Document ID: SEC-2015-0404-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2015-03-06T05:00Z

[Federal Register Volume 80, Number 44 (Friday, March 6, 2015)]
[Notices]
[Pages 12234-12238]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-05191]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74412; File No. SR-NYSE-2014-65]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving a Proposed Rule Change Amending Its Continued Listing 
Requirements, as Set Forth in Section 802.01E of the Exchange's Listed 
Company Manual, in Relation to the Late Filing of a Company's Annual or 
Quarterly Report With the Securities and Exchange Commission

March 2, 2015.

I. Introduction

    On December 4, 2014, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 its continued listing 
requirements, set forth in section 802.01E of its Listed Company 
Manual, with respect to companies whose required annual or quarterly 
reports are late or defective. The proposed rule change was published 
for comment in the Federal Register on December 17, 2014.\3\ On January 
30, 2015, the Commission designated a longer period for Commission 
action on the proposed rule change, until March 17, 2015.\4\ The 
Commission received no comments on 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. 73821 (December 11, 
2014), 79 FR 75217 (``Notice'').
    \4\ See Securities Exchange Act Release No. 74184, 80 FR 6558 
(February 5, 2015).
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II. Description of the Proposal

    The Exchange proposes to amend section 802.01E of its Listed 
Company Manual (the ``Late Filer Rule'') to: (i) Expand the rule to 
impose a maximum period within which a company must file a late 
quarterly report on Form 10-Q in order to maintain its listing, and 
(ii) clarify the Exchange's treatment of companies whose annual or 
quarterly reports are defective at the time of filing or become 
defective at some subsequent date.
    Currently, the Late Filer Rule deems a listed company to be 
delinquent in filing its annual report on Forms 10-K, 20-F, 40-F or N-
CSR with the Commission if it fails to submit the filing by the date 
such report was required to be filed by the applicable form, or if a 
Form 12b-25 was timely filed with the Commission, the extended filing 
due date for the annual report. During the six-month period from the 
date of such delinquency, the Exchange monitors the company and the 
status of the delinquent annual report, including through contact with 
the company, until the filing delinquency is cured. If the company 
fails to cure such delinquency within the initial six-month period, the 
Exchange may, in its sole discretion, allow the company's securities to 
be traded for up to an additional six-month period depending on the 
company's specific circumstances. The Exchange will commence suspension 
and delisting procedures in accordance with Section 804.00 of the 
Listed Company Manual if the Exchange determines that an additional 
trading period of up to six months is not appropriate, or if the 
Exchange determines that an additional trading period of up to six 
months is appropriate and the company fails to file its annual report 
by the end of the additional period.
    A company is not currently subject to the compliance periods set 
forth in the Late Filer Rule in connection with a failure to timely 
file a quarterly report on Form 10-Q with the SEC.\5\ Moreover,

[[Page 12235]]

