[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Notices]
[Pages 42667-42669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20882]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37550; File No. SR-Amex-96-23]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Partial Approval of Proposed Rule Change by the
American Stock Exchange, Inc. Relating to Various Changes to the
Exchange's Company Guide
August 9, 1996.
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 June 27, 1996, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. On July 11, 1996, the Exchange submitted to
the Commission Amendment No. 1 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons. As discussed below, the
Commission is also granting accelerated approval to a portion of the
proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Claudia Crowley, Special Counsel, Amex, to
Jennifer Choi, Attorney, Office of Market Supervision, Division of
Market Regulation, Commission, dated July 11, 1996 (``Amendment No.
1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to amend various sections of the Exchange's
Company Guide to simplify the additional listing process, add a new
shareholder distribution guideline applicable to banks, and make
several minor ``housekeeping'' changes.
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 these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Additional Listings
The Exchange proposes to simplify its additional listing process.
The additional listing process is an essential part of the Exchange's
program to oversee its market generally and monitor the compliance of
listed companies with Sections 711-713 of the Company Guide, which
require prior shareholder approval of certain transactions involving
the issuance of stock, e.g., issuances of 20% or more of the
outstanding shares at a discounted price or to effect an acquisition.
Before a listed company issues additional securities of an already
listed class, it is required to submit an additional listing
application and obtain the Exchange's prior approval; similarly,
transfer agents for listed companies are required to contact the
Exchange to make sure that a company's request for new share issuances
has been so approved. The Exchange typically receives in excess of 300
additional listing applications per year.
The Exchange has determined that it can substantially simplify the
additional listing process for listed companies and transfer agents
alike without undercutting its ability to regulate its market. To
facilitate this, the Exchange has for the first time prepared a
simplified, standardized application form, which can be used for all
additional listings.\4\ This form will allow companies to incorporate
by reference any transactional information that is set forth in a proxy
statement, prospectus or certain other descriptive documents, thus
eliminating the need to provide duplicative summary information on the
application itself. This will also enable the Exchange to significantly
revise the applicable Company Guide provisions by eliminating confusing
and unnecessary instructions.\5\
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\4\ The Commission notes that the new form being adopted will
require listed companies to provide substantially the same
information as is required under the existing procedures. The form
provides for (where applicable): Information for Stock Options,
Plans and Grants; Information for a Private Placement; Information
for an Acquisition; Information for Substitution Listing;
Information for a Forward Stock Split or Stock Dividend; and a
Reconciliation Sheet. Companies wanting to list additional shares
must now complete this form, whereas previously, companies had the
option of doing a ``short form'' or a ``standard form'' application.
\5\ The Commission notes that in simplifying its listings
process, the Amex proposes the following changes to its Company
Guide: Sec. 310 is renumbered as Sec. 303; Secs. 311-313 is deleted;
Sec. 320 is deleted; Sec. 321 is renumbered as Sec. 304 with
modification made to text; new Sec. 305 is added (Listing of Shares
Pursuant to a Reverse Split/Substitution Listing); and Sec. 330 is
renumbered as Sec. 306.
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The Exchange is also proposing to eliminate the requirement that
each application contain a reconciliation of all of the company's
previously listed share reserves, retaining the reconciliation
requirement only in the case of stock dividends, splits, or
substitution listings. Rather than require issuers and transfer agents
to engage in this extremely time-consuming exercise, which in most
circumstances provides little practical information and delays the
approval of pending corporate transactions, the Exchange has determined
to generally allow transfer agents to reconcile their records of shares
outstanding with the Exchange's on a quarterly basis. A similar
procedure is followed at the New York Stock Exchange and in a series of
informal discussions, all of the Exchange's major transfer agents
indicated that they would prefer that the Exchange adopt it as well.
Together, these new procedures should provide substantial benefits
to listed companies and the Exchange alike.
[[Page 42668]]
Distribution Guidelines for Banks
In recent years, the Exchange has listed a number of local banks,
some immediately following their conversion from mutual association to
stock ownership (``demutualizing'').\6\ Such banks often have small,
but because of their local concentration, stable ranks of shareholders.
Even small banks are generally well above the financial criteria for
original listing and due to the highly regulated nature of the banking
industry there is usually little ``business risk'' associated with such
listings.
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\6\ These transactions are typically conducted, in effect, as
``best efforts'' underwritings in the sense that it is impossible to
predict how many deposit-holders will elect to become shareholders
and the conversion itself is not contingent upon the
``accumulation'' of a specific number of shareholders.
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The Exchange's public distribution guidelines call for 500,000
shares and 800 holders, or 1,000,000 shares and 400 holders. The
Exchange has occasionally found that otherwise attractive local banks
have less than one million shares in their public float, and fewer than
800 shareholders. Although the mix of shareholder and public float
requirements is intended to accommodate a specialist's needs in
maintaining a fair and orderly market, the Exchange has observed that
local banks are generally steady traders with relatively stable prices,
and that specialists have not encountered difficulties in trading them.
