Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 47831 

27See Exemption Request, supra note 3, at 3. 

28See id. 

29 15 U.S.C. 78mm. 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 In Amendment No. 1, NYSE added a sentence 

to the purpose section describing where a copy of 

the proposed rule change may be obtained; clarified 

a sentence in the purpose section; revised the 

statutory basis section; and underlined a 

parenthetical in the proposed rule text to show new 

text. 

in any of the controlling shareholders of 

the Applicants; and (2) there are no 

commercial dealings between the 

Applicants and the Foreign Indirect 

Affiliates.27 The Commission also 

believes that, based on the Applicants’ 

representations, it could be burdensome 

for the Applicants to obtain detailed 

corporate and financial information 

with respect to the Foreign Indirect 

Affiliates because these affiliates are 

located in foreign jurisdictions and the 

disclosure of such information could 

implicate foreign information sharing 

restrictions in such jurisdictions.28

Given the limited and indirect 

relationship between the Applicants 

and the Foreign Indirect Affiliates and 

the location of the Foreign Indirect 

Affiliates in foreign jurisdictions, as 

described above, the Commission 

believes that the detailed corporate and 

financial information required in 

Exhibits C and D with respect to the 

Foreign Indirect Affiliates is 

unnecessary for the Commission’s 

review of the Applicants’ Form 1 

applications and would be unnecessary 

for the Commission’s oversight of the 

Applicants as registered national 

securities exchanges following any 

Commission approval of their Form 1 

applications. 

For the reasons discussed above, the 

Commission finds that the conditional 

exemptive relief requested by the 

Applicants is appropriate in the public 

interest and is consistent with the 

protection of investors. 

It is ordered, pursuant to Section 36 

of the Exchange Act,29 and subject to the 

conditions described above, that the 

Applicants are exempt from the 

requirements to: (1) Include in their 

Form 1 applications the information 

required in Exhibits C and D to Form 1 

with respect to the Foreign Indirect 

Affiliates; and (2) with respect to the 

Foreign Indirect Affiliates, update the 

information in Exhibits C and D to Form 

1 as required by Exchange Act Rules 6a– 

2(a)(2), 6a–2(b)(1), and 6a–2(c). 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–22346 Filed 9–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60653; File No. SR–NYSE– 

2009–89] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change As 

Modified by Amendment No. 1 To 

Amend Certain Corporate Governance 

Requirements 

September 11, 2009 

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 August 

26, 2009, New York Stock Exchange 

LLC (‘‘NYSE’’ or the ‘‘Exchange’’) 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 selfregulatory organization. NYSE filed 

Amendment No. 1 to the proposed rule 

change on September 10, 2009.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

certain of its corporate governance 

requirements set forth in Section 303A 

of the Listed Company Manual (the 

‘‘Manual’’). The text of the proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.nyse.com), at the Exchange’s 

Office of the Secretary, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On November 4, 2003, the U.S. 

Securities and Exchange Commission 

(the ‘‘SEC’’) approved Section 303A of 

the Listed Company Manual. This 

section imposed significant corporate 

governance requirements on the 

Exchange’s listed companies and 

focused mainly on director 

independence and the duties of the 

audit, nomination and compensation 

committees of the board. The Exchange 

now proposes to amend Section 303A to 

clarify some of the disclosure 

requirements, to codify certain 

interpretations made since the rules 

were enacted, and to replace certain 

disclosure requirements by 

incorporating into the Exchange’s rules 

the applicable disclosure requirements 

of Regulation S–K. In addition, the 

Exchange is proposing to eliminate the 

current requirements of Section 307.00 

and redesignate Section 303A.14 as 

Section 307. 

The proposed changes to Sections 

303A and 307.00 will not take effect 

until January 1, 2010. Consequently, the 

existing text of these sections will 

remain in the Listed Company Manual 

through December 31, 2009 and will be 

removed immediately thereafter. Upon 

approval of this filing, the amended 

versions of those sections will also be 

included in the Listed Company 

Manual, with introductory text 

indicating that the revised text does not 

become operative until January 1, 2010. 

The Exchange proposes to amend 

references to the ‘‘company’’ throughout 

Section 303A to the ‘‘listed company,’’ 

wherever the context makes that change 

appropriate. 

The discussion below begins with a 

description of the proposed approach to 

corporate governance disclosures, as 

this approach is adopted consistently in 

numerous instances throughout Section 

303A. There then follows a detailed 

section-by-section description of all of 

the other proposed changes. 

Corporate Governance Disclosures: 

On August 29, 2006, in connection 

with amendments to its executive 

compensation and related person 

disclosure, the SEC adopted Item 407 of 

Regulation S–K to consolidate director 

independence and related corporate 

governance disclosure requirements 

under a single item and update such 


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47832 Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 

5See Securities Act Release No. 33–8732A 

(August 29, 2006). 

disclosure requirements regarding 

director independence to reflect the 

SEC’s own disclosure requirements, as 

well as the principal U.S. markets’ 

listing standards.5 These rules duplicate 

some of the NYSE’s Section 303A 

corporate governance disclosure 

requirements. Indeed, in some 

instances, the SEC’s rules require more 

detailed disclosures than are currently 

required by Section 303A. 

