[Federal Register Volume 63, Number 13 (Wednesday, January 21, 1998)]
[Rules and Regulations]
[Pages 3032-3036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1295]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 230
[Release No. 33-7494, 34-39542, File No. S7-17-97]
RIN 3235-AH18
Covered Securities Pursuant to Section 18 of the Securities Act
of 1933
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission (``SEC'' or
``Commission'') is adopting Rule 146(b) under Section 18 the Securities
Act of 1933, as amended (``Securities Act''). The purpose of the Rule
is to designate securities listed on the Chicago Board Options
Exchange, Tier I of the Pacific Exchange, and Tier I of the
Philadelphia Stock Exchange as covered securities for the purposes of
Section 18 of the Securities Act. Covered Securities under Section 18
are exempt from state law registration requirements.
EFFECTIVE DATE: This final rule is effective January 21, 1998.
FOR FURTHER INFORMATION CONTACT: Sharon M. Lawson, Senior Special
Counsel, James T. McHale, Special Counsel, or David S. Sieradzki, Esq.,
at 202/942-0181, 202/942-0190, or 202/942-0135; Office of Market
Supervision, Division of Market Regulation, Securities and Exchange
Commission (Mail Stop 2-2), 450 Fifth Street, N.W., Washington, D.C.
20549.
SUPPLEMENTARY INFORMATION:
I. Introduction
On October 11, 1996, The National Securities Markets Improvement
Act of 1996 (``NSMIA'') 1 was signed into law. Among other
changes made to the federal securities laws, NSMIA amends Section 18 of
the Securities Act 2 to provide for exclusive federal
registration of securities listed, or authorized for listing, on the
New York Stock Exchange (``NYSE''), the American Stock Exchange
(``Amex''), or listed on the National Market System of the Nasdaq Stock
Market (``Nasdaq/NMS''), or any other national securities exchange
designated by the Commission to have substantially similar listing
standards to those markets. More specifically, Section 18(a) provides
that ``no law, rule, regulation, or order, or other administrative
action of any State * * * requiring, or with respect to, registration
or qualification of securities * * * shall directly or indirectly apply
to a security that--(A) is a covered security.'' Covered securities are
defined in Section 18(b)(1) to include those securities listed, or
authorized for listing, on the NYSE, Amex, or listed on Nasdaq/NMS
(collectively the ``Named Markets''), or those securities listed, or
authorized for listing, on a national securities exchange (or tier or
segment thereof) that has listing standards that the Commission
determines by rule are ``substantially similar'' to one of the Named
Markets.
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\1\ Pub. L. 104-290, 110 Stat. 3416 (1996).
\2\ 15 U.S.C. 77r.
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The Pacific Exchange, Incorporated (``PCX''), the Chicago Board
Options Exchange, Incorporated (``CBOE''), the Chicago Stock Exchange,
Incorporated (``CHX''), and the Philadelphia Stock Exchange,
Incorporated (``Phlx'') (collectively the ``Petitioners'') have
petitioned the Commission to adopt a rule which finds their listing
standards to be substantially similar to those of the NYSE, Amex, or
Nasdaq/NMS and, therefore, entitling securities listed pursuant thereto
to be deemed covered securities under Section 18 of the Securities
Act.3
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\3\ See Letter from David P. Semak, Vice President, Regulation,
Pacific Stock Exchange, Incorporated (n/k/a Pacific Exchange, Inc.),
to Arthur Levitt, Jr., Chairman, Commission, dated November 15, 1996
(``PCX Petition''); letter from Alger B. Chapman, Chairman, CBOE, to
Jonathan G. Katz, Secretary, Commission, dated November 18, 1996
(''CBOE Petition''); letter from J. Craig Long, Esq., Foley and
Lardner, to Jonathan G. Katz, Secretary, Commission, dated February
4, 1997(''CHX Petition''); and letter from Michele R. Weisbaum, Vice
President and Associate General Counsel, Phlx, to Jonathan G. Katz,
Secretary, Commission, dated March 31, 1997 (``Phlx Petition'')
(collectively the ``Petitions'').
