Document ID: SEC-2007-1772-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-12-28T05:00Z

[Federal Register: December 28, 2007 (Volume 72, Number 248)]
[Notices]               
[Page 73911-73913]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de07-181]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57016; File No. SR-Amex-2006-31]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 
Thereto Relating to Annual Shareholder Meeting Requirements

December 20, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 7, 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 substantially prepared by the 
Exchange. On December 13, 2007, the Exchange filed Amendment No. 1 to 
the proposed rule change. On December 20, 2007, the Exchange filed 
Amendment No. 2 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend section 704 (Annual Meetings) of the 
Amex Company Guide. The text of the proposed rule change is available 
at Amex, the Commission's Public Reference Room, and http://www.amex.com
.

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 IV 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Amex seeks to amend its annual shareholder meeting requirement 
applicable to its listed issuers. Currently, section 704 of the Amex 
Company Guide requires all listed companies to hold an annual meeting 
of their shareholders in accordance with such listed company's charter, 
by-laws, and applicable state or other laws. An annual meeting allows 
the equity owners of a company the opportunity to elect directors and 
meet with management to discuss company affairs. The Exchange believes, 
however, that this requirement is not necessary for certain issuers of 
specific types of securities because the holders of such securities do 
not directly participate as equity holders and vote in the election of 
directors. In addition, Amex seeks to clarify when an issuer should 
hold its annual meeting and remove the notice requirement for delayed 
annual meetings.
    First, Amex proposes to amend section 704 of its Company Guide to 
explicitly state that an issuer generally must hold an annual meeting 
within one year of the end of its fiscal year if it is subject to the 
annual shareholder meeting requirement. In addition, a new listing that 
was not previously subject to the requirement to hold an annual meeting 
would be required to hold its first annual shareholder meeting within 
one year of its fiscal year end following the date of listing. Amex 
proposes two exceptions to these general requirements: (1) An issuer is 
not required to hold an annual meeting if its fiscal year is less than 
twelve months long as a result of a change in fiscal year end; and (2) 
an issuer does not have to hold an annual meeting in the same year in 
which such issuer completes its initial public offering. Amex believes 
that codifying this time frame and the exceptions will provide 
additional transparency to the annual shareholder meeting requirement.
    Amex also proposes to list a variety of securities, the issuers of 
which should not be subject to the foregoing general

[[Page 73912]]

