[Federal Register: November 23, 2004 (Volume 69, Number 225)]
[Notices]
[Page 68205-68206]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23no04-98]
[[Page 68205]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50677; File No. SR-PCX-2004-108]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To
Amend the Corporate Governance Requirements for PCX Listed Companies
November 16, 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 November 15, 2004, the Pacific Exchange, Inc. (``PCX'' 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 the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons. The
proposed rule change has been filed by PCX as a ``non-controversial''
rule change under Rule 19b-4 under the Act,\3\ which renders the
proposal effective upon filing with the Commission.\4\ The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Id.
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Pacific Exchange, Inc. (``PCX'' or ``Exchange''), through its
wholly owned subsidiary PCX Equities, Inc. (``PCXE'') is proposing to
amend its Corporate Governance and Disclosure Policies. The proposed
changes will amend certain director independence standards so that
immediate family members of a director are only included in the
standards if they are executive officers of the listed company. The
Exchange also proposes to allow dually listed companies to apply the
independence standards of other self-regulatory organizations
(``SROs'') in limited situations. The text of the proposed rule change
is set forth below. Proposed new language is in italics; proposed
deletions are in brackets.
* * * * *
Rules of the PCX Equities, Inc.
Rule 5 Listings
] 7956R Corporate Governance and Disclosure Policies
Rule 5.3-5.3(k)(1)--No Change.
Rule 5.3(k)(1)(A)--A director who is an employee or former
employee, or whose immediate family member is an executive officer, of
the listed company whose employment ended within the past three years.
Rule 5.3(k)(1)(B)-(D)--No Change.
Rule 5.3(k)(1)(E)--A director who is an executive officer or an
employee, or whose immediate family member is an executive officer, of
a company that makes payments to, or receives payments from, the listed
company for property or services in an amount which, in any single
fiscal year, exceeds the greater of $200,000 or 5% of such other
company's consolidated gross revenues, is not ``independent'' until
three years after falling below such threshold. For purposes of this
rule, charitable organizations shall not be considered ``companies'',
provided however that a listed company shall disclose in its annual
proxy statement, or if the listed company does not file an annual proxy
statement, in the company's annual report on Form 10-K filed with the
SEC, any charitable contributions made by the listed company to any
charitable organization in which a director serves as an executive
officer if, within the preceding three years, contributions in any
single fiscal year exceeded the greater of $200,000 or 5% of such
charitable organization's consolidated gross revenues. At any time,
however, when an issuer has a class of securities that is listed on a
national securities exchange or national securities association other
than the Corporation and is subject to requirements substantially
similar to those set forth in this Section 5.3(k)(1)(E) the issuer
shall not be required to separately meet the requirements set forth
above. Governance requirements of other markets will be considered to
be substantially similar to the requirements above if they are adopted
by the New York Stock Exchange or the National Association of
Securities Dealers (for the Nasdaq National Market or Small Cap
Market).
Rule 5.3(k)(1)(F)--A director who receives, or whose immediate
family member is an executive employee who receives, more than $100,000
per year in direct compensation from the listed company, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service). Such director shall not be
independent until three years after he or she ceases to receive more
than $100,000 per year in such compensation.
Rule 5.3(k)(1)(G)-5.3(k)(6)--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 PCX 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 self-regulatory organization 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
The purpose of this rule change is to make certain modifications to
the Exchange's Corporate Governance and Disclosure Policies. With
regard to PCX Rule 5.3(k)(1)(A) and 5.3(k)(1)(F), the proposed changes
will amend director independence standards so that immediate family
members of a director are only included in the standards if they are
executive officers of the listed company.\5\ The Exchange also proposes
to allow, in the limited situation of Rule 5.3(k)(1)(E), dually listed
companies to apply the independence standards of other SROs. The
proposed changes to Rules 5.3(k)(1)(A) and 5.3(k)(1)(F) will eliminate
certain inconsistencies between the Exchange's rules and those of other
national securities exchanges or national securities associations. The
proposed change to Rule 5.3(k)(1)(E) will allow dually listed issuers
to apply one uniform test to determine independence of their directors
regardless of how many SROs list their security.
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\5\ As revised by the proposed rule change, these provisions
will be similar to Sections 303A.02(b)(i) and (b)(ii) of the NYSE
Listed Company Manual. Telephone conversation between Steven B.
Matlin, Senior Attorney, Regulatory Policy, PCX, and Geoffrey
Pemble, Special Counsel, Division, Commission, on November 16, 2004.
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[[Page 68206]]
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \6\ in general, and furthers the
objectives of section 6(b)(5) of the Act \7\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of change, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
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\6\ 6 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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 on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has been designated by PCX as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act
\8\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
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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. Furthermore, the PCX
gave 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. Consequently, the proposed rule change has
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and
Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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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.
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 rule-comments@sec.gov. Please include
File No. SR-PCX-2004-108 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 No. SR-PCX-2004-108. 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 PCX. 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 No. SR-PCX-2004-108 and should
be submitted on or before December 14, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
Margaret H. McFarland,
Deputy Secretary.
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\12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E4-3297 Filed 11-22-04; 8:45 am]
BILLING CODE 8010-01-P