[Federal Register Volume 83, Number 159 (Thursday, August 16, 2018)]
[Notices]
[Pages 40795-40797]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17629]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83822; File No. SR-NYSEAMER-2018-37]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Section
140 and Section 142 of the NYSE American Company Guide To Eliminate the
Initial Application Fee for SPACs Applying To List and Amend the
Additional Shares Fee for Shares Issued in Conjunction With a Business
Combination if the SPAC Remains Listed After Such Business Combination
August 10, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on July 31, 2018, NYSE American LLC (the ``Exchange'' or
``NYSE American'') filed with the Securities and Exchange Commission
(the ``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 140 of the NYSE American
Company Guide to provide that a company applying to list as a special
purpose acquisition company (``SPAC'') under Section 119 of the Company
Guide will not be required to pay an Initial Application Fee. The
Exchange also proposes to amend Section 142 of the Company Guide to
provide that a SPAC remaining listed after consummation of the Business
Combination will not be required to pay listing fees in relation to the
issuance of any additional shares (i) in connection with the
consummation of the Business Combination; or (ii) in a transaction that
occurs at the same time as the Business Combination with a closing
contractually contingent on the consummation of the Business
Combination. The proposed change is available on the Exchange's website
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 119 of the Company Guide provides for the listing of
companies with no prior operating history (``SPACs'') that conduct an
initial public offering for the purpose of engaging in a merger or
acquisition with one or more unidentified companies within a specific
period of time (not to exceed 36 months) (the ``Business
Combination''). At least 90% of the gross proceeds of a SPAC's IPO and
any concurrent sale by the company of equity securities must be
deposited in a trust account maintained by an independent trustee, an
escrow account maintained by an ``insured depository institution,'' as
that term is defined in Section 3(c)(2) of the Federal Deposit
Insurance Act, or in a separate bank account established by a
registered broker or dealer (collectively, a ``deposit account'')
pending completion of the Business Combination or dissolution of the
SPAC. The Business Combination must have an aggregate fair market value
of at least 80% of the value of the deposit account (excluding any
deferred underwriter's fees and taxes payable on the income earned on
the deposit account) at the time of the agreement. A listed SPAC may
remain listed upon consummation of its Business Combination, provided
it
[[Page 40796]]
meets the criteria for initial listing of an operating company.
Proposed Waiver of the Initial Application Fee for SPACs
Pursuant to Section 140 of the Company Guide, issuers applying for
initial listing on the Exchange must (subject to enumerated exceptions)
pay a $5,000 initial application fee (the ``Initial Application Fee'').
The Initial Application Fee is deducted from the amount of initial
listing fees payable by an applicant at the time of its initial
listing. The Exchange proposes to amend Section 140 to provide that
companies listed as SPACs under Section 119 of the Company Guide would
not be charged the Initial Application Fee. SPACs applying to list
almost always complete their offerings and the Exchange is therefore
unlikely to incur unreimbursed costs in reviewing their applications,
which was the concern the Exchange was addressing when it adopted the
Initial Application Fee.
Proposed Waiver of Additional Listing Fees in Connection With SPAC
Business Combinations
The Exchange has observed that a SPAC will frequently reconsider
its listing venue in connection with the consummation of its Business
Combination. The Business Combination is a transformative event in the
life cycle of a SPAC, when it becomes an operating company instead of a
blank check company. In connection with that transformation, a SPAC
will frequently put in place a new management team and significantly
change its board of directors and it will often have a significantly
different shareholder base after the Business Combination than it had
as a SPAC. In effect, a SPAC after its Business Combination is a
completely different company and it is for this reason that the board
and management of the company after the transaction would want to
reconsider the positioning of the company in many respects, including
its listing venue.
The market for the retention or transfer to another exchange of
these companies is very competitive and a number of transfers to a new
listing venue have occurred in connection with the completion of a
SPAC's Business Combination. The listing rules of the Exchange,\4\ the
New York Stock Exchange \5\ and NASDAQ Stock Market \6\ all provide for
a waiver of all initial listing fees in connection with a transfer from
another national securities exchange, so a SPAC moving its listing upon
consummation of its Business Combination does not pay any listing fees
in connection with such transfer or the issuance of any new shares at
the time of its Business Combination. However, pursuant to the
provisions of Section 142 of the Company Guide, a SPAC remaining listed
on the Exchange upon consummation of its Business Combination must pay
additional listing fees in relation to any additional shares issued in
connection with the Business Combination. In such a case, the SPAC
would be faced with the anomalous situation where there would be no
listing fee burden associated with a transfer to another exchange but
it would be required to pay significant additional listing fees if it
remained on its incumbent exchange. Consequently, to eliminate this
disparate treatment of companies listing after a Business Combination,
the Exchange proposes to amend Section 142 to provide that any SPAC
remaining listed on the Exchange upon consummation of its Business
Combination would no longer be subject to any additional listing fees
with respect to any shares issued in connection with such Business
Combination.
