Federal Register / Vol. 73, No. 151 / Tuesday, August 5, 2008 / Notices 45509 

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 19b–4(f)(2). 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

necessary or appropriate in furtherance 

of the purpose of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to section 19(b)(3) of 

the Act 6 and Rule 19b–4(f)(2) 7

thereunder because it establishes or 

changes a due, fee, or other charge 

imposed on members by the NYSE. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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–NYSE–2008–64 on the 

subject line. 

Paper Comments 

• 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–2008–64. 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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. 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 publicly available. All 

submissions should refer to File 

Number SR–NYSE–2008–64 and should 

be submitted on or before August 26, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–17842 Filed 8–4–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58253; File No. SR–NYSE–

2008–57] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Adopt on a Permanent Basis a Pilot 

Program Which Allows the Exchange 

To Adjust the Earnings of Companies 

for Purposes of Its Earnings Standard 

by Reversing the Income Statement 

Effects of Changes in Fair Value of 

Financial Instruments Extinguished at 

the Time of Listing 

July 30, 2008. 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’),1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on July 23, 2008, New York Stock 

Exchange LLC (the ‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

changes as described in Items I, II, and 

III below, which items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

changes from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt on a 

permanent basis an amendment to the 

earnings standard of Section 102.01C(I) 

of the Exchange’s Listed Company 

Manual (the ‘‘Manual’’) which is 

currently in force pursuant to a pilot 

program (the ‘‘Pilot Program’’). The 

amendment will enable the Exchange to 

adjust the earnings of companies by 

reversing the income statement effects 

for all periods of any changes in fair 

value of financial instruments classified 

as a liability recorded by the company 

in earnings, provided such financial 

instrument is either being redeemed 

with the proceeds of an offering 

occurring in conjunction with the listing 

or converted into or exercised for 

common stock of the company at the 

time of listing. 

The text of the proposed rule change 

is available at http://www.nyse.com, the 

NYSE, and 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 these statements may be examined at 

the places specified in Item IV below. 

The NYSE 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 

The Exchange proposes to amend the 

earnings standard of Section 102.01C(I) 

of the Manual. The amendment will 

enable the Exchange to adjust the 

earnings of companies listing in 

conjunction with an initial public 

offering (‘‘IPO’’) by reversing the income 

statement effects for all periods of 

changes in fair value of financial 

instruments classified as a liability 

recorded by the company in earnings, 

provided such financial instrument is 

either being redeemed with the 

proceeds of an offering occurring in 

conjunction with the listing or 


dwashington3 on PRODPC61 with NOTICES
45510 Federal Register / Vol. 73, No. 151 / Tuesday, August 5, 2008 / Notices 

3See Securities Exchange Act Release No. 55974 

(July 6, 2007), 72 FR 37067 (June 28, 2007) (SR–

NYSE–2007–52). [sic] 

4See Securities Exchange Act Release No. 57905 

(June 2, 2008), 73 FR 32613 (June 9, 2008) (SR–

NYSE–2008–43). 

5 15 U.S.C. 78f(b). 

6 15 U.S.C. 78f(b)(5). 

converted into or exercised for common 

stock of the company at the time of 

listing. The proposed amendment was 

originally implemented for a six-month 

period as a Pilot Program.3 The Pilot 

Program expired and was subsequently 

renewed for an additional three months, 

expiring on September 2, 2008.4

Nonpublic companies engaging in 

pre-IPO financings often raise capital 

through the sale of preferred stock and 

warrants to purchase preferred stock. 

Preferred stock and preferred stock 

warrants are also sometimes issued by 

pre-IPO companies to service providers 

in lieu of cash compensation. Typically, 

at the time of the company’s IPO, the 

preferred stock is converted into 

common stock and the preferred stock 

warrants are automatically exercised 

and the underlying preferred stock is 

converted into common stock of the 

company. In some cases, companies 

may also redeem some or all of the 

outstanding preferred stock with a 

portion of the proceeds from the IPO. 

Some pre-IPO companies have 

determined that they must record in 

earnings changes in the fair value of 

certain financial instruments classified 

as liabilities. As the fair value of a preIPO company’s equity often increases as 

the company gets closer to its IPO, many 

companies have had to record 

significant reductions in earnings 

associated with increases in the fair 

value of the preferred stock warrant 

liability. In certain cases, the impact on 

the company’s earnings as reported 

under generally accepted accounting 

principles (‘‘GAAP’’) of the preferred 

stock liability causes otherwise 

qualified companies to fail to qualify 

under the Exchange’s earnings standard. 

Under the Exchange’s current rules, the 

Exchange cannot list these companies 

even though the preferred stock warrant 

liability will be extinguished at the time 

of the IPO by conversion into common 

stock or redemption out of the proceeds 

of the IPO. 

The Exchange believes that it is 

appropriate to exclude the effects of 

changes in fair value of a financial 

instrument classified as a liability from 

a company’s earnings where the 

financial instrument is being retired at 

the time of a company’s listing either 

out of the proceeds of a concurrent 

offering or by conversion into common 

stock at the time of listing. The 

Exchange believes that adjusting 

company earnings for charges arising 

out of the changes in fair value of 

financial instruments that are retired 

with the proceeds of an offering 

occurring in conjunction with the listing 

or converted into common stock at the 

time of listing is consistent with the 

adjustments that are currently permitted 

under Section 102.01C for a number of 

other nonrecurring charges to earnings 

that are included in net income as 

recorded under GAAP, such as the 

exclusion of impairment charges on 

long-lived assets, the exclusion of gains 

and losses on sales of a subsidiary’s or 

investee’s stock and the exclusion of inprocess purchased research and 

development charges. The Exchange 

also believes that this adjustment is 

reasonable given the purpose of the 

earnings standard, which is to 

determine the suitability for listing of 

companies on a forward-looking basis. 

