[Federal Register: March 22, 2007 (Volume 72, Number 55)]
[Notices]
[Page 13542-13543]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr07-105]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55477; File No. SR-Amex-2006-99]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto
Relating to Reverse Mergers
March 15, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, as amended (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on October 5, 2006, the American Stock Exchange
LLC (the ``Amex'' or the ``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 the Exchange. On February 14, 2007, the Exchange filed Amendment No.
1 to the proposed rule change.\3\ 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\ Amendment No. 1 makes revisions to the proposed rule text,
including revisions conforming the proposed rule text to a filing
submitted by The NASDAQ Stock Market LLC (``Nasdaq'') and approved
by the Commission in the period following submission of the original
filing (Securities Exchange Act Release No. 55052 (January 5, 2007),
72 FR 1569 (January 12, 2007) (SR-NASDAQ-2006-047)) and revisions
incorporating an immediately effective filing submitted by Amex in
the same period (Securities Exchange Act Release No. 55096 (January
12, 2007), 72 FR 2563 (January 19, 2007) (SR-Amex-2007-03)).
Amendment No. 1 replaces and supersedes the original filing in its
entirety.
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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 (i) Section 341 of the Amex Company
Guide to clarify the circumstances under which a listed issuer will be
deemed to have engaged in a reverse merger thereby requiring the post-
transaction entity to satisfy the initial listing standards and the
process a listed issuer must follow when applying for initial listing
in connection with a reverse merger and (ii) Section 713 of the Amex
Company Guide to require shareholder approval in connection with the
issuance or potential issuance of additional listed securities that
will result in a change of control of a listed issuer.
The text of the proposed rule change is available on the Amex's Web
site at http://www.amex.com, the Office of the Secretary, the Amex 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, the Exchange 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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 341 of the Amex Company Guide currently provides that if an
issuer listed on the Amex engages in any plan of acquisition, merger or
consolidation, the net effect of which is that the listed issuer is
acquired by an unlisted entity, even if the listed issuer is the
nominal survivor, the post-transaction entity is required to satisfy
the initial listing standards. Such transactions are typically referred
to as ``Reverse Mergers.'' Because the issuer resulting from a Reverse
Merger is essentially a different entity from the listed issuer,
Section 341 does not permit the post-transaction entity to remain
listed on the Amex unless it qualifies as a new listing. This
prohibition is intended to prevent ``back door listings'' whereby an
unqualified entity attempts to obtain an Amex listing. Both the New
York Stock Exchange LLC (``NYSE'') \4\ and Nasdaq \5\ have comparable
provisions.
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\4\ Section 703.08(E) of the NYSE Listed Company Manual.
\5\ Nasdaq Rule 4340(a).
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Many Reverse Mergers are entered into for bona fide business
reasons, however, in some cases listed issuers that are not in
compliance with the continued listing standards, and face potential
delisting, attempt to enter into Reverse Mergers with private entities
in order to retain their Amex listing. In other situations, a listed
issuer may be in compliance with the continued listing standards but
the post-transaction entity would not satisfy the initial listing
standards. In both of these cases, a change of control occurs but the
listed issuer attempts to structure the transaction so that it will not
be deemed a Reverse Merger under the current rule.
The Exchange proposes amending Section 341 to provide greater
clarity and transparency as to (i) what constitutes a Reverse Merger,
(ii) the factors the Exchange will consider in determining whether a
transaction or series of transactions constitute(s) a Reverse Merger,
(iii) the consequences of entering into a Reverse Merger and (iv) the
process a listed issuer must follow in connection with a Reverse
Merger. The proposed rule change will provide that, in addition to
meeting the initial listing standards, a listed company entering into a
Reverse Merger will need to obtain shareholder approval in accordance
with Section 713 in order to issue additional listed securities in
connection with such Reverse Merger. In addition, while the
determination of whether a Reverse Merger has occurred or will occur is
to some degree subjective, the Exchange proposes to amend Section 341
to more clearly delineate the factors that will be considered by the
Exchange in its analysis of a transaction.\6\
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\6\ The Exchange's proposed Section 341 states that a ``Reverse
Merger'' is: ``any plan of acquisition, merger or consolidation
whereby a listed company combines with, or into, a company not
listed on the Exchange, resulting in a change of control of the
listed company and potentially allowing such unlisted company to
obtain an Exchange listing. In determining whether a change of
control constitutes a Reverse Merger, the Exchange will consider all
relevant factors, including, but not limited to, changes in the
management, board of directors, voting power, ownership, and
financial structure of the listed company. The Exchange will also
consider the nature of the businesses and the relative size of both
the listed and the unlisted companies.'' See proposed Section 341 of
the Amex Company Guide.
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With regards to the process to be followed by listed issuers in
connection with Reverse Mergers, Section 341
[[Page 13543]]
currently recommends that listed issuers submit any proposed plan which
could constitute a Reverse Merger to the Exchange for an informal
opinion prior to the plan's promulgation. The intent of such provision
is to permit Exchange staff to review the proposed transaction in order
to determine if it constitutes a Reverse Merger and, in the case of a
Reverse Merger, to review the post-transaction entity in order to
confirm that it will meet initial listing standards. The Exchange
proposes to make such process more transparent by requiring a listed
issuer to submit an initial listing application with sufficient time to
permit the Exchange to complete its review of the post-transaction
entity and providing that delisting proceedings will be commenced if
such initial listing application has not been approved prior to
consummation of the Reverse Merger. The Commission approved a similar
rule change filed by Nasdaq.\7\
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\7\ See supra note 3.
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In association with the proposed changes to Section 341, the
Exchange also proposes to amend Section 713. Section 713 currently
requires shareholder approval as a prerequisite to Exchange approval of
applications to list additional shares issued in connection with a
transaction (other than a public offering) which would involve the
application of the initial listing standards as described in Section
341. The Exchange proposes revising Section 713 to require shareholder
approval as a prerequisite to Exchange approval of additional listing
applications when the issuance or potential issuance of additional
securities will result in a change of control of a listed issuer,
regardless of whether such change of control also constitutes a Reverse
Merger. Additionally, the Exchange proposes changes to Sections 341 and
713 to clarify the relationship between their respective requirements.
Both NYSE \8\ and Nasdaq \9\ require shareholder approval under such
circumstances and the Exchange believes it is necessary and appropriate
to require listed issuers to obtain shareholder approval of any
issuance or potential issuance of additional listed securities that
will result in a change of control. The proposed rule change will
provide investors of listed issuers with more input and participation
with respect to such decisions.
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\8\ Section 312.03(d) of the NYSE Listed Company Manual.
\9\ Nasdaq Rule 4350(i)(1)(B).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\11\ 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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. Instead, the Exchange believes that the proposed rule change
will promote greater uniformity with the listing standards of other
markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 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 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 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 e-mail to rulecomments@sec.gov. Please include
File Number SR-Amex-2006-99 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Amex-2006-99. 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,
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 inspection and
copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the Amex. 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-Amex-2006-99 and should be submitted on or before April
12, 2007.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-5206 Filed 3-21-07; 8:45 am]
BILLING CODE 8010-01-P