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\4\ See Section 140 of the NYSE American Company Guide.
\5\ See Section 902.02 of the NYSE Listed Company Manual.
\6\ See NASDAQ Marketplace Rule 5910(a)(7)(i).
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In addition, the Exchange has observed that it is not uncommon for
a SPAC to raise capital by selling shares in a private placement in
conjunction with the consummation of its Business Combination to fund
its new business after the Business Combination. The private placement
generally closes at the same time as the consummation of the Business
Combination and the closing of the private placement is contractually
conditioned on such consummation.
Under current Exchange rules, the SPAC would be required to pay
listing fees with respect to the shares issued in any such private
placement. By contrast, if the SPAC chose to transfer to another
listing venue at the time of consummation of its Business Combination,
the other market would charge no listing fees on those shares as they
would be subject to the listing fee exemption, which all of the
exchanges have, for shares outstanding at the time of transfer. As this
anomaly would impose a cost on the SPAC if it remained on the Exchange
where none would be incurred if the company chose to transfer, the
Exchange proposes to amend Section 142 to provide that a SPAC that
remains listed after consummation of its Business Combination would not
be required to pay listing fees in relation to the issuance of any
additional shares in a transaction that occurs at the same time as the
Business Combination with a closing contractually contingent on the
consummation of the Business Combination.\7\
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\7\ The Exchange believes that it is appropriate to provide this
waiver to a SPAC at the time of its Business Combination and not to
an operating company that would also be subject to additional
listing fees in connection with a share issuance subsequent to
listing. In the Exchange's experience, there is generally no
parallel to the Business Combination in the life cycle of an
operating company that would cause it to reconsider its listing
venue at the time it issued additional shares, so the anomaly the
Exchange seeks to address in relation to SPACs is not relevant to
operating companies.
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The Exchange does not expect the revenues it forgoes as a result of
the proposed amendments to Sections 140 and 142 to negatively affect
its ability to conduct its regulatory program.
The Exchange also proposes to remove some text from Section 140
that is no longer applicable as it refers to the implantation of the
Initial Application Fee as of January 1, 2013. Additionally, the
Exchange proposes to amend Section 142 to remove text relating to fee
rates that are no longer applicable as they expired by their terms on
December 31, 2014.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Sections 6(b)(4) \9\ and 6(b)(5) \10\ of the Act, in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges and is not
designed to permit unfair discrimination among its members and issuers
and other persons using its facilities.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f(b)(5).
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The proposed amendment to Section 140 is not unfairly
discriminatory and represents an equitable allocation of reasonable
fees, because SPACs applying to list almost always complete their
offerings and the Exchange is therefore unlikely to incur unreimbursed
costs in reviewing their applications, which was the concern the
Exchange was addressing when it adopted the Initial Application Fee. In
addition, the proposed amendment would represent an equitable
allocation of reasonable fees as the Initial Listing Application Fee is
offset against fees payable upon listing and almost all SPACs applying
to list would benefit from this discount to their initial listing fees,
while operating company
[[Page 40797]]
applicants are much more likely not to complete the listing process.
The proposed amendment to Section 142 is not unfairly
discriminatory and represents an equitable allocation of reasonable
fees, as it will result in a SPAC that remains listed on the Exchange
after its Business Combination being treated the same as a SPAC that
transfers to the Exchange from another listing venue. The Exchange also
believes the proposed amendment to Section 142 is not unfairly
discriminatory and represents an equitable allocation of reasonable
fees with respect to listed operating companies, as operating companies
generally do not have an event in their life cycle parallel to the
Business Combination for a SPAC which would normally give rise to a
reconsideration of the company's listing venue.
The proposed removal of text relating to fees that are no longer
applicable is ministerial in nature and has no substantive effect.
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 purpose of the Act. The proposed amendment to
Section 140 does not impose and burden on competition as it merely will
allow the Exchange to better compete with other exchanges for initial
listing of SPACs. In addition, the proposed amendment to Section 142
does not impose any burden on competition, as it will have the effect
of treating a SPAC that remains listed on the Exchange after its
Business Combination the same for fee purposes as a SPAC that transfers
to the Exchange from another listing venue or transfers to another
listing venue at that time.
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 foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \11\ of the Act and subparagraph (f)(2) of Rule
19b-4 \12\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(2).
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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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\13\ 15 U.S.C. 78s(b)(2)(B).
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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. 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-NYSEAMER-2018-37 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAMER-2018-37. 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 website (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 website 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 the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2018-37 and should be submitted
on or before September 6, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-17629 Filed 8-15-18; 8:45 am]
BILLING CODE 8011-01-P