Since the adoption of Item 407, the 

Exchange has received numerous calls 

from listed companies requesting 

guidance from the Exchange on whether 

compliance with the disclosure 

requirements of Item 407 would also 

satisfy their obligations under Section 

303A. For example, Section 303A.02(a) 

provides that the board of directors of a 

listed company may adopt and disclose 

categorical standards to assist it in 

making determinations of independence 

and may make a general disclosure if a 

director meets these standards. Item 

407(a)(3), on the other hand, requires 

that companies describe by specific 

category or type, any transactions, 

relationships or arrangements (other 

than those disclosed pursuant to Item 

404(a) of Regulation S–K) that were 

considered by the board of directors 

with respect to each director that is 

identified as independent. As a result, 

while Section 303A.02(a) would only 

require that companies disclose the 

categories of relationships that were per 

se deemed to be immaterial with respect 

to board independence, Item 407(a)(3) 

goes further, requiring that companies 

also disclose which directors had 

relationships that fall into the 

categorical standards utilized by the 

board in determining independence. 

In an effort to avoid duplication and 

confusion, the Exchange is proposing to 

eliminate each disclosure requirement 

currently included in Section 303A that 

is also required by Item 407 and to 

incorporate directly into Section 303A 

the applicable disclosure requirement of 

Item 407. The Exchange believes that, 

since Item 407 requires duplicative or 

more specific disclosures than Section 

303A, such elimination will facilitate 

compliance for listed companies, while 

providing investors with significant 

transparency on corporate governance. 

While this approach may appear to be 

redundant, the incorporation of certain 

requirements of Item 407 into Section 

303A serves an important purpose in 

that companies whose Item 407 

disclosure is deficient will be deemed to 

be out of compliance with Exchange 

rules. Consequently, the Exchange will 

be able to take actions against a 

noncompliant company, ranging from 

appending a below compliance (‘‘BC’’) 

indicator to the company’s ticker 

symbol to issuing a public reprimand 

letter and, in extreme cases, delisting. 

The following are the disclosure items 

that will be eliminated and the 

provisions of Item 407 that will be 

added: 

• The Section 303A.00 controlled 

company exemption disclosure 

requirement is replaced by a 

requirement that a controlled company 

that chooses to take advantage of any or 

all of the available Section 303A 

controlled company exemptions must 

comply with the disclosure 

requirements in Instruction 1 to Item 

407(a). 

• The Section 303A.02(a) 

independent director disclosure 

requirement is replaced by a 

requirement that the listed company 

must comply with the disclosure 

requirements in Item 407(a). 

• The Section 303A.05(b)(i)(C) 

compensation committee charter 

requirement to produce a compensation 

committee report is replaced by a 

requirement to prepare the disclosure 

required by Item 407(e)(5). 

• The Section 303A.07(c)(i)(B) audit 

committee charter requirement to 

prepare an audit committee report is 

replaced by a requirement to prepare the 

disclosure required by Item 407(d)(3)(i). 

The Exchange is also proposing to 

move the audit, compensation and 

nominating committee charter, 

corporate governance guidelines and 

code of business conduct and ethics 

Web site posting requirements to a new 

Web site Posting Requirement section in 

each of the applicable subsections of 

Section 303A. The Web site Posting 

Requirement section of Section 303A.07 

will specify that closed-end funds are 

not subject to the requirement to post 

their audit committee charter on their 

Web site. This is consistent with the 

Exchange’s current practice, as Section 

303A.00 specifically exempts closedend funds from the application of 

Section 303A.09. 

The Exchange is proposing to change 

the disclosure regarding Web site 

postings to just require a listed company 

to disclose in its annual proxy statement 

or Form 10–K that the applicable 

charters, corporate governance 

guidelines and code of business conduct 

and ethics are available on the 

company’s Web site, providing the 

company’s Web site address. This will 

conform the Exchange’s disclosure 

requirements with respect to committee 

charters to the disclosure required by 

Instruction 2 to Item 407. The Exchange 

proposes to eliminate the requirement 

in Sections 303A.09 and 303A.10 that 

the listed company disclose that hard 

copies of the charters, guidelines and 

code are available in print upon request. 

The Exchange believes that it is 

unnecessary to require companies to 

provide physical copies of these 

documents upon request when they are 

readily accessible on the company’s 

Web site. 

Section 303A currently contains 

certain disclosure requirements that 

require listed companies to make the 

required disclosures in the company’s 

annual proxy statement, or, if the 

company does not file an annual proxy 

statement, in the company’s annual 

report filed with the SEC. The Exchange 

proposes to amend these requirements 

so that companies will have the option 

of either continuing to provide these 

disclosures in the annual proxy 

statement or annual report, as 

applicable, or making the disclosures on 

or through the company’s Web site. If a 

company chooses to make the 

applicable disclosure on or through its 

Web site, it must disclose that fact in its 

annual proxy statement or annual 

report, as applicable, and provide the 

Web site address. The disclosure 

requirements amended [sic] as 

described in this paragraph are as 

follows: 

• The disclosure requirement of 

Section 303A.02(b)(v) with respect to 

contributions made by the listed 

company to any tax exempt organization 

in which any independent director 

serves as an executive officer if, within 

the preceding three years, contributions 

in any single fiscal year from the listed 

company to the organization exceeded 

the greater of $1 million, or 2% of such 

tax exempt organization’s consolidated 

gross revenues. 

