[Federal Register: December 4, 2002 (Volume 67, Number 233)]
[Notices]
[Page 72244-72247]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04de02-97]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46904; File No. SR-Amex-2002-87]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
American Stock Exchange LLC Relating to Elimination of Separate
Exchange Requirements Regarding the Use of Written Consent
Solicitations
November 25, 2002.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\
[[Page 72245]]
notice is hereby given that on October 28, 2002, the American Stock
Exchange LLC (``Amex'' 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
Amex. On November 25, 2002, the Exchange filed Amendment No. 1 to the
proposed rule change.\3\ The Exchange filed the proposed rule change
pursuant to section 19(b)(3)(A) of the Act,\4\ and Rule 19b-4(f)(6)
thereunder,\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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Claudia Crowley, Assistant General Counsel--
Listing Qualifications, Amex, to Nancy Sanow, Assistant Director,
Division of Market Regulation, Commission, dated November 22, 2002
(``Amendment No. 1''). In Amendment No. 1, Amex proposes to delete
the last sentence of the first paragraph of section 711 of the Amex
Company Guide because the requirements set forth therein are already
contained in section 705 of the Amex Company Guide.
\4\ 15 U.S.C. 78s(b)(3)A).
\5\ 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
Amex proposes to amend sections 705, 706, 710, 711, 712 and 713 of
the Amex Company Guide to eliminate separate Exchange requirements
regarding the use of consent solicitations. The following is the text
of the proposed rule change. Proposed new language is italicized;
deleted language is in brackets.
* * * * *
Sec. 705. Meetings and Solicitation of Proxies Required
A listed company is required, with respect to any matter requiring
authorization by its [stockholders] shareholders, to either (a) hold a
meeting of its [stockholders] shareholders in accordance with its
charter, by-laws and applicable state or other laws and to solicit
proxies (pursuant to a proxy statement conforming to the proxy rules of
the SEC) for such meeting of stockholders[; unless, upon prior Exchange
review and approval, the Exchange permits the solicitation from all
stockholders of record, of written consents (conforming to the proxy
rules of the SEC) in lieu of such meeting and proxy solicitation], or,
(b) use written consents in lieu of a special meeting of shareholders
as permitted by applicable law. The Exchange has no separate
requirements with respect to the solicitation of such consents, but
listed companies must comply with applicable state and federal laws and
rules (including interpretations thereof), including without
limitation, SEC Regulations 14A and 14C.
Note: An information statement under Regulation 14C of the SEC
is not considered a proxy statement for purposes of this
requirement.
[Sec. 706. Solicitation of Shareholder Consents
Upon prior Exchange review and approval, the Exchange permits
solicitation of written consents from shareholders in lieu of a
shareholder meeting and the solicitation of proxies (other than for the
election of directors or other major corporate action) as appropriate
authorization for corporate action by a listed company whenever it
appears that a convened meeting of shareholders is not required. The
use of consents may be granted by the Exchange on an individual basis
subject to the observance of certain Exchange requirements including,
among others, the condition that consents conforming to the proxy-
solicitation regulations of the SEC be solicited from all shareholders
of record.
A listed company's request for permission to solicit written
consents of shareholders must be accompanied by a statement as to
whether any substantial controversy regarding any of the matters to be
acted upon is anticipated. If it appears that a contest or controversy
will develop, the Exchange will require a shareholder meeting. If
permission to solicit consents is granted, such authorization will be
subject to the condition that, if a contest develops or a controversy
arises after the consent material is distributed to shareholders, the
company will terminate the solicitation of consents and revert to a
formal proxy solicitation and convene a meeting of shareholders.
The use of consents will not be permitted in connection with any
matter on which the Exchange requires the vote of shareholders. (See
Sec. Sec. 710-713.)
