[Federal Register: August 6, 2004 (Volume 69, Number 151)]
[Notices]
[Page 47967-47970]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06au04-113]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50133; File No. SR-NYSE-2004-36]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of a Proposed Rule Change and Amendment
No. 1 Thereto by the New York Stock Exchange, Inc. Amending the NYSE
Constitution To Permit Certain Individuals To Serve on the Regulation,
Enforcement & Listing Standards Committee
August 2, 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 July 2, 2004, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the NYSE. The Exchange
filed Amendment No. 1 to the
[[Page 47968]]
proposed rule change on July 27, 2004.\3\ The Commission is publishing
this notice to solicit comments on the proposed rule change, as
amended, from interested persons and is approving the proposal on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(l).
\2\ 17 CFR 240. 19b-4.
\3\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE,
to Nancy J. Sanow, Assistant Director, Division of Market Regulation
(``Division''), Commission, dated July 26, 2004 (``Amendment No.
1''). In Amendment No. 1, NYSE marked the proposed rule text to show
changes to its Constitution that it failed to reflect in the
original proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is amending Article IV, Section 12(b)(1) of its
Constitution (``NYSE Constitution''). The proposed amendment will
permit the Board to appoint individuals to serve on the Regulation,
Enforcement & Listing Standards Committee (``RELS Committee'') who have
served previously on either the RELS Committee or the Committee for
Review but who are neither Directors nor members of the Board of
Executives.
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, as
amended, and discussed any comments it received on the proposed rule
change, as amended. The text of these statements may be examined at the
places specified in Item III below. The Exchange has prepared
summaries, set forth in Sections A, B, and C below, of the most
significant aspects of such statements.
The text of thE proposed rule change, as amended, is below.
Proposed new language is in italics; proposed deletions are in
[brackets].
* * * * *
Article IV. Board of Directors
Sec. 12. Standing Committees. The Standing Committees and their
respective Chairmen shall be appointed by the Board at its annual
organizational meeting. The Board shall adopt for each Standing
Committee a charter consistent with the duties prescribed in the
subsections below, and including such additional duties as may be
considered appropriate and not inconsistent with this Constitution.
Each Standing Committee shall have the authority to engage independent
legal counsel and other advisors as it determines necessary to carry
out its duties, but may not use counsel or other advisors who advise
Exchange officers or employees.
* * * * *
(b) Joint Committees
(1) The Regulation, Enforcement & Listing Standards Committee shall
be composed of both directors (other than the Chief Executive Officer)
and Board of Executives members (including at least one Industry Member
of the Board of Executives), as selected by the Board and, to assure
continuity, may also include prior members of either this Committee or
the Committee for Review (as hereinafter defined) who are neither
directors nor members of the Board of Executives, also as selected by
the Board; provided, however, that a majority of the members of [such]
this [c]Committee[s] voting on a matter subject to a vote of [such]
this Committee shall be directors. The [Such] [c]Committee shall report
to the Regulatory Oversight & Regulatory Budget Committee and shall (i)
review and provide general advice with respect to the Exchange's
programs for market surveillance, member and member organization
regulation and enforcement, and the listing and de-listing of
securities, and (ii) hear appeals of disciplinary determinations and
determinations to de-list a listed company. The term ``Committee for
Review'' shall refer to the predecessor of this Committee under the
Exchange's governance structure in effect prior to December 17, 2004.
* * * * *
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
On December 17, 2003, the Commission approved changes to the NYSE
Constitution that restructured the Exchange's governance architecture
to separate the regulatory and marketplace functions, among other
changes. \4\ As part of the new architecture, the Exchange now has both
a Board of Directors (``Board''), which includes six to twelve
independent directors elected by the membership, and a Board of
Executives, which consists of constituent representatives. The
directors are elected annually and the members of the Board of
Executives are appointed annually. Under the Exchange's previous
governance structure, directors had two-year, staggered terms.
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\4\ See Securities Exchange Act Release No. 48946 (December 17,
2003), 68 FR 74678 (December 24, 2003).
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Among the committees constituted under the new architecture is the
RELS Committee, which, among other duties, hears appeals from
disciplinary decisions by the Exchange's Hearing Panels and delisting
determinations by the Exchange's Listings & Compliance unit. The new
annual election and appointment cycle allows for the possibility of a
complete or significant turnover in the membership of the RELS
Committee. Yet, the appellate work of the committee requires knowledge
of the Exchange's procedures and an understanding of precedents that
make some continuity from year to year highly desirable.
The Exchange advises that it recognized this turnover issue in the
context of last year's revisions to its governance structure and
included as Article XVI of the NYSE Constitution a transition period
that permitted the Board to appoint to the RELS Committee former
members of the Board who had served on the predecessor Committee for
Review.\5\ This transitional authority expired at this year's annual
meeting on June 3, 2004.