As with all companies listed on the 

Exchange, the Financial Compliance 

staff of NYSE Regulation will monitor 

on an ongoing basis the compliance 

with the Exchange’s continued listing 

standards of any companies listed in 

reliance upon the proposed amendment. 

Such companies will be subject to 

delisting if they are found at any time 

to be below the Exchange’s continued 

listing standards. 

As the Exchange gains experience in 

listing companies in reliance upon the 

proposed amendment, we will continue 

to carefully reevaluate its 

appropriateness. If we become aware 

that companies listed pursuant to the 

proposed amendment have difficulty 

complying with our continued listing 

standards, we will inform the 

Commission and discuss with the 

Commission the desirability of the 

continued use of the provision. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) 5 of the Exchange Act, in 

general, and furthers the objectives of 

Section 6(b)(5) of the Exchange Act,6 in 

particular in that it is designed 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 

that the proposed amendment is 

consistent with the investor protection 

objectives of the Exchange Act in that it 

provides for an adjustment to listing 

applicants’ historical financial results 

that is consistent with other adjustments 

already permitted under the Exchange’s 

earnings standard and is reasonable 

given the purpose of the earnings 

standard, which is to determine the 

suitability for listing of companies on a 

forward-looking basis. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Exchange Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

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 self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve 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 Exchange 

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–NYSE–2008–57 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 


dwashington3 on PRODPC61 with NOTICES
Federal Register / Vol. 73, No. 151 / Tuesday, August 5, 2008 / Notices 45511 

7 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 55974 (July 6, 

2007), 72 FR 37067 (June 28, 2007) (SR–NYSE–

2007–52). [sic] 4See Exchange Act Release No. 57903 (June 2, 

2008), 73 FR 32610 (June 9, 2008) (SR–NYSE–2008–

43). 

All submissions should refer to File 

Number SR–NYSE–2008–57. 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, 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. 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–NYSE–2008–57 and should 

be submitted on or before August 26, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–17891 Filed 8–4–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58254; File No. SR–NYSE–

2008–58] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Make Permanent a Pilot Program 

Under Which the Exchange Excludes 

From Its Earnings Standard Gains or 

Losses From Extinguishment of Debt 

Prior to Maturity 

July 30, 2008. 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’),1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on July 22, 2008, New York Stock 

Exchange LLC (the ‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

changes as described in Items I, II, and 

III below, which items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

changes from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt on a 

permanent basis an amendment to the 

earnings standard of section 102.01C(I) 

of the Exchange’s Listed Company 

Manual (the ‘‘Manual’’) which is 

currently in force pursuant to a pilot 

program (the ‘‘Pilot Program’’). The 

amendment will enable the Exchange to 

adjust the earnings of companies listing 

in conjunction with an IPO by reversing 

the income statement effects for all 

periods of changes in fair value of 

financial instruments classified as a 

liability recorded by the company in 

earnings, provided such financial 

instrument is either being redeemed 

with the proceeds of an offering 

occurring in conjunction with the listing 

or converted into or exercised for 

common stock of the company at the 

time of listing. 

The text of the proposed rule change 

is available at http://www.nyse.com, the 

NYSE, and 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 these statements may be examined at 

the places specified in Item IV below. 

The NYSE 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 

The Exchange proposes to amend the 

earnings standard of section 102.01C(I) 

of the Manual. The amendment will 

enable the Exchange to adjust the 

earnings of companies for purposes of 

its pre-tax earnings standard by 

excluding gains or losses recognized in 

connection with the extinguishment of 

debt prior to its maturity. The 

adjustment will relate only to gains or 

losses incurred in the three-year period 

under examination for purposes of the 

earnings standard. The proposed 

amendment was originally implemented 

for a six-month period as a Pilot 

Program.3 The Pilot Program expired 

and was subsequently renewed for an 

additional three months, expiring on 

September 2, 2008.4

Prior to the promulgation of 

Statement of Financial Accounting 

Standards No. 145 (‘‘SFAS No. 145’’) in 

2002, Financial Accounting Standards 

Board Statement No. 4 (‘‘FASB No. 4’’) 

required that gains and losses from the 

extinguishment of debt prior to its 

maturity that were included in the 

determination of net income be 

aggregated and, if material, classified as 

an extraordinary item, net of related 

income tax effect. SFAS No. 145 

rescinded FASB No. 4 and, as a result, 

gains or losses in connection with the 

extinguishment of debt prior to its 

maturity are now generally included in 

the calculation of operating earnings 

under generally accepted accounting 

principles (‘‘GAAP’’). As a result, some 

companies that would not otherwise be 

qualified to list may qualify as a result 

of the inclusion in pre-tax income of 

gains from the extinguishment of debt 

prior to its maturity. In addition, some 

prospective listed companies whose 

operating earnings would have met the 

requirements of the Exchange’s pre-tax 

earnings test prior to 2002 are now not 

qualified to list as they are required to 

include losses from the extinguishment 

of debt prior to its maturity in pre-tax 

income. In the Exchange’s experience, 

these gains and losses are primarily 

noncash in nature. The gains generally 

represent the accelerated accrual of 

original issue discount, while the losses 

generally represent the remaining 

unamortized portion of costs incurred at 

the time of initial borrowing. 

The Exchange believes that it is 

appropriate to return to its pre-2002 

approach of excluding gains and losses 

from debt extinguishment from pre-tax 

earnings as calculated for purposes of its 

earnings standard. The purpose of the 

earnings standard is to determine the 

suitability for listing of companies on a 


dwashington3 on PRODPC61 with NOTICES