[Federal Register Volume 77, Number 155 (Friday, August 10, 2012)]
[Notices]
[Pages 47891-47893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19614]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67603; File No. SR-NYSE-2012-35]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Reducing From 10 Days to Five Days the Shareholder Notification Period
That Is a Condition to a Waiver of the NYSE's Shareholder Approval
Requirements Pursuant to Section 312.05 of the Exchange's Listed
Company Manual
August 6, 2012.
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 August 6, 2012, the 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 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\ 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 reduce from 10 days to five days the
shareholder notification period that is a condition to a waiver of the
NYSE's shareholder approval requirements pursuant to Section 312.05 of
the Exchange's Listed Company Manual (the ``Manual''). The Exchange
also proposes to permit the shareholder notification to be effectuated
by a broadly disseminated press release in addition to a letter to
shareholders, and the date of such press release shall serve as the
commencement date of the shareholder notification period, subject to a
minimum notification period of at least two days from the date of
mailing of the shareholder letter. 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
[[Page 47892]]
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
In connection with an emergency capital raising transaction by
Knight Capital Group, Inc. (``KCG''), the Exchange proposes to reduce
from 10 days to five days the shareholder notification period that is a
condition to a waiver of the NYSE's shareholder approval requirements
pursuant to Section 312.05 of the Manual. The Exchange also proposes to
permit the shareholder notification to be effectuated by a broadly
disseminated press release in addition to a letter to shareholders, and
the date of such press release shall serve as the commencement date of
the shareholder notification period, subject to a minimum notification
period of at least two days from the date of mailing of the shareholder
letter. The Exchange does not intend to amend the text of Section
312.05.
Section 312.03(c) of the Manual requires a listed company to obtain
shareholder approval prior to the issuance of shares of common stock
representing 20% or more of the voting power or number of shares
outstanding of the company's then outstanding common stock or the
issuance of securities convertible into, exchangeable for or
exercisable for 20% or more of the voting power or number of shares
outstanding of the company's then outstanding shares of common
stock.\3\
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\3\ There are exceptions to the shareholder approval
requirements of Section 312.03(c) for public offerings for cash and
for a transaction that qualifies as a ``Bona Fide Private
Financing'' as defined in Section 312.04(g).
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Subject to approval by the Exchange of an application made by the
company, Section 312.05 provides an exception to the shareholder
approval requirements of Section 312.03 when (1) the delay in securing
shareholder approval would seriously jeopardize the financial viability
of the enterprise and (2) reliance by the company on that exception is
expressly approved by the audit committee of the listed company's board
of directors (the ``financial distress exception''). A company relying
on this exception must mail to all shareholders not later than 10 days
before issuance of the securities a letter alerting them to its
omission to seek the shareholder approval that would otherwise be
required under the policy of the Exchange and indicating that the audit
committee of the board has expressly approved the exception.
KCG has made an application to the Exchange for a waiver of the
Exchange's shareholder approval requirements pursuant to Section 312.05
in relation to a proposed emergency capital raise. KCG has obtained the
approval of its audit committee as required by Section 312.05. After
extensive discussion with KCG, the Exchange has concluded that KCG's
use of the financial viability exception is warranted and has approved
KCG's application. However, KCG has informed the Exchange that it does
not believe that it will be able to obtain the necessary funding on an
immediate basis unless the investors are able to convert the securities
they purchase into common stock more quickly than would be possible if
the Exchange required the full 10 days notice to shareholders provided
for in Section 312.05 of the Manual.
KCG has informed the Exchange that there is grave doubt as to its
ability to continue its operations in the immediate future if it is
unable to obtain significant funding immediately. Given the company's
belief that it will be unable to raise this capital if it is unable to
issue common stock to its potential investors until the end of the full
10-day notification period required under Section 312.05 of the Manual,
KCG has informed the Exchange that it will likely be unable to continue
its operations with immediate effect unless the Exchange shortens that
notification period.
