[Federal Register Volume 65, Number 230 (Wednesday, November 29, 2000)]
[Notices]
[Page 71160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30381]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43588; File No. SR-Amex-00-46]


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

November 17, 2000.

    On August 16, 2000, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 \3\ adopting commentary to Section 713 that 
defines ``Public Offering'' for purposes of shareholder approval 
rules.\4\ The proposed rule change was noticed in the Federal 
Register.\5\ On October 13, 2000, the Amex filed Amendment No. 2 to the 
proposed rule change.\6\ No comments were received on the proposed rule 
change. This order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The National Association of Securities Dealers, Inc., 
through its wholly owned subsidiary The Nasdaq Stock Market, Inc., 
filed a similar proposed rule change (SR-NASD-00-50). See Securities 
Exchange Act Release No. 43420 (Oct. 6, 2000), 65 FR 61011 (Oct. 13, 
2000).
    \4\ 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 (``Division''), 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).
    \5\ Securities Exchange Act Release No. 43419 (Oct. 6, 2000), 65 
FR 61206 (Oct. 16, 2000).
    \6\ Amendment No. 2 made a minor technical change to the 
proposal. See Letter from Claudia Crowley, Assistant General 
Counsel, Amex, to Florence Harmon, Esq., Senior Special Counsel, 
Division, SEC (Oct. 10, 2000). Because the amendment is technical, 
it does not need to be published for comment.
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I. Background

    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.\7\ 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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    \7\ 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 help to ensure 
issuer understanding of how Amex determines whether a transaction is a 
``public offering'' for purposes of 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.

II. Discussion

    The Commission finds that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(5) \9\ 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.\10\ The Commission 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, thus promoting just 
and equitable principles of trade and protecting investors and the 
public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ In approving the proposal, the Commission has considered 
the rule's impact on efficiency, competition, and capital formation. 
15 U.S.C. 78c(f).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposal, SR-Amex-00-46, as amended, be and hereby is 
approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regualtion, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-30381 Filed 11-28-00; 8:45 am]
BILLING CODE 8010-01-M