[Federal Register: March 10, 2004 (Volume 69, Number 47)]
[Notices]
[Page 11467-11469]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr04-109]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49351; File No. SR-Amex-2003-110]
Self-Regulatory Organizations; Notice of Filing of a Proposed
Rule Change and Amendment No. 1 Thereto by the American Stock Exchange
LLC Relating to Procedures Applicable to Continued Listing Evaluation
and Follow-Up
March 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 December 12, 2003, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. On February 19, 2004, 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)(l).
\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 (``Division''), Commission, dated February 18,
2004 (``Amendment No. 1''). In Amendment No. 1, the Amex replaced
the text of the proposed rule change 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 Section 1009 of the Amex Company
Guide (``Company Guide'') to clarify the authority of the Exchange
staff to establish a time period of less than 18 months for a listed
company that is below the continued listing standards to return to
compliance thereof.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.
* * * * *
Sec. 1009. Continued Listing Evaluation And Follow-Up
(a) The following procedures shall be applied by the Exchange staff
to companies identified as being below the Exchange's continued listing
policies and standards. Notwithstanding such procedures, when the
Exchange staff deems it necessary for the protection of investors,
trading in any security can be suspended immediately, and
[[Page 11468]]
application made to the SEC to delist the security and/or the Exchange
staff may truncate the procedures specified in this Section.
(b) Once the Exchange staff identifies, through internal reviews or
notice (a press release, news story, company communication, etc.), a
company as being below the continued listing criteria set forth in
Sections 1001 through 1006 (and not able to otherwise qualify under an
initial listing standard), the Exchange staff will notify the company
by letter of its status within 10 business days. This letter will also
provide the company with an opportunity to provide the Exchange staff
with a plan (the ``Plan'') advising the Exchange staff of action the
company has taken, or will take, that would bring it into compliance
with the continued listing standards within 18 months of receipt of the
letter. However, the Exchange staff may establish a time period of less
than 18 months for a company to regain compliance with some or all of
the continued listing standards if it determines that the nature and
circumstances of the company's particular continued listing status
warrant such shorter period of time (see Commentary .01). Within 10
five business days after receipt of the letter, the company must
contact the Exchange staff to confirm receipt of the notification,
discuss any possible financial data of which the Exchange staff may be
unaware, and indicate whether or not it plans to present a Plan;
otherwise, delisting proceedings will commence.
(c) The company has 30 days from the receipt of the letter to
submit its Plan to the Exchange staff for review[;]. However, the
Exchange staff may require submission of a company's Plan within less
than 30 days (but in no event less than seven days) if the Exchange
staff has established a time period of 90 days or less for the company
to regain compliance with some or all of the continued listing
standards pursuant to paragraph (b) of this Section. [i]If it does not
submit a Plan within [this] the specified time period, delisting
procedures will commence. The Plan must include specific milestones,
quarterly financial projections, and details related to any strategic
initiatives the company plans to complete. Exchange staff will evaluate
the Plan, including any additional documentation that supports the
Plan, and make a determination as to whether the company has made
reasonable demonstration in the Plan of an ability to regain compliance
with the continued listing standards within the [18 month] time period
described in paragraph (b) of this Section. The Exchange staff will
make such determination within 45 days of receipt of the proposed Plan
(or such shorter period of time as is consistent with the time period
established by the Exchange staff for the company to regain compliance
pursuant to paragraph (b) of this Section), and will promptly notify
the company of its determination in writing.
(d) and (e)--No change.
(f) If, prior to the end of the [18-month] extension period, the
company is able to demonstrate compliance with the continued listing
standards (or that it is able to qualify under an original listing
standard) for a period of two consecutive quarters, the Exchange staff
will deem the Plan period over. If the company does not meet continued
listing standards at the end of the [18-month] extension period, the
Exchange staff will promptly initiate delisting procedures.
(g) through (i)--No change.
Commentary . . .
