.19b–4. PHLX LLC (‘‘Phlx’’ and, together with committee member; (2) an Issuer Director or Issuer
3 See Securities Exchange Act Release No. 76776
committee member; or (3) any other individual who
(Dec. 28, 2015), 80 FR 120. 5 Id.
would not be an Industry Director or Industry
4 15 U.S.C. 78s(b)(2). 6 17 CFR 200.30–3(a)(31). committee member. See Article I(q) of the By-Laws.
VerDate Sep<11>2014 17:06 Feb 22, 2016 Jkt 238001 PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 E:\FR\FM\23FEN1.SGM 23FEN1](https://thefederalregister.org/doc/81_FR_9076/page/1.svg)
![Federal Register / Vol. 81, No. 35 / Tuesday, February 23, 2016 / Notices 9043
securities exchange.23 In particular, the Board were forced to replace a Director when deferring determinations
Commission finds that the proposed between annual meetings.28 regarding Director disqualification
rule changes by the Exchanges are Based on the foregoing, the pursuant to revised Section 4.7 of the
consistent with the requirements of Commission finds that the proposed By-Laws, the Company also must take
Section 6(b)(5) of the Act, which rule changes filed by BX, NASDAQ, and into account the Listing Rules,
requires, among other things, that an Phlx are consistent with the Act. including the ‘‘cure periods’’ contained
exchange’s rules be designed to prevent The Commission also finds that the therein, if the Director is serving in the
fraudulent and manipulative acts and proposed rule changes by BSECC and capacity of an ‘‘independent director’’
practices, to promote just and equitable SCCP are consistent with the within the meaning of the Listing Rules.
principles of trade, to remove requirements of the Act and the rules
and regulations thereunder applicable to IV. Conclusion
impediments to and perfect the
mechanism of a free and open market clearing agencies. Section 17A(b)(3)(F) For the foregoing reasons, the
and a national market system, and, in of the Act requires, among other things, Commission finds that the proposed
general, to protect investors and the that the rules of a clearing agency be rule changes, as modified by the
public interest.24 designed to protect investors and the amendments thereto, are consistent with
public interest.29 In addition, Rule the Act and the rules and regulations
The proposed amendment to Section 17Ad–22(d)(8) under the Act requires thereunder applicable to a national
4.3 of the By-Laws would allow, but no registered clearing agencies to establish, securities exchange, in the case of BX,
longer require, that the Board include an implement, maintain, and enforce NASDAQ, and Phlx, and to a registered
Issuer Director. The Exchanges state that written policies and procedures clearing agency, in the case of BSECC
the Company’s Directors are sufficiently reasonably designed to have governance and SCCP.
experienced and capable to handle arrangements that are clear and It is therefore ordered, pursuant to
issues relating to listed companies transparent.30 Here, BSECC and SCCP Section 19(b)(2) of the Act,34 that the
without requiring the explicit filed proposed rule changes to highlight proposed rule changes (SR–BSECC–
participation of an Issuer Director.25 changes being made to the By-Laws of 2015–002; SR–SCCP–2015–02; SR–BX–
Further, the Exchanges state that issues the Company,31 which indirectly owns 2015–085; SR–NASDAQ–2015–160; SR–
relating to listed companies are BSECC and SCCP. Therefore, the Phlx–2015–113), as modified by the
generally the province of NASDAQ, as proposed rule changes by BSECC and amendments thereto, be, and hereby are,
NASDAQ is the Company subsidiary SCCP help make clear and transparent approved.
that provides listing services.26 The the governance arrangements of the
Exchanges represent that NASDAQ’s Company and, thus, BSECC and SCCP, For the Commission, by the Division of
Trading and Markets, pursuant to delegated
board includes issuer representation, as which helps ensure investor protection authority.35
mandated by NASDAQ’s by-laws.27 and the public interest.
