[Federal Register Volume 74, Number 179 (Thursday, September 17, 2009)]
[Notices]
[Pages 47831-47837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-22392]


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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 self-
regulatory 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.
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    \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.
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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

[[Page 47832]]

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.
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    \5\ See Securities Act Release No. 33-8732A (August 29, 2006).
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    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:
    <bullet> 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).
    <bullet> 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).
    <bullet> 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).
    <bullet> 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 closed-end 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:
    <bullet> 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.
    <bullet> The disclosure requirement of Section 303A.03 with respect 
to the identity of the director chosen to preside at executive sessions 
of non-management 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.
    <bullet> 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 non-management or independent 
directors as a group.
    <bullet> 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

[[Page 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 three-person 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:
    <bullet> Satisfy the majority independent board requirement of 
Section 303A.01, if applicable, within one year of the listing date.
    <bullet> 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.
    <bullet> 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:
    <bullet> Satisfy the majority independent board requirement of 
Section 303A.01, if applicable, within one year of the listing date.
    <bullet> 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.
    <bullet> 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

[[Page 47834]]

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:
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    \6\ 17 CFR 240.3b-4.
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    <bullet> 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'').
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> The company must comply with the three-person audit 
committee requirement of Section 303A.07(a) within six months of the 
Determination Date.
    <bullet> 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.
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    \7\ See Securities Exchange Act Release No. 54344 (August 21, 
2006); 71 FR 51260 (August 29, 2006) (SR-NYSE-2005-68).
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    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

[[Page 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 ``Exchange-Traded 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:
    <bullet> 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).
    <bullet> 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).
    <bullet> 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

[[Page 47836]]

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:
    <bullet> 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
    <bullet> 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 non-compliance 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 non-compliant 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

[[Page 47837]]

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.
---------------------------------------------------------------------------

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

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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#4230372e276f212d2f2f272c3631023127216c252d34"><span class="__cf_email__" data-cfemail="443631282169272b2929212a3037043721276a232b32">[email protected]</span></a>. Please include 
File Number SR-NYSE-2009-89 on the subject line.

Paper Comments

    <bullet> 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.
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).

    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


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