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On June 10, 1997, the Commission issued a release proposing to
adopt Rule 146(b) that would designate securities listed on the CBOE
and Tier I of the PCX as designated securities for the purposes of
Section 18(a) of the Securities Act, and soliciting comment on whether
Tier I securities of the CHX and Phlx should be included in Rule
146(b).4 The Commission received three comment letters in
response to the proposal.5
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\4\ Securities Act Release No. 7422, Securities Exchange Act
Release No. 38728 (June 10, 1997) (``proposing release''), 62 FR
32705 (June 17, 1997).
\5\ See Letter from J. Craig Long, Esq., Foley & Lardner, to
Jonathan G. Katz, Secretary, Commission, dated June 26, 1997
(received June 30, 1997) (``Foley letter''); letter from Ira L.
Kotel, Esq., Roberts, Sheridan & Kotel, to Jonathan G. Katz,
Secretary, Commission, dated July 16, 1997 (received July 21, 1997)
(``Kotel letter''); and letter from James C. Yong, First Vice
President and General Counsel, The Options Clearing Corporation
(``OCC''), to Jonathan G. Katz, Secretary, Commission, dated July 8,
1997 (received July 22, 1997) (``OCC letter'').
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As to the inclusion of securities listed on Tier I of the CHX and
Tier I of the Phlx in Rule 146(b), the Commission stated that while
most of their Tier I listing standards are substantially similar to one
of the Named Markets, they differed in several important
respects.6 The Commission also indicated, however, that if
the CHX and Phlx were to revise their Tier I listing standards in these
areas to conform them to those of the NYSE, Amex, or Nasdaq/NMS prior
to the adoption of the proposed Rule, the Commission likely would
include securities listed on these markets in final Rule 146(b).
Accordingly, in order to obtain the benefits of the exemption under the
proposed Rule, the CHX and Phlx 7 both revised their Tier I
listing standards to address the noted deficiencies. Although CHX has
modified its listing and maintenance standards as suggested, the
Commission has concerns regarding the CHX's listing and maintenance
procedures and thus does not include CHX in the final Rule. The
Commission will continue to review the CHX's listing program, including
listing standards and operations, and may determine to include
securities listed on CHX Tier I in the future.
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\6\ Specifically, the Commission noted that unlike the NYSE,
Amex, or Nasdaq/NMS, the CHX did not have a minimum share price
requirement for continued listing of common stock on Tier I. With
regard to the Phlx, the Commission identified the Exchange's lack of
a maintenance standard for bonds and debentures listed on Tier I of
the Exchange as a deficiency in their listing standards. Moreover,
with respect to stock index, currency and currency index warrants,
the Phlx had no public distribution, aggregate market value, nor
term to maturity requirements. Finally, the Commission noted that
issuers of ``other securities'' listed on Tier I of the Phlx were
required to have pre-tax income of only $100,000 in three of the
four last fiscal years, versus the Amex requirement that issuers
have $750,000 in pre-tax income in their last fiscal year, or in two
of their last three fiscal years. See proposing release, supra note
4.
\7\ See Phlx Listing Standards Order, infra note 18.
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After careful comparison, the Commission concludes that currently
[[Page 3033]]
the listing standards of Tier I of the PCX, and Phlx, and the listing
standards of the CBOE are substantially similar to the listing
standards of the NYSE, Amex or Nasdaq/NMS. Accordingly, the Commission
today is adopting Rule 146(b) which designates securities listed on
such markets as covered securities under Section 18(b)(1) of the
Securities Act. As adopted, Rule 146(b) will provide those covered
securities with an exemption from state blue sky provisions as set
forth under Section 18(a) of the Securities Act.
II. Background
The development and enforcement of adequate standards governing the
initial and continued listing of securities on an exchange is of
critical importance to financial markets and the investing public.