annual shareholder meeting requirement. For example, Amex proposes to 
exempt from the requirement issuers of a number of securities listed 
pursuant to section 107 (Other Securities) of the Company Guide and 
certain other securities issued by various passive business 
organizations.\4\ The Exchange states that these types of securities 
are typically not an issuer's primary equity security, and their 
holders have only limited economic interests or other rights, which do 
not include voting rights. Although many of these products are issued 
by operating companies with listed equity securities and are thus 
subject to an annual meeting requirement pursuant to the primary 
market's rules, the Exchange submits that the Company Guide should 
specifically exempt from such requirement those operating companies 
which do not issue common stock or voting preferred stock.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange states that Amendment No. 2 supersedes and 
replaces the proposed rule change, as originally filed, and 
Amendment No. 1 in their entirety.
    \4\ The various types of securities which the Exchange believes 
should not be subject to the annual shareholder meeting requirement 
include: bonds and debentures; currency and index warrants; trust 
preferred securities; contingent value rights; equity-linked term 
notes; index-linked exchangeable notes; index-linked securities; 
commodity-linked securities; currency-linked securities; trust 
certificate securities; investment trusts based on securities of 
individual issuers, stock indexes, or debt instruments; equity 
derivatives; trust issued receipts; commodity-based trust shares; 
currency trust shares; certain partnership interests; and paired 
trust shares. Amex believes that the foregoing securities should be 
exempt because they do not entitle their respective holders to 
voting rights.
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    Similarly, Amex proposes to exempt from the general annual meeting 
requirement portfolio depository receipts and index fund shares, which 
are securities issued by unit investment trusts (``UITs'') and open-end 
management investment companies, respectively (collectively, ``ETFs''), 
and typically organized as business trusts. ETFs, which are generally 
passive investment vehicles that seek to match the performance of an 
index, must obtain an exemptive order from the Commission before they 
offer securities. As a result, their operations are circumscribed by 
numerous representations and conditions contained in the applicable 
orders, and they do not typically experience the need for operational 
or other changes requiring a shareholder vote, and, by extension, a 
shareholder meeting.\5\ In addition, UITs do not have boards of 
directors, which the UITs' unitholders would need to elect.\6\ 
Accordingly, the Exchange submits that section 704 of the Amex Company 
Guide should specifically exclude ETFs from an annual shareholder 
meeting requirement.
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    \5\ The Exchange states that ETFs are registered under, and 
remain subject to, the Investment Company Act of 1940, which already 
imposes various shareholder-voting requirements that may be 
applicable to the ETFs.
    \6\ The Exchange states that UITs are typically operated or 
administered by a corporate trustee, and the portfolio of a UIT, 
which generally consists of a fixed pool of securities, is not 
actively managed.
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    Amex also proposes to exempt from the annual meeting requirement 
issuers of a variety of trust issued receipts (``TIRs'')\7\ based on 
securities, commodities, and currencies. Traditional TIRs (i.e., 
HOLDRs) are securities issued by a trust that holds, but does not 
manage, specific securities on behalf of investors in the trust. Other 
types of TIRs also include Commodity-Based Trust Shares\8\ and Currency 
Trust Shares.\9\ The Exchange states that these trusts typically do not 
hold shareholder (or unitholder) meetings because the trusts have no 
board of directors and essentially serve as conduits for the investors' 
indirect investments in the underlying securities, commodities, and/or 
currencies of the trusts. Similarly, the Exchange lists Partnership 
Units, which are securities issued by a partnership that invests in a 
combination of futures contracts, options on futures contracts, forward 
contracts, commodities, and/or securities.\10\ A holder of a 
Partnership Unit does not have the right of equity ownership of the 
partnership, but instead, obtains a beneficial interest in the 
partnership. Because the partnership is a conduit for the investment in 
the underlying assets, the operation and management of the partnership 
is performed by a general partner without holding annual meetings. 
Lastly, Paired Trust Shares (also known as MACROS) are securities 
designed to track either the positive or negative performance of a 
benchmark underlying asset.\11\ The shares are issued by a trust in 
pairs, with the trust not holding the underlying asset, but instead 
holding only short-term U.S. Treasuries and cash equivalents. As the 
market price of the underlying asset fluctuates, U.S. Treasuries and 
cash are moved between the trusts. As indicated above in connection 
with TIRs, issuers of Paired Trust Shares typically do not hold 
shareholder (or unitholder) meetings because the trusts have no board 
of directors and essentially serve as conduits for the investors' 
indirect investments in the performance of the underlying benchmark 
asset. As a result, Amex believes that section 704 of the Amex Company 
Guide should specifically exempt the issuers of TIRs, Commodity-Based 
Trust Shares, Currency Trust Share Shares, Partnership Units, and 
Paired Trust Shares from the annual shareholder meeting requirement.
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    \7\ A trust issued receipt is defined in Amex Rule 1200(b) as a 
security: (1) that is issued by a trust which holds specified 
securities deposited with the trust; (2) that, when aggregated in 
some specified minimum number, may be surrendered to the trust by 
the beneficial owner to receive the securities; and (3) that pays 
beneficial owners dividends and other distributions on the deposited 
securities, if any are declared and paid to the trustee by an issuer 
of the deposited securities.
    \8\ See Amex Rule 1200A.
    \9\ See Amex Rule 1200B.
    \10\ See Amex Rule 1500.
    \11\ See Amex Rule 1400.
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    For these reasons, Amex has not generally required issuers of these 
securities to hold annual shareholder meetings in the past, consistent 
with their respective governance and organizational documents. However, 
in order to provide greater certainty and transparency for listed 
issuers, Amex believes it is appropriate to revise section 704 of the 
Company Guide to clarify that only issuers of voting and non-voting 
common stock and voting preferred stock, and their equivalents (e.g., 
callable common stock) are required to hold an annual shareholder 
meeting. With respect to the proposed list of securities, the issuers 
of which would be exempt from holding an annual meeting, if such 
issuers also list common stock or voting preferred stock, or their 
equivalent, such issuers must still hold an annual meeting for the 
holders of that common stock or voting preferred stock, or their 
equivalent.\12\ In addition, the Exchange notes that the proposed 
annual meeting requirement and the listed exemptions from such 
requirement do not supplant any applicable state or federal securities 
laws concerning annual shareholder meetings. The Exchange further notes 
that the proposed rule change is similar to the changes approved by the 
Commission that were proposed by The Nasdaq Stock Market, Inc. (n/k/a 
The NASDAQ Stock Market LLC) (``Nasdaq'')\13\ and the New York Stock 
Exchange LLC (``NYSE'').\14\
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    \12\ See proposed Commentary .01 to Section 704 of the Amex 
Company Guide.
    \13\ See Securities Exchange Act Release No. 53578 (March 30, 
2006), 71 FR 17532 (April 6, 2006) (SR-NASD-2005-073) (approving 
certain changes to Nasdaq's annual shareholder meeting requirement).
    \14\ See Securities Exchange Act Release No. 54029 (June 21, 
2006), 71 FR 37147 (June 29, 2006) (SR-NYSE-2005-68) (approving, 
among other things, certain changes to NYSE's annual shareholder 
meeting requirement).
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    Finally, Amex proposes to remove the provision from section 704 of 
the Company Guide that requires an issuer, who is unable to hold an 
annual shareholder meeting in a timely manner,

[[Page 73913]]

to notify the Exchange and the stockholders of such issuer of the 
reasons for the delay, and then use good faith efforts to hold the 
meeting as soon as reasonably practicable in light of the circumstances 
causing the delay. Amex believes it is more appropriate to address 
annual meeting delays through its ``Continued Listing and Evaluation 
and Follow-Up'' procedures which are a part of the rules governing 
suspension and delisting in section 1009(a)(i) of the Company 
Guide.\15\ Amex currently does not rely on the notification required in 
section 704 of the Company Guide to monitor compliance with the annual 
shareholder meeting requirement. Instead, the Exchange staff utilizes 
an electronic database supplemented by manual review of proxy 
statements and, in the case of issuers that do not file proxy 
statements, other Commission filings to determine compliance. The 
electronic database receives public filings on a real-time basis (i.e., 
deemed to be within one business day) and generates alerts, which are 
investigated by analysts. Finally, because neither Nasdaq nor NYSE 
require its respective listed issuers to notify them of their good 
faith efforts to hold the annual meeting as soon as reasonably 
practicable, continuing to enforce such a provision at Amex places the 
Exchange at a competitive disadvantage.
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    \15\ See Section 1009(a) of the Amex Company Guide.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\16\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\17\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanisms 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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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change does not 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

    The Exchange states that 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 Amex 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 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-Amex-2006-31 on the subject line.

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-2006-31. 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 such filing also will be available for 
inspection and copying at the principal offices of the Exchange. 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-2006-31 and should be 
submitted on or before January 18, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Florence E. Harmon,
Deputy Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-25202 Filed 12-27-07; 8:45 am]

BILLING CODE 8011-01-P