
[Federal Register Volume 77, Number 98 (Monday, May 21, 2012)]
[Notices]
[Pages 30040-30043]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12197]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66994; File No. SR-NYSE-2012-12]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Sections 102.01C and 103.01B of the Exchange's Listed Company 
Manual To Permit the Listing of Emerging Growth Companies on the Basis 
of Two Years of Reported Financial Data

May 15, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on May 4, 2012, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II 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 Sections 102.01C and 103.01B of the 
Exchange's Listed Company Manual (the ``Manual'') to permit the listing 
of companies on the basis of two years of reported financial data as 
permitted under the JOBS Act.\4\ The text of the proposed rule change 
is available at the Exchange, the Commission's Public Reference Room, 
and www.nyse.com.
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    \4\ The Commission notes that the JOBS Act permits companies 
that meet the definition of an ``emerging growth company'' to 
include two years of audited financial data in their registration 
statement rather than the normally required three years and does not 
specifically address exchange listings.
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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,

[[Page 30041]]

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
    On April 5, 2012, President Obama signed into law the Jumpstart Our 
Business Startups Act (the ``JOBS Act''),\5\ which amends the 
Securities Act of 1933 (``Securities Act'') and the Securities Exchange 
Act of 1934 (``Exchange Act''). Among other things, the JOBS Act amends 
the Securities Act by adding Section 7(a)(2) and amends Section 13(a) 
of the Exchange Act. These amendments provide that a company which 
qualifies as an emerging growth company (``EGC''), as defined in 
Section 2(a)(19) of the Securities Act and Section 3(a)(80) of the 
Exchange Act,\6\ may choose to include only two years of audited 
financial data in the registration statement used in connection with 
the ``first sale of common equity securities of the issuer pursuant to 
an effective registration statement under the Securities Act of 1933'' 
(the date of such first sale is defined in Section 101(c) of the JOBS 
Act as the company's ``initial public offering date''), rather than the 
three years of audited financial data that had previously been 
required. In addition, for as long as a company remains an EGC, it is 
not required to file selected financial data for any period prior to 
the earliest period for which it had included audited financial 
statements in its initial public offering registration statement in (i) 
any subsequent registration statement filed under the Securities Act or 
(ii) any Exchange Act registration statement. An issuer that is an EGC 
will continue to be considered an EGC until the earliest of: (i) The 
last day of the fiscal year during which it had total annual gross 
revenues of at least $1 billion; (ii) the last day of the fiscal year 
following the fifth anniversary of its initial public offering date; 
(iii) the date on which it has, during the previous three-year period, 
issued more than $1 billion in non-convertible debt; or (iv) the date 
on which it is considered to be a ``large accelerated filer'' under the 
Exchange Act.
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    \5\ Public Law 112-106.
    \6\ An EGC is defined as an issuer that had total annual gross 
revenues of less than $1 billion during its most recently completed 
fiscal year.
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    Certain of the NYSE's financial initial listing standards set forth 
in Sections 102.01C and 103.01B of the Manual require listing 
applicants to meet the applicable financial criteria over a period of 
three fiscal years. As the staff of NYSE Regulation, Inc. bases its 
determination as to a company's compliance with the financial initial 
listing standards only on publicly available audited financial data, an 
EGC which availed itself of the right to file only two years of audited 
financial data as part of its initial public offering registration 
statement or subsequent registration statements would be unable to 
qualify for listing under those particular financial listing standards. 
The NYSE proposes to amend the initial financial listing standards in 
Sections 102.01C and 103.01B to permit an EGC to meet the applicable 
standard on the basis of the two years of audited financial data 
actually reported, rather than the three years of financial data that 
would otherwise be required. The proposed amendment would only be 
applicable to EGCs that actually avail themselves of their ability to 
report only two years of audited financial information. Under the 
proposed amendments, EGCs would still be required to meet the same 
aggregate financial requirements, but would be required to do so over a 
two-year period rather than a three-year period, if they have availed 
themselves of the JOBS Act provision allowing EGCs to file only two 
years of audited financial statements. The Exchange notes that this 
approach is similar to that taken by Nasdaq with respect to the initial 
listing standards for its Nasdaq Global Select Market in Nasdaq 
Marketplace Rules 5310(g) and (h) and that the proposed amended listing 
standards would not establish lower initial listing requirements than 
all other national securities exchanges, as the amended standards would 
still be significantly more stringent than those applied by the Nasdaq 
Capital Market.
    As a result of the changes to the financial reporting requirements 
applicable to EGCs, the Exchange has decided to amend certain of its 
initial listing standards to facilitate the listing of EGCs that avail 
themselves of the ability to report only two years of audited financial 
data. There are two separate financial listing standards in Section 
102.01C which the NYSE proposes to amend, the Domestic Earnings Test 
and the Domestic Valuation/Revenue with Cash Flow Test. In addition, 
there are two separate financial listing standards in Section 103.01B 
which the NYSE proposes to amend, the International Earnings Test and 
the International Valuation/Revenue with Cash Flow Test.\7\
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    \7\ Foreign companies are also permitted to list under the 
initial listing standards in Section 102.01B applicable to domestic 
companies.
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    The Domestic Earnings Test requires that an applicant's earnings 
must total (x) at least $10 million in the aggregate in the three most 
recent fiscal years together with a minimum of $2 million in the two 
most recent years and positive amounts in all three years or (y) at 
least $12 million in aggregate in the last three years with a minimum 
of $5 million in the most recent fiscal year and a minimum of $2 
million in the next most recent fiscal year. The proposed amendment to 
the Domestic Earnings Test applicable to EGCs which elect to report 
only two years of audited financial data would require that the EGC's 
earnings must total at least $10 million in the aggregate in the two 
most recent fiscal years together with a minimum of $2 million in each 
of the two years.
    Under the Domestic Valuation/Revenue with Cash Flow Test, the 
applicant must have (1) At least $500 million in global market 
capitalization; (2) at least $100 million in revenues during the most 
recent twelve month period; and (3) an aggregate of at least $25 
million in cash flows for the last three fiscal years with positive 
amounts in all three years. Under the proposed amended Domestic 
Valuation/Revenue with Cash Flow Test applicable to EGCs that have 
availed themselves of the JOBS Act provision allowing EGCs to file only 
two years of audited financial statements, the market capitalization 
and revenue requirements in (1) and (2) would remain unchanged, but the 
cash flow requirement in (3) would be amended to require an aggregate 
of at least $25 million in cash flows for the two most recent fiscal 
years with positive amounts in both years.
    The International Earnings Test requires that an applicant's 
earnings must total at least $100 million in the aggregate in the three 
most recent fiscal years together with a minimum of $25 million in the 
two most recent years. The proposed amendment to the International 
Earnings Test applicable to EGCs which report only two years of audited 
financial data would require that the EGC's earnings must total at 
least $100 million in the aggregate in the two most recent fiscal years 
together with a minimum of $25 million in each of the two years.
    Under the International Valuation/Revenue with Cash Flow Test, the 
applicant must have (1) At least $500 million in global market 
capitalization;