Listing standards serve as a means for a self-regulatory organization
(``SRO'') to screen issuers and to provide listed status only to bona
fide companies with sufficient float, investor base and trading
interest to maintain fair and orderly markets. Once a security has been
approved for initial listing, maintenance criteria allow an exchange to
monitor the status and trading characteristics of that issue to ensure
that it continues to meet the exchange's standards for market depth and
liquidity.
Many States have recognized the importance of listing standards by
excepting from state registration requirements securities traded on the
Named Markets.8 In enacting Section 18, Congress intended to
codify in the Securities Act an exemption from state registration
requirements similar to these state law provisions.9 In
order to avoid competitive disparities, Congress provided the
Commission with the discretionary authority to extend similar
preemption treatment to other national securities exchanges (or tiers
or segments thereof) that have substantially similar listing
standards.10
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\8\ See, e.g., Del. Code Ann. tit. 6 sec. 7309(a)(8) (1996).
\9\ H.R. Rep. No. 622, 104th Cong., 2d Sess., pt. 1, at 30
(1996) (``Legislative History''). As a result of this federal
preemption of the state registration process, SRO listing standards
have become all the more important to preserving the integrity of
U.S financial markets and protecting investors.
\10\ See Legislative History, supra note 9.
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As noted above, the PCX, CBOE, CHX, and Phlx all have petitioned
the Commission to adopt a rule as contemplated by Section
18.11 The Petitioners assert that their Tier I listing
standards 12 are substantially similar to those of the Named
Markets, and that until the Commission acts to provide them with the
benefits of the Section 18 exemption, they will be at a competitive
disadvantage to these markets. The Commission recognizes the
competitive concerns raised by the Petitioners, but notes that the
statute requires the Commission to make an independent finding that the
Petitioners' listing standards are substantially similar to those of
the NYSE, the Amex or Nasdaq/NMS.
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\11\ See Petitions, supra note 3.
\12\ The Commission notes that presently the CBOE only has one
tier, or segment, for listing purposes.
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III. Comment Letters
As noted above, the Commission received three comment letters in
response to the proposal.\13\ The Foley letter, filed on behalf of the
CHX, noted that the CHX had submitted a proposed rule change with the
Commission to amend its maintenance standards for common stock listed
on Tier I of the Exchange to add a minimum share price. The Foley
letter urged that once approved, the amendment should resolve the
Commission's concerns relating to the CHX's Tier I standards and that
the Commission should include securities listed on CHX's Tier I in Rule
146(b).
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\13\ See supra note 5.
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The Kotel letter did not address the desirability of adopting
proposed Rule 146(b) generally, but urged the Commission to include
securities listed on the Nasdaq SmallCap Market (``SmallCap'') in the
Rule. In support of this view, the Kotel letter noted that the National
Association of Securities Dealers, Inc. (``NASD'') recently proposed to
amend the requirements for initial listing on SmallCap and that once
the new SmallCap listing standards were approved, they would be
substantially similar to those of the Amex.\14\ Accordingly, the Kotel
letter urged that securities listed on SmallCap should be deemed
covered securities for purposes of Rule 146(b). In addition, the Kotel
letter stated that extending the benefits of the Rule to securities
listed on SmallCap would further the Commission's policy of simplifying
securities regulation for small businesses and would lower the costs
for small businesses in complying with federal and state regulations.
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\14\ The changes to the SmallCap listing standards referred to
in the Kotel letter were recently approved by the Commission. See
Securities Exchange Act Release No. 38961 (August 22, 1997)
(``Nasdaq Listing Standards Order'').
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The third comment letter received by the Commission, the OCC
letter, generally supported the proposed Rule. In addition, the OCC
letter urged the Commission to designate standardized options traded on
Tier I of the Phlx as covered securities under the Rule, in the event
the Phlx did not file to amend its listing standards to address the
concerns raised by the Commission in the proposing release.