• The disclosure requirement of 

Section 303A.03 with respect to the 

identity of the director chosen to 

preside at executive sessions of nonmanagement or independent directors 

or, if the same individual is not the 

presiding director at every meeting, the 

procedure by which a presiding director 

is selected for each executive session. 

• The requirement of Section 303A.03 

that listed companies must disclose a 

method for interested parties to 

communicate directly with the 

presiding director or the nonmanagement or independent directors 

as a group. 

• The disclosure requirement of 

Section 303A.07(a) with respect to the 

board’s determination that the service of 

any audit committee member on more 

than three public company audit 

committees does not impair the ability 


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Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 47833 

of such audit committee member to 

serve effectively on the listed company’s 

audit committee. 

If a listed company makes a required 

Section 303A disclosure in its annual 

proxy statement, or if the company does 

not file an annual proxy statement, in its 

annual report filed with the SEC, it may 

incorporate such disclosure by reference 

from another document that is filed 

with the SEC to the extent permitted by 

applicable SEC rules. 

Where a listed company has the 

option of making a required disclosure 

under Section 303A in an annual report 

filed with the SEC and is not a company 

required to file a Form 10–K, a new 

‘‘Disclosure Requirements’’ subsection 

of Section 303A.00 provides that the 

provision shall be interpreted to mean 

the annual periodic disclosure form that 

the listed company does file with the 

SEC. For example, for a closed-end 

management company, the appropriate 

form would be the annual Form N–CSR. 

This approach is identical to that of the 

current ‘‘References to Form 10–K’’ 

subsection of Section 303A.00 which is 

being eliminated as part of the 

reorganization of Section 303A.00. The 

reference in the ‘‘References to Form 

10–K’’ subsection of Section 303A.00 to 

companies that are not required to file 

either an annual proxy statement or an 

annual periodic report with the SEC is 

not carried over into the new 

‘‘Disclosure Requirements’’ section, as 

there are no companies that have 

disclosure obligations under Section 

303A that are not subject to one of these 

filing requirements. 

Section 303A.00—Introduction: 

Under the Exchange’s current rules, 

companies listing in conjunction with 

an initial public offering (‘‘IPO’’) are 

able to phase in their independent 

audit, nominating and compensation 

committees, but are required to have 

one independent director on each 

committee as of the date of listing. 

Market practice, however, is that a 

company does not normally appoint 

independent directors to its board in 

advance of the date it lists on the NYSE. 

Instead, the initial board meeting is held 

sometime after the listing date but prior 

to the date that the transaction closes. 

In light of this practice, the Exchange 

proposes to amend the Introduction 

section of Section 303A to clarify its 

requirements by specifying that 

companies listing in conjunction with 

an IPO, spin-off or carve-out must be in 

compliance with the applicable 

provisions of the SEC’s audit committee 

requirements set forth in Rule 10A–3, 

which is incorporated into the 

Exchange’s corporate governance rules 

as Section 303A.06, as of the listing 

date. The Exchange proposes to define 

the listing date for these purposes as the 

date the company’s securities first trade 

on the Exchange (trading may be regular 

way or when issued). The Exchange is 

also proposing to require that a 

company listing in conjunction with its 

IPO, spin-off or carve-out have a 

majority of independent members on its 

audit committee within 90 days of the 

effective date of its registration 

statement and a fully independent 

committee within one year of the 

effective date of its registration 

statement. 

Section 303A.07(a) requires a 

company to have a minimum of three 

members on the audit committee as of 

the date of listing. As a result, 

companies on the NYSE that are not 

required to have a fully independent 

audit committee until one year from the 

listing date may be forced to appoint 

non-independent directors to the audit 

committee in order to satisfy the threeperson minimum. The Exchange 

proposes in the Introduction section to 

clarify that companies listing in 

conjunction with an IPO, spin-off or 

carve-out may also phase in compliance 

with the three-person minimum on the 

following schedule: At least one 

member by the listing date, at least two 

members within 90 days of the listing 

date and at least three members within 

one year of the listing date. 

Alternatively, the company may choose 

to have non-independent directors on 

the audit committee subject to the 

independent director phase-in 

requirements as discussed below. 

For purposes of Rule 10A–3, the SEC 

provides that a company is listing in 

conjunction with an IPO only to the 

extent that, immediately prior to the 

effective date of the registration 

statement relating to the IPO, the 

company is not ‘‘required to file’’ 

periodic reports with the SEC under the 

Act. The Exchange has been advised by 

the staff of the SEC that a company that 

voluntarily files reports under the Act 

may be considered an IPO and avail 

itself of the IPO transitions under Rule 

10A–3. The Exchange proposes to 

clarify that a company that was required 

to file periodic reports with the SEC 

prior to listing is precluded from 

including non-independent directors on 

its audit committee during the phase-in 

period. 

