82 FR 40181 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to Capital Acquisition Broker Rules 203 (Engaging in Distribution and Solicitation Activities With Government Entities) and 458 (Books and Records Requirements for Government Distribution and Solicitation Activities)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 163 (August 24, 2017)
Federal Register Volume 82, Issue 163 (August 24, 2017)
| Page Range | 40181-40183 | |
| FR Document | 2017-17910 |
[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)] [Notices] [Pages 40181-40183] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-17910] [[Page 40181]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81438; File No. SR-FINRA-2017-027] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to Capital Acquisition Broker Rules 203 (Engaging in Distribution and Solicitation Activities With Government Entities) and 458 (Books and Records Requirements for Government Distribution and Solicitation Activities) August 18, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on August 17, 2017, Financial Industry Regulatory Authority, Inc. (``FINRA'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to adopt Capital Acquisition Broker Rules 203 (Engaging in Distribution and Solicitation Activities with Government Entities) and 458 (Books and Records Requirements for Government Distribution and Solicitation Activities) that would apply established ``pay-to-play'' and related rules to the activities of member firms that have elected to be governed by the Capital Acquisition Broker (``CAB'') Rules and that engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisers. The text of the proposed rule change is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FINRA Pay-to-Play Rules In July 2010, the SEC adopted Rule 206(4)-5 under the Investment Advisers Act of 1940 addressing pay-to-play practices \3\ by investment advisers (the ``SEC Pay-to-Play Rule'').\4\ The SEC Pay-to-Play Rule prohibits, in part, an investment adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any person to solicit a government entity for investment advisory services on behalf of the investment adviser unless the person is a ``regulated person.'' \5\ A ``regulated person'' includes a member firm, provided that: (a) FINRA rules prohibit member firms from engaging in distribution or solicitation activities if political contributions have been made; and (b) the SEC finds, by order, that such rules impose substantially equivalent or more stringent restrictions on member firms than the SEC Pay-to-Play Rule imposes on investment advisers and that such rules are consistent with the objectives of the SEC Pay-to-Play Rule.\6\ --------------------------------------------------------------------------- \3\ ``Pay-to-play'' practices typically involve a person making cash or in-kind political contributions (or soliciting or coordinating others to make such contributions) to help finance the election campaigns of state or local officials or bond ballot initiatives as a quid pro quo for the receipt of government contracts. See FINRA Regulatory Notice 16-40 (October 2016) at 9, note 1. \4\ See Investment Advisers Act Release No. 3043 (July 1, 2010), 75 FR 41018 (July 14, 2010) (S7-18-09) (Political Contributions by Certain Investment Advisers) (``SEC Pay-to-Play Rule Adopting Release''). See also Investment Advisers Act Release No. 3221 (June 22, 2011), 76 FR 42950 (July 19, 2011) (S7-36-10) (Rules Implementing Amendments to the Investment Advisers Act of 1940); Investment Advisers Act Release No. 3418 (June 8, 2012), 77 FR 35263 (June 13, 2012) (S7-18-09) (Political Contributions by Certain Investment Advisers; Ban on Third Party Solicitation; Extension of Compliance Date). \5\ See Investment Advisers Act Rule 206(4)-5(a)(2)(i)(A), 17 CFR 275.206(4)-5(a)(2)(i)(A). \6\ See Investment Advisers Act Rule 206(4)-5(f)(9), 17 CFR 275.206(4)-5(f)(9). A ``regulated person'' also includes SEC- registered investment advisers and SEC-registered municipal advisors, subject to specified conditions. --------------------------------------------------------------------------- Based on this regulatory framework, on August 25, 2016, the SEC approved FINRA Rules 2030 and 4580 to establish a comprehensive regime to regulate the activities of member firms that engage in distribution or solicitation activities with government entities on behalf of investment advisers.\7\ On September 20, 2016, the SEC, by order, found that FINRA Rule 2030 imposes substantially equivalent or more stringent restrictions on member firms than the SEC Pay-to-Play Rule imposes on investment advisers and is consistent with the objectives of the SEC Pay-to-Play Rule.