Document ID: SEC-2020-1820-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-11-16T05:00Z

[Federal Register Volume 85, Number 221 (Monday, November 16, 2020)]
[Notices]
[Pages 73121-73124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25178]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90382; File No. SR-NYSE-2020-90]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Amend the Requirement 
Applicable to Special Purpose Acquisition Companies Upon Consummation 
of a Business Combination Concerning Compliance With the Round Lot 
Shareholder Requirement

November 9, 2020.
    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 27, 2020, New York Stock Exchange LLC (``NYSE'' 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 self-regulatory 
organization. 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 certain of the requirements of the 
NYSE Listed Company Manual (``Manual'') that are applicable to special 
purpose acquisition companies upon consummation of a business 
combination. 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

[[Page 73122]]

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
    Section 102.06 of the Manual sets forth initial listing 
requirements applicable to a company whose business plan is to complete 
an initial public offering and engage in a merger or acquisition with 
one or more unidentified companies within a specific period of time (an 
``Acquisition Company'' or ``AC'').\4\ Section 102.06 requires, in 
part, that an Acquisition Company: (i) Deposit into and retain in an 
escrow account at least 90% of the proceeds of its initial public 
offering, together with the proceeds of any other concurrent sales of 
the AC's equity securities, through the date of its Business 
Combination; (ii) complete the Business Combination within 36 months of 
the effectiveness of the IPO registration statement; and (iii) provide 
the public shareholders who object to the Business Combination with the 
right to convert their common stock into a pro rata share of the funds 
held in escrow.\5\
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    \4\ Section 102.06 provides that an Acquisition Company must 
complete one or more business combinations having an aggregate fair 
market value of at least 80% of the value of the deposit account 
(the ``Business Combination'') within 36 months of the effectiveness 
of its IPO registration statement.
    \5\ Section 102.06 also requires that each proposed business 
combination be approved by a majority of the company's independent 
directors.
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    Section 802.01B of the Manual currently states that: After 
consummation of its Business Combination, a company that had originally 
listed as an AC will be subject to Section 801 and Section 802.01 in 
its entirety and will be required immediately upon consummation of the 
Business Combination to meet the following requirements:
    (i) A price per share of at least $4.00;
    (ii) a global market capitalization of at least $150,000,000;
    (iii) an aggregate market value of publicly-held shares of at least 
$40,000,000; \6\ and
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    \6\ Shares held by directors, officers, or their immediate 
families and other concentrated holding of 10 percent or more are 
excluded in calculating the number of publicly-held shares.
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    (iv) the requirements with respect to shareholders and publicly-
held shares set forth in Section 102.01A for companies listing in 
connection with an initial public offering.\7\
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    \7\ The applicable requirement is 400 holders of round lots 
(i.e., 100 shares).
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    Section 802.01B also provides that an Acquisition Company failing 
to meet these requirements will be promptly subject to suspension and 
delisting proceedings. However, while it is clear that an Acquisition 
Company must satisfy all initial listing requirements immediately upon 
consummation of its Business Combination, Section 802.01B does not 
provide a timetable for the company to demonstrate that it satisfies 
those requirements. Accordingly, the Exchange proposes to modify the 
rule to specify that if the Acquisition Company demonstrates that it 
will satisfy all requirements except the applicable round lot 
shareholder requirement, then the company will receive 15 calendar days 
following the closing to demonstrate that it satisfied the applicable 
round lot shareholder requirement immediately following the 
transaction's closing.
    When a listed AC consummates its Business Combination, the Exchange 
will also consider whether the Business Combination gives rise to a 
``back door listing'' as described in Section 703.08(E). If the 
resulting company would not qualify for original listing (including by 
meeting the applicable distribution standards), the Exchange will 
promptly initiate suspension and delisting of the AC. The Exchange 
proposes to modify the rule in relation to Business Combinations that 
give rise to a ``back door listing'' to specify that if the Acquisition 
Company demonstrates that it will satisfy all requirements except the 
applicable round lot shareholder requirement, then the company will 
receive 15 calendar days following the closing to demonstrate that it 
satisfied the applicable round lot shareholder requirement immediately 
following the transaction's closing.
    In determining compliance with the round lot shareholder 
requirement at the time of a Business Combination, the Exchange will 
review a company's public disclosures and information provided by the 
company about the transaction. For example, the merger agreement may 
result in the Acquisition Company issuing a round lot of shares to more 
than 400 holders of the target of the Business Combination at closing. 
If public information is not available that enables the Exchange to 
determine compliance, the Exchange will typically request that the 
company provide additional information such as registered shareholder 
lists from the company's transfer agent, data from Cede & Co. about 
shares held in street name, or data from broker-dealers and from third 
parties that distribute information such as proxy materials for the 
broker-dealers. If the company can provide information demonstrating 
compliance before the Business Combination closes, no further 
information would be required.\8\
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    \8\ Companies must seek this information from third parties 
because many accounts are held in street name and shareholders may 
object to being identified to the company.
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    However, the Exchange has observed that in some cases it can be 
difficult for a company to obtain evidence demonstrating the number of 
shareholders that it has or will have following a Business Combination. 
As noted above, shareholders of an Acquisition Company may redeem or 
tender their shares until just before the time of the Business 
Combination, and the company may not know how many shareholders will 
choose to redeem until very close to the consummation of the business 
combination. In cases where the number of round lot shareholders is 
close to the applicable requirement, this could affect the ability for 
the Exchange to determine compliance before the Business Combination 
closes. Accordingly, for a company that has demonstrated that it will 
satisfy all initial listing requirements except for the round lot 
shareholder requirement (including the initial listing standards that 
are applicable in the event that the Business Combination gives rise to 
a ``back door listing'') before consummating the Business Combination, 
the Exchange will allow the company 15 calendar days after the closing 
of the Business Combination to demonstrate that it also complied with 
the round lot requirement at the time of the business combination. To 
be clear, the company must still demonstrate that it satisfied the 
round lot shareholder requirement immediately following the Business 
Combination; the proposal is merely giving the company 15 calendars 
days to provide evidence that it did.
    The Exchange believes that this proposal balances the burden placed 
on the Acquisition Company to obtain accurate shareholder information 
for the new entity and the need to ensure that a company that does not 
satisfy the initial listing requirements following a Business 
Combination enters the delisting process promptly. If the company does 
not evidence compliance within the proposed time period, Exchange staff 
would immediately