The Exchange also proposes to amend 

the Introduction section to clarify that 

companies listing in connection with an 

IPO must: 

• Satisfy the majority independent 

board requirement of Section 303A.01, 

if applicable, within one year of the 

listing date. 

• Satisfy the Web site posting 

requirements of Sections 303A.04, 

303A.05, 303A.07(b), 303A.09 and 

303A.10, to the extent such sections are 

applicable, by the earlier of the date the 

initial public offering closes or five 

business days from the listing date. 

• Have at least one independent 

member on its nominating committee 

and at least one independent member 

on its compensation committee as 

required by Sections 303A.04 and 

303A.05, if applicable, by the earlier of 

the date the initial public offering closes 

or five business days from the listing 

date, at least a majority of independent 

members on each committee within 90 

days of the listing date and fully 

independent committees within one 

year of the listing date. 

The Exchange proposes to amend the 

Introduction section to clarify that 

companies listing in conjunction with a 

carve-out or spin-off transaction must: 

• Satisfy the majority independent 

board requirement of Section 303A.01, 

if applicable, within one year of the 

listing date. 

• Satisfy the Web site posting 

requirements of Sections 303A.04, 

303A.05, 303A.07(b), 303A.09 and 

303A.10, to the extent such sections are 

applicable, by the date the transaction 

closes. 

• Have at least one independent 

member on its nominating committee 

and at least one independent member 

on its compensation committee as 

required by Sections 303A.04 and 

303A.05, if applicable, by the date the 

transaction closes, at least a majority of 

independent members on each 

committee within 90 days of the listing 

date and fully independent committees 

within one year of the listing date. 

In addition, the Exchange proposes to 

include sections detailing the 

compliance requirements applicable to a 

company that (i) lists upon emergence 

from bankruptcy; (ii) transfers from 

another market; (iii) ceases to be a 

controlled company; or (iv) ceases to be 

a foreign private issuer. 

Companies that list upon emergence 

from bankruptcy will be able to phase 

in majority independent boards and 

independent nominating and 

compensation committees on the same 

schedule as companies listing in 

conjunction with an IPO. The applicable 

compliance dates, however, will run 

from the listing date. A company listing 

upon emergence from bankruptcy will 

be required to have a fully compliant 

audit committee at the time of listing 

unless an exemption is available to it 

under Rule 10A–3. 

Currently, the rule provides that 

companies listing upon transfer from 


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47834 Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 

6 17 CFR 240.3b–4. 

7See Securities Exchange Act Release No. 54344 

(August 21, 2006); 71 FR 51260 (August 29, 2006) 

(SR–NYSE–2005–68). 

another market have one year from the 

date of transfer in which to comply with 

any requirement to the extent the 

market on which they were listed did 

not have the same requirement. The 

Exchange proposes to amend this 

section to apply only to companies 

registered pursuant to Section 12(b) of 

the Act that transfer to the NYSE. If the 

other exchange had a substantially 

similar requirement and the company 

was afforded a transition period that 

had not expired, the company will have 

the same transition period as would 

have been available to it on the other 

exchange. 

Companies registered pursuant to 

Section 12(g) of the Act that transfer to 

the NYSE would not have been subject 

to corporate governance standards at the 

time of transfer. Therefore, the Exchange 

believes that it would not be appropriate 

for such companies to have 12 months 

to comply with every aspect of the 

Exchange’s corporate governance rules. 

Instead, the Exchange proposes to treat 

such companies like a company listing 

in connection with an IPO. The 

applicable compliance dates, however, 

would run from the listing date and 

since such companies were required to 

file periodic reports with the SEC prior 

to listing, only independent directors 

would be permitted on the audit 

committee during the transition period. 

Companies that cease to be controlled 

companies will be able to phase in 

majority independent boards and 

independent nominating and 

compensation committees on the same 

schedule as companies listing in 

conjunction with an IPO. The applicable 

compliance dates, however, will run 

from the date that the company’s status 

changed. 

The Exchange also proposes to clarify 

its requirements as to when a company 

is a controlled company. The 

Exchange’s current rule defines a 

controlled company as a listed company 

of which more than 50% of the voting 

power is held by an individual, group 

or another company. Since Section 

303A was approved in 2003, the 

Exchange has had a number of inquiries 

as to what constitutes a ‘‘group’’ for 

purposes of the controlled company 

definition. It also came to the 

Exchange’s attention that some 

companies were claiming to be owned 

by a ‘‘group’’ where a shareholder 

agreement existed relating only to the 

disposition of assets. The Exchange 

proposes, therefore, to make it clear 

that, in order to be deemed a controlled 

company, more than 50% of the voting 

power for the election of directors must 

be held by an individual, group or 

another company. 

When a foreign private issuer ceases 

to qualify as such under SEC rules (so 

that it is required to file on domestic 

forms with the SEC), it may become 

subject to a number of requirements 

under Section 303A that it was not 

previously subject to if its home country 

practice differed from the applicable 

requirements of Section 303A. 