the Late Filer Rule currently does not explicitly detail the Exchange's 
treatment of companies whose annual or quarterly reports are defective. 
The Exchange has now proposed to amend its Late Filer Rule to add these 
elements.
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    \5\ While a company is not currently subject to the compliance 
periods in the Late Filer Rule in connection with the failure to 
timely file a Form 10-Q, such companies are subject to the 
Exchange's late filer (or ``.LF'') indicator process. The .LF 
indicator is appended to the company's trading symbol as 
disseminated on the consolidated tape and to market data vendors, 
and the company's name is included on the late filer list on the 
Exchange's Web site. The .LF indicator and web posting commence five 
days after the due date or extended due date (if applicable) of the 
first late annual report or Form 10-Q (unless the company has 
submitted the required report within that five day period) and 
continue until the company becomes current again with respect to all 
required periodic reports. In addition, the Commission notes that a 
listed company is obligated to comply with the Exchange's listing 
agreement, which requires, among other things, that the company file 
all required periodic financial reports with the SEC, including 
quarterly or semi-annual reports (and annual reports), by the due 
dates established by the SEC, and which states that the Exchange 
may, consistent with applicable laws and SEC rules, suspend a listed 
company's securities and commence delisting proceedings upon failure 
of the company to comply with any one or more sections of the 
listing agreement.
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    Specifically, the Exchange has proposed to amend its Late Filer 
Rule to explicitly state that, for purposes of remaining listed on the 
Exchange, a company would incur a filing delinquency and be subject to 
the procedures set forth in the amended rule on the date on which any 
of the following occurs:
     The company fails to file its annual report or its 
quarterly report on Form 10-Q with the Commission by the date such 
report was required to be filed by the applicable form (or extended due 
date if a Form 12b-25 is timely filed with the Commission) (the 
``Filing Due Date,'' and the failure to file a report by the applicable 
Filing Due Date, a ``Late Filing Delinquency'');
     The company files its annual report without an audit 
report from its independent auditor for any or all of the periods 
included in such annual report (a ``Required Audit Report'' and the 
absence of a Required Audit Report, a ``Required Audit Report 
Delinquency'');
     The company's independent auditor withdraws a Required 
Audit Report or the company files a Form 8-K with the Commission 
pursuant to Item 4.02(b) thereof disclosing that it has been notified 
by its independent auditor that a Required Audit Report or completed 
interim review should no longer be relied upon (a ``Required Audit 
Report Withdrawal Delinquency''); or
     The company files a Form 8-K with the Commission pursuant 
to Item 4.02(a) thereof to disclose that previously issued financial 
statements should no longer be relied upon because of an error in such 
financial statements or, in the case of a foreign private issuer, makes 
a similar disclosure in a Form 6-K filed with the Commission or by 
other means (a ``Non-Reliance Disclosure'') and, in either case, the 
company does not refile all required corrected financial statements 
within 60 days of the issuance of the Non-Reliance Disclosure (an 
``Extended Non-Reliance Disclosure Event'' and, together with a Late 
Filing Delinquency, a Required Audit Report Delinquency and a Required 
Audit Report Withdrawal Delinquency, a ``Filing Delinquency'') (for 
purposes of the cure periods described in the rule, an Extended Non-
Reliance Disclosure Event would be deemed to have occurred on the date 
of original issuance of the Non-Reliance Disclosure); if the Exchange 
believes that a company is unlikely to refile all required corrected 
financial statements within 60 days after a Non-Reliance Disclosure or 
that the errors giving rise to such Non-Reliance Disclosure are 
particularly severe in nature, the Exchange may, in its sole 
discretion, determine earlier than 60 days that the applicable company 
