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[Federal Register Volume 90, Number 14 (Thursday, January 23, 2025)]
[Notices]
[Pages 8073-8076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-01549]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102220; File No. SR-NYSEAMER-2024-61]

Self-Regulatory Organizations; NYSE American LLC; Order Granting 
Approval of a Proposed Rule Change To Amend Section 1003 of the NYSE 
American LLC Company Guide To Provide for the Suspension and Delisting 
of Any Company That: (i) 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; or (ii) Has Effectuated a Reverse Stock Split and the 
Effectuation of Such Reverse Stock Split Results in the Company's 
Security Falling Below Any of the Continued Listing Requirements of 
Section 1003

January 16, 2025.

I. Introduction

    On October 16, 2024, NYSE American LLC (``NYSE American'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 to amend Section 1003 of the NYSE American LLC 
Company Guide (``Company Guide'') to provide for the suspension and 
delisting of any listed company that (i) 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 or (ii) has effectuated a reverse 
stock split and the effectuation of such reverse stock split

[[Page 8074]]

results in the company's security falling below any of the continued 
listing requirements of Section 1003 of the Company Guide. The proposed 
rule change was published for comment in the Federal Register on 
November 4, 2024.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 101457 (Oct. 29, 
2024), 89 FR 87661 (``Notice''). Comments on the Notice are 
available at: https://www.sec.gov/comments/sr-nyseamer-2024-61/srnyseamer202461.htm.
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    On December 16, 2024, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ This order approves the proposed rule change.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 101929, 89 FR 104253 
(Dec. 20, 2024) (designating February 2, 2025, as the date by which 
the Commission shall either approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change).
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II. Description of the Proposed Rule Change

    Section 1003(f)(v) of the Company Guide (Low Selling Price Issues) 
currently provides that in the case of a listed common stock selling 
for a substantial period of time at a low price per share, the Exchange 
may suspend and delist a company if such company shall fail to effect a 
reverse split of such shares within a reasonable time after being 
notified that the Exchange deems such action to be appropriate under 
all the circumstances. In its review of the question of whether it 
deems a reverse split of a given issue to be appropriate, the Exchange 
will consider all pertinent factors, including market conditions in 
general, the number of shares outstanding, plans which may have been 
formulated by management, applicable regulations of the state or 
country of incorporation or of any governmental agency having 
jurisdiction over the issuer, the relationship to other Exchange 
policies regarding continued listing, and, in respect of securities of 
foreign issuers, the general practice in the country of origin of 
trading in low-selling price issues.\6\
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    \6\ See Section 1003(f)(v) of the Company Guide.
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    The Exchange proposes to amend Section 1003(f) of the Company Guide 
(Other Events) to add two circumstances relating to effectuating 
reverse stock splits under which the Exchange would immediately suspend 
and delist a listed company. First, proposed Section 1003(f)(vi) of the 
Company Guide would provide that if a listed issuer has effectuated one 
or more reverse stock splits over the prior two-year period with a 
cumulative ratio of 200 shares or more to one, the Exchange would 
commence immediate suspension and delisting procedures in accordance 
with the procedures set out in Section 1010 of the Company Guide.\7\ In 
addition, proposed Section 1003(f)(vii) of the Company Guide would 
provide that if a listed issuer has effectuated a reverse stock split 
and the effectuation of such reverse stock split results in the 
company's security falling below any of the continued listing 
requirements of Section 1003 of the Company Guide,\8\ the Exchange 
would commence immediate suspension and delisting procedures in 
accordance with the procedures set out in Section 1010 of the Company 
Guide. In either case, the issuer would not be eligible to follow the 
procedures outlined in Section 1009 of the Company Guide.\9\
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    \7\ Part 12 of the Company Guide provides that companies may 
seek review of a delisting determination from the Committee for 
Review of the Board of Directors of the Exchange.
    \8\ Section 1003 of the Company Guide sets forth certain 
quantitative requirements for continued listing on the Exchange, 
including criteria relating to stockholders' equity, market 
capitalization, and number of shareholders. Section 1003 of the 
Company Guide also sets forth certain non-quantitative requirements 
for continued listing on the Exchange, such as maintaining an 
effective registration under the Act.
    \9\ Section 1009 of the Company Guide sets forth specific 
procedures for listed companies that are identified as being below 
the continued listing criteria. In general, Section 1009 of the 
Company Guide provides that if the Exchange identifies a company as 
being below the Exchange's continued listing criteria, the Exchange 
will notify the company within 10 business days and provide the 
company with an opportunity to submit a plan to regain compliance 
with the continued listing standards within 18 months. If the 
company does not submit a plan within the specified deadline, or if 
the Exchange does not accept the plan, the Exchange will initiate 
delisting procedures. If the Exchange accepts the plan, the Exchange 
will review the company on a quarterly basis for compliance with the 
plan.
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    The Exchange states that many companies seek to address low selling 
price issues under Section 1003(f)(v) of the Company Guide by 
effectuating a reverse stock split.\10\ 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.\11\ The Exchange states 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.\12\ The Exchange states that 
it has observed that the challenges facing such companies, generally, 
are not temporary and may be so severe that a company is not likely to 
remain compliant with Exchange listing standards after curing its low 
selling price by means of a reverse stock split.\13\ Accordingly, the 
Exchange states the proposal protects investors and the public interest 
by immediately commencing suspension and delisting procedures with 
respect to any listed company that (i) 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 or (ii) conducts a reverse stock split that 
causes the company to fall below any of the continued listing 
requirements of Section 1003 of the Company Guide.\14\ The Exchange 
states that the proposal enhances the Exchange's listing requirements 
and would limit the ability of listed companies with a history of 
having a low stock price to use reverse stock splits to remain 
qualified for listing.\15\
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    \10\ See Notice at 878661-62.
    \11\ See id. at 87662.
    \12\ See id.
    \13\ See id. The Exchange further states that 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. See id.
    \14\ See id.
    \15\ See id.
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    The Exchange also states that the proposal is consistent with the 
provisions of Section 1003(f)(v) of the Company Guide related to common 
stock selling for a substantial period of time at a low price,\16\ as 
well as with the Exchange's consistent policy that it would immediately 
suspend and delist a listed company if the company effects a reverse 
stock split to cure a low selling price issue under Section 1003(f)(v) 
of the Company Guide and the company would fall below another 
quantitative continued listing standard as a direct result of effecting 
that reverse stock split.\17\
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    \16\ See supra note 6 and accompanying text.
    \17\ See id. at 87661.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\18\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\19\ which 
requires,