Depending upon the type of issuer, 

these may include the requirement to 

have independent nominating and 

compensation committees and a 

majority of independent directors. In 

addition, the company’s directors may 

be required to meet the Section 303A.02 

definition of independence, including 

with respect to their existing audit 

committee members. The Exchange 

proposes to modify its rules to take into 

consideration recent changes in Rule 

3b–4–6 of the Act which enables a 

foreign private issuer to test its 

eligibility once a year. Specifically, the 

Exchange proposes to require a 

company that ceases to be a foreign 

private issuer to be in compliance with 

the domestic company requirements of 

Section 303A as follows: 

• The company must satisfy the 

majority independent board 

requirement of Section 303A.01, if 

applicable, within six months of the 

date it fails to qualify for foreign private 

issuer status pursuant to SEC Rule 

240.3b–4. Under SEC Rule 240.3b–4, a 

company tests its status as a foreign 

private issuer on an annual basis at the 

end of its most recently completed 

second fiscal quarter (the 

‘‘Determination Date’’). 

• The company must satisfy the Web 

site posting requirements of Sections 

303A.04, 303A.05, 303A.07(b), 303A.09 

and 303A.10, to the extent such sections 

are applicable, within six months of the 

Determination Date. 

• The company must have fully 

independent nominating and 

compensation committees as required 

by Sections 303A.04 and 303A.05, if 

applicable, within six months of the 

Determination Date. 

• The company’s audit committee 

members must be in compliance with 

the independence requirements of 

Section 303A.02, if applicable, within 

six months of the Determination Date. 

• The company must comply with the 

three-person audit committee 

requirement of Section 303A.07(a) 

within six months of the Determination 

Date. 

• The company must comply with the 

shareholder approval requirements of 

Section 303A.08 by the Determination 

Date, subject to the provisions in 

Section 303A.08 under the heading 

‘‘Ongoing Transition Period for a 

Foreign Private Issuer Whose Status 

Changes.’’ 

Prior to the amendment of Sections 

203.01 and 103 in August 2006,7

Section 203.01 required listed 

companies to distribute to their 

shareholders each year an annual report 

containing audited financial statements. 

Section 103 permitted foreign private 

issuers to distribute a summary annual 

report in fulfillment of their obligations 

under Section 203.01. As amended, 

Sections 203.01 and 103 no longer 

require the physical distribution of 

annual reports. Instead, companies are 

required to post their annual report filed 

with the SEC on or through their Web 

site. The Exchange proposes to conform 

Section 303A to these amendments by 

eliminating from Section 303A all 

references to annual reports previously 

required under Section 203.01 and 

summary annual reports previously 

permitted under Section 103. 

The Exchange also proposes to revise 

the Introduction section to more clearly 

specify which issuers are required to 

comply with Section 303A.08 and to 

delete the section relating to effective 

dates due to the fact that the rules are 

fully applicable, other than for the 

specified transition periods. The 

Exchange notes that it proposes to 

clarify that closed-end funds are subject 

to Section 303A.08. The fact that 

Section 303A.00 does not currently 

appear to require closed-end funds to 

comply with Section 303A.08 results 

from an oversight on the part of the 

Exchange. 

The Exchange is adding a reference in 

the ‘‘Preferred and Debt Listings’’ 

subsection of the Introduction section to 

specify that, except as otherwise 

provided by Rule 10A–3 under the Act, 

Section 303A does not apply to 

securities listed under Section 703.22 

(‘‘Equity Index-Linked Securities, 

Commodity-Linked Securities and 

Currency-Linked Securities’’) of the 

Listed Company Manual. Section 703.22 

had not yet been adopted at the time 

that Section 303A.00 was adopted. 

Securities listed under Section 703.22 

are debt securities and, as companies 

listing only debt securities on the 

Exchange are generally not subject to 

Section 303A, the Exchange believes it 

is consistent to adopt the same approach 

with issuers of securities listed under 

Section 703.22. In addition, the 

Exchange proposes to move the 

reference to securities listed under 


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Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 47835 

Section 703.21 (‘‘Equity-linked Debt 

Securities’’) from the ‘‘Other Entities’’ 

subsection of the Introduction section to 

the ‘‘Preferred and Debt Listings’’ 

subsection, as securities listed under 

Section 703.21 are debt securities and 

are more properly subject to the 

corporate governance requirements 

applicable to debt securities. To the 

extent that Rule 10A–3 applies to the 

issuer of a security listed under either 

Section 703.21 or Section 703.22, such 

issuer will be required to comply with 

Sections 303A.06 and 303A.12(b). The 

Exchange also proposes to delete the 

reference to Section 703.16 

(‘‘Investment Company Units’’, more 

commonly referred to as ‘‘ExchangeTraded Funds’’ or ‘‘ETFs’’) in the ‘‘Other 

Entities’’ subsection as ETFs are covered 

by the ‘‘Closed-End and Open-End 

Funds’’ subsection of the Introduction 

section. 

