Document ID: SEC-2008-1198-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-08-29T04:00Z

[Federal Register: August 29, 2008 (Volume 73, Number 169)]
[Notices]               
[Page 51033-51035]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au08-144]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58413; File No. SR-NYSE Arca-2008-84]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Arca, Inc. To Discontinue 
Its Policy of Requiring Legal Opinions in Connection With Listings of 
Securities

August 22, 2008.
    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 August 8, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice and order to solicit comments on 
the proposal from interested persons.
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    \1\15 U.S.C. 78s(b)(1).
    \2\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

    NYSE Arca, through its wholly-owned subsidiary NYSE Arca Equities, 
Inc. (``NYSE Arca Equities''), proposes to discontinue its practice of 
requiring the delivery of an opinion of counsel in connection with any 
application to list securities on the Exchange. In lieu thereof, the 
Exchange will require companies to (i) furnish the Exchange with copies 
of opinions of counsel filed in connection with recent public offerings 
or private placements or (ii) if no opinions of counsel exist, provide 
to the Exchange a certificate of good standing from the company's 
jurisdiction of incorporation. In addition, the Exchange is 
discontinuing its policy of requiring an opinion of counsel to the 
effect that the company is in compliance with all of the Exchange's 
corporate governance requirements at the time of listing and, in lieu 
thereof, will require that companies provide a revised form of initial 
written affirmation evidencing

[[Page 51034]]

their compliance with the applicable corporate governance 
requirements.\3\ The text of the proposed rule change is available on 
the Exchange's Web site (http://www.nyse.com), at the Exchange's Office 
of the Secretary, and at the Commission's Public Reference Room.
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    \3\ See Exhibit 3 to this filing, which includes the revised 
initial and annual written affirmation (Rule 5.3--Corporate 
Governance and Disclosure Policies) marked to show changes from the 
initial written affirmation previously used by the Exchange. The 
Commission notes that pursuant to the General Instructions for Form 
19b-4, if any form, report, or questionnaire is referred to in a 
proposed rule change, then the form, report, or questionnaire must 
be attached and shall be considered as part of the proposed rule 
change. See Securities Exchange Act Release No. 50486 (October 4, 
2004), 69 FR 60287 (October 8, 2004).
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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 Exchange 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 III below. The Exchange 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 discontinue its practice of requiring the 
delivery of an opinion of counsel in connection with any application to 
list securities on the Exchange. In lieu thereof, the Exchange will 
require companies to (i) furnish the Exchange with copies of opinions 
of counsel filed in connection with recent public offerings or private 
placements or (ii) if no opinions of counsel exist, provide to the 
Exchange a certificate of good standing from the company's jurisdiction 
of incorporation. In addition, the Exchange is discontinuing its policy 
of requiring an opinion of counsel to the effect that the company is in 
compliance with all of the Exchange's corporate governance requirements 
at the time of listing and, in lieu thereof, will require that 
companies provide a revised form of initial written affirmation 
evidencing their compliance with the applicable corporate governance 
requirements.
    The Exchange has had a longstanding policy of requiring the 
delivery of an opinion of counsel addressed to the Exchange in 
connection with each application to list securities, including 
applications to list additional shares of a previously listed class.\4\ 
The Exchange believes that its opinion requirement is duplicative of 
several safeguards that now exist to protect investors in listed 
securities. In particular, an issuer's independent auditor reviews the 
issuance of securities as part of its annual audit. Additionally, the 
underwriters of securities sold in a public offering receive legal 
opinions as to the validity of the issuance of the securities they 
purchase, as well as performing their own due diligence on the company 
and the securities. Furthermore, a legal opinion as to the legality of 
the issuance of the securities being registered is delivered to the SEC 
in connection with the filing of any registration statement. 
Accordingly, the Exchange proposes to end its policy of requiring legal 
opinions in connection with listing applications, including 
applications to list additional shares of a previously listed class. 
Through its standard condition letter, the Exchange will require 
issuers to (i) furnish the Exchange with copies of opinions of counsel 
filed in connection with recent public offerings or private placements 
or (ii) if no opinions of counsel exist, provide to the Exchange a 
certificate of good standing from the company's jurisdiction of 
incorporation.\5\
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    \4\ The required opinion relates to: The legality and valid 
existence of the issuer; the issuer's qualification to do business 
in jurisdictions other than its jurisdiction of incorporation; the 
validity of authorization and issuance of the securities; whether 
the securities are fully paid and non-assessable; the validity of 
the securities; any government orders or proceedings that are a 
prerequisite to the issuance of the securities; whether registration 
of the securities is required; whether such registration has 
occurred; and that the company is in compliance with the Exchange's 
corporate governance listing requirements.
    \5\ The Exchange will also put companies on notice of this 
requirement by including a reference to it in the list of required 
documentation in connection with listing applications presented on 
its Web site and the checklist of required documentation sent out to 
listing applicants. See the revised list of required documentation 
included in Exhibit 3 hereto. The Exchange has significantly revised 
and shortened the section of its Web site dealing with the listing 
application process, primarily by deleting text that relates to 
procedures that are no longer in use and have not been for some 
time. In revising the Web site, the Exchange has not changed its 
listing policies or procedures in any way that is not disclosed 
elsewhere in this filing.
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    The Exchange notes that the Commission approved a rule filing by 
the American Stock Exchange (the ``Amex'') in 2000 to eliminate opinion 
requirements from the Amex Company Guide under the same conditions NYSE 
Arca is proposing in this filing.\6\ Additionally, to the Exchange's 
knowledge, Nasdaq does not require legal opinions in connection with 
new listings. As such, the Exchange believes that it is appropriate to 
conform its listing procedure in this regard to those of its direct 
competitors. In doing so, the Exchange will avoid the possibility of 
any competitive harm arising out of the imposition of this additional 
burden on issuers.
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    \6\ See Securities Exchange Act Release No. 42539 (March 17, 
2000), 65 FR 15672 (March 23, 2000) (SR-Amex-99-39).
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    No other major exchange requires as a condition to listing an 
opinion with respect to the issuer's compliance with the exchange's 
corporate governance requirements. The Exchange believes that it has 
two different sources of assurance that, at the time of initial 
listing, a company is in compliance with the Exchange's corporate 
governance requirements. First, the company provides a listing 
application executed by an authorized officer of the company in which 
it affirms that, at the time of filing the application, it has ``read 
and understood the Exchange's Listings Rule, and fully believes itself 
to be in compliance with, and, if approved for listing, intends to 
continue to be in compliance with, the Exchange's listing and corporate 
governance rules and requirements, as amended.'' Second, the Company 
provides a written affirmation at the time of listing that it is in 
compliance with the Exchange's board and audit committee independence 
requirements. The Exchange intends to amend the written affirmation so 
that it includes affirmations of compliance with the Exchange's 
nominating and compensation committee independence requirements and 
thereby comprehensively covers the Exchange's corporate governance 
requirements. The revised affirmation is included in Exhibit 3 to the 
filing.\7\ The Exchange believes that the affirmation in the listing 
application and the written affirmation provide sufficient evidence of 
a company's compliance with the corporate governance requirements at 
the time of listing and that requiring a corporate governance opinion 
is unnecessary.
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    \7\ See note 3, supra.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of section 6 \8\ of the Act in general and furthers 
the objectives of section 6(b)(5),\9\ in particular, in that it is 
designed to promote just and

