82 FR 31790 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Listing Standards for Special Purpose Acquisition Companies To Change Its Requirements With Respect to the Approval of a Business Combination

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 130 (July 10, 2017)

[Federal Register Volume 82, Number 130 (Monday, July 10, 2017)]
[Notices]
[Pages 31790-31792]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-14341]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81073; File No. SR-NYSE-2017-20]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Amend Listing Standards for Special Purpose Acquisition Companies To 
Change Its Requirements With Respect to the Approval of a Business 
Combination

July 3, 2017

I. Introduction

    On May 1, 2017, the New York Stock Exchange LLC (``NYSE'' or 
``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 amend listing standards for Special Purpose 
Acquisition Companies (``SPACs'') \3\ to amend the Exchange's listing 
standards with respect to its shareholder vote requirement for approval 
of a Business Combination. The proposed rule change was published for 
comment in the Federal Register on May 19, 2017.\4\ On May 23, 2017, 
NYSE filed Amendment No. 1 with the Commission to amend and restate its 
proposal to, among other things, require a majority of a SPAC's 
independent directors to approve a Business Combination, until a SPAC 
has satisfied the Business Combination condition.\5\ The Commission 
received no comments on the proposal. The Commission is publishing this 
notice on Amendment No. 1 and approving the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that throughout this order we have used 
the term ``SPAC'' or ``SPACs'', but these terms have the same 
meaning as ``Acquisition Company'' or ``Acquisition Companies'' 
which are the terms used for listing, and continued listing, in 
Section 102.06 of the NYSE Listed Company Manual (``Manual'').
    \4\ See Securities Exchange Act Release No. 80677 (May 15, 
2017), 82 FR 23123 (May 19, 2017) (``Notice'').
    \5\ In Amendment No. 1, the Exchange also proposed to add two 
new defined terms, ``Business Combination'' and ``Business 
Combination Condition'', using the existing language in Section 
102.06 of the Manual, concerning listing standards for SPACs, as the 
definition for these defined terms. Therefore, these changes merely 
provided clarification and do not substantively change the SPAC 
standards or the Business Combination requirements for SPACs. See 
also, note 6, infra.
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II. Description of the Proposal, as Modified by Amendment No. 1

A. General Background on SPACs

    A SPAC is a special purpose company that raises capital in an 
initial public offering (``IPO'') to enter into future undetermined 
business combinations (a ``Business Combination'') through mergers, 
capital stock exchanges, assets acquisitions, stock purchases, 
reorganizations or similar business combinations with one or more 
operating businesses or assets with a fair market value equal to at 
least 80% of the net assets of the SPAC held in trust (``Business 
Combination Condition''). Section 102.06 of the Manual sets forth the 
listing standards that apply to SPACs. In addition to requiring SPACs 
to meet certain quantitative standards, Section 102.06 of the Manual 
provides additional investor protection safeguards for shareholders 
investing in SPACs.\6\
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    \6\ See also, NYSE SPAC Continued Listing Standards, Section 
802.01B.
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B. Proposed Change to Shareholder Vote Requirements

    Section 102.06 of the Manual sets forth, among other things, the 
approval process of SPAC Business Combinations. If the SPAC holds a 
shareholder vote on a Business Combination for which the SPAC must file 
and furnish a proxy or information statement subject to Regulation 14A 
or 14C under the Act in advance of the shareholding meeting, the 
Business Combination must be approved by a majority of the votes cast 
by public shareholders at the shareholder meeting at which the Business 
Combination is being considered.\7\ Until the Business Combination 
Condition is met each Business Combination of a SPAC, utilizing the 
voting option,\8\ must be approved by a majority of the public 
shareholders. The Exchange proposes to amend the approval requirement 
from a majority of the votes cast by public shareholders to a majority 
of the votes cast at the shareholder meeting at which the Business 
Combination is being considered.
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    \7\ See Section 102.06(a) of the Manual. Shares held by 
directors, officers, or their immediate families and other 
concentrated holdings of 10 percent or more are excluded in 
calculating the number of publicly-held shares. See note (B) of 
Section 102.01 of the Manual.
    \8\ See note 15, infra.
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C. Proposed Change To Require Independent Director Approval

    The Exchange, in Amendment No. 1, also proposed to add a new 
requirement that each Business Combination to be approved by a majority 
of the SPAC's independent directors, until the SPAC satisfies the 
Business Combination Condition. The Exchange also made some clarifying 
changes to its proposal.\9\
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    \9\ See note 5, supra.
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    The Exchange represented that its amended proposal would harmonize 
its SPAC listing standards with those of the NASDAQ Stock Market and 
NYSE MKT. NYSE stated that both the NASDAQ Stock Market and NYSE MKT 
have comparable voting and independent director requirements for SPACs 
as those being proposed by the Exchange in the amended filing.\10\
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    \10\ See NASDAQ IM 5101-2 and Section 119 of the NYSE MKT 
Company Guide.
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III. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2017-20 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.


[[Page 31791]]


All submissions should refer to File Number SR-NYSE-2017-20. 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 the filing will also 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 publicly available. All 
submissions should refer to File Number SR-NYSE-2017-20 and should be 
submitted on or before July 31, 2017.