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\5\ See NYSE Constitution, Article XVI.
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So that the Board may continue to have this authority, the proposed
rule change in effect eliminates the sunset date and moves this
authority to Article IV, Section 12(b)(1) of the NYSE Constitution,
which is where the Constitution constitutes the RELS Committee.
According to the Exchange, the proposed rule change also recognizes
that the requisite knowledge, experience and understanding will in due
course reside not simply in former members of the predecessor Committee
for Review, but also in former members of the RELS Committee itself. In
addition, the Exchange proposes to revise a provision in Article IV,
Section 12(b)(1) of the NYSE Constitution to refer to ``this
Committee'' rather than ``such Committees.''\6\
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\6\ The Commission notes that this provision expressly requires
that the majority of the members of the RELS Committee voting on a
matter subject to a Committee vote must be members of the Board,
i.e., independent directors. Moreover, the Commission points out
that Article IV, Section 14 of the NYSE Constitution, among other
things, expressly provides that the Board may not delegate, and no
committee may re-delegate, to the Board of Executives or to any
committee not consisting solely of directors authority to act on any
subject matter described in Article IV, Section 12(a) (i.e.,
Standing Committee duties) or (b)(1) (i.e., RELS Committee duties),
except by effecting a rule change within the meaning of Section
19(b)(1) of the Act.
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2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the
[[Page 47969]]
requirement under Section 6(b)(1)\7\ that an exchange be organized and
have the capacity to be able to carry out the purposes of the Act,
under Section 6(b)(5)\8\ 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 a national market
system, and, in general, to protect investors and the public interest,
and under Section 6(b)(7)\9\ that the rules of the exchange provide a
fair procedure for the disciplining of members and persons associated
with members.
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\7\ 15 U.S.C. 78f(b)(1).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(7).
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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 Act.
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. However,
members of the exchange were given notice of the proposed change in a
Proxy Statement issued on April 30, 2004.
III. 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 rule-comments@sec.gov. Please include
File Number SR-NYSE-2004-36 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz, Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549-0609. All submissions should refer to File Number SR-NYSE-
2004-36. 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 Section, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such filing also will be
available for inspection and copying at the principal office of the
NYSE. 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-
NYSE-2004-36 and should be submitted on or before August 27, 2004.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
NYSE has asked the Commission to approve the proposal on an
accelerated basis to make the proposal effective on or before August 2,
2004, in order that the existing transitional committee members can
participate in the appeals scheduled for that day. The Commission notes
that it previously approved a proposal for former members of the
Committee for Review where neither directors or members of the Board of
Executives to serve on the RELS Committee during the transition
period,\10\ and that the current proposed rule change seeks an
extension of that policy to former members of the RELS Committee, as
well as members of the Committee for Review.
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\10\ See supra note 4.
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After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder,\11\ applicable to a national
securities exchange, and, in particular, with the requirements of
Section 6(b)(5)\12\ 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 a national market system,
and, in general, to protect investors and the public interest, and with
the requirements of Section 6(b)(7)\13\ that the rules of the exchange
provide a fair procedure for the disciplining of members and persons
associated with members. The Commission notes that the RELS Committee's
responsibility for hearing appeals from disciplinary panels and
delisting determinations can foster the need for the Committee to have
members who are knowledgeable about the Committee's procedures and
familiar with its precedents and deliberations. The Commission notes
that the new annual election and appointment cycle for members of the
Board and the Board of Executives, respectively, could hinder the RELS
Committee from retaining experienced and knowledgeable members. The
Commission believes that allowing former members of the Committee for
Review and RELS Committee to participate on future RELS Committees
should help ensure the continuity of the RELS Committee by ameliorating
the effect that the annual turnover of members of the Board and Board
of Executives otherwise could have on the RELS Committee.
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\11\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78f(b)(7)
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The Commission finds good cause for approving the proposed rule
change, as amended, prior to the thirtieth day after the date of
publication of notice of filing thereof in the Federal Register. The
Commission notes that the next RELS Committee meeting to hear appeals
is on August 2, 2004. The Exchange has requested accelerated approval
in order to allow prior Committee for Review Members and RELS Committee
members to serve on the current RELS Committee and hear appeals
scheduled for that day. Accordingly, the Commission believes that there
is good cause, consistent with Sections 6(b)(5) and 19(b)(2) of the
Act,\14\ to approve the proposal, on an accelerated basis.
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\14\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NYSE-2004-36), as amended,
is hereby approved on an accelerated basis.
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\15\ 15 U.S.C. 78s(b)(2).
[[Page 47970]]
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-18001 Filed 8-5-04; 8:45 am]
BILLING CODE 8010-01-P