[Federal Register Volume 65, Number 200 (Monday, October 16, 2000)]
[Notices]
[Pages 61206-61207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26465]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43419; File No. SR-Amex-00-46]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Adopting Commentary to 
Section 713 That Defines ``Public Offering'' for Purposes of 
Shareholder Approval Rules

October 6, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 16, 2000, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Amex filed its proposed rule change on August 16, 2000. 
On September 29, 2000, the Amex filed Amendment No. 1 that entirely 
replaced the original rule filing. See Letter from Michael J. Ryan, 
Senior Vice President, Chief of Staff and Senior Legal Officer, 
Amex, to Katherine A. England, Assistant Director, Division of 
Market Regulation, Commission (September 29, 2000) (``Amendment No. 
1''). In Amendment No. 1, the Amex also designated SR-Amex-00-46 as 
a proposed rule change under Section 19(b)(2) of the Act. 15 U.S.C. 
78s(b)(2).
    \4\ The National Association of Securities Dealers, Inc., 
through its wholly owned subsidiary The Nasdaq Stock Market Inc., 
has filed a similar proposed rule change (SR-NASD-00-50). See 
Securities Exchange Act Release No. 43420 (October 6, 2000).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to adopt Commentary .01 to Section 713, to define 
the term ``public offering'' for purposes of the Exchange's shareholder 
approval rules. Below is the text of the proposed rule change, which is 
entirely new.
* * * * *

Amex Rules, Sec. 713. Other Transactions, Commentary .01

    Section 713 provides that shareholder approval is required for 
``a transaction involving the sale or issuance by the company of 
common stock (or securities convertible into or exercisable for 
common stock) equal to 20 percent or more of presently outstanding 
stock for less than the greater of book or market value of the 
stock.'' Under this rule, shareholder approval is not required for a 
``public offering.''
    Issuers are encouraged to consult with Exchange staff in order 
to determine if a particular offering is a ``public offering'' for 
purposes of the shareholder approval rules. Generally, a firm 
commitment underwritten securities offering registered with the 
Securities and Exchange Commission will be considered a public 
offering for these purposes. Likewise, any other securities offering 
which is registered with the Securities and Exchange Commission and 
which is publicly disclosed and distributed in the same general 
manner and extent as a firm commitment underwritten securities 
offering will be considered a public offering for purposes of the 
shareholder approval rules. However, Exchange staff will not treat 
an offering as a ``public offering'' for purposes of the shareholder 
approval rules merely because they are registered with the 
Commission prior to the closing of the transaction.
    When determining whether an offering is a ``public offering'' 
for purposes of these rules, Exchange staff will consider all 
relevant factors, including but not limited to:
    (i) The type of offering (including whether the offering is 
conducted by an underwriter on a firm commitment basis, or an 
underwriter or placement agent on a best-efforts basis, or whether 
the offering is self-directed by the issuer);
    (ii) The manner in which the offering is marketed (including the 
number of investors offered securities, how those investors were 
chosen, and the breadth of the marketing effort);
    (iii) The extent of the offering's distribution (including the 
number and identify of the investors who participate in the offering 
and whether any prior relationship existed between the issuer and 
those investors);
    (iv) The offering price (including the extent of any discount to 
the market price of the securities offered); and
    (v) The extent to which the issuer controls the offering and its 
distribution.
* * * * *

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose

    Section 713 of the Amex Company Guide requires shareholder 
approval for stock issuances of 20 percent or more of an issuer's 
total shares outstanding, offered at less than the greater of book 
or market value. The applicable rules further provide, however, that 
shareholder approval is not required for a ``public offering,'' 
although that term is not defined in the rules. The Exchange 
proposes to adopt Commentary .01 to Section 713, to clarify the 
definition of ``public offering'' for issuers and interested 
parties. According to the Amex, a number of issuers have recently 
inquired as to whether certain large, below-market offerings were 
``public offerings'' because the transactions were registered with 
the Commission prior to closing the transactions.\5\ The Exchange 
notes that historically, for purposes of assessing the applicability 
of the shareholder approval rules, it has interpreted ``public 
offering'' as a broadly distributed, registered offering based on a 
firm commitment underwriting. Conversely, the Exchange does not 
consider a transaction to be a ``public offering'' for these 
purposes when the transaction is of limited distribution and/or is 
not based on a firm commitment underwriting, even if the offering 
was registered. Because the offerings described above had limited 
distributions and, in some cases, offerees that were pre-determined 
by the issuer, the Exchange believes that these transactions were 
not ``public offerings'' for purposes of the shareholder approval 
rules.
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    \5\ It is the Exchange's understanding that the Commission 
believes that this activity is not appropriate under Section 5 of 
the Securities Act of 1933. See 15 U.S.C. 77e
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    The Amex expects that proposed Commentary .01 will ensure issuer 
understanding of how Amex determines whether a transaction is a 
``public offering'' for purposes of the shareholder approval rules. 
The proposed Commentary identifies a number of factors that will be 
considered in establishing the existence of a ``public offering.'' 
Such factors include the type of offering; the marketing of the 
offering; the extent of the offering's distribution; the offering 
price; and the extent to which the issuer controls the offering and 
its distribution. Decisions as to whether a transaction is a 
``public offering'' for purposes of these rules will be based on the 
facts and circumstances surrounding each particular transaction.

2. Statutory Basis

    The Exchange believes that the proposed Commentary to Section 
713 is designed to educate issuers and other interested parties as 
to how the Exchange defines a ``public offering'' and ensure that 
issuers recognize which transactions require shareholder approval 
under the Exchange's rules. For this reason, the Exchange represents 
that the proposed rule change is consistent with Section 6(b) of the 
Act \6\ in general, and furthers the objectives of Section 6(b)(5) 
\7\ in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on 
Competition

    The Amex does not believe that the proposed rule change will 
impose any burden on competition that is not necessary

[[Page 61207]]

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

    The Exchange has neither solicited nor received comments on 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, as amended, is consistent with the Act. 
Persons making written submissions should file six copies thereof 
with the Secretary, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Washington, D.C. 20549-0609. 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 at the Commission's 
Public Reference Room. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. 
All submissions should refer to the File No. SR-Amex-00-46 and 
should be submitted by November 6, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-26465 Filed 10-13-00; 8:45 am]
BILLING CODE 8010-01-M