Document ID: SEC-2013-1297-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York StockExchange LLC
Posted Date: 2013-07-17T04:00Z

[Federal Register Volume 78, Number 137 (Wednesday, July 17, 2013)]
[Notices]
[Pages 42813-42815]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17095]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69970; File No. SR-NYSE-2013-47]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Section 312.07 of the Listed Company Manual To Remove the 50% 
Quorum Requirement and Add Certain Clarifying Language

July 11, 2013.
    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 June 28, 2013, 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 and 
II 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\ 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 312.07 of the Listed Company 
Manual (the ``Manual'') to remove the requirement that the total vote 
cast on any proposal requiring shareholder approval under NYSE rules 
must represent over 50% in interest of all securities entitled to vote 
on the proposal.
    The text of the proposed rule change is available on the Exchange's 
Web site 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Section 312.07 of the Manual to 
remove the requirement that the total vote cast on any proposal 
requiring shareholder approval under NYSE rules must represent over 50% 
in interest of all securities entitled to vote on the proposal.\3\
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    \3\ The Commission notes that the Exchange has also proposed to 
amend Section 312.07 to add ``or where any matter requires 
shareholder approval'' to the rule text.
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    Section 312.07 establishes voting requirements for any shareholder 
meeting proposal where shareholder approval of that proposal is a 
prerequisite to the listing of any additional or new securities.\4\ The 
rule requires approval by a majority of votes cast on any such 
proposal, subject to a quorum requirement that the total vote cast on 
the proposal must represent over 50% in interest of all securities 
entitled to vote on the proposal.\5\
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    \4\ Section 312.03 of the Manual requires shareholder approval 
of the sale or transfer by the listed company of shares of common 
stock or securities convertible into or exercisable for common stock 
where the size of the issuance exceeds thresholds established in the 
rule or would result in a change of control. Section 303A.08 
requires shareholder approval of equity compensation plans and 
material amendments thereto.
    \5\ Section 306.00 of the Manual provides that listed companies 
may use written consents in lieu of a special meeting to the extent 
permitted by applicable state and federal law and rules (including 
interpretations thereof), including, without limitation, Regulations 
14A and 14C under the Act.
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    The Exchange notes that listed companies are subject to quorum 
requirements under the laws of their states of incorporation.\6\ In 
addition, the

[[Page 42814]]

