Notice of Filing of Amendment No. 2 to Proposed Rule Change To Amend NYSE Rule 500 re: Voluntary Delistings by Listed Companies
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-40688; File No. SR-NYSE-97-31)
November 18, 1998
Self-Regulatory Organizations; Notice of Filing of Amendment No. 2 to Proposed Rule Change by the New York Stock Exchange, Inc. to Amend its Rule 500 Relating to Voluntary Delistings by Listed Companies
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 November 9, 1998, the New York Stock Exchange, Inc. ("NYSE" or "Exchange") filed with the Securities and Exchange Commission ("SEC" or "Commission") Amendment No. 2 to the proposed rule change as described in Items I, II and III below, which Items have been prepared by the NYSE. The Commission is publishing this notice to solicit comments on Amendment No. 2 from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange is proposing the second amendment to its proposed rule change to replace existing NYSE Rule 500 with a new Rule 500 to revise the procedures a NYSE-listed company must follow to delist its securities from the Exchange. The text of Amendment No. 2 to the proposed rule change is available at the Office of the Secretary, the NYSE, and at the Commission.
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 NYSE 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 NYSE 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 Statutory Basis for, the Proposed Rule Change
On November 17, 1997, the Exchange submitted the proposed rule change, proposing to amend NYSE Rule 500, which states the procedures a NYSE-listed company must follow before voluntarily delisting its securities from the Exchange. On December 3, 1997, the Exchange submitted Amendment No. 1 to the proposed rule change to the Commission. The amended proposal was published for comment in the Federal Register on December 10, 1997. 3
NYSE Rule 500 currently requires holders of 66 percent of a security to approve a company's decision to delist the company's securities from the Exchange, with less than ten percent of the individual holders objecting to the delisting. As originally proposed, the amended rule would have permitted a domestic issuer to delist stock if it obtained the approval of: (1) a majority of the company's full board of directors; and (2) the company's audit committee. The issuer then would have been required to provide shareholders with between 45 and 60 calendar days' notice of the delisting. A non-U.S. issuer would have had to obtain board approval to delist its stock. A non-U.S. issuer also would have had to provide holders with reasonable notice of its intention to delist, which would have required the issuer to send written notice to U.S. holders and to follow home-country practice to provide notice to non-U.S. holders.
In response to the Commission's request for comment on the original proposal, the Commission received a number of comments both for and against the proposal. In response to those comments and discussions with Commission staff, the Exchange now proposes the following amendments to the original proposal:
- Permit approval by a company's board of directors according to applicable state law requirements on majority votes (generally the majority of a quorum), rather than requiring approval by a majority of the entire board. The Exchange would continue to require audit committee approval.
- Amend the notice provision to require U.S. companies to provide actual written notice to no less than 35 of their largest record holders (rather than all holders). A foreign issuer would have to provide such notice to its 35 largest U.S. shareholders.
- Require both U.S. and foreign companies to issue a press release to inform shareholders generally of the proposed delisting.
- Shorten the minimum waiting period from 45 calendar days to 20 business days, and change the maximum waiting period from 60 calendar days to 60 business days, with the ability of companies to extend the period, subject to approval by the Exchange.
The Exchange believes that new Rule 500, as proposed to be amended, will continue to provide investors with adequate procedural protections in the delisting process while providing listed companies with greater flexibility in this area.
2. Statutory Basis
The Exchange believes Amendment No. 2 to the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, 4 which requires that the rules of the Exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal does not 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
In adopting the original proposal to amend Rule 500, the Exchange consulted with numerous Board and advisory committees, pension funds and other Exchange constituents. The Exchange also has informally discussed the current proposals with various of these constituencies.
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 self-regulatory organization consents, the Commission will:
- (A) by order approve the 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 Amendment No. 2, including whether Amendment No. 2 is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 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 at the Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. All submissions should refer to File No. SR-NYSE-97-31 and should be submitted by [insert date 21 days from date of publication].
For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5
Jonathan G. Katz
115 U.S.C. 78s(b)(1).
217 CFR 240.19b-4.
3 Securities Exchange Act Release No. 39394 (December 3, 1997) 62 FR 65116.
415 U.S.C. 78f(b)(5).
517 CFR 200.30-3(a)(12).