IV. Discussion
The Commission has reviewed extensively the listing and maintenance
standards for all securities listed and traded on the Petitioners'
markets, including common stock, preferred stock, bonds and debentures,
and options.\15\ With regard to applying the ``substantially similar''
standard, the Commission notes that under Section 18(b)(1)(B) of the
Securities Act the Commission has the authority to compare the listing
standards of a petitioner with those of either the NYSE, Amex, or
Nasdaq/NMS. The Commission attempted initially to compare a
petitioner's listing standards for all securities with only one of
these markets.\16\ If a petitioner's listing standards in a particular
category did not meet the standards of that market, however, the
Commission compared the petitioner's standards to the other two
markets. Additionally, the Commission interpreted the substantially
similar standard to require listing standards at least as comprehensive
as those of the markets named in Section 18(b)(1)(A). If a petitioner's
standards were higher than such markets, then the Commission still
determined that the petitioner's standards were substantially similar
to these markets. Finally, the Commission reviewed the listing
standards for each type of security in making the substantially similar
determination. Differences in language or approach of the listing
standards for a particular security did not necessarily lead to a
determination that the listing standards of a petitioner were not
substantially similar to those of the named exchange.
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\15\ The Commission also has reviewed each exchange's listing
and maintenance standards for warrants, currency and index warrants,
other securities, contingent value rights, equity linked notes, and
unit investment trusts. See proposing release, supra note 4.
\16\ For purposes of comparing the listing standards of the CBOE
and Tier I of the PCX, Phlx and CHX, the Commission used the listing
standards applicable to securities listed on the Amex.
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After careful comparison, using the approach outlined above, the
Commission concludes that currently the listing standards of the CBOE
and Tier I of the PCX, and Phlx are substantially similar to the
listing standards of the NYSE, Amex or Nasdaq/NMS.\17\ Therefore, the
[[Page 3034]]
Commission is adopting Rule 146(b), designating securities listed on
these markets as ``covered securities'' for purposes of Section 18 of
the Securities Act. With regard to the CHX, the Commission has
determined not to include securities listed on Tier I of the Exchange
at this time. Although the Exchange has modified its listing and
maintenance standards as suggested, the Commission has concerns
regarding the CHX's listing and maintenance procedures. The Commission
will continue to review the CHX's listing program, including listing
standards and operations, and may determine to include securities
listed on CHX Tier I in the future.
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\17\ The proposing release contains a more detailed description
of the comparison of these exchanges to the Named Markets. See
proposing release, supra note 4.
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With regard to the Phlx, the Commission concludes that the changes
recently made by the Exchange to its Tier I listing standards
18 enable the Commission to make the substantially similar
finding.19 First, the Phlx amended Rule 803(e) to adopt
additional listing standards for stock index warrants, currency
warrants and currency index warrants (collectively ``non-equity
warrants''). New subsection (2) to Rule 803(e) requires that non-equity
warrants have a term of between one and five years from the date of
issuance. Rule 803(e)(3) imposes a minimum public distribution and
market value requirement of 1,000,000 non-equity warrants with at least
400 public warrant holders and a minimum aggregate market value of
$4,000,000. Finally, new subsection (9) to Rule 803(e) requires that
non-equity warrants be cash-settled in U.S. dollars.20
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\18\ See Securities Exchange Act Release No. 39053 (September
11, 1997), 62 FR 49286 (September 19, 1997) (``Phlx Listing
Standards Order'').
\19\ As noted above, the Commission stated in the proposing
release that if the Phlx were to revise its Tier I listing standards
in the areas where the Commission identified deficiencies prior to
the adoption of the proposed Rule, the Commission likely would
include securities listed on the Phlx in final Rule 146(b).
\20\ Although the Commission did not identify the lack of a
cash-settlement requirement as a deficiency in the Phlx's Tier I
listing standards, the Phlx determined to codify its existing
requirement that non-equity warrants be cash-settled in U.S.
dollars. This requirement is identical to Section 106(d) of the Amex
Company Guide.
