[Federal Register: November 19, 2002 (Volume 67, Number 223)]
[Notices]
[Page 69789-69793]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no02-133]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46802; File No. SR-NYSE-2001-46]
Self-Regulatory Organizations; Notice of Filing of a Proposed
Rule Change and Amendment Nos. 1 and 2 Thereto by the New York Stock
Exchange, Inc. Amending Section 804 to the NYSE Listed Company Manual
and NYSE Rule 499
November 8, 2002.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 29, 2001, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. On October 30, 2002, the Exchange submitted Amendment No. 1
to the proposed rule change.\3\ On November 7, 2002, the Exchange
submitted Amendment No. 2 to the proposed rule change.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE,
to Nancy Sanow, Assistant Director, Division of Market Regulation
(``Division''), Commission, dated October 29, 2002 (``Amendment No.
1''). Amendment No. 1 replaces the original proposed rule change in
its entirety, and clarifies: (1) The scope of the NYSE Committee for
Review's review on appeal; (2) that neither document discovery nor
depositions are available; and (3) the rationale for requiring
payment of a non-refundable fee in connection with a request for
review.
\4\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE,
to Nancy Sanow, Assistant Director, Division, Commission
(``Amendment No. 2''). Amendment No. 2 makes a technical correction
to the proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Section 804 of the NYSE Listed
Company Manual and NYSE Rule 499 to make the procedures for appealing
delisting determinations more efficient and effective, and to charge
issuers a non-refundable appeal fee in the amount of $20,000. Below is
the text of the proposed rule change. Proposed new language is
italicized; proposed deletions are in brackets.
* * * * *
804.00 Procedure for Delisting
[sbull] If the Exchange staff should determine that a security be
removed from the list, it will so notify the issuer in writing,
describing the basis for such decision and the specific policy or
criterion under which such action is to be taken. The Exchange will
simultaneously (1) issue a press release disclosing the company's
status and basis for the Exchange's determination and (2) begin daily
dissemination of ticker and information notices identifying the
security's status, and include similar information on the Exchange's
web site.
[sbull] The notice to the issuer shall also inform the issuer of
its right to a review of the determination by a Committee of the Board
of Directors of the Exchange (comprised of a majority of public
Directors), provided a written request for such a review is filed with
the Secretary of the Exchange within ten business days after receiving
the aforementioned notice. Such written request must state with
specificity the grounds on which the issuer intends to challenge the
determination of the Exchange staff, must indicate whether the issuer
desires to make an oral presentation to the Committee, and must be
accompanied or preceded by payment of a non-refundable appeal fee in
the amount of $20,000. [Such review will be conducted on the next
monthly Review Day which is at least 25 business days from the date the
request for review is filed with the Secretary of the Exchange. If the
next Review Day is in less than 25 business days, the review will be
scheduled for the following Review Day.]
[sbull] If the issuer does not request a review within the
specified period, the Exchange shall suspend trading in the security
and an application shall be submitted by the Exchange staff to the
Securities and Exchange Commission to strike the security from listing
and a copy of such application shall be furnished to the issuer in
accordance with Section 12 of the Securities Exchange Act of 1934 and
the rules promulgated thereunder.
[sbull] If a review is requested, the review will be [conducted by
a Committee of the Board of Directors.] scheduled for the first Review
Day which is at least 25 business days from the date the request for
review is filed with the Secretary of the Exchange, unless the next
subsequent Review Day must be selected to accommodate the Committee's
schedule. The Committee's review shall be based on oral argument (if
any) and the written briefs and accompanying materials submitted by the
parties. The company shall not be permitted to argue grounds for
reversing the staff's decision that are not identified in its request
for review, however, the company may ask the Committee for leave to
adduce additional evidence or raise arguments not identified in its
request for review, if it can demonstrate that the proposed additional
evidence or new arguments are material to its request for review and
that there was reasonable ground for not adducing such evidence or
identifying such issues earlier. This section shall not, however, (i)
authorize a company to seek to file a reply brief in support of its
request for review or (ii) be deemed to limit the staff's response to a
request for review to the issues raised in the request for review. Upon
review of a properly supported request, the Committee may in its sole
discretion permit new arguments or additional evidence to be raised
before the Committee. Following such event, the Committee may, as it
deems appropriate, (i) itself decide the matter, or (ii) remand the
matter to the
[[Page 69790]]
staff for further review. Should the Committee remand the matter to the
staff, the Committee will instruct the staff to (i) give prompt
consideration to the matter, and, (ii) complete its review and inform
the Committee of its conclusions no later than seven (7) days before
the first Review Day which is at least 25 business days from the date
the matter is remanded to the staff.