[[Page 8075]]

among other things, that the rules of an exchange be 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, and not 
be designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers; and with Section 6(b)(7) of the Act,\20\ which 
requires, among other things, that the rules of a national securities 
exchange provide a fair procedure for the prohibition or limitation by 
the exchange of any person with respect to access to services offered 
by the exchange.
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    \18\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ 15 U.S.C. 78f(b)(7).
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    The development and enforcement of meaningful listing standards 
\21\ for an exchange is of critical importance to financial markets and 
the investing public. Among other things, such listing standards help 
ensure that exchange-listed companies will have sufficient public 
float, investor base, and trading interest to provide the depth and 
liquidity to promote fair and orderly markets. Meaningful listing 
standards also are important given investor expectations regarding the 
nature of securities that have achieved an exchange listing, and the 
role of an exchange in overseeing its market and assuring compliance 
with its listing standards.\22\
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    \21\ The Commission notes that this reference to ``listing 
standards'' is referring to both initial and continued listing 
standards.
    \22\ See, e.g., Securities Exchange Act Release Nos. 101271 
(Oct. 7, 2024), 89 FR 82652, 82653 n.23 and accompanying text (Oct. 
11, 2024) (SR-NASDAQ-2024-029) (Order Granting Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, to Modify the 
Application of Bid Price Compliance Periods); 88716 (Apr. 21, 2020), 
85 FR 23393 (Apr. 27, 2020) (SR-NASDAQ-2020-001) (Order Approving a 
Proposed Rule Change To Modify the Delisting Process for Securities 
With a Bid Price at or Below $0.10 and for Securities That Have Had 
One or More Reverse Stock Splits With a Cumulative Ratio of 250 
Shares or More to One Over the Prior Two-Year Period); 88389 (Mar. 
16, 2020), 85 FR 16163 (Mar. 20, 2020) (SR-NASDAQ-2019-089) (Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend 
Rule 5815 To Preclude Stay During Hearing Panel Review of Staff 
Delisting Determinations in Certain Circumstances). See also 
Securities Exchange Act Release No. 81856 (Oct. 11, 2017), 82 FR 
48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31) (Notice of Filing of 
Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend the 
Listed Company Manual To Adopt Initial and Continued Listing 
Standards for Subscription Receipts) (stating that ``[a]dequate 
standards are especially important given the expectations of 
investors regarding exchange trading and the imprimatur of listing 
on a particular market'' and that ``[o]nce a security has been 
approved for initial listing, maintenance criteria allow an exchange 
to monitor the status and trading characteristics of that issue . . 
. so that fair and orderly markets can be maintained.'').
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    The Exchange's proposal would provide that the Exchange would 
immediately commence suspension and delisting procedures with respect 
to a listed company that effectuates a reverse stock split in certain 
circumstances. Specifically, proposed Sections 1003(f)(vi) and (vii) of 
the Company Guide would provide for the immediate suspension and 
delisting of any listed company that (i) has effectuated one or more 
reverse stock splits over the prior two-year period with a cumulative 
ratio of 200 shares or more to one or (ii) has effectuated a reverse 
stock split and the effectuation of such reverse stock split results in 
the company's security falling below any of the continued listing 
requirements of Section 1003 of the Company Guide.
    The Exchange's proposal is reasonably designed to enhance its 
continued listing standards, thereby protecting investors and the 
public interest. In particular, the proposal is reasonably designed to 
curtail the use of reverse stock splits to inappropriately delay 
delisting and thereby allow a company's security to remain listed on 
the Exchange for an extended period despite being inappropriate for 
trading on the Exchange and not being able to maintain compliance with 
the Exchange's listing standards. As discussed above, the Exchange 
states that engaging in a pattern of repeated reverse stock splits is 
often indicative of deep financial or operational distress that renders 
a company inappropriate for trading on the Exchange for investor 
protection reasons.\23\ The Exchange can reasonably conclude from its 
experience that a listed company that 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, or a listed company that effects a reverse 
stock split that results in the company being unable to maintain 
