[Federal Register Volume 89, Number 201 (Thursday, October 17, 2024)]
[Notices]
[Pages 83738-83740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23898]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101306; File No. SR-NYSE-2024-48]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Amend Section 802.01C of 
the NYSE Listed Company Manual (Price Criteria for Capital or Common 
Stock) To Limit the Use of Reverse Stock Splits To Regain Compliance 
With the Price Criteria in Certain Circumstances

October 10, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on September 30, 2024, New York Stock Exchange LLC (``NYSE'' 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change 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.
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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 Section 802.01C (``Price Criteria 
for Capital or Common Stock'') of the NYSE Listed Company Manual to 
modify the implications of a reverse stock split for an issuer that 
falls below compliance with the price criteria set forth in that rule. 
The proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, 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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Section 802.01C (``Price Criteria for Capital or Common Stock'') of 
the NYSE Listed Company Manual (the ``Manual'') provides that a listed 
company will be considered to be below compliance standards if the 
average closing price of a security as reported on the consolidated 
tape is less than $1.00 over a consecutive 30 trading-day period (the 
``Price Criteria''). While the term ``Price Criteria'' is used as a 
defined term in Section 802.01C, the current rule does not actually 
provide a definition for the term. Consequently, the Exchange proposes 
to define the term in the rule using the definition set forth in the 
immediately preceding sentence.
    Once notified that it has fallen below the Price Criteria, the 
company must bring its share price and average share price back above 
$1.00 by six months following receipt of the notification. A company is 
not eligible to follow the procedures outlined in Sections 802.02 and 
802.03 of the Manual with respect to this criteria. The company must, 
however, notify the Exchange, within 10 business days of receipt of the 
notification, of its intent to cure this deficiency or be subject to 
suspension and delisting procedures as set forth in Section 804.00 of 
the Manual. The company can regain compliance at any time during the 
six-month cure period if on the last trading day of any calendar month 
during the cure period the company has a closing share price of at 
least $1.00 and an average closing share price of at least $1.00 over 
the 30 trading-day period ending on the last trading day of that month. 
In the event that at the expiration of the six-month cure period, both 
a $1.00 closing share price on the last trading day of the cure period 
and a $1.00 average closing share price over the 30 trading-day period 
ending on the last trading day of the cure period are not attained, the 
Exchange will commence suspension and delisting procedures as set forth 
in Section 804.00.
    Notwithstanding the foregoing, if a company determines that, if 
necessary, it will cure the price condition by taking an action that 
will require approval of its shareholders, it must so inform the 
Exchange in the above referenced notification, must obtain the 
shareholder approval by no later than its next annual meeting, and must 
implement the action promptly thereafter. The company will be deemed to 
have regained compliance with the Price Criteria if the price promptly 
exceeds $1.00 per share, and the price remains above the level for at 
least the following 30 trading days. The action taken by a company to 
cure its noncompliance with the Price Criteria that is subject to 
shareholder approval is generally a reverse stock split.
    The Exchange proposes to amend Section 802.01C to limit the 
circumstances under which a listed company may utilize a reverse stock 
split to regain compliance with the Price Criteria. Specifically, the 
Exchange proposes that, notwithstanding the general ability of a 
company to utilize a reverse stock split as a mechanism for regaining 
compliance with the Price Criteria if a company's security fails to 
meet the Price Criteria and (i) the company has effected a reverse 
stock split over the prior one-year period \4\ or (ii) has effected one 
or more reverse stock splits over the prior two-year period with a 
cumulative ratio of 200 shares or more to one, then the company shall 
not be eligible for any compliance period specified in Section 802.01C 
and the Exchange will immediately commence suspension and delisting 
procedures with respect to such security