has incurred a Filing Delinquency as a result of such Non-Reliance 
Disclosure.\6\
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    \6\ See proposed section 802.01E of the Listed Company Manual 
(``Manual''). The proposed rule states that the annual report or 
Form 10-Q that gives rise to a Filing Delinquency shall be referred 
to therein as the ``Delinquent Report.'' Id.

Additionally, under the proposed rule, the Exchange would deem a 
company to have incurred a Late Filing Delinquency if it submits an 
annual report or Form 10-Q to the Commission by the applicable Filing 
Due Date, but such filing fails to include an element required by the 
applicable form and the Exchange determines in its sole discretion that 
such deficiency is material in nature.\7\
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    \7\ Id. The Exchange states that the following is a non-
exclusive list of elements that would cause the Exchange to deem the 
company to have incurred a Late Filing Delinquency: The filing does 
not include required financial statements or a required audit 
opinion; a required financial statement audit opinion includes 
qualifying or disclaiming language or the auditor provides an 
adverse financial statement audit opinion; a required financial 
statement audit opinion is unsigned or undated; there is a 
discrepancy between the period end date for required financial 
statements and the date cited in the related audit report; the 
company's auditor has not conducted a SAS 100 review with respect to 
the company's Form 10-Q; required chief executive officer or chief 
financial officer certifications are missing; a Sarbanes-Oxley Act 
section 404 required internal control report or auditor 
certification is missing; the filing does not comply with the 
applicable SEC XBRL requirements; or the filing does not include 
signatures of officers or directors required by the applicable form. 
See Notice, 79 FR at 75218 n.6.
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    Upon the occurrence of a Filing Delinquency, the Exchange would 
promptly send written notification to a company of its procedures 
relating to late filings (the ``Filing Delinquency Notification'').\8\ 
As is the case under the current rule, within five days of the date of 
the Filing Delinquency Notification, the company would be required to 
contact the Exchange to discuss the status of the Delinquent Report and 
issue a press release disclosing the occurrence of the Filing 
Delinquency, the reason therefor, and (if known) the anticipated date 
such Filing Delinquency will be cured via the filing or refiling of the 
applicable report, as the case may be.\9\
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    \8\ See proposed section 802.01E of the Manual. The Exchange 
states that it typically sends such notification within five 
business days. See Notice, 79 FR at 75218.
    \9\ See proposed section 802.01E of the Manual. If the company 
has not issued the required press release within five days of the 
date of the Filing Delinquency Notification, the Exchange will issue 
a press release stating that the company has incurred a Filing 
Delinquency and providing a description thereof. Id.
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    During the six-month period from the date of the Filing Delinquency 
(the ``Initial Cure Period''), the Exchange would monitor the company 
and the status of the Delinquent Report and any subsequent annual 
report or quarterly report on Form 10-Q the company fails to file by 
the applicable Filing Due Date (a ``Subsequent Report''), through 
contact with the company, until the Filing Delinquency is cured.\10\ If 
the company fails to cure the Filing Delinquency within the Initial 
Cure Period, the Exchange may, in its sole discretion, allow the 
company's securities to be traded for up to an additional six-month 
period (the ``Additional Cure Period'') depending on the company's 
specific circumstances.\11\ If the Exchange determines that an 
Additional Cure Period is not appropriate, suspension and delisting 
procedures would commence in accordance with the procedures set out in 
section 804.00 of the Manual.\12\ A company would not be eligible to 
follow the procedures outlined in sections 802.02 and 802.03 with 
respect to this criterion.\13\ Notwithstanding the foregoing, however, 
under the proposed rule the