The Exchange is therefore proposing to adopt a specific
distribution guideline applicable to banks, which would require only
400 public holders of a least 500,000 shares.\7\ It should be noted
that presently there are two other circumstances where the Exchange
lists issues with a float of less than one million shares and only 400
holders: those are stocks which trade 2,000 shares a day or more, and
warrants sold as part of a unit offering. The Exchange has not
experienced any difficulties in providing an appropriate marketplace
for these listings, and, as noted above, given the stability of the
banks' shareholder bases and the regulated nature of the banking
industry, the Exchange does not anticipate any difficulties with
banking stocks.
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\7\ The new distribution provision for banks will be included in
Section 102 of the Amex's Company Guide.
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Miscellaneous
There are several changes necessary to conform particular sections
of the Company Guide to changes previously made to other sections:
Section 1003 of the Company Guide should be amended to provide that
for continued listing purposes a company needs to have 300 public
holders, and not 300 round lot holders. Similar changes were previously
made to the Exchange's other public distribution guidelines.\8\
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\8\ See Section 102(a)--Distribution--of the Company Guide which
describes the minimum number of shareholders as ``public
shareholder.'' The Company Guide notes that the term ``public
shareholders,'' as used therein, includes both shareholders of
record and beneficial holders, but is exclusive of the holdings of
officers, directors, controlling shareholders and other concentrated
(i.e., 5% or greater) affiliated or family holdings.
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Section 505, which provides that the Exchange would not look
favorably upon a stock split that would result in a price below $5,
should be amended to refer to a $3 minimum price, to be consistent with
the $3 stock price original listing guideline set forth in Section
102(b).\9\
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\9\ The Commission notes that the $3 minimum price was approved
in Securities Exchange Act Release No. 24043 (January 30, 1987), 52
FR 4071.
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Additionally, Section 220(b) of the Company Guide should be amended
to conform to changes that were previously made to Section 140 of the
Company Guide with respect to the maximum listing fee applicable to
foreign issuers.\10\
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\10\ The Commission notes that the maximum $25,000 fee for non-
U.S. issuers already listed on a foreign exchange was approved in
Securities Exchange Act Release No. 34272 (June 28, 1994), 59 FR
34701.
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Finally, Sections 510 and 512 of the Company Guide should be
amended to conform to the three-day settlement time frame (``T+3'').
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) that an exchange have rules that are
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 regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to protect and
perfect the mechanism of a free and open market and a national market
system, and in general, to protect investors and public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange, however, has requested that the Commission find good
cause pursuant to Section 19(b)(2) of the Act for approving the
proposed changes to Sections 510 and 512, which conforms Amex rules to
T+3 settlement, of the Company Guide on an accelerated basis prior to
the 30th day after publication in the Federal Register.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Room in Washington, DC. Copies of
such filing will also be available for inspection and copying at the
principal office of the Amex. All submissions should refer to the File
No. SR-Amex-96-23 and should be submitted by [insert date 21 days from
date of publication].
V. Commission Findings and Order Granting Partial Accelerated Approval
of the Proposed Rule Change
After careful consideration, the Commission has concluded, for the
reasons set forth below, that the amendments to sections 510 and 512 of
the Amex's Company Guide are consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange and, in particular the requirement of Section
6(b)(5)\11\ of the Act, which states in part, that the rules of an
exchange must be designed to foster cooperation and coordination
[[Page 42669]]
with persons engaged in regulating, clearing, settling, and processing
information.
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\11\ 15 U.S.C. 78f(b)(5).
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On October 6, 1993, the Commission adopted Rule 15c6-1 under the
Act,\12\ which establishes three business days after the trade date
(``T+3''), instead of five business days (``T+5''), as the standard
settlement cycle for most securities transactions.\13\ The rule became
effective on June 7, 1995.\14\ Although the Commission previously
approved a number of changes to the Amex's rules to conform them to the
T+3 requirement of Commission Rule 15c6-1,\15\ Sections 510 and 512
were not amended to reflect the change in the settlement cycle.
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\12\ 17 CFR 240.15c6-1.
\13\ See Securities Exchange Act Release No. 33023 (October 6,
1993), 58 FR 52891.
\14\ Securities Exchange Act Release No. 34952 (November 9,
1994), 59 FR 59137.
\15\ See Securities Exchange Act Release No. 35553 (March 31,
1995), 60 FR 18161.
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It has been more than a year since the T+3 settlement cycle has
been in operation. The current Sections 510 and 512 of the Amex's
Company Guide, which provide for a T+5 settlement cycle, is
inconsistent and incompatible with Commission's T+3 rules. Amex's
current proposal will amend these sections to bring them in conformity
with the mandated T+3 settlement cycle. Accordingly, the Commission
believes that, because the Exchange has proposed the amendments to
Sections 510 and 512 merely to reflect the T+3 cycle, the proposed rule
change is consistent with the purposes of the Act.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after publication of the proposed
rule change in the Federal Register. The Commission believes that
accelerated approval of this portion of the proposal will benefit
investors by eliminating the obsolete references to five-day
settlement. Deleting the outdated references to T+5 settlement cycle as
soon as possible will be beneficial because this amendment will
eliminate any opportunities for confusion.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the portion of the proposed rule change (File No. SR-Amex-96-23)
containing the amendments to Sections 510 and 512 of the Amex's Company
Guide be and is hereby approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-20882 Filed 8-15-96; 8:45 am]
BILLING CODE 8010-01-M
