Document ID: SEC-2018-1735-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2018-11-13T05:00Z

[Federal Register Volume 83, Number 219 (Tuesday, November 13, 2018)]
[Notices]
[Pages 56384-56385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24637]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84544; File No. SR-NYSE-2018-51]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Section 303A.00 of the Manual To Change the Threshold for 
Qualifying as a Smaller Reporting Company To Qualify for Certain 
Exemptions From the Compensation Committee Requirements

November 6, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on October 26, 2018, New York Stock Exchange LLC (``NYSE'' or the 
``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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes to amend Section 303A.00 of the NYSE Listed 
Company Manual (the ``Manual'') to change the threshold for listed 
companies to benefit from the exemptions from the NYSE compensation 
committee requirements applicable to smaller reporting companies so 
that all companies that qualify for smaller reporting company status 
under the revised SEC definition will qualify for those exemptions.
    The proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, 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 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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The SEC recently adopted \4\ amendments to the definition of 
``smaller reporting company'' set forth in Item 10(f)(1) of Regulation 
S-K,\5\ Rule 12b-2 under the Act \6\ and Rule 405 under the Securities 
Act of 1933.\7\ The amendments raise the smaller reporting company cap 
from less than $75 million in public float to less than $250 million 
and also include as smaller reporting companies issuers with less than 
$100 million in annual revenues if they also have either no public 
float or a public float that is less than $700 million. The amendments 
became effective on September 10, 2018. The Exchange estimates that a 
consequence of the SEC rule changes is that a significantly larger 
number of its listed companies will qualify for smaller reporting 
company status than was previously the case.
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    \4\ Release Nos. 33-10513 and 34-83550 (June 28, 2018); 83 FR 
31992 (July 10. 2018).
    \5\ 17 CFR 229.10(F)(1).
    \6\ 17 CFR 240.12b-2.
    \7\ 17 CFR 230.405.
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    Smaller reporting companies are entitled to avail themselves of 
certain exemptions from the NYSE's compensation committee 
requirements.\8\ Section 303A.00 includes a provision describing the 
period within which a company must comply with all applicable 
compensation committee requirements after it ceases to be a smaller 
reporting company.\9\ This provision currently states explicitly that a 
smaller reporting company must have less than $75 million in public 
float. In light of the recent changes to the SEC's rules with respect 
to smaller reporting companies, the Exchange proposes to delete this 
reference to the $75 million public float cap and revise the provision 
to state simply that a smaller reporting company that fails to meet the 
requirements for smaller reporting company status as of the last 
business day of its second fiscal quarter will cease to be a smaller 
reporting company as of the beginning of the following fiscal year. The 
effect of this amendment will be to change the threshold for listed 
companies to be eligible to benefit from the exemptions from the NYSE 
compensation committee requirements applicable to smaller reporting 
companies so that all companies that qualify for smaller reporting 
company status under the revised SEC definition will qualify for those 
exemptions.
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    \8\ Specifically, listed companies that satisfy the definition 
of smaller reporting company are not required to comply with (i) the 
enhanced requirements with respect to the independence of 
compensation committee members set forth in Section 303A.02(a)(ii) 
and the second paragraph of the Commentary to Section 303A.02(a) of 
the Manual; or (ii) the requirements set forth under Section 
303A.05(c)(iv) of the Manual with respect to the analysis of the 
independence of any compensation consultant, legal counsel or other 
adviser to the compensation committee. Listed smaller reporting 
companies must comply with all other applicable Exchange corporate 
governance requirements, including all other applicable compensation 
committee requirements.
    \9\ Under the SEC rules set forth above with respect to smaller 
reporting companies, a company tests its status as a smaller 
reporting company on an annual basis at the end of its most recently 
completed second fiscal quarter (the ``Smaller Reporting Company 
Determination Date''). A smaller reporting company ceases to be a 
smaller reporting company as of the beginning of the fiscal year 
following the Smaller Reporting Company Determination Date. The 
compensation committee of a company that has ceased to be a smaller 
reporting company as of its Smaller Reporting Company Determination 
Date [sic] must comply with Section 303A.05(c)(iv) as of six months 
from the date it ceases to be a smaller reporting company and must 
have: One member of its compensation committee that meets the 
independence standard of Section 303A.02(a)(ii) and the second 
paragraph of the commentary to Section 303A.02(a) within six months 
of that date; a majority of directors on its compensation committee 
meeting those requirements within nine months of that date; and a 
compensation committee comprised solely of members that meet those 
requirements within twelve months of that date.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \11\ 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 
and is not designed to permit unfair

[[Page 56385]]

discrimination between customers, issuers, brokers, or dealers. As 
noted above, the effect of the proposed rule change is to change the 
threshold for listed companies to benefit from the exemptions from the 
NYSE compensation committee requirements applicable to smaller 
reporting companies so that all companies that qualify for smaller 
reporting company status under the revised SEC definition will qualify 
for those exemptions. Listed smaller reporting companies must comply 
with all other applicable Exchange corporate governance requirements, 
including all other applicable compensation committee requirements. The 
Commission has already determined through its own rulemaking that the 
revised thresholds for smaller reporting company status proposed in 
this rule proposal are consistent with the goal of the Act to further 
the protection of investors and the public interest \12\ and the 
Exchange believes that its own proposal is consistent with Section 
6(b)(5) of the Act for the same reasons.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See footnote 4, supra.
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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. The proposed rule change 
will not impose any burden competition as its sole purpose is to change 
the threshold for listed companies to benefit from the exemptions from 
the NYSE compensation committee requirements applicable to smaller 
reporting companies so that all companies that qualify for smaller 
reporting company status under the revised SEC definition will qualify 
for those exemptions.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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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 email to [email protected]. Please include 
File Number SR-NYSE-2018-51 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-2018-51. This file 
number should be included on the subject line if email 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2018-51, and should be submitted on 
or before December 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24637 Filed 11-9-18; 8:45 am]
 BILLING CODE 8011-01-P