[[Page 12236]]

Exchange may in its sole discretion decide: (i) Not to afford a company 
any Initial Cure Period or Additional Cure Period, as the case may be, 
at all; or (ii) at any time during the Initial Cure Period or 
Additional Cure Period, as the case may be, to truncate the Initial 
Cure Period or Additional Cure Period, as the case may be, and 
immediately commence suspension and delisting procedures if the company 
is subject to delisting pursuant to any other provision of the Manual, 
including if the Exchange believes, in its sole discretion, that 
continued listing and trading of a company's securities on the Exchange 
is inadvisable or unwarranted in accordance with sections 802.01A, 
802.01B, 802.01C or 802.01D of the Manual.\14\
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    \10\ Id. Under the proposed amended rule, a company that has an 
uncured Filing Delinquency would not incur an additional Filing 
Delinquency if it fails to file a Subsequent Report by the 
applicable Filing Due Date. However, in order for the company to 
cure its initial Filing Delinquency, no Subsequent Report may be 
delinquent or deficient on the date by which the initial Filing 
Delinquency is required to be cured. Id.
    \11\ Id.
    \12\ Id.
    \13\ Id.
    \14\ Id.
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    The Exchange may also commence suspension and delisting procedures 
if it believes, in its sole discretion, that it is advisable to do so 
based on an analysis of all relevant factors, including, but not 
limited to:
     Whether there are allegations of financial fraud or other 
illegality in relation to the company's financial reporting;
     The resignation or termination by the company of the 
company's independent auditor due to a disagreement;
     Any extended delay in appointing a new independent auditor 
after a prior auditor's resignation or termination;
     The resignation of members of the company's audit 
committee or other directors;
     The resignation or termination of the company's chief 
executive officer, chief financial officer or other key senior 
executives;
     Any evidence that it may be impossible for the company to 
cure its Filing Delinquency within the cure periods otherwise available 
under the Late Filer Rule; and
     Any past history of late filings.\15\
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    \15\ Id.
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    In determining whether an Additional Cure Period after the 
expiration of the Initial Cure Period is appropriate, the Exchange 
would, as is currently the case, consider the likelihood that the 
Delinquent Report and all Subsequent Reports can be filed or refiled, 
as applicable, during the Additional Cure Period, as well as the 
company's general financial status, based on information provided by a 
variety of sources, including the company, its audit committee, its 
outside auditors, the staff of the SEC and any other regulatory 
body.\16\ Further, the Exchange, as it currently does, would strongly 
encourage companies to provide ongoing disclosure on the status of the 
Delinquent Report and any Subsequent Reports to the market through 
press releases, and would also take the frequency and detail of such 
information into account in determining whether an Additional Cure 
Period is appropriate.\17\
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    \16\ Id.
    \17\ Id.
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    As proposed, if the Exchange determines that an Additional Cure 
Period is appropriate and the company fails to file the Delinquent 
Report and all Subsequent Reports by the end of such additional period, 
suspension and delisting procedures would commence immediately in 
accordance with the procedures set out in section 804.00.\18\ In no 
event would the Exchange continue to trade a company's securities if: 
(i) it has failed to cure its Filing Delinquency; and (ii) it is not 
current with all Subsequent Reports, on the date that is twelve months 
after its initial Filing Delinquency.\19\
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    \18\ Id.
    \19\ Id. See supra note 10.
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    The Exchange has proposed that its amended Late Filer Rule become 
operative on March 1, 2015.\20\ Accordingly, the current provisions of 
section 802.01E of the Manual would be applicable to any listed company 
that fails to timely file an annual report (Forms 10-K, 20-F, 40-F or 
N-CSR) prior to March 1, 2015.\21\ On or after March 1, 2015, any 
listed company that fails to timely file an annual report, or quarterly 
report on Form 10-Q, would be subject to the amended provisions of 
Section 802.01E.\22\ Any listed company that is late as of March 1, 
2015, in filing a Form 10-Q with a due date prior to that date would 
not be subject to the proposed amended rule with respect to that 
filing; however, any such company would be subject to the proposed 
amended rule with respect to any periodic report it does not file on a 
timely basis with a due date that is on or after March 1, 2015.\23\
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    \20\ See Notice, 79 FR at 75219.
    \21\ Id. Both prior to and after March 1, 2015, the Exchange's 
other continued listing standards would, of course, continue to 
apply, including the ability to suspend and delist if any other 
event or condition exists or occurs that makes further dealings or 
listing of the securities on the Exchange inadvisable or 
unwarranted.
    \22\ Id.
    \23\ Id.
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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.\24\ In particular, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\25\ which 
requires, among other things, that the rules of a national securities 
exchange be designed 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 are not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \24\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \25\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the goal of ensuring that listed 
companies have filed accurate, up-to-date reports under the Act is of 
critical importance so that investors have reliable information upon 
which they can make informed investment decisions. For the same reason, 
it is also important that companies with stale or defective publicly 
filed financial information do not remain listed on a national 
securities exchange if such information is not brought up-to-date or 
the deficiency cured in a timely manner. The Commission previously 
stated its view that the NYSE should consider shortening the timeframes 
within which a company would be delisted for failing to file annual 
reports as well as extending such requirements to issuers that are late 
in filing their quarterly reports with the Commission.\26\ The 
Commission believes that the proposed rule change, by including 
quarterly reports, should help to prevent an undue amount of time from 
passing without the company's annual or quarterly reports being 
provided to the marketplace.
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    \26\ See Securities Exchange Act Release No. 51777 (June 2, 
2005), 70 FR 33573 (June 8, 2005).
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    The Commission also believes that the proposed changes to section 
802.01E of the Manual should help to ensure that companies cannot 
continue to trade for extended periods of time without making their 
annual and interim reports publicly available.\27\ In this regard, the

