Document ID: SEC-2006-0528-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-04-24T04:00Z

[Federal Register: April 24, 2006 (Volume 71, Number 78)]
[Notices]               
[Page 21055-21056]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap06-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53656; File No. SR-Amex-2006-04]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Approving a Proposed Rule Change and Amendment No. 1 Thereto Relating 
to Procedures for Denying Initial and Continued Listing

April 14, 2006.

I. Introduction

    On January 23, 2006, the American Stock Exchange LLC (``Amex'' 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 
proposal to add new section 127 and amend sections 101, 401, 402, 710, 
1002, and 1009 of the Amex Company Guide which the Exchange states will 
increase the transparency of the process associated with staff 
determinations to deny the initial or continued listing of a company's 
securities on the Amex. On February 22, 2006, Amex filed Amendment No. 
1 to the proposed rule change. The proposed rule change was published 
for comment in the Federal Register on March 13, 2006.\3\ The 
Commission received no comments regarding the proposal. This order 
approves the proposed rule change.
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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. 53403 (March 2, 
2006), 71 FR 12736.
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II. Description of the Proposal

    The Exchange proposes to add new section 127 and amend sections 101 
and 1002 of the Amex Company Guide to clarify the circumstances in 
which the Exchange can use its discretionary authority to deny initial 
or continued listing to a company which raises public interest or other 
qualitative concerns about its condition or business. The proposed rule 
would specify that the Exchange has authority to deny initial listing 
to an applicant, impose additional or more stringent criteria on 
initial or continued listing of a company's securities, or delist a 
company's securities where there has been: (i) A history of regulatory 
misconduct; (ii) filing for protection under any provision of the 
federal bankruptcy laws or comparable foreign laws; (iii) issuance of a 
disclaimer opinion on financial statements required to be audited; (iv) 
failure to provide required certification with the financial statements 
of the listed company or applicant; or (v) a determination that the 
listed company or applicant entity has violated or evaded applicable 
corporate governance standards.
    Proposed section 127 of the Amex Company Guide would explain the 
factors used by the Exchange in evaluating whether the regulatory 
misconduct of an individual associated with a company should be used as 
a basis to deny initial or continued listing; explain the remedial 
measures that may serve to mitigate public interest concerns; and state 
that sections 101 and 1002 of the Amex Company Guide do not provide a 
basis for the Exchange to grant exemptions or exceptions from the 
enumerated initial or continued listing criteria.
    The proposal also amends sections 402 and 1009 of the Amex Company 
Guide to conform the Amex disclosure time frames to those mandated by 
the Commission for current reports filed on Form 8-K by reducing to 
four business days the time within which a listed company must publicly 
disclose that the Exchange has given it written notice that it is 
noncompliant with one or more of the continued listing standards. The 
proposed amendments would also extend the disclosure obligations 
applicable to a company that receives a written delisting notice to 
include a company that receives a written notice of noncompliance with 
a continued listing requirement, which may be in the form of a Warning 
Letter or a Deficiency Letter.
    In addition, the Amex proposes certain clarifying amendments to 
section 710 of the Amex Company Guide to provide that an exception to 
the shareholder approval requirements may be made upon application to 
the Exchange when (i) the delay in securing shareholder approval would 
seriously jeopardize the financial viability of the enterprise; and 
(ii) reliance by the company on the exception is expressly approved by 
the audit committee of the company's board of directors or a comparable 
body of the board of directors. The Exchange proposes to add that the 
comparable body of the board of directors, which may approve a 
company's reliance on the financial viability exception, must be 
comprised solely of independent and disinterested directors. The 
Exchange also proposes to prohibit a company from issuing, or 
authorizing its transfer agent or registrar to issue or register the 
securities subject to the shareholder approval requirements, until it 
has received written notification from the Exchange

[[Page 21056]]

that the financial viability exception has been granted, and the 
securities have been approved for listing. In addition, the Exchange 
proposes to require a company that receives the financial viability 
exception to issue a press release ten days before issuance of the 
subject securities, in addition to the notice to shareholders that is 
currently required by Exchange rules.
    Further, the Exchange proposes to update its disclosure policies by 
amending sections 402 and 1009 of the Amex Company Guide and to make 
minor, technical changes to section 401 of the Amex Company Guide.

III. Discussion

    After careful consideration of the amended proposal and 
consideration of the comment letters, the Commission finds that the 
proposed rule change, as amended, is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange \4\ and, in particular, the requirements 
of section 6 of the Act.\5\ Specifically, as discussed in detail below, 
the Commission finds that the proposed rule change is consistent with 
section 6(b)(5) of the Act,\6\ which requires, among other things, that 
the rules of a national securities exchange be 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, and 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. Section 6(b)(5) of the Act 
\7\ also requires that the rules of an exchange not be designed to 
permit unfair discrimination among customers, issuers, brokers, or 
dealers.
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
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    The Commission believes that the proposal to set forth the factors 
used by the Exchange in evaluating the regulatory conduct and corporate 
governance of a company clarifies the Exchange rules and provides 
greater transparency to listed companies and applicants about the 
criteria and evaluation methods that the Exchange employs in its broad 
discretionary authority to deny initial or continued listing to a 
company.\8\
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    \8\ The Commission notes that this proposed rule change is 
substantially similar to a proposal submitted by the National 
Association of Securities Dealers, Inc. and approved by the 
Commission. See Securities Exchange Act Release No. 52342 (August 
26, 2005), 70 FR 52456 (September 2, 2005) (SR-NASD-2004-125).
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    The Commission believes that the proposal to update the Exchange's 
disclosure policies may provide increased investor protection by 
conforming the disclosure time frames with existing federal securities 
laws and requiring increased disclosure, such as when the company 
relies on the financial viability exception or when it receives a 
Warning Letter or a Deficiency Letter. The Commission also believes 
that the proposal to amend shareholder approval requirements may 
provide increased investor protection by requiring companies, when 
relying on the financial viability exception, to obtain the approval of 
independent and disinterested directors and to prohibit the issuance or 
registration of the securities subject to shareholder approval until 
companies have received written approval confirmation from the 
Exchange.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-Amex-2006-04) is approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-6040 Filed 4-21-06; 8:45 am]

BILLING CODE 8010-01-P