by-laws or other governing documents of listed companies frequently 
include more stringent voting requirements than imposed by state 
law.\7\ In light of the protection afforded to shareholders by those 
other applicable requirements, the Exchange believes that the quorum 
requirement of Section 312.07 is unnecessary. The Exchange also 
believes that requiring companies to comply with a separate NYSE quorum 
requirement with respect to a limited category of proposals is 
confusing to companies and their shareholders, as it requires companies 
to disclose and apply two separate quorum requirements with respect to 
those matters, while applying only the requirements of their 
certificate of incorporation or bylaws or state law for all other 
proposals being voted on at the meeting.\8\ The Exchange also notes 
that neither of the other two primary equities listing markets in the 
United States--the NASDAQ Stock Exchange LLC (``NASDAQ'') and NYSE MKT 
LLC (``NYSE MKT'')--has a quorum requirement comparable to that 
included in Section 312.07.\9\
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    \6\ For example, Delaware allows companies to establish their 
own quorum requirements in their certificates of incorporation or 
bylaws, provided that the quorum must be at least one-third of the 
shares entitled to vote on the matter. In the absence of a quorum 
provision in the company's certificate of incorporation or bylaws, 
Delaware requires a quorum of 50% of the shares entitled to vote on 
the matter. See Del. Code Sec. 216.
    \7\ Section 310.00 of the Manual provides that the quorum 
required for any meeting should be sufficiently high to insure a 
representative vote and that the Exchange will give careful 
consideration to provisions fixing any proportion less than a 
majority of the outstanding shares as the quorum for shareholders' 
meetings. Section 310 provides that the Exchange will generally not 
object to reasonable lesser quorum requirements if the company 
solicits proxies for shareholder meetings. Typically, companies 
seeking to list on the Exchange require a majority of outstanding 
shares as the quorum for a shareholders' meeting. On occasion, 
however, the Exchange has listed a company with a quorum requirement 
of less than a majority of outstanding shares consistent with 
applicable state law. The Exchange is not aware, however, that any 
company with a quorum requirement of less than one-third of 
outstanding shares (except for companies entitled to rely on the 
provisions set forth in Section 103.00 of the Manual) has previously 
been listed on the Exchange. Additionally, the Exchange will not 
list a company with a quorum requirement of less than one-third of 
outstanding shares (except for companies entitled to rely on the 
provisions set forth in Section 103.00 of the Manual) going forward.
    \8\ The Exchange notes that further confusion is generated by 
the different treatment of broker non-votes under Section 312.07 and 
state law. The broker non-vote at a shareholder meeting represents 
those shares held by brokers as registered holders on behalf of 
beneficial owners who do not provide voting instructions. Under some 
state law, broker non-votes are generally deemed to be present for 
quorum purposes. However, it has been the NYSE's longstanding 
interpretation of Section 312.07 that broker non-votes should not be 
counted in determining whether a majority of the shares outstanding 
and entitled to vote have been voted. The NYSE's treatment of broker 
non-votes for purposes of Section 312.07 has long been a source of 
confusion among listed companies and their service providers.
    \9\ The Commission notes that under Section 312.07, the minimum 
vote which will constitute shareholder approval is a majority of 
votes cast on a proposal, and that Section 310 contains general 
quorum requirements that will still apply to all shareholder 
meetings as discussed in footnotes 7 and 16.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \10\ of 
the Exchange in general, and furthers the objectives of Section 6(b)(5) 
\11\ of the Act 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, and 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. The Exchange believes that the 
proposed amendment is consistent with the protection of investors and 
the public interest in that the laws of the various states have quorum 
requirements and many companies' own by-laws establish more stringent 
requirements than imposed by state law.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. In this regard, 
the Exchange notes that the competition among exchanges for listings is 
robust and vigorous, and the proposed rule change is not intended, nor 
is it expected, to reduce or diminish such competition. By conforming 
the NYSE's voting requirements to those of NASDAQ, the proposed rule 
change would potentially increase competition for listings of companies 
that are concerned about their ability to meet the existing NYSE quorum 
requirements.

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the Exchange immediately to harmonize its quorum 
requirement for listed companies with analogous quorum requirements of 
other primary listing exchanges, such as NYSE MKT and NASDAQ. The 
Commission further notes that as a result of the rules of these other 
listing markets, listed companies can already list on a primary market 
while not having to comply with a 50% quorum requirement.\16\ 
Accordingly, the

[[Page 42815]]

Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.\17\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ The Commission notes that, as discussed in footnote 7 
above, Section 310.00 of the Manual provides that the quorum 
required for any meeting should be sufficiently high to insure a 
representative vote and that the Exchange will give careful 
consideration to provisions fixing any proportion less than a 
majority of the outstanding shares as the quorum for shareholders' 
meetings. Also, the Exchange has represented in footnote 7 above, 
that the Exchange is not aware that any company with a quorum 
requirement of less than one-third of outstanding shares (except for 
companies entitled to rely on the provisions set forth in Section 
103.00 of the Manual) has previously been listed on the Exchange. In 
addition, the Exchange represented, in footnote 7, that it will not 
list a company with a quorum requirement of less than one-third of 
outstanding shares (except for companies entitled to rely on the 
provisions set forth in Section 103.00 of the Manual) going forward. 
The Commission notes that these quorum requirements, which apply to 
all shareholder meetings, including ones where the shareholder 
approval matters in Section 312 are presented, are at least as 
stringent as NASDAQ's (see NASDAQ Rule 5620(c)).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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.

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-2013-47 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2013-47. 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 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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-NYSE-2013-47 and should be 
submitted on or before August 7, 2013.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17095 Filed 7-16-13; 8:45 am]
BILLING CODE 8011-01-P