\8\ These rules enable member firms to continue to engage in distribution and solicitation activities with government entities on behalf of investment advisers while at the same time deterring member firms from engaging in pay-to-play practices. --------------------------------------------------------------------------- \7\ See Securities Exchange Act Release No. 78683 (August 25, 2016), 81 FR 60051 (August 31, 2016) (SR-FINRA-2015-056) (Approval Order). See also Securities Exchange Act Release No. 76767 (December 24, 2015), 80 FR 81650 (December 30, 2015) (SR-FINRA-2015-056) (Proposing Release). \8\ See Investment Advisers Act Release No. 4532 (September 20, 2016), 81 FR 66526 (September 28, 2016) (S7-16-16). --------------------------------------------------------------------------- In October 2016, FINRA published a Regulatory Notice announcing Commission approval of FINRA Rules 2030 and 4580.\9\ The Notice also announced that Rules 2030 and 4580 will become effective on August 20, 2017. --------------------------------------------------------------------------- \9\ See FINRA Regulatory Notice 16-40 (October 2016). --------------------------------------------------------------------------- FINRA Capital Acquisition Broker Rules On August 18, 2016, the SEC approved \10\ a separate set of FINRA rules for firms that meet the definition of a ``capital acquisition broker'' and that elect to be governed under this rule set. CABs are member firms that engage in a limited range of activities, essentially advising companies and private equity funds on capital raising and corporate restructuring, and acting as placement agents for sales of unregistered securities to institutional investors under limited conditions. Member firms that elect to be governed under the CAB rule set are not permitted, among other things, to carry or maintain customer accounts, handle customers' funds or securities, accept customers' trading orders, or engage in proprietary trading or market- making. --------------------------------------------------------------------------- \10\ See Securities Exchange Act Release No. 78617 (August 18, 2016), 81 FR 57948 (August 24, 2016) (SR-FINRA-2015-054) (Order Approving Rule Change as Modified by Amendment Nos. 1 and 2 to Adopt FINRA Capital Acquisition Broker Rules). --------------------------------------------------------------------------- The CAB Rules became effective on April 14, 2017. In order to provide new CAB applicants with lead time to apply for FINRA membership and obtain the necessary qualifications and registrations, CAB Rules 101-125 became effective on January 3, 2017. [[Page 40182]] Addition of FINRA Pay-to-Play Rules to CAB Rulebook The CAB Rules subject CABs to a number of FINRA Rules, but do not expressly provide that FINRA Rules 2030 and 4580 apply to CABs. FINRA believes that the CAB Rules should be clarified to reflect that FINRA Rule 2030 and the related record-keeping requirements of FINRA Rule 4580 apply to CABs. As stated above, the SEC Pay-to-Play Rule prohibits, in part, an investment adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any person to solicit a government entity for investment advisory services on behalf of the investment adviser unless the person is a ``regulated person.'' The SEC Pay-to-Play Rule defines a ``regulated person'' to include a member firm subject to a FINRA pay-to-play rule. The proposed rule change would make clear that CABs are subject to FINRA's pay-to-play rule and, therefore, that CABs, similarly to non- CAB member firms, are ``regulated persons'' that can engage in distribution and solicitation activities with government entities on behalf of investment advisers in accordance with the SEC's Pay-to-Play Rule, while at the same time deterring CABs from engaging in pay-to- play practices. To make this clarification, FINRA proposes the addition of CAB Rule 203, which would provide that all capital acquisition brokers are subject to FINRA Rule 2030. CAB Rule 458 would provide that all capital acquisition brokers are subject to FINRA Rule 4580. Effective Date If the Commission approves the proposed rule change, FINRA will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following Commission approval. The effective date will be no later than 30 days following publication of the Regulatory Notice announcing Commission approval. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,\11\ which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78o-3(b)(6). --------------------------------------------------------------------------- FINRA believes that the proposed rule change would make clear that CABs are subject to the same regime that regulates the activities of non-CAB member firms that engage in distribution or solicitation activities with government entities on behalf of investment advisers, while deterring CABs from engaging in pay-to-play practices. In the absence of this proposed rule change, under the SEC's Pay-to-Play Rule, CABs could be prohibited from receiving compensation for engaging in distribution and solicitation activities with government entities on behalf of investment advisers following the effective date of FINRA Rule 2030 because the rule set for CABs does not expressly provide that FINRA Rule 2030 applies to CABs. FINRA believes that clarifying that FINRA Rule 2030 and