[[Page 83739]]

in accordance with Section 804.00. Section 804.00 of the Manual 
provides that these companies can seek review of a delisting 
determination from the Committee for Review of the Board of Directors 
of the Exchange. Furthermore, the Exchange proposes that a listed 
company would not be allowed to effectuate a reverse stock split, for 
purposes of regaining compliance with the Price Criteria or otherwise, 
if the effectuation of such reverse stock split results in the 
company's security falling below the continued listing requirements of 
Section 802.01A. If a listed company effectuated a reverse stock split 
notwithstanding this proposed limitation, the Exchange would promptly 
commence suspension and delisting procedures with respect to such 
company in accordance with Section 804.00.
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    \4\ For the avoidance of doubt, the proposed rule would apply to 
a company even if the company was in compliance with the Price 
Criteria at the time of its prior reverse stock split.
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    As described above, many companies seek to cure their noncompliance 
with the Price Criteria or seek to increase their stock price for other 
reasons by effectuating a reverse stock split. However, the Exchange 
has observed that some companies, typically those in financial distress 
or experiencing a prolonged operational downturn, engage in a pattern 
of repeated reverse stock splits. The Exchange believes that such 
behavior is often indicative of deep financial or operational distress 
within such companies rendering them inappropriate for trading on the 
Exchange for investor protection reasons. In these situations, the 
Exchange has observed that the challenges facing such companies, 
generally, are not temporary and may be so severe that the company is 
not likely to maintain or regain compliance on a sustained basis.
    The Exchange believes that the restrictions set forth in this 
proposal on the excessive use of reverse splits as a means of 
maintaining or regaining compliance with the Price Criteria will 
protect investors by resulting in the delisting of companies whose 
history of recurring inability to maintain price compliance is 
indicative of their financial instability and unsuitability for 
continued listing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\6\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
The Exchange believes the proposal protects investors and the public 
interest by enhancing the Exchange's listing requirements and limiting 
the ability of listed companies with a history of having a low stock 
price to use reverse stock splits as a means to remain qualified for 
listing. In that regard, the Exchange has observed that the challenges 
facing such companies generally are not temporary and may be so severe 
that the company is not likely to remain compliant with the Price 
Criteria after curing non-compliance by means of a reverse stock split. 
Moreover, the price concerns with these companies can be a leading 
indicator of other listing compliance concerns, and these companies 
often become subject to delisting for other reasons within a short 
period of time.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it is consistent with the protection of 
investors and the public interest to delist any company that takes a 
deliberate action that causes it to fall below an Exchange listing 
standard, including as in the current proposal, the effectuation of a 
reverse split that causes a company to fall below a quantitative 
continued listing standard.
    The Exchange believes that the adoption of the term ``Price 
Criteria'' as a defined term provides helpful clarification of the rule 
without making any substantive change to the rule text.
    The Exchange believes the proposed rule change furthers the 
objectives of Section 6(b)(7) of the Act \7\ in that the Exchange 
continues to provide a fair procedure for companies subject to these 
enhanced listing requirements. Section 804.00 of the Manual provides 
that these companies can seek review of a delisting determination from 
the Committee for Review of the Board of Directors of the Exchange. As 
a result, the Exchange believes that the proposed rule appropriately 
balances the need for appropriate listing standards with the statutory 
requirement to protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal will not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of Section 6(b)(8) of the Act.\8\ While the Exchange does 
not believe there will be any impact on competition from the proposed 
change, any impact on competition that does arise will be necessary to 
better protect investors, in furtherance of a central purpose of the 
Act.
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    \8\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that the proposal will not impose a burden on 
intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed rule change 
is designed to protect investors and facilitate a fair and orderly 
market, which are both important purposes of the Act. To the extent 
that there is any impact on intermarket competition, it is incidental 
to these objectives.
    The Exchange does not believe that the proposed rule change imposes 
a burden on intra-market competition because the provisions apply to 
all market participants and issuers on the Exchange equally.

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 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove 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 (https://www.sec.gov/rules/sro.shtml); or

[[Page 83740]]

    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#bccec9d0d991dfd3d1d1d9d2c8cffccfd9df92dbd3ca"><span class="__cf_email__" data-cfemail="b3c1c6dfd69ed0dcdeded6ddc7c0f3c0d6d09dd4dcc5">[email protected]</span></a>. Please include 
file number SR-NYSE-2024-48 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NYSE-2024-48. This file 
number should be included on the subject line if email 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 website (https://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 website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSE-2024-48 and should be 
submitted on or before November 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-23898 Filed 10-16-24; 8:45 am]
BILLING CODE 8011-01-P


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