Document ID: SEC-2018-1720-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2018-11-08T05:00Z

[Federal Register Volume 83, Number 217 (Thursday, November 8, 2018)]
[Notices]
[Pages 55922-55924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24399]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84527; File No. SR-NYSEAMER-2018-47]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Section 805(c)(5) of the Guide to Change the Threshold for Qualifying 
as a Smaller Reporting Company To Qualify for Certain Exemptions From 
the Compensation Committee Requirements

November 2, 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 23, 2018, NYSE American LLC (``NYSE American'' 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 805(c)(5) of the NYSE 
American Company Guide (the ``Company Guide'') to change the threshold 
for listed companies to benefit from the exemptions from the Exchange's 
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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    Section 805(c)(1) of the Company Guide requires a heightened 
standard of independence for compensation committee members.\8\ Section 
805(c)(4) requires the compensation committee to undertake an 
independence analysis when hiring a compensation consultant. Section 
801(h) of the Company Guide provides that smaller reporting companies 
are exempt from these heightened independence requirements. Section 
805(c)(5) of the Company Guide includes a provision describing the 
period within which a company must comply with Sections 805(c)(1) and 
805(c)(4) after it ceases to be smaller reporting company.\9\ This 
provision

[[Page 55923]]

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 Smaller Reporting Company 
Determination Date 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 compensation committee 
independence 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\ In addition to the director independence requirements of 
Section 803A, the board must affirmatively determine that all of the 
members of the Compensation Committee or, in the case of a company 
that does not have a Compensation Committee, all of the independent 
directors, are independent under Section 805(c)(1). In affirmatively 
determining the independence of any director who will serve on the 
Compensation Committee, the Board must consider all factors 
specifically relevant to determining whether a director has a 
relationship to the listed company which is material to that 
director's ability to be independent from management in connection 
with the duties of a Compensation Committee member, including, but 
not limited to: (A) The source of compensation of such director, 
including any consulting, advisory or other compensatory fee paid by 
the listed company to such director; and (B) whether such director 
is affiliated with the listed company, a subsidiary of the listed 
company or an affiliate of a subsidiary of the listed company.
    \9\ Under the applicable SEC rules, 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 is required to comply with Section 
805(c)(4)) 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 805(c)(1) 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.
    Any such company that does not have a compensation committee 
must comply with this transition requirement with respect to all of 
its independent directors as a group.
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    The Exchange also proposes to delete from Section 805(c)(5) text 
referencing the transition period for companies to comply with the 
enhanced compensation committee provisions at the time of their 
original adoption, as the transition period ended on October 31, 2014 
and the text is therefore no longer relevant.\10\
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    \10\ The Exchange also proposes to remove a typographical error 
from Section 805(c)(5).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \12\ 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 discrimination between customers, 
issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    As noted above, the effect of the proposed change to the definition 
in Section 805(c)(5) of the definition of a smaller reporting company 
is to change the threshold for listed companies to benefit from the 
exemptions from the compensation committee independence 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 \13\ 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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    \13\ See footnote 4, supra.
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    The deletion from Section 805(c)(5) of the text referencing the 
transition period for companies to comply with the enhanced 
compensation committee provisions at the time of their original 
adoption is consistent with Section 6(b)(5), as the transition period 
ended on October 31, 2014 and the text is therefore no longer relevant.

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 change to the 
definition of smaller reporting company in Section 805(c)(5) 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 
Exchange's compensation committee independence 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 deletion from Section 805(c)(5) of 
the text referencing the transition period for companies to comply with 
the enhanced compensation committee provisions at the time of their 
original adoption will not impose any burden on competition, as the 
transition period ended on October 31, 2014 and the text is therefore 
no longer relevant.

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 \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-NYSEAMER-2018-47 on the subject line.

[[Page 55924]]

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-NYSEAMER-2018-47. 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 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-NYSEAMER-2018-47, and should be 
submitted on or before November 29, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24399 Filed 11-7-18; 8:45 am]
 BILLING CODE 8011-01-P