the related record-keeping requirements of FINRA Rule 4580 apply to CABs is a more effective regulatory response to the concerns identified by the SEC regarding third-party solicitations than an outright ban on such activity. Thus, the proposed rule change is intended to make clear that CABs, similarly to non-CAB member firms, are ``regulated persons'' that can engage in distribution and solicitation activities with government entities on behalf of investment advisers in accordance with the SEC Pay-to-Play rule, while at the same time deterring such firms from engaging in pay-to-play practices. B. Self-Regulatory Organization's Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. While CABs have a more limited scope of permitted activities relative to other member firms, they still may engage, for example, in providing advice to municipalities either as issuer or as participant in the issuance. The proposed rule change would allow CABs to be subject to the same pay-to-play rules as other non-CAB member firms. As such, the economic impacts associated with this proposal are all contemplated in the Economic Impact Assessment accompanying the filing of FINRA Rules 2030 and 4580. In this regard, FINRA's Economic Impact Assessment in the Proposing Release for FINRA Rules 2030 and 4580 considered the impact on all FINRA member firms, including firms that at that time engaged solely in activities that were later deemed permissible for CABs.\12\ --------------------------------------------------------------------------- \12\ See supra note 7. See also Securities Exchange Act Release No. 76767 (December 24, 2015), 80 FR 81650, 81656-81658 (December 30, 2015) (SR-FINRA-2015-056) (at the time of the Economic Impact Assessment, the SEC had not approved the separate set of rules for CABs). --------------------------------------------------------------------------- C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-FINRA-2017-027 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-FINRA-2017-027. 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 [[Page 40183]] 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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-FINRA-2017-027 and should be submitted on or before September 14, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\13\ --------------------------------------------------------------------------- \13\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2017-17910 Filed 8-23-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices 40181
SECURITIES AND EXCHANGE proposed rule change and discussed any a comprehensive regime to regulate the
COMMISSION comments it received on the proposed activities of member firms that engage in
rule change. The text of these statements distribution or solicitation activities
[Release No. 34–81438; File No. SR–FINRA–
may be examined at the places specified with government entities on behalf of
2017–027]
in Item IV below. FINRA has prepared investment advisers.7 On September 20,
Self-Regulatory Organizations; summaries, set forth in sections A, B, 2016, the SEC, by order, found that
Financial Industry Regulatory and C below, of the most significant FINRA Rule 2030 imposes substantially
Authority, Inc.; Notice of Filing of a aspects of such statements. equivalent or more stringent restrictions
Proposed Rule Change Relating to on member firms than the SEC Pay-to-
A. Self-Regulatory Organization’s
Capital Acquisition Broker Rules 203 Play Rule imposes on investment
Statement of the Purpose of, and
(Engaging in Distribution and advisers and is consistent with the
Statutory Basis for, the Proposed Rule
Solicitation Activities With objectives of the SEC Pay-to-Play Rule.8
Change
Government Entities) and 458 (Books These rules enable member firms to
and Records Requirements for 1. Purpose continue to engage in distribution and
Government Distribution and FINRA Pay-to-Play Rules solicitation activities with government
Solicitation Activities) entities on behalf of investment advisers
In July 2010, the SEC adopted Rule while at the same time deterring
August 18, 2017. 206(4)–5 under the Investment Advisers member firms from engaging in pay-to-
Pursuant to Section 19(b)(1) of the Act of 1940 addressing pay-to-play play practices.
Securities Exchange Act of 1934 practices 3 by investment advisers (the In October 2016, FINRA published a
(‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule ‘‘SEC Pay-to-Play Rule’’).4 The SEC Pay- Regulatory Notice announcing
19b–4 thereunder,2 notice is hereby to-Play Rule prohibits, in part, an Commission approval of FINRA Rules
given that on August 17, 2017, Financial investment adviser and its covered 2030 and 4580.9 The Notice also
Industry Regulatory Authority, Inc. associates from providing or agreeing to announced that Rules 2030 and 4580
(‘‘FINRA’’) filed with the Securities and provide, directly or indirectly, payment will become effective on August 20,
Exchange Commission (‘‘SEC’’ or to any person to solicit a government 2017.