The ‘‘Closed-End and Open-End 

Fund’’ subsection of the ‘‘Introduction’’ 

section is amended to clarify the 

requirements applicable to closed-end 

funds. Closed-end funds must comply 

with the requirements of Sections 

303A.06, 303A.07(a), 303A.07(b), 

303A.08 and 303A.12 with the 

following exceptions: 

• A closed-end fund is not required to 

comply with the director independence 

requirements of Section 303A.02 

incorporated into Section 303A.07(a) 

(this exemption already exists in the 

current rule, but the Exchange is 

proposing to move the requirement to 

comply with the director independence 

requirements of Section 303A.02 from 

its current position in Section 

303A.07(b) to Section 303A.07(a), 

requiring a conforming change in the 

‘‘Closed-End and Open-End Fund’’ 

subsection of the ‘‘Introduction’’ 

section. A similar conforming change is 

required in the paragraph discussing 

Business Development Companies). 

• Closed-end funds are not required 

to comply with the Disclosure 

Requirements in Section 303A.07(a), 

when a director serves on multiple 

boards in the same fund complex as 

such service will be counted as one 

board for purposes of Section 303A (this 

exemption is already in the ‘‘Closed-End 

and Open-End Fund’’ subsection of the 

‘‘Introduction’’ section). 

• A closed-end fund is not required to 

make the audit committee charter 

required by Section 303A.07(b) 

available on or through its Web site (this 

specifies the existence of an exemption 

that is implicit in the current rule). 

Section 303A.02—Independence 

Requirements: 

The Exchange proposes to revise the 

General Commentary to Section 

303A.02(b) to clarify that references to 

a listed company or any other company 

relevant to the independence standards 

of Section 303A.02(b) include any 

parent or subsidiary in a consolidated 

group with such company. 

The Exchange proposes to delete the 

‘‘Transition Rule’’ subsection of Section 

303A.02(b) as the transition period has 

ended. 

Section 303A.03—Requirement for 

meetings of non-management directors: 

The Exchange’s current rule requires 

that listed companies hold regular 

meetings of non-management directors 

and recommends that companies 

schedule a meeting of independent 

directors at least once a year. Some 

companies have expressed a preference 

to holding regular executive sessions of 

just independent directors. The 

Exchange believes that allowing 

companies to hold regular executive 

sessions of independent directors 

satisfies the original intention of the 

rule, so the Exchange proposes to revise 

the Commentary accordingly. 

The Exchange is also proposing to 

clarify the fact that all interested parties, 

not only shareholders, must be able to 

communicate their concerns regarding 

the listed company to the presiding 

director, or the non-management or 

independent directors as a group. 

Section 303A.05—Requirements for 

Compensation Committees: 

The current responsibilities 

designated to the compensation 

committee include the review and 

approval of corporate goals, objectives, 

and the CEO’s performance as they 

relate to CEO compensation. The 

committee also makes recommendations 

to the board regarding compensation of 

non-CEO executive officers. 

The Exchange proposes to update the 

current requirement for the 

compensation committee to produce a 

report to reflect the disclosure required 

by Item 407(e)(5) of Regulation S–K 

regarding compensation of executive 

officers. 

Section 303A.06—Requirements for 

Audit Committees: 

In an effort to highlight listed 

companies’ disclosure requirements, the 

Exchange proposes to revise the 

Commentary to Section 303A.06 to 

specifically point out that Rule 10A–3 

requires disclosure of reliance on 

certain exceptions contained in that 

rule. 

Section 303A.07—Duties of the Audit 

Committee: 

The Exchange is proposing to 

combine the Section 303A.07(a) 

requirement for a listed company to 

have an audit committee comprised of 

a minimum of three members with the 

Section 303A.07(b) requirement that 

such audit committee members must 

meet the independence standards set 

forth in Section 303A.02 and, in the 

absence of an applicable exemption, 

Rule 10A–3 and to renumber the 

remaining parts of Section 303A.07. 

In addition, Section 303A.07(a) 

currently requires that, if an audit 

committee member simultaneously 

serves on the audit committees of more 

than three public companies, and the 

listed company does not limit the 

number of audit committees on which 

its audit committee members serve to 

three or less, then in each case, the 

board must determine that such 

simultaneous service would not impair 

the ability of such member to effectively 

serve on the listed company’s audit 

committee and must disclose such 

determination. The current language has 

led to some confusion that disclosure is 

only required to the extent that the 

listed company does not limit the 

number of audit committees on which 

its audit committee members serve to 

three or less. The Exchange proposes to 

amend the language to make clear that 

the mandated disclosure is required to 

the extent that an audit committee 

member simultaneously serves on the 

audit committees of more than three 

public companies. 

Section 303A.07 requires that a 

company’s audit committee charter 

must provide that the audit committee 

will meet to review and discuss the 

company’s financial statements and 

must review the company’s specific 

Management’s Discussion and Analysis 

disclosures. Closed-end funds, however, 

are not subject to the requirement to 

provide this disclosure. The Exchange 

proposes to add language to the 

Commentary to make clear that, if a 

closed-end fund chooses to voluntarily 

include a ‘‘Management’s Discussion of 

Fund Performance’’ in its Form N–CSR, 

its audit committee is required to meet 

to review and discuss it. The Exchange 

also intends to clarify that telephonic 

conference calls constitute meetings for 

purposes of Section 303A.07 if allowed 

by applicable corporate law, but that 

polling directors is not allowed in lieu 

of a meeting. 

