[Federal Register: March 1, 2004 (Volume 69, Number 40)]
[Notices]
[Page 9651-9653]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01mr04-104]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49295; File No. SR-Amex-2004-06]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendments No. 1 and 2 by the
American Stock Exchange LLC Relating to Small Business Issuers
February 23, 2004.
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 January 21, 2004, the American Stock Exchange LLC (the ``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by Amex. On January 30,
2004, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ On February 12, 2004, the Exchange filed Amendment No. 2 to
the proposed rule change.\4\ Amex has filed the proposed rule change as
a ``non-controversial'' rule change under Rule 19b-4(f)(6) under the
Act,\5\ which renders the proposal effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Claudia Crowley, Vice President, Listing
Qualifications, Amex, to Nancy Sanow, Assistant Director, Division
of Market Regulation, Commission, dated January 29, 2004.
\4\ See Letter from Claudia Crowley, Vice President, Listing
Qualifications, Amex, to Nancy Sanow, Assistant Director, Division
of Market Regulation, Commission, dated February 11, 2004.
\5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to make technical amendments to the Exchange's
recently approved enhanced corporate governance requirements to: (i)
Amend sections 121A, 121B(2)(c), 802(a), and 809(b) of the Amex Company
Guide to reference small business issuers rather than small business
filers, and (ii) insert in section 809 of the Amex Company Guide the
date of Commission approval and certain effective dates based on the
date of approval. Below is the text of the proposed rule change.
Proposed new language is in italics; proposed deletions are in
brackets.
* * * * *
American Stock Exchange Company Guide
Section 121. INDEPENDENT DIRECTORS AND AUDIT COMMITTEE
A. Independent Director
Each listed company must have a sufficient number of independent
directors on its Board of Directors (1) such that at least a majority
of such directors are independent directors (subject to the exceptions
set forth in section 801 and, with respect to small business [filers]
issuers, section 121B(2)(c)), and (2) to satisfy the audit committee
requirement set forth below. ``Independent director'' means a person
other than an officer or employee of the
[[Page 9652]]
company or any parent or subsidiary. No director qualifies as
independent unless the Board of Directors affirmatively determines that
the director does not have a material relationship with the listed
company that would interfere with the exercise of independent judgment.
In addition, audit committee members must also comply with the
requirements set forth in paragraph B(2) below. The following is a non-
exclusive list of persons who shall not be considered independent:
(a) through (g)--No change.
B. Audit Committee:
(1)--No change.
(2) Composition
(a) and (b)--No change.
(c) Small Business [Filers] Issuers--Small Business Issuers [that
file reports under] (as defined in SEC Regulation S-B) are subject to
all requirements specified in this Section, except that such issuers
are only required to maintain a Board of Directors comprised of at
least 50% independent directors, and an Audit Committee of at least two
members, comprised solely of independent directors who also meet the
requirements of Rule 10A-3 under the Securities Exchange Act of 1934.
Section 802. BOARD OF DIRECTORS
(a) At least a majority of the directors on the Board of Directors
of each listed company must be independent directors as defined in
Section 121A, except for (i) a controlled company (see Section 801(a)),
and (ii) a Small Business [filer] Issuer (see Section 121B(2)(c)).
(b) through (e)--No change.
Section 809. EFFECTIVE DATES/TRANSITION
(a) In order to permit listed companies to make necessary
adjustments in the course of their regular annual meeting schedule, to
the extent not inconsistent with Rule 10A-3 under the Securities
Exchange Act of 1934, Sections 802-805 (other than Section 802(d)), as
well as the corresponding changes to Section 121, are effective as set
forth below. During the transition period between December 1, 2003 and
the applicable effective date, listed companies must comply with
Section 121 as in effect immediately prior to December 1, 2003 (see
Commentary .01).
July 31, 2005 for foreign private issuers and
small business issuers (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934); and
For all other listed companies, by the earlier
of: (1) The listed company's first annual shareholders meeting after
March 15, 2004; or (2) October 31, 2004.
In the case of a company with a staggered board, to the extent not
inconsistent with Rule 10A-3 under the Securities Exchange Act of 1934,
if the company would be required to change a director who would
normally not stand for election in such annual meeting, the company may
continue such director in office until the second annual meeting after
the date specified above, but no later than December 31, 2005.
(b) Companies that have listed or will be listed in conjunction
with their initial public offering shall be afforded exemptions from
all board composition requirements consistent with the exemptions
afforded in Rule 10A-3 under the Securities Exchange Act of 1934. That
is, for each applicable committee that the company establishes (i.e.,
nominating and/or compensation) the company shall have one independent
member at the time of listing, a majority of independent members within
90 days of listing and all independent members within one year. Such
companies will be required to meet the majority independent board
requirement (or 50% independent in the case of a small-business [filer]
issuer) within one year of listing. It should be noted however, that
investment companies are not afforded these exemptions under Rule 10A-3
under the Securities Exchange Act of 1934. Companies emerging from
bankruptcy or which have ceased to be controlled companies will be
required to meet the majority independent board requirement (or 50%
independent in the case of a small-business [filer] issuer) within one
year. Companies may choose not to establish a compensation or
nomination committee and may rely instead upon a majority of
independent directors to discharge responsibilities under Part 8.