[sbull] A request for review will ordinarily stay the suspension of
the subject security pending the review, but the Exchange staff may
immediately suspend from trading any security pending review should it
determine that such immediate suspension is necessary or appropriate in
the public interest, for the protection of investors, or to promote
just and equitable principles of trade.
[sbull] Promptly following receipt of a request for review and the
appeal fee, the Exchange's Office of the General Counsel will notify
the issuer and the Exchange staff of the scheduled Review Day and the
briefing schedule. The schedule will be set by the Office of the
General Counsel so as to provide the Committee adequate time to review
materials submitted to it, with the remaining time split so as to
afford the issuer and the Exchange staff substantially equal periods
for the submission of a brief by the issuer and a responsive brief by
the Exchange staff. [Any brief or memorandum dealing with the issuer's
or the Exchange staff's position as well as any other written material
which the aforementioned parties want the Committee to consider must be
received by the Office of the General Counsel of the Exchange within 17
business days from the date the issuer receives the notice of its right
to a review so that such material can be furnished to the members of
the Committee.] Each party must [also serve such materials] submit its
brief and any accompanying materials to [on]both its counterparty
[simultaneously with the submission to] and to the Office of the
General Counsel of the Exchange, and must do so by means calculated to
ensure the party's submission reaches both the Office of the General
Counsel and the counterparty at or prior to the deadline specified in
the briefing schedule. [The counterparty service must be made in the
same manner as such material is filed with the Office of the General
Counsel of the Exchange.]
[sbull] The Committee, in its sole discretion upon written motion
of either party or upon its own motion, may extend any of the time
periods specified above. The Committee in its sole discretion [and] may
permit the parties to make oral presentations on their Review Day in
accordance with such procedures as the Committee may specify at the
time. If the Committee denies a request by either party to make an oral
presentation, its reason for doing so must be included in its written
decision on the review, which decision is provided to all parties.
Document discovery and depositions will not be permitted.
[sbull] If the Committee decides that the security of the issuer
should be removed from listing, the Exchange shall suspend trading in
the security as soon as practicable and an application shall be
submitted by the Exchange to the Securities and Exchange Commission to
strike the security from listing and registration and a copy of such
application shall be furnished to the issuer in accordance with Section
12 of the Securities Exchange Act of 1934 and the rules promulgated
thereunder. If the Committee decides that the security should not be
removed from listing, the issuer will receive from the Exchange a
notice to that effect.
* * * * *
Rule 499
Delisting of Securities
Suspension from Dealings or Removal From List by Action of the Exchange
* * * * *
* * * Supplementary Material:
.70 Procedure for Delisting.
a. If the Exchange staff should determine that a security be
removed from the list, it will so notify the issuer in writing,
describing the basis for such decision and the specific policy or
criterion under which such action is to be taken. The Exchange will
simultaneously: (1) Issue a press release disclosing the company's
status and basis for the Exchange' s determination and (2) begin
appending a suffix to the security's ticker symbol identifying the
security's status. The notice to the issuer shall also inform the
issuer of its right to a review of the determination by a Committee of
the Board of Directors of the Exchange (comprised of a majority of
public Directors), provided a written request for such a review is
filed with the Secretary of the Exchange within ten business days after
receiving the aforementioned notice. Such written request must state
with specificity the grounds on which the issuer intends to challenge
the determination of the Exchange staff, must indicate whether the
issuer desires to make an oral presentation to the Committee, and must
be accompanied or preceded by payment of a non-refundable appeal fee in
the amount of $20,000. [Such review will be conducted on the next
monthly Review Day which is at least 25 business days from the date the
request for review is filed with the Secretary of the Exchange. If the
next Review Day is in less than 25 business days, the review will be
scheduled for the following Review Day.]