[[Page 51035]]

equitable principles of trade, to remove impediments, and to 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 
proposed amendment specifically seeks to remove impediments to and 
perfect the mechanisms of a free and open market by conforming the 
Exchange's listing procedures to those of Nasdaq and the Amex, thereby 
eliminating any competitive disadvantage the Exchange may suffer as a 
result of imposing a legal opinion requirement with respect to 
securities listings. In addition, the Exchange's procedures will 
continue to protect the interests of investors by imposing requirements 
that will ensure that listed companies are duly and validly organized 
and in good standing in their jurisdiction of incorporation.
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    \8\ 15 U.S.C. 78f.
    \9\ 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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has taken effect upon filing pursuant to 
section 19(b)(3)(A) of the Act.\10\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
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    The Exchange asserts that the proposed rule change (i) will not 
significantly affect the protection of investors or the public 
interest, (ii) will not impose any significant burden on competition, 
and (iii) will not become operative for 30 days after the date of this 
filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest.
    The Exchange provided the Commission with written notice of its 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change, at least five business days prior 
to the date of the filing of the proposed rule change as required by 
Rule 19b-4(f)(6).\11\
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    \11\ 17 C.F.R. 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2008-84 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-NYSEArca-2008-84. 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 self-regulatory 
organization. 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-
NYSEArca-2008-84 and should be submitted on or before September 19, 
2008.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20063 Filed 8-28-08; 8:45 am]

BILLING CODE 8010-01-P