compliance with the continued listings requirements of Section 1003 of 
the Company Guide, indicates serious difficulties within such company 
that are likely to put continued downward pressure on the stock price, 
such that the company is less likely to maintain or regain compliance 
with the continued listing standards. In this respect, the proposal is 
appropriately targeted to those listed companies' securities that are 
more likely to have serious recurrent issues in regaining and 
maintaining compliance with the Exchange's continued listing standards.
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    \23\ See Notice at 87662.
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    The Exchange's proposal is reasonably designed to further investor 
protection by limiting the ability of listed companies with a history 
of having a low stock price to use reverse stock splits to remain 
qualified for listing.\24\ The Exchange states that it has observed 
that the challenges facing such companies generally are not temporary 
and may be so severe that a company is not likely to remain compliant 
with Exchange listing standards after curing its low selling price by 
means of a reverse stock split.\25\ In addition, the Exchange states 
that the price concerns with such companies can be a leading indicator 
of other listing compliance concerns, and that these companies often 
become subject to delisting for other reasons within a short period of 
time.\26\ Further, the continued listing of low-priced securities 
raises concerns that these securities may not have sufficient public 
float, investor base, and trading interest to promote fair and orderly 
markets and relatedly may have heightened susceptibility to 
manipulation. Given these concerns, the Exchange's proposal to 
immediately suspend and delist a company that effectuates a reverse 
stock split in the circumstances described above is appropriate and 
consistent with Section 6(b)(5) of the Act.
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    \24\ See id.
    \25\ See id.
    \26\ See id.
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    While the Commission recognizes that the Exchange delisting process 
is in part designed to allow listed companies experiencing temporary 
financial and/or business issues to regain compliance with continued 
listing standards, the proposal reasonably balances the intent of the 
delisting process with the need to prevent companies from taking 
advantage of the delisting process for an extended period of time 
despite being inappropriate for trading on the Exchange and not being 
able to comply with Exchange standards for continued listing, which is 
contrary to the goal of protecting investors and the public interest.
    The proposed rule change is also consistent with Section 6(b)(7) of 
the Act \32\ in that it provides a fair procedure for the prohibition 
or limitation by the Exchange of any person with respect to access to 
services offered. A listed company whose securities are subject to 
immediate suspension and delisting under the proposal would still be 
able to seek review of a delisting determination from the Committee for 
Review of the Board of Directors of the

[[Page 8076]]

Exchange as set forth in Part 12 of the Company Guide. Accordingly, the 
proposal is appropriate in light of the need to protect investors and 
the public interest and the Exchange's process for review of a 
delisting determination will continue to provide a fair procedure for 
the review of delisting determinations in accordance with Section 
6(b)(7) of the Act.
    In sum, the Exchange's proposal appropriately identifies securities 
listed on its market that are more likely to have serious recurrent 
issues in regaining and maintaining compliance with the Exchange's 
continued listing standards, and proposes reasonable changes to shorten 
the time that such non-compliant securities can remain trading on the 
Exchange, thereby protecting investors and the public interest in 
accordance with Section 6(b)(5) of the Act,\27\ while at the same time 
maintaining a fair procedure for affected companies to seek review of a 
delisting determination from the Committee for Review of the Board of 
Directors of the Exchange in accordance with Section 6(b)(7) of the 
Act.\28\ For these reasons, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act.\29\
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    \27\ 15 U.S.C. 78f(b)(5).
    \28\ 15 U.S.C. 78f(b)(7).
    \29\ The Commission received one comment letter on the proposal 
that was generally supportive. See Letter from Melody Brand, dated 
Dec. 16, 2024.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that the proposed rule change (SR-NYSEAMER-2024-61), be, and 
it hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-01549 Filed 1-22-25; 8:45 am]
BILLING CODE 8011-01-P
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