[Federal Register Volume 78, Number 137 (Wednesday, July 17, 2013)]
[Notices]
[Pages 42813-42815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17095]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69970; File No. SR-NYSE-2013-47]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Section 312.07 of the Listed Company Manual To Remove the 50%
Quorum Requirement and Add Certain Clarifying Language
July 11, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 28, 2013, New York Stock Exchange LLC (``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 Exchange. 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.
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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 312.07 of the Listed Company
Manual (the ``Manual'') to remove the requirement that the total vote
cast on any proposal requiring shareholder approval under NYSE rules
must represent over 50% in interest of all securities entitled to vote
on the proposal.
The text of the proposed rule change is available on the Exchange's
Web site at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Section 312.07 of the Manual to
remove the requirement that the total vote cast on any proposal
requiring shareholder approval under NYSE rules must represent over 50%
in interest of all securities entitled to vote on the proposal.\3\
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\3\ The Commission notes that the Exchange has also proposed to
amend Section 312.07 to add ``or where any matter requires
shareholder approval'' to the rule text.
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Section 312.07 establishes voting requirements for any shareholder
meeting proposal where shareholder approval of that proposal is a
prerequisite to the listing of any additional or new securities.\4\ The
rule requires approval by a majority of votes cast on any such
proposal, subject to a quorum requirement that the total vote cast on
the proposal must represent over 50% in interest of all securities
entitled to vote on the proposal.\5\
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\4\ Section 312.03 of the Manual requires shareholder approval
of the sale or transfer by the listed company of shares of common
stock or securities convertible into or exercisable for common stock
where the size of the issuance exceeds thresholds established in the
rule or would result in a change of control. Section 303A.08
requires shareholder approval of equity compensation plans and
material amendments thereto.
\5\ Section 306.00 of the Manual provides that listed companies
may use written consents in lieu of a special meeting to the extent
permitted by applicable state and federal law and rules (including
interpretations thereof), including, without limitation, Regulations
14A and 14C under the Act.
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The Exchange notes that listed companies are subject to quorum
requirements under the laws of their states of incorporation.\6\ In
addition, the
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by-laws or other governing documents of listed companies frequently
include more stringent voting requirements than imposed by state
law.\7\ In light of the protection afforded to shareholders by those
other applicable requirements, the Exchange believes that the quorum
requirement of Section 312.07 is unnecessary. The Exchange also
believes that requiring companies to comply with a separate NYSE quorum
requirement with respect to a limited category of proposals is
confusing to companies and their shareholders, as it requires companies
to disclose and apply two separate quorum requirements with respect to
those matters, while applying only the requirements of their
certificate of incorporation or bylaws or state law for all other
proposals being voted on at the meeting.\8\ The Exchange also notes
that neither of the other two primary equities listing markets in the
United States--the NASDAQ Stock Exchange LLC (``NASDAQ'') and NYSE MKT
LLC (``NYSE MKT'')--has a quorum requirement comparable to that
included in Section 312.07.\9\
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\6\ For example, Delaware allows companies to establish their
own quorum requirements in their certificates of incorporation or
bylaws, provided that the quorum must be at least one-third of the
shares entitled to vote on the matter. In the absence of a quorum
provision in the company's certificate of incorporation or bylaws,
Delaware requires a quorum of 50% of the shares entitled to vote on
the matter. See Del. Code Sec. 216.
\7\ Section 310.00 of the Manual provides that the quorum
required for any meeting should be sufficiently high to insure a
representative vote and that the Exchange will give careful
consideration to provisions fixing any proportion less than a
majority of the outstanding shares as the quorum for shareholders'
meetings. Section 310 provides that the Exchange will generally not
object to reasonable lesser quorum requirements if the company
solicits proxies for shareholder meetings. Typically, companies
seeking to list on the Exchange require a majority of outstanding
shares as the quorum for a shareholders' meeting. On occasion,
however, the Exchange has listed a company with a quorum requirement
of less than a majority of outstanding shares consistent with
applicable state law. The Exchange is not aware, however, that any
company with a quorum requirement of less than one-third of
outstanding shares (except for companies entitled to rely on the
provisions set forth in Section 103.00 of the Manual) has previously
been listed on the Exchange. Additionally, the Exchange will not
list a company with a quorum requirement of less than one-third of
outstanding shares (except for companies entitled to rely on the
provisions set forth in Section 103.00 of the Manual) going forward.