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Second, the Phlx increased the pre-tax income requirement for
issuers of ``other securities'' in Rule 803(f)(2) from $100,000 in
three of the four prior fiscal years to $750,000 in the issuer's last
fiscal year or in two of its last three fiscal years.21
Other securities are hybrid securities that have features common to
both equity and debt securities, yet do not fit within the traditional
definitions of either.
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\21\ This provision is substantially similar to Section 107 and,
by reference, Section 101(b) of the Amex Company Guide.
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Third, the Phlx amended Rule 810(a), which contains the maintenance
standards for Tier I securities, to add maintenance standards for
bonds, notes and debentures. New subsection (5) to Rule 810(a) requires
that debt securities maintain an aggregate market value or principal
amount of bonds that are publicly held of $400,000 and that the issuer
is able to meet its obligations in the listed debt securities. Also,
for any debt security convertible into a listed equity security, the
debt security will be reviewed when the underlying equity security is
delisted and will be delisted when the underlying equity security is no
longer subject to real-time trade reporting in the United States. In
addition, if common stock is delisted for violation of any of the
corporate governance criteria in Phlx Rules 812 through 899, the
Exchange also will delist any listed debt security convertible into
that common stock.22
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\22\ These provisions are substantially similar to Section
1003(b)(iii) and (e) of the Amex Company Guide.
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In light of the above changes made by the Phlx to its Tier I
listing standards, the Commission concludes that the Phlx's Tier I
listing standards, when taken as a whole, are substantially similar to
those of the Amex, and that securities listed on Tier I of the Phlx
should be included in Rule 146(b) as covered securities. In addition,
because Phlx Tier I securities include options, the Commission need not
consider whether standardized options traded on the Phlx could be
deemed covered securities separately from other Phlx Tier I securities,
as suggested in the OCC letter.
With regard to the Kotel letter, while it does appear that the
SmallCap initial listing standards for common stock are similar to
those of the Amex, the Commission has determined not to include
securities listed on SmallCap in Rule 146(b) at this time. First, the
proposing release did not solicit comment on whether SmallCap listing
standards are substantially similar to one of the Named Markets.
Second, the Commission has identified several aspects of the SmallCap
listing standards which appear to differ significantly from those of
the Amex and the other primary markets. 23 Third, pursuant
to the Nasdaq Listing Standards Order, the new maintenance standards do
not become effective until six months after the Order was issued
(February 22, 1998), and the existing maintenance standards for
securities listed on SmallCap are considerably less stringent than
those of any one of the Named Markets. Finally, the Commission notes
that it has the authority to undertake a more extensive review of the
SmallCap listing standards in the future and, if appropriate, propose
an amendment to Rule 146(b) to include securities listed on SmallCap in
the Rule.
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\23\ Specifically, the minimum share price for preferred stock
to be listed on SmallCap is $4 per share, while the minimum share
price for initial inclusion of preferred shares on the Amex is $10.
See Section 103(b) of the Amex Company Guide and NASD Rule
4310(c)(4). In addition, SmallCap does not have a minimum
distribution requirement for preferred stock, while the Amex
requires a minimum of 100,000 publicly held shares when the issuer
of the preferred shares has common stock listed on the Amex or NYSE.
See Amex Section 103(b). Lastly, warrants listed on SmallCap are
required to have a minimum distribution of 100,000 warrants for
initial inclusion, while Amex requires a minimum distribution of
1,000,000 warrants to 400 public holders or 500,000 warrants to 800
public holders. See Amex Section 105(b) and NASD Rule 4310(c)(9).
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With respect to a designated exchange maintaining its status under
Rule 146(b), the Commission notes that Congress intended for the
Commission to monitor the listing requirements of the regional
exchanges, consistent with its supervisory authority under the
Securities Exchange Act of 1934 (``Exchange Act''), to ensure the
continued integrity of these markets and the protection of investors.
