Document ID: SEC-2006-0326-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-03-13T05:00Z

[Federal Register: March 13, 2006 (Volume 71, Number 48)]
[Notices]               
[Page 12736-12738]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr06-84]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53403; File No. SR-Amex-2006-04]

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

March 2, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 23, 2006, the American Stock Exchange LLC (``Amex'' or 
``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 Amex. On February 
22, 2006, Amex filed Amendment No. 1 to the proposed rule change.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 made technical changes to the rule text 
submitted in Exhibit 5.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to add new Section 127 and amend Sections 
101, 401, 402, 710, 1002, and 1009 of the Amex Company Guide to 
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.
    The text of the proposed rule change is available on the Amex's Web 
site at http://www.amex.com, at the Amex's principal office, 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 Amex included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Amex 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

    Sections 101 and 1002 of the Amex Company Guide provide broad 
discretionary authority to the Exchange to deny initial or continued 
listing to a company, the condition or business of which raises public 
interest or other qualitative concerns that could undermine investor 
confidence in Amex listed securities. 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 generally uses this 
authority and provide greater transparency to listed companies and 
applicants.\4\
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    \4\ 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 proposed rule and rule amendments 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 under the 
following circumstances:
     The listed company or applicant, or an individual 
associated with the listed company or applicant, has a history of 
regulatory misconduct; \5\
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    \5\ Such individuals would typically be an officer, director, 
substantial security holder or consultant to the issuer. The 
Exchange proposes in new Section 127, Commentary .01 that an 
interest consisting of more than either 5% of the number of shares 
of common stock or 5% of the voting power outstanding of an issuer 
or party shall be considered a substantial interest and cause the 
holder of such an interest to be regarded as a substantial security 
holder. Telephone conversation between Jan Woo, Attorney, Division 
of Market Regulation, Commission, and Courtney McBride, Assistant 
General Counsel, Amex, on February 23, 2006.

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[[Page 12737]]

     The listed company or applicant files for protection under 
any provision of the federal bankruptcy laws or comparable foreign 
laws;
     The independent accountants of the listed company or 
applicant issue a disclaimer opinion on financial statements required 
to be audited;
     The financial statements of the listed company or 
applicant do not contain a required certification; or
     The Exchange determines that the listed company or 
applicant entity has violated or evaded applicable corporate governance 
standards (for example, by delisting from another marketplace in order 
to effect a violative transaction and seeking an Amex listing 
thereafter).
    Proposed new 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, as well as remedial 
measures that may serve to mitigate public interest concerns. Section 
127 would also state that Sections 101 and 1002 do not provide a basis 
for the Exchange to grant exemptions or exceptions from the enumerated 
initial or continued listing criteria.
    The Exchange is also proposing to update its disclosure policies by 
amending Sections 402 and 1009 of the Amex Company Guide. These 
proposed amendments would conform the Amex disclosure time frames to 
those mandated by the Commission for current reports filed on Form 8-K, 
specifically to instructions provided under General Instruction B.1. to 
Form 8-K for material disclosed pursuant to Item 3.01 of Form 8-K 
(Notice of Delisting or Failure to Satisfy a Continued Listing Rule or 
Standard; Transfer of Listing), 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. A written notice of noncompliance with a continued listing 
requirement may be in the form of either a Warning Letter or a 
Deficiency Letter.\6\
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    \6\ Telephone conversation between Jan Woo, Attorney, Division 
of Market Regulation, Commission, and Courtney McBride, Assistant 
General Counsel, Amex, on February 23, 2006.
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    In addition, the Amex proposes certain clarifying amendments to 
Section 710 of the Amex Company Guide. Section 710(b) provides that an 
exception to the shareholder approval requirements contained in 
Sections 711, 712, and 713 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 that the financial viability exception 
has been granted and the securities have been approved for listing.
    Section 710 of the Amex Company Guide currently requires a company 
that receives the financial viability exception to provide notice to 
shareholders of its reliance on such exception ten days before issuance 
of the subject securities. The Exchange proposes to require increased 
disclosure by requiring the company to issue a press release ten days 
before issuance of the subject securities. Both the shareholder notice 
and press release would need to specify: (i) The terms of the 
transaction subject to the shareholder approval requirements (including 
the number of shares of common stock that could be issued and the 
consideration received), (ii) the fact that the company is relying on 
the financial viability exception to the stockholder approval rules, 
and (iii) that such reliance has been approved either by the audit 
committee or by another body of the board of directors that is 
comprised solely of independent and disinterested directors.
    Finally, the Exchange proposes minor, technical changes to Section 
401 of the Amex Company Guide.
2. Statutory Basis
    The Exchange believes that the amended proposed rule change is 
consistent with Section 6(b) of the Act,\7\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act,\8\ in particular, in that 
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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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 Act.

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 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 Exchange consents, the Commission will: (a) By order approve 
such 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 amended 
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 rule-comments@sec.gov. Please include 

File No. SR-Amex-2006-04 on the subject line.

[[Page 12738]]

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2006-04. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the Amex. 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-Amex-2006-04 and should be submitted on or before April 
3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-3485 Filed 3-10-06; 8:45 am]

BILLING CODE 8010-01-P