‘‘Commission’’) the proposed rule entity for investment advisory services
on behalf of the investment adviser FINRA Capital Acquisition Broker Rules
change as described in Items I, II, and
III below, which Items have been unless the person is a ‘‘regulated On August 18, 2016, the SEC
prepared by FINRA. The Commission is person.’’ 5 A ‘‘regulated person’’ approved 10 a separate set of FINRA
publishing this notice to solicit includes a member firm, provided that: rules for firms that meet the definition
comments on the proposed rule change (a) FINRA rules prohibit member firms of a ‘‘capital acquisition broker’’ and
from interested persons. from engaging in distribution or that elect to be governed under this rule
solicitation activities if political set. CABs are member firms that engage
I. Self-Regulatory Organization’s contributions have been made; and (b) in a limited range of activities,
Statement of the Terms of Substance of the SEC finds, by order, that such rules essentially advising companies and
the Proposed Rule Change impose substantially equivalent or more private equity funds on capital raising
FINRA is proposing to adopt Capital stringent restrictions on member firms and corporate restructuring, and acting
Acquisition Broker Rules 203 (Engaging than the SEC Pay-to-Play Rule imposes as placement agents for sales of
in Distribution and Solicitation on investment advisers and that such unregistered securities to institutional
Activities with Government Entities) rules are consistent with the objectives investors under limited conditions.
and 458 (Books and Records of the SEC Pay-to-Play Rule.6 Member firms that elect to be governed
Requirements for Government Based on this regulatory framework, under the CAB rule set are not
Distribution and Solicitation Activities) on August 25, 2016, the SEC approved permitted, among other things, to carry
that would apply established ‘‘pay-to- FINRA Rules 2030 and 4580 to establish or maintain customer accounts, handle
play’’ and related rules to the activities customers’ funds or securities, accept
of member firms that have elected to be
3 ‘‘Pay-to-play’’ practices typically involve a customers’ trading orders, or engage in
person making cash or in-kind political proprietary trading or market-making.
governed by the Capital Acquisition contributions (or soliciting or coordinating others to
Broker (‘‘CAB’’) Rules and that engage The CAB Rules became effective on
make such contributions) to help finance the
in distribution or solicitation activities election campaigns of state or local officials or bond April 14, 2017. In order to provide new
for compensation with government ballot initiatives as a quid pro quo for the receipt CAB applicants with lead time to apply
entities on behalf of investment
of government contracts. See FINRA Regulatory for FINRA membership and obtain the
Notice 16–40 (October 2016) at 9, note 1. necessary qualifications and
advisers. 4 See Investment Advisers Act Release No. 3043
The text of the proposed rule change (July 1, 2010), 75 FR 41018 (July 14, 2010) (S7–18–
registrations, CAB Rules 101–125
is available on FINRA’s Web site at 09) (Political Contributions by Certain Investment became effective on January 3, 2017.
http://www.finra.org, at the principal Advisers) (‘‘SEC Pay-to-Play Rule Adopting
Release’’). See also Investment Advisers Act Release 7 See Securities Exchange Act Release No. 78683
office of FINRA and at the No. 3221 (June 22, 2011), 76 FR 42950 (July 19, (August 25, 2016), 81 FR 60051 (August 31, 2016)
Commission’s Public Reference Room. 2011) (S7–36–10) (Rules Implementing (SR–FINRA–2015–056) (Approval Order). See also
Amendments to the Investment Advisers Act of Securities Exchange Act Release No. 76767
II. Self-Regulatory Organization’s 1940); Investment Advisers Act Release No. 3418 (December 24, 2015), 80 FR 81650 (December 30,
Statement of the Purpose of, and (June 8, 2012), 77 FR 35263 (June 13, 2012) (S7– 2015) (SR–FINRA–2015–056) (Proposing Release).