[[Page 30042]]

(2) at least $100 million in revenues during the most recent twelve 
month period; and (3) an aggregate of at least $100 million in cash 
flows for the last three fiscal years with a minimum of $25 million in 
each of the two most recent fiscal years. Under the proposed amended 
International Valuation/Revenue with Cash Flow Test applicable to EGCs 
that have availed themselves of the JOBS Act provision allowing EGCs to 
file only two years of audited financial statements, the market 
capitalization and revenue requirements in (1) and (2) would remain 
unchanged, but the cash flow requirement in (3) would be amended to 
require an aggregate of at least $100 million in cash flows for the two 
most recent two fiscal years with a minimum of $25 million in each of 
the two years.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \8\ of the Exchange Act in general, and furthers the 
objectives of Section 6(b)(5) of the Exchange Act,\9\ 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. The Exchange believes that the proposed amendments are 
consistent with the protection of investors and the public interest 
because: (i) The financial requirements for initial listing under the 
proposed amendments would be the same as those under the Exchange's 
existing standards, except that companies would need to meet the 
aggregate financial requirements over a two-year rather than a three-
year period; (ii) the proposed amended listing standards are similar to 
listing standards already applied by the Nasdaq Global Select Market; 
and (iii) the proposed amended listing standards would not establish 
lower initial listing requirements than all other national securities 
exchanges, as the amended standards would still be significantly more 
stringent than those applied by the Nasdaq Capital Market. In addition, 
the Exchange notes that the proposed amendments would facilitate the 
listing of EGCs by the Exchange on the basis of two years of audited 
financial data, which is the level of financial disclosure permissible 
for an EGC under the JOBS Act.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 
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

    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 \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ Id. In addition, Rule 19b-4(f)(6) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file 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) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ 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.
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
and, therefore, designates the proposal operative upon filing.\15\ The 
Commission notes that the proposed amendments are similar to rules 
currently in effect for the Nasdaq Global Select Market and therefore 
do not raise any novel regulatory issues and would allow the Exchange 
to list such companies immediately. Furthermore, the Commission notes 
that the amended listing standards are higher than the initial listing 
requirements of other national securities exchanges.\16\ Finally, the 
Commission notes that although companies will be allowed to meet 
certain financial listing standards over a two-year period as opposed 
to a three-year period as currently required, the aggregate dollar 
amounts of the financial requirements are remaining the same. Based on 
the above, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest.
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    \15\ 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).
    \16\ See e.g. NASDAQ Stock Market Rules 5000 Series (detailing 
listing requirements for the NASDAQ Global Market and NASDAQ Capital 
Market) and NYSE Amex LLC Company Guide Section 101.
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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-2012-12 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-2012-12. This file

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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 the 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 available publicly. All 
submissions should refer to File Number SR-NYSE-2012-12 and should be 
submitted on or before June 11, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12197 Filed 5-18-12; 8:45 am]
BILLING CODE 8011-01-P