b. If the issuer does not request a review within the specified
period, the Exchange shall suspend trading in the security and an
application shall be submitted by the Exchange staff to the Securities
and Exchange Commission to strike the security from listing and a copy
of such application shall be furnished to the issuer in accordance with
Section 12 of the Securities Exchange Act of 1934 and the rules
promulgated thereunder.
c. If a review is requested, the review will be [conducted by a
Committee of the Board of Directors.] scheduled for the first Review
Day which is at least 25 business days from the date the request for
review is filed with the Secretary of the Exchange, unless the next
subsequent Review Day must be selected to accommodate the Committee's
schedule. The Committee's review shall be based on oral argument (if
any) and the written briefs and accompanying materials submitted by the
parties. The company shall not be permitted to argue grounds for
reversing the staff's decision that are not identified in its request
for review, however, the company may ask the Committee for leave to
adduce additional evidence or raise arguments not identified in its
request for review, if it can demonstrate that the proposed additional
evidence or new arguments are material to its request for review and
that there was reasonable ground for not adducing such evidence or
identifying such issues earlier. This section shall not, however, (i)
authorize a company to seek to file a reply brief in support of its
request for review or (ii) be deemed to limit the staff's response to a
request for review to the issues raised in the request for review. Upon
review of a properly supported request, the Committee may in its sole
discretion permit new arguments or additional evidence to be raised
before the Committee. Following such event, the Committee may, as it
deems appropriate, (i) itself decide the matter, or (ii) remand the
matter to the staff for further review. Should the Committee remand the
matter to the staff, the Committee will instruct the staff to (i) give
prompt consideration to the matter, and, (ii) complete its review and
inform the Committee of its conclusions no later than seven (7) days
before the first Review Day which is at least 25 business days from the
date the matter is remanded to the staff.
[[Page 69791]]
A request for review will ordinarily stay the suspension of the
subject security pending the review, but the Exchange staff may
immediately suspend from trading any security pending review should it
determine that such immediate suspension is necessary or appropriate in
the public interest, for the protection of investors, or to promote
just and equitable principles of trade.
d. Promptly following receipt of a request for review and the
appeal fee, the Exchange's Office of the General Counsel will notify
the issuer and the Exchange staff of the scheduled Review Day and the
briefing schedule. The schedule will be set by the Office of the
General Counsel so as to provide the Committee adequate time to review
materials submitted to it, with the remaining time split so as to
afford the issuer and the Exchange staff substantially equal periods
for the submission of a brief by the issuer and a responsive brief by
the Exchange staff. [Any brief or memorandum dealing with the issuer's
or the Exchange staff's position as well as any other written material
which the aforementioned parties want the Committee to consider must be
received by the Office of the General Counsel of the Exchange within 17
business days from the date the issuer receives the notice of its right
to a review so that such material can be furnished to the members of
the Committee.] Each party must [also serve such materials] submit its
brief and any accompanying materials to [on]both its counterparty
[simultaneously with the submission to]and to the Office of the General
Counsel of the Exchange, and must do so by means calculated to ensure
the party's submission reaches both the Office of the General Counsel
and the counterparty at or prior to the deadline specified in the
briefing schedule. [The counterparty service must be made in the same
manner as such material is filed with the Office of the General Counsel
of the Exchange.]
e. The Committee, in its sole discretion upon written motion of
either party or upon its own motion, may extend any of the time periods
specified above. The Committee in its sole discretion [and] may permit
the parties to make oral presentations on their Review Day in
accordance with such procedures as the Committee may specify at the
time. If the Committee denies a request by either party to make an oral
presentation, its reason for doing so must be included in its written
decision on the review, which decision is provided to all parties.