24 For example, if a regional exchange proposed to lower its
listing standards for common stock, the Commission likely would
consider this to be a substantive revision which may change the finding
that the regional exchange's listing standards are substantially
similar to those of the Named Markets. 25 Accordingly, in
reviewing future proposed changes to SRO listing standards, the
Commission will consider whether the proposed change(s) will require an
amendment to Rule 146(b). In the event that the
[[Page 3035]]
Commission determines that a proposed change in listing standards would
require an amendment to Rule 146(b), and where the proposed rule change
is subject to full notice and comment under Section 19(b) of the
Exchange Act, the Commission may conclude that it is unnecessary to
provide notice and comment for the corresponding amendment to this
Rule. 26 Finally, the Commission notes that enforcement of
an SRO's listing standards is subject to periodic inspections by
Commission staff, as is enforcement of all SRO rules, and should the
Commission find that an exchange designated in Rule 146(b) is not
adequately enforcing its requirements for initial and continued
listing, the Commission will take appropriate action to revoke that
exchange's exemption.
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\24\ See Legislative History, supra note 9.
\25\ If, however, one of the Named Markets raised its listing
standards with respect to a particular security, a conforming change
by the exchanges designated in Rule 146(b) may not necessarily be
required for two reasons. First, Section 18(b)(1)(B) requires that
the regional exchanges' listing standards be substantially similar
to only one of the Named Markets in order to qualify for the
exemption. Second, a listing standard change made by one of the
Named Markets should not force the exchanges designated in Rule
146(b) to conform their listing standards. Otherwise, a single Named
Market would be, in effect, setting the listing standards for all
the regional exchanges. If, however, all three Named Markets were to
raise their listing standards, and the Commission believed that the
change was significant enough so that failure to adopt the new
standard rendered the exchanges designated in Rule 146(b) to have
substantially inferior standards, then the Commission may require
the latter exchanges to raise their standards in order to maintain
their exemption under the Rule.
\26\ Although the Administrative Procedure Act states that an
agency must provide general notice of the proposed rulemaking and an
opportunity for comment, these requirements do not apply if the
agency for good cause, finds that those procedures are
``impracticable, unnecessary, or contrary to the public interest.''
5 U.S.C. 553(b)(B).
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V. Conclusion
For the reasons discussed above, as supplemented by the
Commission's detailed discussion in the proposing release, the
Commission concludes that the listing standards of the CBOE, and Tier I
of the PCX, and Phlx are substantially similar to those of the NYSE,
Amex or Nasdaq/NMS. Accordingly, securities listed on these Exchanges
should be deemed covered securities and entitled to an exemption from
state blue sky provisions as set forth in Section 18(a) of the
Securities Act.
The Commission concludes that the Rule offers potential benefits
for investors. The Rule should facilitate listings on qualifying
exchanges, or tiers or segments thereof, which should increase
competition and enhance the overall liquidity of the U.S. securities
markets. The Commission does not anticipate that the Rule would result
in any costs for U.S. investors or others. As noted above, through the
review of SRO listing standards pursuant to Section 19(b) of the
Exchange Act, the Commission will be able to continue to ensure such
listing standards are sufficient to protect investors. The Commission
also concludes that Rule 146(b) should serve to reduce the cost of
raising capital because it will streamline the registration process for
issuers listing on the Exchanges designated in the Rule. Thus, the
Commission has considered the Rule's impact on efficiency, competition
and capital formation and concludes that it would promote these three
objectives. 27 At the same time, Rule 146(b) does not
undercut the state securities review of offerings because the listing
standards of the CBOE and Tier I of the PCX, and Phlx are substantially
similar to the Named Markets, which are already exempt from state
registration. Finally, Rule 146(b) imposes no recordkeeping or
compliance burdens, and merely provides a limited purpose exemption
under the federal securities laws.
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\27\ 15 U.S.C. 77b(b).