The Exchange proposes to update the 

current requirement for the audit 

committee to produce a report to reflect 

the disclosure required by Item 

407(d)(3)(i). 

Section 303A.08—Shareholder 

Approval of Equity Compensation 

Plans: 

The Exchange proposes to revise the 

‘‘Transition Rules’’ section of this item 

to specify that the effective date of this 

listing standard was June 30, 2003 and 


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47836 Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 

to eliminate references to transitional 

provisions that are no longer relevant in 

light of the expiration of the specified 

transition periods. 

To the extent that a listed foreign 

private issuer ceases to qualify as such 

under SEC rules (so that it is required 

to file on domestic forms with the SEC) 

and as a result of such change in status 

becomes subject to Section 303A.08 for 

the first time, such company will be 

granted a limited transition period with 

respect to discretionary plans and 

formula plans that do not comply with 

Section 303A.08 that were in place prior 

to the date that its status changed so that 

additional grants may be made after the 

date that its status changed without 

shareholder approval. This transition 

period will end upon the later to occur 

of: 

• Six months after the date as of 

which the company fails to qualify for 

foreign private issuer status pursuant to 

SEC Rule 240.3b–4. Under SEC Rule 

240.3b–4, a company tests its status as 

a foreign private issuer on an annual 

basis at the end of its most recently 

completed second fiscal quarter (the 

‘‘Determination Date’’); and 

• the first annual meeting after the 

Determination Date, but, in any event no 

later than one year after the 

Determination Date. 

A shareholder-approved formula plan 

may continue to be used after the end 

of this transition period if it is amended 

to provide for a term of ten years or less 

from the date of its original adoption or, 

if later, the date of its most recent 

shareholder approval. Such an 

amendment may be made before or after 

the Determination Date, and would not 

itself be considered a ‘‘material 

revision’’ requiring shareholder 

approval. 

In addition, a formula plan may 

continue to be used, without 

shareholder approval, if the grants after 

the date that the company’s status 

changed are made only from the shares 

available immediately before the 

Determination Date, in other words, 

based on formulaic increases that 

occurred prior to the Determination 

Date. 

A shareholder-approved formula plan 

may continue to be used after the end 

of this transition period if it is amended 

to provide for a term of ten years or less 

from the date of its original adoption or, 

if later, the date of its most recent 

shareholder approval. Such an 

amendment may be made before or after 

the date that the company’s status 

changed, and would not itself be 

considered a ‘‘material revision’’ 

requiring shareholder approval. 

In addition, a formula plan may 

continue to be used, without 

shareholder approval, if the grants after 

the date that the company’s status 

changed are made only from the shares 

available immediately before the date 

that the company’s status changed, in 

other words, based on formulaic 

increases that occurred prior to the date 

that the company’s status changed. 

Section 303A.10—Code of Business 

Conduct and Ethics: 

Section 303A.10 requires that listed 

companies disclose any waiver of the 

code of business conduct and ethics 

granted to executive officers and 

directors. The Exchange proposes to 

specify that the waiver must be 

disclosed to shareholders within four 

business days of such determination 

and that disclosure must be made by 

distributing a press release, providing 

Web site disclosure, or by filing a 

current report on Form 8–K with the 

SEC. This proposed approach varies 

slightly from the guidance currently 

provided by Question G–1 of the 

NYSE’s Frequently Asked Questions on 

Section 303A, which provides that the 

waiver must be disclosed to 

shareholders within two to three 

business days of the board’s 

determination. The Exchange is 

proposing a four-day period to be 

uniform with the requirements of Item 

5.05 of Form 8–K regarding disclosure 

of waivers from codes of ethics and will 

revise the answer in the FAQs 

accordingly. 

Section 303A.11—Foreign Private 

Issuer Disclosure: 

Section 303A.11 requires that foreign 

private issuers disclose the significant 

differences between the corporate 

governance practices followed by the 

company in its home country and the 

requirements of Section 303A 

applicable to U.S. companies. Currently, 

companies have a choice to make that 

disclosure either in their annual report 

to shareholders or on their corporate 

Web sites. Under Item 16G of Form 

20–F (which became effective for filings 

relating to fiscal years ending on or after 

December 15, 2008), foreign private 

issuers that file their annual report on 

Form 20–F are now required to include 

the disclosure of significant differences 

on the Form 20–F. Therefore, to avoid 

confusing and duplicative requirements, 

the Exchange proposes to require 

foreign private issuers that are required 

to file an annual report on Form 20–F 

with the SEC to include the statement 

of significant differences in that annual 

report. All other foreign private issuers 

will have the choice to either (i) include 

the statement of significant differences 

in an annual report filed with the SEC 

or (ii) make the statement of significant 

differences available on or through the 

company’s Web site. If the statement of 

significant differences is made available 

on or through the company’s Web site, 

the company must disclose that fact in 

its annual report filed with the SEC and 

provide the Web site address. 