Statutory Basis for, the Proposed Rule 18–09) (Political Contributions by Certain 8 See Investment Advisers Act Release No. 4532
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Investment Advisers; Ban on Third Party (September 20, 2016), 81 FR 66526 (September 28,
Change Solicitation; Extension of Compliance Date). 2016) (S7–16–16).
In its filing with the Commission, 5 See Investment Advisers Act Rule 206(4)– 9 See FINRA Regulatory Notice 16–40 (October
FINRA included statements concerning 5(a)(2)(i)(A), 17 CFR 275.206(4)–5(a)(2)(i)(A). 2016).
6 See Investment Advisers Act Rule 206(4)–5(f)(9), 10 See Securities Exchange Act Release No. 78617
the purpose of and basis for the 17 CFR 275.206(4)–5(f)(9). A ‘‘regulated person’’ (August 18, 2016), 81 FR 57948 (August 24, 2016)
also includes SEC-registered investment advisers (SR–FINRA–2015–054) (Order Approving Rule
1 15 U.S.C. 78s(b)(1). and SEC-registered municipal advisors, subject to Change as Modified by Amendment Nos. 1 and 2
2 17 CFR 240.19b–4. specified conditions. to Adopt FINRA Capital Acquisition Broker Rules).
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![Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices 40183
proposed rule change between the Federal Register on June 20, 2017.4 The trading in the private market for such
Commission and any person, other than Commission received one comment on security; and (iv) Rule 123D to specify
those that may be withheld from the the proposed rule change.5 On August 3, that the Exchange may declare a
public in accordance with the 2017, the Commission extended the regulatory halt in a security that is the
provisions of 5 U.S.C. 552, will be time period within which to approve subject of an initial listing on the
available for Web site viewing and the proposed rule change, disapprove Exchange. The proposed rule change is
printing in the Commission’s Public the proposed rule change, or institute available on the Exchange’s Web site at
Reference Room, 100 F Street NE., proceedings to determine whether to www.nyse.com, at the principal office of
Washington, DC 20549, on official approve or disapprove the proposed the Exchange, and at the Commission’s
business days between the hours of 10 rule change to September 18, 2017.6 Public Reference Room.
a.m. and 3 p.m. Copies of such filing The Exchange filed Amendment No. 2
also will be available for inspection and to the proposed rule change on August II. Self-Regulatory Organization’s
copying at the principal office of 16, 2017, which amended and replaced Statement of the Purpose of, and
FINRA. All comments received will be the proposed rule change.7 The Statutory Basis for, the Proposed Rule
posted without change; the Commission Commission is publishing this notice to Change
does not edit personal identifying solicit comments on the proposed rule In its filing with the Commission, the
information from submissions. You change, as modified by Amendment No. self-regulatory organization included
should submit only information that 2, from interested persons.8 statements concerning the purpose of,
you wish to make available publicly. All and basis for, the proposed rule change
I. Self-Regulatory Organization’s
submissions should refer to File and discussed any comments it received
Statement of the Terms of Substance of
Number SR–FINRA–2017–027 and on the proposed rule change. The text
the Proposed Rule Change
should be submitted on or before of those statements may be examined at
September 14, 2017. The Exchange proposes to amend: (i) the places specified in Item IV below.
For the Commission, by the Division of
Footnote (E) to Section 102.01B of the The Exchange has prepared summaries,
Trading and Markets, pursuant to delegated NYSE Listed Company Manual (the set forth in sections A, B, and C below,
authority.13 ‘‘Manual’’) to modify the provisions of the most significant parts of such
Robert W. Errett, relating to the qualification of statements.