Document discovery and depositions will not be permitted.
f. If the Committee decides that the security of the issuer should
be removed from listing, the Exchange shall suspend trading in the
security as soon as practicable and an application shall be submitted
by the Exchange to the Securities and Exchange Commission to strike the
security from listing and registration and a copy of such application
shall be furnished to the issuer in accordance with section 12 of the
Securities Exchange Act of 1934 and the rules promulgated thereunder.
If the Committee decides that the security should not be removed from
listing, the issuer will receive from the Exchange a notice to that
effect.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange 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
Section 804 of the NYSE Listed Company Manual and NYSE Rule 499
describe the procedures to be followed when the Exchange determines
that a security should be removed from listing with the Exchange. They
provide that the issuer has a right to request a review of the
Exchange's determination by a committee of the Exchange's Board of
Directors (``Committee For Review'' or ``Committee''), and contains the
procedures to be followed in connection with such an appeal. In 2000,
the SEC approved certain changes in the appeal procedures to allow
companies to continue to trade on the Exchange during the appeal
process, and set certain time parameters intended to ensure that
appeals for delisting determinations are handled expeditiously by the
Exchange.\5\ After more than a year's experience under the new
procedures, the Exchange believes that certain changes are needed to
make the process more efficient and effective, for both issuers and the
Committee.
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\5\ See Securities Exchange Act Release No. 42863 (May 30,
2000), 65 FR 36488 (June 8, 2000) (File No. SR-NYSE-99-30).
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Under the current procedures, both the issuer and the Exchange
staff are required to file their appeal briefs at the same time. In
contrast, the Exchange asserts that most court procedures call for the
appellant to submit its brief first. This allows the respondent to
focus on the arguments advanced by the appellant, rather than having to
speculate on what issues the appellant will raise. The Exchange
believes that having the appellant submit its brief first would more
effectively utilize the resources of both the Committee and the
Exchange staff. Accordingly, the Exchange proposes to amend the
procedures to specify that the issuer will submit its written brief
first, including any accompanying materials, with the Exchange
permitted to respond. In addition, the Exchange proposes to clarify
that the briefing schedule will be set to provide the Committee with
adequate time to review the materials submitted to it in advance of the
review date.
The Exchange's Office of the General Counsel, which oversees the
appeals process on behalf of the Committee, will schedule reviews on
the first review day that is at least 25 business days from the date an
issuer files the request for review, unless the next subsequent Review
Day must be selected to accommodate the Committee's schedule,\6\ and
can establish a briefing schedule that takes account of both the
Committee's caseload and the complexities of the specific case. To
assist in the Committee's evaluation, an issuer will be required to
specify in its written request for review the grounds on which it
intends to challenge the Exchange staff's determination, and whether it
is requesting to make an oral presentation to the Committee. To cover
other procedural questions, the Exchange proposes to specify in the
procedures that document discovery and depositions are not permitted.
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\6\ The Committee For Review typically meets every two months.
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The Exchange also proposes to specify in its appeal procedures the
scope of the Committee's review on appeal and the guidelines pursuant
to which the Committee may decide to hear new issues or evidence not
identified in an issuer's original request for review.\7\ The
[[Page 69792]]
proposed rule changes states that the Committee for Review's review
shall be based on oral argument (if any) and the written briefs and
accompanying materials submitted by the parties. Typically,
accompanying materials include materials the issuer or NYSE staff
relies on in support of its position and are supplied as exhibits to
the brief submitted by the party.
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\7\ In this regard, the Commission specifically notes that the
NYSE's proposal would not permit the issuer to argue grounds for
reversing the NYSE staff's decision that are not identified in its
request for review. However, the issuer would be permitted to ask
the Committee for leave to adduce additional evidence or raise
arguments not identified in its request for review, if it can
demonstrate that the proposed additional evidence or new arguments
are material to its request for review and that there was reasonable
ground for not adducing such evidence or identifying such issues
earlier. The proposed rule language would not, however, (i)
authorize an issuer to seek to file a reply brief in support of its
request for review or (ii) be deemed to limit the NYSE staff's
response to a request for review to the issues raised in the request
for review. Upon review of a properly supported request, the
Committee may in its sole discretion permit new arguments or
additional evidence to be raised before the Committee. Following
such event, the Committee may, as it deems appropriate, (i) itself
decide the matter, or (ii) remand the matter to the NYSE staff for
further review. Should the Committee remand the matter to the staff,
the proposed rules provide that the Committee will instruct the
staff to (i) give prompt consideration to the matter, and, (ii)
complete its review and inform the Committee of its conclusions no
later than seven (7) days before the first Review Day which is at
least 25 business days from the date the matter is remanded to the
staff.
