Document ID: SEC-2007-1759-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-12-27T05:00Z

[Federal Register: December 27, 2007 (Volume 72, Number 247)]
[Notices]               
[Page 73386-73388]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de07-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56982; File No. SR-Amex-2007-79]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change as Modified by Amendments No. 
1 and 2 Relating to Independent Directors and Audit Committee Members

December 18, 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 September 18, 2007, the American Stock Exchange LLC (``Amex'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been substantially 
prepared by Amex. On November 8, 2007, Amex submitted Amendment No. 1 
to the proposed rule change.\3\ On November 16, 2007, Amex submitted 
Amendment No. 2 to the proposed rule change.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \4\ Amendment No. 2 replaced and superseded Amendment No. 1 in 
its entirety.
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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 sections 802 and 803 of the Amex 
Company Guide (``Company Guide'') in order to modify the cure period 
available to a listed issuer that loses an independent director or 
audit committee member. In addition, the Exchange proposes to 
reorganize sections 121, 126, 801, 802, 803, 804 and 805 of the Company 
Guide to consolidate the provisions related to independent director and 
audit committee requirements.
    The text of the proposed rule change is available at Amex's Office 
of the Secretary, at the Commission's Public Reference Room, and on 
Amex's Web site at 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, Amex 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. Amex 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Most listed issuers are required to maintain a majority independent 
board and an audit committee comprised of at least three independent 
directors who

[[Page 73387]]

meet the general Amex independence criteria specified in section 121 of 
the Company Guide, as well as the audit committee independence 
requirements mandated by Rule 10A-3 under the Act \5\ and section 803 
of the Company Guide. Section 121B(2)(c) of the Company Guide provides 
an exemption for small business issuers (``Small Business Issuers'') 
\6\ which states that Small Business Issuers are only required to 
maintain a board of directors comprised of at least 50% independent 
directors and an audit committee of at least two members, comprised 
solely of independent directors who also meet the requirements of Rule 
10A-3 under the Act.\7\
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    \5\ 17 CFR 240.10A-3.
    \6\ A ``small business issuer'' is generally defined as a 
company whose annual revenue is less than $25 million and whose 
``public float'' is less than $25 million. See Item 10(a)(1) of SEC 
Regulation S-B (17 CFR 228.10(a)(1)).
    \7\ 17 CFR 240.10A-3.
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    Issuers that lose an independent audit committee member because the 
director ceases to be ``independent'' pursuant to Rule 10A-3 of the Act 
\8 \or section 121A of the Company Guide for reasons outside his or her 
reasonable control are afforded a cure period to replace the 
director.\9\ The cure period lasts until the earlier of the company's 
next annual shareholders' meeting or one year from the date of the 
event that caused the noncompliance and is based on Rule 10A-3(a)(3) 
under the Act,\10\ which permits an exchange to provide such a cure 
period.
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    \8\ Id.
    \9\ See Section 803(a) of the Company Guide.
    \10\ 17 CFR 240.10A-3(a)(3).
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    Currently, the Company Guide does not provide an explicit cure 
period for a listed issuer that fails to comply with the audit 
committee requirements due to a vacancy on its audit committee. 
Further, the Company Guide does not provide an explicit cure period for 
a listed issuer that fails to comply with the majority independent 
board requirements due to a vacancy or if a director ceases to be 
independent due to circumstances beyond his or her reasonable control. 
The Exchange proposes to provide a cure period to apply to situations 
in which an issuer becomes non-compliant with the audit committee 
requirements due to a vacancy \11\ or the majority independent board 
requirements as a result of either (i) a vacancy or (ii) if a director 
ceases to be independent due to circumstances beyond his or her 
reasonable control.\12\ The proposed rule change would provide that if 
the annual shareholders' meeting occurs no later than 180 days 
following the event that caused the issuer's failure to comply with the 
majority independent board requirement or the audit committee 
composition requirement, the listed issuer (other than a Small Business 
Issuer) will instead have 180 days from the event to regain 
compliance.\13\ The 180-day minimum cure period will help assure 
adequate time for companies to conduct an appropriate search process 
for a qualified replacement for an independent director or audit 
committee member.
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    \11\ See proposed Section 803B(6)(b) of the Company Guide.
    \12\ See proposed Section 802(b) of the Company Guide.
    \13\ See proposed Sections 803B(6)(b) and 802(b) of the Company 
Guide.
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    Currently, the Nasdaq Stock Market, Inc. (``Nasdaq'') provides a 
similar cure period for its listed issuers with a vacancy on the board 
or audit committee,\14\ though Nasdaq does not provide an exemption for 
Small Business Issuers. Section 121B(2)(c) of the Company Guide 
provides an exemption for Small Business Issuers in that they are only 
required to maintain a board of directors comprised of at least 50% 
independent directors, and an audit committee of at least two members, 
comprised solely of independent directors who also meet the 
requirements of Rule 10A-3 under the Act.\15\ In the event that a Small 
Business Issuer elects to have more than two members on its audit 
committee, a vacancy of one of the audit committee members will not 
trigger a violation of the audit committee requirements under section 
121B(2)(c) of the Company Guide. If, on the other hand, a Small 
Business Issuer decides to have only two members on its audit 
committee, it becomes imperative that a vacancy on the audit committee 
be filled as quickly and efficiently as possible. Thus, in light of the 
exemption provided to Small Business Issuers, Amex proposes that if the 
annual shareholders' meeting of a Small Business Issuer occurs no later 
than 75 days following the event that caused the failure to comply with 
the audit committee composition requirement, that such Small Business 
Issuer have 75 days from the event to regain compliance.\16\
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    \14\ See Nasdaq Rule 4350(d)(4)(B). See also Securities Exchange 
Act Release No. 54421(September 11, 2006), 71 FR 54698 (September 
18, 2006) (SR-NASDAQ-2006-011).
    \15\ 17 CFR 240.10A-3.
    \16\ See proposed Section 803B(6)(b).
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    Amex also proposes to reorganize sections 121, 126, 801, 802, 803, 
804, and 805 of the Company Guide to consolidate the provisions related 
to independent director and audit committee requirements.
    The Exchange believes that the proposed changes strike an 
appropriate balance between the shareholder protections provided by an 
independent board and audit committee and the time that is generally 
needed to replace an independent director and/or audit committee 
member. Moreover, the Exchange expects the use of the explicit cure 
period to provide greater transparency and clarity to the process, as 
well as greater uniformity with the corporate governance standards of 
other national securities exchanges.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the 
Act,\17\ in general, and furthers the objectives of section 6(b)(5) of 
the Act,\18\ in particular, in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and to protect investors and the 
public interest.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will impose no 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

    No written comments were solicited or received by the Exchange on 
this proposal.

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.

[[Page 73388]]

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-2007-79 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Amex-2007-79. 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 office of the Amex. 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-2007-79 and should be 
submitted on or before January 17, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-24987 Filed 12-26-07; 8:45 am]

BILLING CODE 8011-01-P