IV. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change, as 
modified by Amendment No. 1, and finds that it is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange and, in particular, the 
requirements of Section 6(b) of the Act and the rules and regulations 
thereunder.\11\ Specifically, the Commission finds that the proposal is 
consistent with the requirements of Sections 6(b)(5) of the Act,\12\ in 
particular, in that it is 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \11\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The proposal seeks to modify the requirements in the Manual with 
respect to how a SPAC may seek approval of a Business Combination in 
two ways. First, the Exchange is proposing to require a majority of all 
votes cast at a shareholder meeting to approve a Business Combination 
instead of a majority of votes cast by public shareholders. Second, the 
Exchange is proposing to require the approval of a majority of a SPAC's 
independent directors until the Business Combination Condition is 
satisfied.
    The Commission notes that the proposed changes are substantially 
similar to previously approved requirements of the NASDAQ Stock Market 
and NYSE MKT.\13\ These requirements have previously been subject to 
full public notice and comment period and have been found to be 
consistent with the Act. The Commission also notes, under the Exchange 
rules, that the public shareholders of an Exchange listed SPAC will 
continue to have a conversion right which allows them to convert their 
shares for a pro rata share of the cash held in the trust account if 
they vote against a Business Combination, provided that the Business 
Combination is approved and consummated.\14\ The Commission believes 
that this provision should help to provide protections to those 
shareholders who have voted against the Business Combination. Moreover, 
requiring a majority of the independent directors to approve a Business 
Combination should provide further protection for public shareholders 
by including an additional level of review.
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    \13\ See Securities Exchange Act Release No. 58228 (July 25, 
2008), 73 FR 44794 (July 31, 2008) (SR-Nasdaq-2008-013) and 
Securities Exchange Act Release No. 63366 (November 23, 2010), 75 FR 
74119 (November 30, 2010) (SR-NYSEAmex-2010-103). SR-NYSEAmex-2010-
103 filing was noticed and immediately effective upon filing. This 
was a copycat filing of the previously approved SR-Nasdaq-2008-013 
and was filed under Section 19(b)(3)(A)(iii) of the Act and Rule 
19b-4(f)(6). See 17 CFR 240.19b-4(f)(6).
    \14\ See Section 102.06(b) of the Manual.
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    In approving the same provisions for the Nasdaq Stock Market that 
NYSE is proposing, the Commission stated that the conversion rights 
will help to ensure that public shareholders who disagree with 
management's decisions with respect to a Business Combination have 
adequate remedies. In addition, the Commission noted that requiring the 
majority of the independent directors to approve a Business Combination 
should help to ensure that a Business Combination is entered into by 
the SPAC after a fair and impartial decision. The Commission continues 
to believe that these two provisions together, in addition to the other 
requirements in the Exchange's SPAC listing and continued listing 
standards both prior to, at the time of and after a Business 
Combination, should continue to adequately protect public investors of 
SPACs upon approval of the Exchange's proposal.\15\
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    \15\ The Commission notes that amending the vote requirement for 
approval of a Business Combination to all shareholders rather than 
public shareholders may also help prevent greenmail situations that 
have arisen over recent years with SPACs. NYSE recently adopted a 
tender offer option for a SPAC to complete a Business Combination, 
rather than a shareholder vote, to address greenmail concerns. 
Greenmail is a situation where a particular, or group of, hedge 
funds and other activist investors employ a strategy of acquiring an 
interest in a SPAC. These SPAC investors then use their voting 
rights as a threat to block a proposed Business Combination unless 
additional consideration is provided to them which is not provided 
to other shareholders. See Securities Exchange Act Release No. 80199 
(March 10, 2017), 82 FR 13905, 13907 (March 15, 2017) (The 
Commission approving a SPAC related filing describing the threat of 
greenmail).
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    Based on the foregoing, the Commission finds that the proposed 
changes to SPAC listing standards are consistent with the requirements 
of the Act.

V. Accelerated Approval of the Proposal, as Modified by Amendment No. 1

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\16\ for approving the proposed rule change, as modified by 
Amendment No. 1 thereto, prior to the 30th day after publication of 
Amendment No. 1 in the Federal Register. Amendment No. 1 requires a 
majority of a SPAC's independent directors to approve a Business 
Combination, until a SPAC has satisfied the Business Combination 
Condition and contains additional clarifying amendments.\17\ The 
Commission notes that the remainder of the proposed rule change is not 
being amended and was subject to a full notice-and-comment period. The 
Commission further notes that Amendment No. 1 would bring the proposal 
to align with the requirements of other national securities exchanges, 
whose proposals were subject to notice and comment, and does not raise 
any novel regulatory concerns. Accordingly, the Commission finds that 
good cause exists to approve the proposal, as modified by Amendment No. 
1, on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).
    \17\ See note 5, supra.

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[[Page 31792]]

VI. Conclusion

    It is therefore ordered that pursuant to Section 19(b)(2) of the 
Act \18\ that the proposed rule change, as modified by Amendment No. 1, 
(SR-NYSE-2017-20) be, and hereby is, approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-14341 Filed 7-7-17; 8:45 am]
 BILLING CODE 8011-01-P