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In addition, the Exchange proposes to institute a non-refundable
appeal fee in the amount of $20,000. The Exchange has not previously
considered it necessary to charge a separate fee to companies appealing
an Exchange delisting decision. The Exchange believes that this
historical approach, however, has to be considered in the context of
the delisting and related appeal policies in effect at the time.
According to the Exchange, changes in policies and procedures adopted
or formalized in 1999 have resulted in a larger number of companies
being delisted, compared to prior years.\8\ More recently, the Exchange
notes that the percentage of delistings that are appealed has
significantly increased, a result the Exchange ascribes to the changes
made to the appeal procedures in 2000, whereby a company that has
appealed a delisting would likely be permitted to trade on the Exchange
during the appeal process. In a 21-month period since the new appeal
procedures were in effect, there were 18 appeals out of 114 delisting
determinations. In contrast, during the previous 21 months, there were
only 6 appeals out of 104 delisting determinations. In sum, there are
now more potential appellants, and they are appealing at a greater
rate. Finally, while difficult to evidence with statistics, the
Exchange staff is also under the impression that the appeals since the
rule change have been more zealously contended by the companies
involved, compared with previous years.
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\8\ For example, there were an average of 22 financial
delistings per year during the three years from 1996 through 1998,
but an average of 61 per year during the period 1999 through 2001.
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The Exchange has elected to use outside counsel to represent the
Exchange's Financial Compliance staff in these delisting appeals.
During the 12 months ending December 31, 2001, the Exchange paid
slightly in excess of $300,000 in legal fees to cover 11 delisting
appeals completed during that time, giving an average out of pocket
cost of slightly less than $30,000 for each appeal. This does not
include the resources of the Exchange's own Financial Compliance and
Office of the General Counsel personnel consumed in servicing these
appeals. The Exchange considers it only fair and appropriate that the
companies incurring these added out of pocket costs defray these costs
by paying the proposed $20,000 appeal fee.
The Exchange does not believe that the appeal fee will deter
companies from taking reasonable appeals. Most companies that do appeal
Exchange staff determinations are represented in that appeal by their
own outside counsel, suggesting that they are able to invest a
significant sum in the prosecution of their appeal. While the proposed
Exchange appeal fee is greater than the amount charged at other listing
markets, the Exchange notes that its original and continuing annual
listing fees are also higher than those at other markets, and that its
listed company population in general represents larger capitalization
companies than on the other markets. The Exchange also notes that,
particularly in the case of companies that have been delisted after
attempting to utilize the financial plan process outlined in Section
802 of the NYSE Listed Company Manual, companies delisted by the
Exchange typically have received a significant quantum of service and
attention from the Exchange's Financial Compliance staff. For these
reasons the Exchange believes that companies electing to appeal a
delisting decision can bear, and should pay, the $20,000 appeal fee
that has been proposed.
2. Statutory Basis
The Exchange believes that the basis under the Act for this
proposed rule change is the requirement under section 6(b)(5) that an
exchange have rules that are 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, in general, to protect
investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 Exchange consents, the Commission will:
A. By order approve 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, as amended, is consistent with the Act. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549-0609. 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 inspection and
copying in the Commission's Public Reference Room. Copies of such
filing will also be available for inspection and copying at the
principal office of the Exchange. All submissions should refer to File
No. SR-NYSE-2001-46 and should be submitted by December 10, 2002.
[[Page 69793]]
For the Commission, by the Division of Market Regulation,
pursuant to the delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-29244 Filed 11-18-02; 8:45 am]
BILLING CODE 8010-01-P