In addition to prior Exchange approval, the following requirements
also apply:
(a) a record date for the distribution of consent forms must be
used in the same manner as for the distribution of proxy-soliciting
material;
(b) consents must be sent to, and solicited from, all shareholders
of record in conformity with the proxy-soliciting regulations of the
SEC, which also apply to the solicitation of consents;
(c) corporate action is not to be taken on the matters presented
for shareholders' consideration until the consent solicitation period
has expired, even if the required number of consents is received
earlier; and
(d) the solicitation period (preferably about 30 days) must be for
a minimum of 20 days.]
Sec. 710. Vote Required
(a) With respect to votes cast on a proposal in person or by proxy,
[T]the minimum vote, under Sec. Sec. 711, 712 and 713, which will
constitute shareholder approval for listing purposes, is defined as
approval by a majority of votes cast [on a proposal in person or by
proxy]. (See Sec. 123 regarding quorum requirements.) With respect to
the use of written consents in lieu of a special shareholders meeting,
the written consent to the proposal of holders of a majority of the
shares entitled to vote will constitute shareholder approval for
listing purpose under Sec. Sec. 711, 712 and 713.
(b)--No change.
Sec. 711. Options to Officers, Directors or Key Employees
Approval of shareholders is required in accordance with Sec. 705
(unless exempted under paragraphs (a) and (b) below) as a prerequisite
to approval of applications to list additional shares reserved for
options granted or to be granted to officers, directors or key
employees, regardless of whether or not such authorization is required
by law or by the company's charter. [The Exchange requires that such
shareholders' approval be solicited pursuant to a proxy statement
conforming to SEC proxy rules which discloses all of the essential
details of the options or of the plan pursuant to which the options
will be granted.]
Note: This policy does not preclude the adoption of a stock
option plan, or the granting of options, subject to ratification by
shareholders, prior to the filing of an application for the listing
of the shares reserved for such purpose.
The Exchange will not require shareholders' approval as a condition
to listing shares reserved for the exercise of options when:
(a) through (b)--No change.
Sec. 712. Acquisitions
Approval of shareholders is required in accordance with Sec. 705
[(pursuant to a proxy solicitation conforming to SEC proxy rules)] as a
prerequisite to approval of applications to list additional shares to
be issued as sole or partial consideration for an acquisition of the
stock or assets of another company in the following circumstances:
[[Page 72246]]
(a) through (b)--No change.
Sec. 713. Other Transactions
The Exchange will require shareholder approval in accordance with
Sec. 705 [(pursuant to a proxy solicitation conforming to SEC proxy
rules)] as a prerequisite to approval of applications to list
additional shares to be issued in connection with:
(a) through (b)--No change.
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, 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
The Amex requires listed companies to obtain shareholder approval
of certain discounted stock and option issuances as well as other
potentially dilutive transactions. These requirements are set forth in
Sections 711-713 of the Amex Company Guide. State law, as well as a
company's charter and by-laws typically require shareholder approval of
a variety of corporate actions as well. Section 705 of the Amex Company
Guide requires listed companies to convene a formal shareholder meeting
accompanied by a proxy solicitation conforming to SEC proxy
requirements whenever shareholder approval is required. Although
Section 706 of the Amex Company Guide permits a listed company, subject
to Exchange approval, to solicit written consents from all shareholders
in lieu of a meeting, it does not permit the use of consents for any
matter requiring shareholder approval pursuant to Amex rules or for the
election of directors and other major corporate action.
The Amex rules governing proxy solicitations and the use of written
consents have been in existence for decades, and appear to be based on
an assumption that the written consent process would not necessarily
provide adequate shareholder participation or information. However, for
several years, under Commission requirements, issuers relying on
written consents have been required to provide disclosure comparable to
that required in proxy solicitations. Consents will sometimes be used
when a company is permitted under state law to take action without a
shareholder meeting upon the written consent of a specified percentage
of shareholders, and the company has an individual or a small group
that holds sufficient voting power to approve the corporate action
involved. Under federal securities laws, when a company is permitted to
take corporate action without a shareholder meeting upon the written
consent of a specified percentage of shareholders, such company is not
required to solicit the consent of all shareholders. Instead, under
certain circumstances, the company is required by Section 14(c) of the
Act \6\ and Regulation 14C thereunder \7\ to furnish all shareholders
with an information statement \8\ that contains the same disclosure as
would have been provided to those shareholders had they been sent a
proxy or consent solicitation. Regulation 14C also requires that the
information statement be sent at least 20 days prior to the earliest
date that corporate action can be taken.\9\
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\6\ 15 U.S.C. 78n(c).
