13542 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 makes revisions to the 

proposed rule text, including revisions conforming 

the proposed rule text to a filing submitted by The 

NASDAQ Stock Market LLC (‘‘Nasdaq’’) and 

approved by the Commission in the period 

following submission of the original filing 

(Securities Exchange Act Release No. 55052 

(January 5, 2007), 72 FR 1569 (January 12, 2007) 

(SR–NASDAQ–2006–047)) and revisions 

incorporating an immediately effective filing 

submitted by Amex in the same period (Securities 

Exchange Act Release No. 55096 (January 12, 2007), 

72 FR 2563 (January 19, 2007) (SR–Amex–2007–

03)). Amendment No. 1 replaces and supersedes the 

original filing in its entirety. 

4Section 703.08(E) of the NYSE Listed Company 

Manual. 

5Nasdaq Rule 4340(a). 

6The Exchange’s proposed Section 341 states that 

a ‘‘Reverse Merger’’ is: ‘‘any plan of acquisition, 

merger or consolidation whereby a listed company 

combines with, or into, a company not listed on the 

Exchange, resulting in a change of control of the 

listed company and potentially allowing such 

unlisted company to obtain an Exchange listing. In 

determining whether a change of control constitutes 

a Reverse Merger, the Exchange will consider all 

relevant factors, including, but not limited to, 

changes in the management, board of directors, 

voting power, ownership, and financial structure of 

the listed company. The Exchange will also 

consider the nature of the businesses and the 

relative size of both the listed and the unlisted 

companies.’’ See proposed Section 341 of the Amex 

Company Guide. 

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–Amex–2006–114 and 

should be submitted on or before April 

12, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5205 Filed 3–21–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55477; File No. SR–Amex–

2006–99] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing of Proposed Rule Change and 

Amendment No. 1 Thereto Relating to 

Reverse Mergers 

March 15, 2007. 

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

Securities Exchange Act of 1934, as 

amended (the ‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on October 5, 2006, the American Stock 

Exchange LLC (the ‘‘Amex’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. On February 

14, 2007, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 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 (i) 

Section 341 of the Amex Company 

Guide to clarify the circumstances 

under which a listed issuer will be 

deemed to have engaged in a reverse 

merger thereby requiring the posttransaction entity to satisfy the initial 

listing standards and the process a listed 

issuer must follow when applying for 

initial listing in connection with a 

reverse merger and (ii) Section 713 of 

the Amex Company Guide to require 

shareholder approval in connection 

with the issuance or potential issuance 

of additional listed securities that will 

result in a change of control of a listed 

issuer. 

The text of the proposed rule change 

is available on the Amex’s Web site at 

http://www.amex.com, the Office of the 

Secretary, the Amex and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Section 341 of the Amex Company 

Guide currently provides that if an 

issuer listed on the Amex engages in 

any plan of acquisition, merger or 

consolidation, the net effect of which is 

that the listed issuer is acquired by an 

unlisted entity, even if the listed issuer 

is the nominal survivor, the posttransaction entity is required to satisfy 

the initial listing standards. Such 

transactions are typically referred to as 

‘‘Reverse Mergers.’’ Because the issuer 

resulting from a Reverse Merger is 

essentially a different entity from the 

listed issuer, Section 341 does not 

permit the post-transaction entity to 

remain listed on the Amex unless it 

qualifies as a new listing. This 

prohibition is intended to prevent ‘‘back 

door listings’’ whereby an unqualified 

entity attempts to obtain an Amex 

listing. Both the New York Stock 

Exchange LLC (‘‘NYSE’’) 4 and Nasdaq 5

have comparable provisions. 

Many Reverse Mergers are entered 

into for bona fide business reasons, 

however, in some cases listed issuers 

that are not in compliance with the 

continued listing standards, and face 

potential delisting, attempt to enter into 

Reverse Mergers with private entities in 

order to retain their Amex listing. In 

other situations, a listed issuer may be 

in compliance with the continued 

listing standards but the posttransaction entity would not satisfy the 

initial listing standards. In both of these 

cases, a change of control occurs but the 

listed issuer attempts to structure the 

transaction so that it will not be deemed 

a Reverse Merger under the current rule. 