Deputy Secretary. companies listing without a prior
Exchange Act registration; (ii) Rule 15 to A. Self-Regulatory Organization’s
[FR Doc. 2017–17910 Filed 8–23–17; 8:45 am] Statement of the Purpose of, and the
add a Reference Price for when a
BILLING CODE 8011–01–P
security is listed under Footnote (E) to Statutory Basis for, the Proposed Rule
Section 102.01B; (iii) Rule 104 to Change
SECURITIES AND EXCHANGE specify DMM requirements when a 1. Purpose
COMMISSION security is listed under Footnote (E) to
Section 102.01B and there has been no The Exchange proposes to amend: (i)
[Release No. 34–81440; File No. SR–NYSE– Footnote (E) to Section 102.01B of the
2017–30] 4 See Securities Exchange Act Release No. 809333 Manual to modify the provisions
(June 15, 2017), 82 FR 28200 (June 20, relating to the qualification of
Self-Regulatory Organizations; New 2017)(‘‘Notice’’). companies listing without a prior
York Stock Exchange LLC; Notice of 5 See letter from James J. Angel, Associate
Exchange Act registration; (ii) Rule 15 to
Filing of Amendment No. 2 to Professor of Finance, Georgetown University, dated
July 28, 2017.
add a Reference Price for when a
Proposed Rule Change To Amend 6 See Securities Exchange Act Release No. 81309 security is listed under Footnote (E) to
Section 102.01B of the NYSE Listed (August 3, 2017), 82 FR 37244 (August 9, 2017). Section 102.01B; (iii) Rule 104 to
Company Manual To Provide for the 7 The Exchange filed Amendment No. 1 to the specify DMM requirements when a
Listing of Companies That List Without proposed rule change on July 28, 2017 and security is listed under Footnote (E) to
a Prior Exchange Act Registration and withdrew Amendment No. 1 on August 16, 2017.
Section 102.10B and there has been no
8 In Amendment No. 2, the Exchange, among
That Are Not Listing in Connection trading in the private market for such
other things, provides that a Designated Market
With an Underwritten Initial Public Maker (‘‘DMM’’) can only use a trading price in a security; and (iv) Rule 123D to specify
Offering and Related Changes to Rules private placement market as a reference price and that the Exchange may declare a
15, 104, and 123D to facilitate a fair and orderly opening on the first regulatory halt in a security that is the
day of trading in a security being listed under
August 18, 2017. proposed Footnote (E) to Section 102.01(B) of the subject of an initial listing on the
Pursuant to Section 19(b)(1) 1 of the NYSE’s Listed Company Manual (‘‘non-IPO new Exchange.9
listing’’) if the private placement market has had
Securities Exchange Act of 1934 (the recent sustained history of trading prior to listing. Amendments to Footnote (E) to Section
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 If there is no recent sustained history of trading 102.01B
notice is hereby given that, on June 13, prior to listing in the private placement market, the
2017, New York Stock Exchange LLC proposal states that the DMM will consult with a Generally, the Exchange expects to
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with financial advisor to the issuer of the security to list companies in connection with a firm
establish a reference price pursuant to Exchange commitment underwritten initial public
the Securities and Exchange Rule 15 and facilitate a fair and orderly opening
Commission (the ‘‘Commission’’) the pursuant to Exchange Rule 104. Amendment No. 2,
offering (‘‘IPO’’), upon transfer from
proposed rule change as described in also amended the proposal to delete the proposed another market, or pursuant to a spin-
Items I and II below, which Items have regulatory halt provision for an initial public off. Companies listing in connection
offering so that the proposed new regulatory halt with an IPO must demonstrate that they
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been prepared by the self-regulatory authority is only applicable to a security that is the
organization. The proposed rule change subject of a non-IPO new listing. Amendment No
have $40 million in market value of
was published for comment in the 2 also adds language to make clear that the
regulatory halt authority for a non-IPO new listing 9 The Exchange has previously filed this proposal
13 17
will be terminated when the DMM opens the as SR–NYSE–2017–30. See Securities Exchange Act
CFR 200.30–3(a)(12). security for trading. The proposed new regulatory Release No. 80933 (June 15, 2017), 82 FR 28200
1 15 U.S.C. 78s(b)(1).
halt will, therefore, only apply during the pre- (June 20, 2017) (SR–NYSE–2017–30). This
2 15 U.S.C. 78a.
opening period on the first day of trading on the Amendment No. 2 replaces and supersedes the
3 17 CFR 240.19b–4. Exchange in a non-IPO new listing. original filing of SR–NYSE–2017–30 in its entirety.
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Document Created: 2018-10-24 12:36:13
Document Modified: 2018-10-24 12:36:13
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