Accordingly, the Exchange proposes to reduce from 10 to five days
the shareholder notification requirement of Section 312.05 in relation
to KCG's financial distress application. In addition, the Exchange
proposes to permit the shareholder notification to be effectuated
through KCG's issuance of a broadly disseminated press release, in
addition to a shareholder letter, disclosing the information required
by Section 312.05 of the Manual as well as that it obtained additional
exemptive relief to reduce the shareholder notification requirement
from 10 to five days, and the date of such press release shall serve as
the commencement date of the shareholder notification period, subject
to a minimum notification period of at least two days from the date of
mailing of the shareholder letter. The press release must also disclose
the earliest date at which the convertible securities will be converted
or become convertible into common stock.\4\
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\4\ KCG has advised that it will also send a letter to
shareholders contemporaneously with or shortly after issuance of the
press release, but in any event at least two days prior to
conversion by the investors of the securities they purchase into
common stock.
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The Exchange believes that this relief is appropriate in light of
the uniqueness of the circumstances giving rise to KCG's urgent need
for capital. In particular, KCG operates a broker-dealer with
significant operations and there could be some disruption to KCG's
customers should KCG's operations cease abruptly. Moreover, KCG has
advised that if the notice period is not shortened it will not be able
to raise the capital needed to continue operations in the immediate
future. With respect to the use of a press release in addition to a
shareholder letter, the Exchange believes that the extremely high
volume of trading in KCG' stock during the last few days has likely
resulted in significant changes to its shareholder base and that a
press release is therefore an effective means of communication with
such shareholders. In addition, the Exchange believes that the
reduction in the notification period is in the best interests of KCG's
existing shareholders, since KCG will otherwise likely be unable to
raise necessary capital to avoid insolvency, and likely significant
erosion or elimination of shareholder value, absent such reduction.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \5\ of the Securities Exchange Act of 1934 (the
``Act''), in general, and furthers the objectives of Section 6(b)(5) of
the Act,\6\ in particular in that it is designed to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and 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. The Exchange believes that
the proposed amendment is consistent with the investor protection
objectives of Section 6(b)(5) of the Act in that KCG will likely become
insolvent if the Exchange does not reduce the required notification
period and the existing shareholders of KCG therefore have a compelling
[[Page 47893]]
interest in the company's ability to raise capital as quickly as
possible. The Exchange also believes that use of a broadly disseminated
press release is an effective means of communication with KCG's
shareholders, in view of the extremely high trading volume in its stock
during the last few days. The Exchange also notes that shareholders
would still have a reasonable period of at least five days notice of
the issuance, including at least a two day notice period after mailing
of the shareholder letter. The Exchange also believes that the proposed
waiver would facilitate transactions in securities, as there could be
disruption to KCG's customers if KCG ceased operations abruptly.
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\5\ 15 U.S.C. 78f(b).
\6\ 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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ Because
the Exchange states that 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, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). The Exchange has requested that the
Commission waive the requirement that the Exchange provide 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 on which the
Exchange filed the proposed rule change pursuant to Rule 19b-
4(f)(6)(iii). The Commission hereby grants this request.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requested that the Commission waive
the 30-day operative delay so that the proposed rule change may take
effect upon filing with the Commission pursuant to Section 19(b)(3)(A)
\11\ and Rule 19b-4(f)(6) \12\ thereunder, and also become operative on
that same date. The Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest.\13\ The Exchange has represented, among other things,
that (i) the waiver would allow KCG to obtain on an immediate basis the
capital it needs to enable it to continue operations and avoid
insolvency; (ii) KCG's existing shareholders, whom this notification is
designed to inform, have a compelling interest in KCG's ability to
raise capital as quickly as possible; and (iii) under these
circumstances, by issuing a broadly disseminated press release, in
addition to mailing a shareholder letter, KCG will provide effective
notice of the issuance to its shareholders and its shareholders will
still have a reasonable notice period of the issuance of at least five
days. The Commission hereby waives the 30-day operative delay and
designates the proposal operative upon filing.\14\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\14\ In connection with this release, the Commission is not
making any findings as to the accuracy of the representations made
by the Exchange or expressing any view regarding the merits of any
transaction, or its terms, entered into by KCG.
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At any time within 60 days of the filing of the 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-2012-35 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-2012-35. 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
a.m. and 3 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; 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 Number SR-NYSE-2012-35 and should be
submitted on or before August 31, 2012.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19614 Filed 8-9-12; 8:45 am]
BILLING CODE 8011-01-P