[[Page 12237]]

Commission notes that the proposed rule change should help reduce those 
situations in which investors continuously have outdated or stale 
financial information upon which to base their investment decisions. As 
is discussed above, a company that has an uncured Filing Delinquency 
would not be able to cure the Filing Delinquency until all subsequent 
annual or quarterly reports that are delinquent have been filed.\28\ In 
other words, once it is a delinquent filer, a company can only become 
current in its filings if all of its annual and quarterly filings have 
been submitted to the SEC within 12 months of the first Filing 
Delinquency. Under the current rule by contrast, only annual reports 
trigger the suspension and delisting procedures of section 802.01E of 
the Manual. Furthermore, a listed company that demonstrates a history 
of delinquent filings could still be subject to delisting under the 
proposed rule change without the Exchange affording it any cure period 
at all (or at any time during an initial or additional cure period) as 
a result of the Exchange's ability to commence suspension and delisting 
procedures based on a company's ``past history of late filings.'' \29\ 
The Commission believes these provisions will enable the Exchange to 
delist those companies that have demonstrated a history of providing 
outdated or stale financial information to investors and help the 
Exchange address the situation where a company becomes current within 
12 months and then a short while later, such as by the next Commission 
filing date, incurs another Filing Delinquency. In such a case, the 
Commission would be concerned that investors continue to rely on 
outdated information and do not have current financial information on a 
timely basis in which to make their trading and investment decisions. 
The Commission believes that the proposal is reasonably designed to 
further these goals of investor protection and therefore is consistent 
with the Act and section 6(b)(5) thereunder.
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    \27\ The Commission notes that, although section 802.01E does 
not specifically provide for late filer treatment if a foreign 
private issuer fails to provide quarterly or semi-annual financial 
information, violation of section 802.01D could result in a foreign 
private issuer becoming subject to delisting. Specifically, section 
802.01D provides that a listed company could be subject to delisting 
under sections 802.02 and 802.03 for ``failure of a company to make 
timely, adequate, and accurate disclosures of information to its 
shareholders and the investing public.'' The Commission believes 
that failure by a listed company to make interim financial 
disclosures, on at least a semi-annual basis, would meet this 
definition.
    \28\ See supra note 10.
    \29\ See supra note 15 and accompanying text.
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    Additionally, by clearly stating that the Exchange's Late Filer 
Rule applies not only to companies that file late or defective annual 
reports but also broadening the delisting procedures to include listed 
companies that file late or defective quarterly reports, the Commission 
believes that the proposal should benefit the public interest and 
protect investors by helping to assure that a larger segment of the 
financial information investors may rely upon when deciding whether to 
invest in a company listed on the Exchange is up-to-date and accurate. 
Further, by detailing what the Exchange considers to be a defective 
annual or quarterly report and how the Exchange treats listed companies 
whose filed reports suffer from a deficiency, the Commission believes 
that the proposed rule change promotes just and equitable principles of 
trade by providing additional transparency to listed companies as to 
what could cause them to become subject to the section 802.01E 
delisting procedures for a late or deficient filing. For example, as 
noted above, Exchange rules will be clear that a company that files an 
8-K pursuant to Item 4.02(b) thereof and has a Required Audit Report 
Withdrawal Delinquency will be subject to the procedures in section 
802.01E and can only be extended a maximum of 12 months to cure the 
delinquency. Moreover, and importantly, this additional transparency, 
as well as the more stringent requirements set forth in the amended 
rule, could encourage listed companies to take extra care to ensure 
that their filed reports are timely and accurate, which would protect 
investors and the public interest. To the extent this occurs, the 
Commission believes that the proposal also has the potential to enhance 
the reliability of reports filed by companies listed on the Exchange as 
well as investor confidence in such reports, which should help to 
perfect the mechanism of a free and open market.
    The new rules also give the Exchange discretion in certain areas 
when a filing fails to include an element required by the applicable 
Commission form and the Exchange determines in in its sole discretion 
that such deficiency is material in nature. The rule filing provided a 
non-exclusive list of elements that, if missing from a filing, would 
cause the Exchange to deem the company to have incurred a Filing 
Delinquency. The Exchange stated in its rule filing that, in making 
this determination, it would not be making any judgments as to the 
sufficiency of the filing in question for purposes of compliance with 
Commission rules, but rather only for purposes of compliance with 
Exchange rules. The Commission emphasizes that any determination by the 
Exchange that a missing element is not material for purposes of a 
Filing Delinquency has no effect on the company's compliance with 
Commission rules. The Commission further notes that while there is a 
provision in the new rules concerning a listed company that files an 8-
K or 6-K announcing a Non-Reliance Disclosure having 60 days to correct 
its financial statements, the proposal makes clear that the Filing 
Delinquency will date from the original announcement of the Non-
Reliance Disclosure if it is not cured within 60 days. This will ensure 
that the period for curing a Non-Reliance Disclosure will not extend 
past the 12 month period given to listed companies that have had 
another type of Filing Delinquency.
    Finally, the Commission notes that the time periods allowed to cure 
a Filing Delinquency are maximums for purposes of continued listing. 
The new provisions being adopted provide additional transparency to 
investors and the marketplace but also give the Exchange discretion to 
analyze the particular case and consider whether it is appropriate to 
commence suspension and delisting procedures immediately based on the 
particular facts, as well giving the Exchange discretion to grant an 
additional six month cure period, or shorten any time periods 
previously given. The new rules provide additional transparency by 
setting forth certain factors that may cause immediate delisting or 
shortened periods, such as resignation of a company's chief executive 
officer, financial officer or members of the audit committee; 
allegations of fraud or other illegality in relation to financial 
reporting; and past history of late filings. We expect the Exchange to 
carefully review each Filing Deficiency and ensure that the public 
interest is being served by continued trading. As noted above, the 
importance of timely and complete Commission filings to ensure that 
investors and the marketplace have accurate and up-to-date information 
about publicly traded companies is of extreme importance for confidence 
in our public markets.\30\
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    \30\ As noted above, the Exchange strongly encourages companies 
to provide ongoing disclosure on the status of the Delinquent Report 
and any Subsequent Reports to the market through press releases, and 
would also take the frequency and detail of such information into 
account in determining whether an Additional Cure Period is 
appropriate. The Commission believes such disclosures are very 
important to the marketplace during the delinquency period.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\31\ that the proposed rule change (SR-NYSE-2014-65) be, and it 
hereby is, approved.
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    \31\ 15 U.S.C. 78s(b)(2).

[[Page 12238]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-05191 Filed 3-5-15; 8:45 am]
 BILLING CODE 8011-01-P