The Commission notes that the Robert W. Errett,
Under the proposals, the Company
would still retain the option to include Company, as an issuer listed on Deputy Secretary.
one or more Issuer Director on the NASDAQ, will continue to be required [FR Doc. 2016–03669 Filed 2–22–16; 8:45 am]
Board. to comply with NASDAQ’s Listing BILLING CODE 8011–01–P
Rules, including the provisions in the
The proposed amendment to Section
Listing Rules relating to Corporate
4.7 of the By-Laws would allow the SECURITIES AND EXCHANGE
Governance Requirements, which
Board to elect to defer determinations COMMISSION
requirements may differ from the By-
under Section 4.7 regarding Director
Laws. The SROs have represented that
disqualification until the next annual [Release No. 34–77164; File No. SR–FINRA–
the Company will continue to comply
meeting of stockholders, and to do so 2015–048]
with the Listing Rules following the
without being in violation of the By-
effectiveness of the proposed By-Law Self-Regulatory Organizations;
Laws. The By-Laws currently are silent
amendments.32 The Commission further Financial Industry Regulatory
regarding the required timeframe within
notes that the Listing Rules provide Authority, Inc.; Notice of Filing of
which the Board must make Director
generally that a majority of the directors Partial Amendment No. 1 and Order
disqualification determinations under
of a listed issuer must be ‘‘independent’’ Granting Accelerated Approval to a
Section 4.7. The Exchanges represent
as defined in those rules and that a Proposed Rule Change, as Modified by
that the proposal would aid the Board
listed issuer’s audit, compensation, and Partial Amendment No. 1, To Adopt
to act in the best interests of the
nominations committees must be FINRA Rule 6191(b) and Amend FINRA
Company and its stockholders as it
composed solely of directors who are Rule 7440 To Implement the Data
would allow the Board to continue to
‘‘independent.’’ 33 Because the Collection Requirements of the
make informed, deliberate decisions
Company’s securities are listed on Regulation NMS Plan To Implement a
regarding Director nominees and
NASDAQ, the Commission notes that, Tick Size Pilot Program
prevent the significant disruption that
the SROs believe would occur if the 28 Id. February 17, 2016.
29 15 U.S.C. 78q–1(b)(3)(F).
23 Certain provisions of the Company’s By-Laws 30 17 CFR 240.17Ad–22(d)(8). I. Introduction
are considered rules of BX, NASDAQ, and Phlx if 31 Certain provisions of the Company’s By-Laws
they are stated policies, practices, or
On November 13, 2015, the Financial
are considered rules of BSECC and SCCP if they are
mstockstill on DSK4VPTVN1PROD with NOTICES
interpretations, as defined in Rule 19b–4 under the stated policies, practices, or interpretations, as
Industry Regulatory Authority, Inc.
Act, of BX, NASDAQ, and Phlx, and must be filed defined in Rule 19b–4 under the Act, of BSECC and (‘‘FINRA’’) filed with the Securities and
with the Commission pursuant to Section 19(b) of SCCP, and must be filed with the Commission Exchange Commission (‘‘Commission’’
the Act and Rule 19b–4 thereunder. 15 U.S.C. pursuant to Section 19(b) of the Act and Rule 19b–
78s(b); 17 CFR 240.19b–4.
or ‘‘SEC’’), pursuant to Section 19(b)(1)
4 thereunder. 15 U.S.C. 78q–1(b); 17 CFR 240.19b–
24 15 U.S.C. 78f(b)(5).
4. See supra note 23.
of the Securities Exchange Act of 1934
25 See Notices, supra note 6. 32 See Notices, supra note 6.
26 Id. 33 See NASDAQ Rules 5605(b)(1), (c)(2), (d)(2), 34 15 U.S.C. 78s(b)(2).
27 Id. and (e). 35 17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014 17:06 Feb 22, 2016 Jkt 238001 PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 E:\FR\FM\23FEN1.SGM 23FEN1](https://thefederalregister.org/doc/81_FR_9076/page/3.svg)
Document Created: 2018-02-02 14:33:37
Document Modified: 2018-02-02 14:33:37
| 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 | 81 FR 9041 |
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