[[Page 73123]]

commence suspension and delisting proceedings with respect to the 
company.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\10\ 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 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 the 
public interest and the interests of investors, by imposing a specific 
timeline for Acquisition Companies to demonstrate that they will comply 
with the initial listing requirements following a Business Combination 
and allowing a reasonable period of time for the company to provide 
evidence that it complied with the round lot shareholder requirement at 
the time of the business combination.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The proposed rule would specify the time when an Acquisition 
Company must demonstrate compliance with the initial listing standards 
following the completion of a Business Combination, thereby enhancing 
investor protection. Specifically, it would require an Acquisition 
Company to provide evidence before completing the Business Combination 
that it will satisfy all requirements for initial listing, except for 
the round lot shareholder requirement. While the proposed rule would 
allow Acquisition Companies 15 calendar days, if needed, to provide 
evidence that they also complied with the round lot shareholder 
requirement at the time of the Business Combination, that additional 
time is a reasonable accommodation given both the difficulty companies 
face in identifying their shareholders and the ability for the 
Acquisition Company's shareholders to redeem their shares when the 
Business Combination is consummated. In that regard, Acquisition 
Companies are unlike other newly listing companies, which do not face 
redemptions and are not already listed and trading at the time they 
must demonstrate compliance. Importantly, the company must still 
demonstrate that it satisfied the round lot shareholder requirement 
immediately following the Business Combination. As such, the Exchange 
believes that the proposed rule change appropriately balances the 
protection of prospective investors with the protection of shareholders 
of the Acquisition Company, the latter of whom would be harmed if the 
Exchange issued a delisting determination at a time when the company 
did, in fact, satisfy all initial listing requirements but could not 
yet provide proof.
    The proposed rule change is also consistent with Section 6(b)(7) of 
the Act in that it provides a fair procedure for the prohibition or 
limitation by the Exchange of any person with respect to access to 
services offered. The proposed rule change accounts for the particular 
difficulties encountered by Acquisition Companies when attempting to 
determine their total number of shareholders due to the ability of 
shareholders to redeem their shares. Acquisition Companies will still 
be required to demonstrate compliance with all initial listing 
standards immediately following the Business Combination, which is the 
initial listing of the combined company. This is no different from the 
requirements imposed on other newly listing companies.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule would clarify 
that a company listing in connection with a merger with an Acquisition 
Company must provide evidence before completing the Business 
Combination that it will satisfy all requirements for initial listing, 
although a reasonable accommodation would be made to allow the company 
to demonstrate compliance with the round lot shareholder requirement 
before the immediate commencement of suspension and delisting 
procedures if that is the only requirement that the company cannot 
demonstrate compliance with before completing the Business Combination. 
This change is not expected to have any impact on competition.

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 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the 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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-90 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-2020-90. 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 the filing also will be available for

[[Page 73124]]

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-2020-90, and should be 
submitted on or before December 7, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25178 Filed 11-13-20; 8:45 am]
BILLING CODE 8011-01-P