\8\ The Exchange notes that further confusion is generated by
the different treatment of broker non-votes under Section 312.07 and
state law. The broker non-vote at a shareholder meeting represents
those shares held by brokers as registered holders on behalf of
beneficial owners who do not provide voting instructions. Under some
state law, broker non-votes are generally deemed to be present for
quorum purposes. However, it has been the NYSE's longstanding
interpretation of Section 312.07 that broker non-votes should not be
counted in determining whether a majority of the shares outstanding
and entitled to vote have been voted. The NYSE's treatment of broker
non-votes for purposes of Section 312.07 has long been a source of
confusion among listed companies and their service providers.
\9\ The Commission notes that under Section 312.07, the minimum
vote which will constitute shareholder approval is a majority of
votes cast on a proposal, and that Section 310 contains general
quorum requirements that will still apply to all shareholder
meetings as discussed in footnotes 7 and 16.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \10\ of
the Exchange in general, and furthers the objectives of Section 6(b)(5)
\11\ of the Act 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, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Exchange believes that the
proposed amendment is consistent with the protection of investors and
the public interest in that the laws of the various states have quorum
requirements and many companies' own by-laws establish more stringent
requirements than imposed by state law.
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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 Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. In this regard,
the Exchange notes that the competition among exchanges for listings is
robust and vigorous, and the proposed rule change is not intended, nor
is it expected, to reduce or diminish such competition. By conforming
the NYSE's voting requirements to those of NASDAQ, the proposed rule
change would potentially increase competition for listings of companies
that are concerned about their ability to meet the existing NYSE quorum
requirements.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of the
Exchange's 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, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because such waiver
would allow the Exchange immediately to harmonize its quorum
requirement for listed companies with analogous quorum requirements of
other primary listing exchanges, such as NYSE MKT and NASDAQ. The
Commission further notes that as a result of the rules of these other
listing markets, listed companies can already list on a primary market
while not having to comply with a 50% quorum requirement.\16\
Accordingly, the
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Commission hereby grants the Exchange's request and designates the
proposal operative upon filing.\17\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ The Commission notes that, as discussed in footnote 7
above, Section 310.00 of the Manual provides that the quorum
required for any meeting should be sufficiently high to insure a
representative vote and that the Exchange will give careful
consideration to provisions fixing any proportion less than a
majority of the outstanding shares as the quorum for shareholders'
meetings. Also, the Exchange has represented in footnote 7 above,
that the Exchange is not aware that any company with a quorum
requirement of less than one-third of outstanding shares (except for
companies entitled to rely on the provisions set forth in Section
103.00 of the Manual) has previously been listed on the Exchange. In
addition, the Exchange represented, in footnote 7, that it will not
list a company with a quorum requirement of less than one-third of
outstanding shares (except for companies entitled to rely on the
provisions set forth in Section 103.00 of the Manual) going forward.
The Commission notes that these quorum requirements, which apply to
all shareholder meetings, including ones where the shareholder
approval matters in Section 312 are presented, are at least as
stringent as NASDAQ's (see NASDAQ Rule 5620(c)).
\17\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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 email to [email protected]. Please include
File Number SR-NYSE-2013-47 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2013-47. This file
number should be included on the subject line if email 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. 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 publicly available. All
submissions should refer to File Number SR-NYSE-2013-47 and should be
submitted on or before August 7, 2013.
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\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17095 Filed 7-16-13; 8:45 am]
BILLING CODE 8011-01-P