(c) Companies transferring from other markets with a substantially
similar requirement shall be afforded the balance of any grace period
afforded by the other market. Companies transferring from other markets
that do not have a substantially similar requirement shall be afforded
one year from the date of listing, to the extent not inconsistent with
Rule 10A-3 under the Securities Exchange Act of 1934.
(d) Section 807 is effective June 1, 2004.
(e) Section 808 and the amendments to Sections 110, 120, 401, 402
and 610 are effective December 31, 2003.
(f) The amendments to Section 1009 and the adoption of Section
802(d) are effective December 1, 2003.
Commentary--No change.
* * * * *
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 Amex 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. The Amex 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
On December 1, 2003 the Commission approved comprehensive
enhancements to the corporate governance requirements applicable to
listed companies in order to promote accountability, transparency and
integrity by such companies, including the changes required by
Commission Rule 10A-3 \6\ with respect to listed company audit
committees.\7\ In order to provide consistency between certain
provisions of Amex requirements and Rule 10A-3 with respect to small
business issuers, the Exchange is proposing to revise Section
121B(2)(c) of the Amex Company Guide to reference small business
issuers rather than small business filers. Section 121B(2)(c) of the
Amex Company Guide provides a limited exception from certain of new
requirements. Specifically, such companies are subject to the enhanced
corporate governance requirements, except that they are only required
to have a board of directors comprised of at least 50% independent
directors, rather than a majority, and must have an audit committee of
at least two, rather than three, independent directors. Small business
companies are required to fully comply with Rule 10A-3.
---------------------------------------------------------------------------
\6\ 17 CFR 240.10A-3.
\7\ See Securities Exchange Act Release No. 48863 (December 1,
2003), 68 FR 68432 (December 8, 2003) (order approving File No. SR-
Amex-2003-65).
---------------------------------------------------------------------------
Rule 10A-3 provides a later effective date for small business
issuers than is available for other listed companies. The Amex states
that the proposed change to Section 121B(2)(c) of the Amex Company
Guide will provide consistency between these two provisions. Further,
by limiting the applicability of section 121B(2)(c) of the Amex Company
Guide to small business filers, the provision provides a
[[Page 9653]]
disincentive for small business companies to voluntarily provide the
greater disclosure required pursuant to Regulation S-K. The limited
exception for small business companies is intended to provide narrow
relief for smaller companies in view of the difficulties that such
issuers may face in recruiting independent directors. Companies that
choose to provide enhanced disclosure should not be penalized in this
regard.
The Exchange is also proposing to make conforming changes in
Sections 121A, 802(a), and 809(b) and to amend Section 809 of the Amex
Company Guide to insert the effective date of Commission approval of
the new corporate governance standards and related effective dates.
2. Statutory Basis
The Amex believes that the proposed rule change, as amended, is
consistent with Section 6(b) of the Act \8\ in general and furthers the
objectives of Section 6(b)(5) of the Act,\9\ in particular in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, to
protect investors and the public interest and is not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change, as
amended, will impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange did not receive any written comments on the proposed
rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has been filed by the Amex as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act
\10\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
Consequently, because the foregoing proposed rule change: (1) Does
not significantly affect the protection of investors or the public
interest, (2) does not impose any significant burden on competition,
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate, if consistent with the protection of investors and the
public interest, and the self-regulatory organization has given the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of the
proposed rule change, it has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
Pursuant to Rule 19b-4(f)(6)(iii),\12\ a proposed ``non-
controversial'' rule change does not become operative for 30 days after
the date of filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest. The Amex has requested that the Commission waive the 30-day
operative delay.
---------------------------------------------------------------------------
\12\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The revision contained in the proposed rule change relating to small
business issuers would provide consistency between the treatment
afforded to such entities under Amex's enhanced corporate governance
listing standards and the provisions of those standards that were
adopted to comply with Rule 10A-3. Acceleration of the operative date
will ease implementation of the new rules. The other revisions
contained in the proposed rule change are non-substantive. For these
reasons, the Commission designates the proposed rule change, as
amended, to be effective and operative upon filing with the
Commission.\13\
---------------------------------------------------------------------------
\13\ For the purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rules
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.\14\
---------------------------------------------------------------------------
\14\ For purposes of calculating the 60-day abrogation period,
the Commission considers the period to commence on February 12,
2004, the date that the Exchange filed Amendment No. 2.
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, as amended, including
whether the proposed rule change 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. Comments may also be submitted
electronically at the following e-mail address: rule-comments@sec.gov.
All comment letters should refer to File No. SR-Amex-2004-06 . This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, comments should be sent in hardcopy or by e-mail but not
by both methods. 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 at the Commission's Public Reference Room. Copies of such
filing will also be available for inspection and copying at the
principal office of the Amex. All submissions should refer to the File
No. SR-Amex-2004-06 and should be submitted by March 22, 2004.
For the Commission, by the Division of Market Regulation, pursuant
to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4430 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P