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VI. Administrative Requirements
Pursuant to Section 605(b) of the Regulatory Flexibility Act, 5
U.S.C. 605(b), the Chairman of the Commission has certified that Rule
146(b) should not have a significant economic impact on a substantial
number of small entities. This certification, including the reasons
therefor, is attached to this release as Appendix A. The Paperwork
Reduction Act does not apply because the proposed amendments do not
impose recordkeeping or information collection requirements, or other
collections of information which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et. seq.
VII. Statutory Basis
Rule 146(b) is being adopted pursuant to 15 U.S.C. 77r et seq.,
particularly Section 18 of the Securities Act unless otherwise noted.
List of Subjects in 17 CFR Part 230
Securities.
Text of the Rule
For the reasons set forth in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
1. The authority citation for Part 230 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 78t, 80a-8, 80a-29, 80a-30,
and 80a-37, unless otherwise noted.
* * * * *
2. Section 230.146 is amended by revising the section heading,
redesignating the introductory text and paragraphs (a) and (b) as
paragraph (a) introductory text and paragraphs (a)(1) and (a)(2),
respectively, and adding paragraph (b) to read as follows:
Sec. 230.146 Rules under Section 18 of the Act.
* * * * *
(b) Covered securities for purposes of Section 18. (1) For purposes
of Section 18(b) of the Act (15 U.S.C. 77r), the Commission finds that
the following national securities exchanges, or segments or tiers
thereof, have listing standards that are substantially similar to those
of the New York Stock Exchange (``NYSE''), the American Stock Exchange
(``Amex''), or the National Market System of the Nasdaq Stock Market
(``Nasdaq/NMS''), and that securities listed on such exchanges shall be
deemed covered securities:
(i) Tier I of the Pacific Exchange, Incorporated;
(ii) Tier I of the Philadelphia Stock Exchange, Incorporated; and
(iii) The Chicago Board Options Exchange, Incorporated.
(2) The designation of securities in paragraphs (b)(1)(i) through
(iii) of this section as covered securities is conditioned on such
exchanges' listing standards (or segments or tiers thereof) continuing
to be substantially similar to those of the NYSE, Amex, or Nasdaq/NMS.
By the Commission.
Dated: January 13, 1998.
Margaret H. McFarland,
Deputy Secretary.
Note: Appendix A to the Preamble will not appear in the Code of
Federal Regulations.
Appendix A--Regulatory Flexibility Act Certification
I, Arthur Levitt, Jr., Chairman of the Securities and Exchange
Commission, hereby certify, pursuant to 5 U.S.C. 605(b), that Rule
146(b) (``Rule'') under the Securities Act of 1933 (``Securities
Act''), which will designate securities listed on certain national
securities exchanges, or tiers or segments thereof, as covered
securities under Section 18 of the Securities Act, and therefore
provide them with an exemption from state registration requirements,
will not have a significant economic impact on a substantial number
of small entities for the following reasons. Under the Securities
Act, a small entity is defined as ``an issuer whose total assets on
the last day of its most recent fiscal year were $5,000,000 or
less.'' Issuers of this size generally will not qualify for listing
on the national securities exchanges, or tiers or segments thereof,
designated in Rule 146(b). More specifically, both the Chicago Board
Options Exchange, Incorporated and Tier I of the Pacific Exchange,
Incorporated require issuers of common stock to have net worth of at
least $4,000,000. To be listed on Tier I of the Philadelphia Stock
Exchange, Incorporated issuers of common stock must have net
tangible assets of at least $4,000,000. I do not believe that there
are a substantial number of small entities which have total assets
less than $5,000,000, yet a net worth or net tangible assets of at
least $4,000,000. For example, none of the issuers of common stock
listed exclusively on Tier I of the
[[Page 3036]]
Pacific Exchange have total assets of $5,000,000 or less. In
addition, the proposed rule imposes no record-keeping or compliance
burden, but merely exempts certain qualifying securities from state
law registration requirements.
Dated: January 2, 1998.
Arthur Levitt, Jr.,
Chairman.
[FR Doc. 98-1295 Filed 1-20-98; 8:45 am]
BILLING CODE 8010-01-P