The Exchange proposes amending 

Section 341 to provide greater clarity 

and transparency as to (i) what 

constitutes a Reverse Merger, (ii) the 

factors the Exchange will consider in 

determining whether a transaction or 

series of transactions constitute(s) a 

Reverse Merger, (iii) the consequences 

of entering into a Reverse Merger and 

(iv) the process a listed issuer must 

follow in connection with a Reverse 

Merger. The proposed rule change will 

provide that, in addition to meeting the 

initial listing standards, a listed 

company entering into a Reverse Merger 

will need to obtain shareholder 

approval in accordance with Section 

713 in order to issue additional listed 

securities in connection with such 

Reverse Merger. In addition, while the 

determination of whether a Reverse 

Merger has occurred or will occur is to 

some degree subjective, the Exchange 

proposes to amend Section 341 to more 

clearly delineate the factors that will be 

considered by the Exchange in its 

analysis of a transaction.6

With regards to the process to be 

followed by listed issuers in connection 

with Reverse Mergers, Section 341 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 13543 

7See supra note 3. 

8Section 312.03(d) of the NYSE Listed Company 

Manual. 

9Nasdaq Rule 4350(i)(1)(B). 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 12 17 CFR 200.30–3(a)(12). 

currently recommends that listed 

issuers submit any proposed plan which 

could constitute a Reverse Merger to the 

Exchange for an informal opinion prior 

to the plan’s promulgation. The intent of 

such provision is to permit Exchange 

staff to review the proposed transaction 

in order to determine if it constitutes a 

Reverse Merger and, in the case of a 

Reverse Merger, to review the posttransaction entity in order to confirm 

that it will meet initial listing standards. 

The Exchange proposes to make such 

process more transparent by requiring a 

listed issuer to submit an initial listing 

application with sufficient time to 

permit the Exchange to complete its 

review of the post-transaction entity and 

providing that delisting proceedings 

will be commenced if such initial listing 

application has not been approved prior 

to consummation of the Reverse Merger. 

The Commission approved a similar 

rule change filed by Nasdaq.7

In association with the proposed 

changes to Section 341, the Exchange 

also proposes to amend Section 713. 

Section 713 currently requires 

shareholder approval as a prerequisite 

to Exchange approval of applications to 

list additional shares issued in 

connection with a transaction (other 

than a public offering) which would 

involve the application of the initial 

listing standards as described in Section 

341. The Exchange proposes revising 

Section 713 to require shareholder 

approval as a prerequisite to Exchange 

approval of additional listing 

applications when the issuance or 

potential issuance of additional 

securities will result in a change of 

control of a listed issuer, regardless of 

whether such change of control also 

constitutes a Reverse Merger. 

Additionally, the Exchange proposes 

changes to Sections 341 and 713 to 

clarify the relationship between their 

respective requirements. Both NYSE 8

and Nasdaq 9 require shareholder 

approval under such circumstances and 

the Exchange believes it is necessary 

and appropriate to require listed issuers 

to obtain shareholder approval of any 

issuance or potential issuance of 

additional listed securities that will 

result in a change of control. The 

proposed rule change will provide 

investors of listed issuers with more 

input and participation with respect to 

such decisions. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,10 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,11

in particular, in that it is 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 a national market system, and, in 

general, to protect investors and the 

public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

Instead, the Exchange believes that the 

proposed rule change will promote 

greater uniformity with the listing 

standards of other markets. 

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 Exchange consents, 

the Commission will: 

(A) By order approve such 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–Amex–2006–99 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Amex–2006–99. 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 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Amex. 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–Amex–2006–99 and should 

be submitted on or before April 12, 

2007. 

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5206 Filed 3–21–07; 8:45 am] 

BILLING CODE 8010–01–P 


rwilkins on PROD1PC63 with NOTICES