Section 303A.12—Certification 

Requirements: 

Currently, Section 303A.12(a) requires 

that listed companies disclose that they 

filed the CEO certification required by 

the NYSE and any certifications 

required by the SEC in the following 

year’s annual report. This requirement 

has caused significant confusion due to 

the fact that it relates to filings that were 

made in the previous year. The 

Exchange proposes to eliminate this 

disclosure requirement in light of 

several factors. First, the Exchange notes 

that at the time the Section 303A.12(a) 

disclosure requirement was adopted, the 

SEC had not yet amended the exhibit 

requirements of Form 10–K to require 

that the SEC certification be included as 

an exhibit to the company’s annual 

report filed with the SEC. The Exchange 

also notes that with respect to 

disclosure on whether a company 

submitted a qualified annual written 

affirmation to the NYSE during the 

previous year, investors now have 

timely notification of all material noncompliance with the NYSE’s listing 

standards due to the SEC’s amended 

requirements relating to Form 8–K 

filings (Item 3.01 of Form 8–K requires 

registrants to file a Form 8–K disclosing 

any noncompliance with Exchange rules 

and any action or response that, at the 

time of filing, the registrant has 

determined to take regarding its 

noncompliance, within four business 

days of either (i) notification by the 

Exchange of the registrant’s 

noncompliance with an Exchange rule 

or (ii) notification by the registrant to 

the Exchange that the registrant is aware 

of a material noncompliance with an 

Exchange rule). In addition, the NYSE 

has a program of appending a below 

compliance (‘‘BC’’) indicator to the 

ticker symbol of an issuer that is noncompliant with the Exchange’s 

corporate governance standards. In light 

of the above, the Exchange has 

reevaluated the benefit of its current 

disclosure requirements and believes 

that disclosure regarding the previous 

year’s compliance is unnecessary. 

The Exchange is also proposing to 

revise Section 303A.12(b) to specify that 

listed companies must notify the 

Exchange in writing after any executive 

officer of the listed company becomes 

aware of any non-compliance with 

Section 303A, as opposed to requiring 


cprice-sewell on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 179 / Thursday, September 17, 2009 / Notices 47837 

8 15 U.S.C. 78f(b)(5). 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

notification in the event of ‘‘material 

non-compliance’’ as provided by the 

current rule. 

Section 303A.14—Web site 

requirement: 

Listed companies have expressed 

confusion regarding the placement 

within Section 303A of the requirement 

contained in Section 303A.14 that each 

listed company must maintain a 

publicly accessible Web site. As a result, 

the Exchange proposes to redesignate 

Section 303A.14 as Section 307.00 and 

to clarify in the commentary that this 

requirement applies to companies 

subject to Web site posting requirements 

under any applicable provision of the 

Listed Company Manual, rather than 

just Section 303A. Section 307 will 

specify that companies’ Web sites must 

be accessible from the United States, 

must clearly indicate in the English 

language the location of the documents 

on the Web site that are required to be 

posted and such documents must be 

printable in the English language. 

Section 307.00: 

Section 307.00 of the Listed Company 

Manual sets out guidance regarding 

related party transactions. As this 

guidance is duplicative of Section 314 

(‘‘Related Party Transactions’’) and is 

therefore redundant, the Exchange 

proposes to eliminate Section 307. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 8 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 remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. The Exchange 

believes the proposed amendments are 

consistent with the protection of 

investors and the public interest, as they 

simply apply existing principles of 

Section 303A to situations not currently 

covered by the rules, clarify existing 

interpretations of Exchange rules and 

harmonize Exchange disclosure 

requirements with those of the 

Commission and, therefore, do not 

substantively lessen the Exchange’s 

regulatory requirements for listed 

companies. 

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 

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 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2009–89 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–2009–89. This file 

number should be included on the 

subject line if e-mail 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 inspection and copying in 

the Commission’s Public Reference 

Section, 100 F Street, NE., Washington, 

DC 20549–1090 on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of the filing will also be 

available for inspection and copying at 

the NYSE’s principal office and on its 

Internet Web site at www.nyse.com. 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–2009–89 and should 

be submitted on or before October 5, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary 

[FR Doc. E9–22392 Filed 9–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60648; File No. SR–FINRA– 

2009–048] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

FINRA Rule 5230 (Payments Involving 

Publications That Influence the Market 

Price of a Security) in the Consolidated 

FINRA Rulebook 

September 10, 2009. 

On July 21, 2009, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. (‘‘NASD’’)) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend the By-Laws of FINRA 

Regulation, Inc. (‘‘FINRA Regulation’’) 

to adopt NASD Rule 3330 (Payment 

Designed to Influence Market Prices, 

Other than Paid Advertising) as FINRA 

Rule 5230 in the consolidated FINRA 

rulebook, with several changes to clarify 


cprice-sewell on DSK2BSOYB1PROD with NOTICES