.01 In determining whether to establish a time period of less than
whether to establish a time period of less than 18 months for a company
to regain compliance with some or all of the continued listing
standards, pursuant to paragraph (b), the Exchange staff will consider
whether, in view of the nature and severity of the particular continued
listing deficiency, including the investor protections concerns raised,
18 months would be an inappropriately long period of time to regain
compliance. While it is not possible to enumerate all possible
circumstances, the following is a non-exclusive list of the types of
continued listing deficiencies that, based on the a particular listed
company's unique situation, may result in imposition of a shorter time
period: delinquencies with respect to SEC filing obligations, severe
short-term liquidity and/or financial impairment, present or potential
public interest concerns;\4\ deficiencies with respect to the requisite
distribution requirements that make the security unsuitable for auction
market trading.
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\4\ Public interest concerns could include, for example,
situations where the company, a corporate officer or affiliate is
the subject of a criminal or regulatory investigation or action; or
the company's auditors have resigned and withdrawn their most recent
audit opinion raising concerns regarding the internal controls and
financial reporting process. However, other situations not
specifically enumerated could also raise public interest concerns
regarding the appropriateness of a particular company's continued
listing.
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* * * * *
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 1009 of the Company Guide became effective in May 2002.\5\
It specifies the procedures applicable to listed companies identified
as being below the continued listing standards, and provides such
companies with the opportunity to submit a business plan to the staff
of the Amex Listing Qualifications Department detailing the action it
has taken or proposes to take to bring it into compliance with the
continued listing standards within 18 months. Any business plan
submitted pursuant to this provision is subject to approval and
monitoring by the staff of the Listing Qualifications Department, as
well as public disclosure by the listed company.
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\5\ See Securities Exchange Act Release No. 45898 (May 8, 2002),
67 FR 34502 (May 14, 2002) (order approving File No. SR-Amex-2001-
47).
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The Exchange's experience with the procedures specified in section
1009 of the Company Guide indicates that certain clarifying amendments
are necessary. Specifically, paragraphs (b) and (c) specify that a
listed company identified as below the continued listing standards must
submit a business plan which makes a reasonable demonstration of an
ability to regain compliance with 18 months. However, paragraph (a)
provides that the Exchange staff may initiate immediate delisting
proceedings at any time, notwithstanding the specified procedures, if
deemed necessary for the protection of investors. In view of this broad
authority, the staff of Listing Qualifications Department has
occasionally required a particular listed company to submit a business
plan demonstrating an ability to regain compliance within less than 18
months. Such shortened time periods have been applied in circumstances
in which the
[[Page 11469]]
staff believed that 18 months was an inappropriately long period of
time to regain compliance in view of the nature and severity of the
particular continued listing deficiency. For example, companies which
are delinquent with respect to SEC filing obligations, facing severe
short-term liquidity and financial impairment, or present potential
public interest concerns,\6\ or deficiencies with respect to the
requisite distribution requirements that make the security unsuitable
for auction market trading, have typically been required to return to
compliance with the impacted continued listing standards within 30 to
90 days. In some cases, a particular company has been given staggered
extension deadlines (i.e., the company must resolve its SEC filing
deficiency and short-term financial impairment issues within 30 days,
but is given 18 months to increase its shareholders equity to the
required level).
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\6\ Public interest concerns could include, for example,
situations where the company, a corporate officer or affiliate is
the subject of a criminal or regulatory investigation or action; or
the company's auditors have resigned and withdrawn their most recent
audit opinion raising concerns regarding the internal controls and
financial reporting process. However, other situations not
specifically enumerated could also raise public interest concerns
regarding the appropriateness of a particular company's continued
listing.
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Although none of the listed companies that have been subject to the
shortened extension periods have challenged the staff's authority to
impose a shorter period, some have raised questions about it.
Accordingly, the Exchange is proposing to revise section 1009 of the
Company Guide to clarify that the staff may establish a time period of
less than 18 months for a listed company to regain compliance with some
or all of the continued listing standards, if the nature and
circumstances of the company's particular continued listing status
warrant such shorter time period. In addition, the Exchange proposes
that corresponding revisions be made to the applicable submission and
review deadlines.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\7\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\8\ 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, and,
in general, to protect investors and the public interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 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
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 proposal, 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.
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-2003-110. The 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 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 Amex. All
submissions should be submitted by March 31, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to 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. 04-5377 Filed 3-9-04; 8:45 am]
BILLING CODE 8010-01-P