\7\ 17 CFR 240.14C.
\8\ An information statement is a disclosure document used to
inform shareholders of corporate action that has or will be taken
without the general solicitation of their proxy, consent or
authorization.
\9\ 17 CFR 240.14C.
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A number of Amex-listed companies have such control vested in an
individual or small group, and have, on occasion, indicated a desire to
take corporate action on the basis of the written consent of such
individual or group. Under existing Amex rules (Section 706 of the Amex
Company Guide), listed companies are precluded from using consents for
many corporate actions, and even if a company is permitted to use
consents (i.e., if the corporate action did not require shareholder
approval pursuant to Amex rules or involve the election of directors or
major corporate action), it would be required to actually solicit the
consents from all shareholders, notwithstanding that the vote was
predetermined because of the voting control of an individual or small
group. The additional requirement to collect and tabulate votes adds an
extra level of cost and burden to the process, which some companies
argue has no substantive justification, since non-control shareholders
cannot change the outcome, and receive the same information regarding
the transaction whether their consent is solicited or not.
The Exchange believes that such concerns are credible and that it
is appropriate to align the Exchange with what has become accepted
corporate practice and has long been sanctioned by state and federal
regulation. The federal proxy rules insure that all shareholders are
provided all the information material to the corporate action being
taken, regardless of whether the issuer must solicit shareholder
approval generally, or is able to proceed based on the written consent
of a smaller group. Accordingly, the Amex proposes to eliminate its
separate requirements governing the use of written consents by listed
companies in lieu of special shareholder meetings. This proposal would
enable listed companies to obtain shareholder approval of corporate
action when necessary by any lawful method.
Under the proposed rule amendments, a listed company would be
permitted to obtain the requisite shareholder approval for corporate
action (whether required by Amex rules or otherwise) by either holding
a special meeting of shareholders and soliciting proxies in accordance
with SEC proxy requirements, or by the use of written consents in lieu
of such meeting as permitted by applicable law. However, Amex-listed
companies will not be permitted to use written consents in lieu of the
annual meeting of shareholders at which directors are to be elected.
2. Statutory Basis
The Exchange believes that 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),\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 investor and the public
interest; and are not designed to permit unfair discrimination between
customers, issuers, brokers and dealers.
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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
Amex believes that the proposed rule change will impose no burden
on competition.
[[Page 72247]]
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
Because the foregoing proposed rule change, as amended: (1) does
not significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from the date of filing,
or such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, and the Exchange
has provided the Commission with written notice of its intent to file
the proposed rule change at least five business days prior to the
filing date, the proposed rule change, as amended, has become effective
pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)
thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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Amex has requested that the Commission waive the 30-day operative
delay. The Commission believes waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that it recently approved a similar proposal by
the New York Stock Exchange.\14\ The Commission did not receive any
comments on that proposal when it was published for comment.\15\ For
these reasons, the Commission designates the amended proposal to be
effective and operative upon filing with the Commission.\16\
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\14\ See Securities Exchange Act Release No. 46654 (October 11,
2002), 67 FR 64687 (October 21, 2002).
\15\ See Securities Exchange Act Release No. 46092 (June 19,
2002), 67 FR 43199 (June 26, 2002).
\16\ The proposed rule change became effective on November 25,
2002, the date on which Amendment No. 1 was filed.
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At any time within 60 days of the filing of such amended 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.\17\
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\17\ Because the proposed rule change became effective on
November 25, 2002, the date on which Amendment No. 1 was filed, the
60-day abrogation period began on November 25, 2002.
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 refer to File No. SR-Amex-2002-87 and
should be submitted by December 26, 2002.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30680 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P