[Federal Register Volume 84, Number 100 (Thursday, May 23, 2019)]
[Notices]
[Pages 23815-23818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10753]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85889; File No. SR-NYSE-2019-20]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending Section 302 of the 
Listed Company Manual To Provide Exemptions for the Issuers of Certain 
Categories of Securities From the Obligation To Hold Annual 
Shareholders' Meetings

May 17, 2019.
    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 6, 2019, 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, 
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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 302 of the Listed Company 
Manual (the ``Manual'') to provide exemptions for the issuers of 
certain categories of securities from the obligation to hold annual 
shareholders' meetings. 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
    Section 302 of the Manual provides that listed companies are 
required to hold an annual shareholders' meeting during each fiscal 
year.
    Section 303A.00 of the Manual provides that preferred and debt 
listings, passive business organizations in the form of trusts (such as 
royalty trusts) and derivative and special purpose securities are not 
required to comply with certain of the corporate governance 
requirements set forth in Section 303A.\4\ Section 303A.00 does not 
exclude the obligation to hold an annual meeting pursuant to Section 
302 from those requirements with which such issuers must comply.
---------------------------------------------------------------------------

    \4\ To the extent that Rule 10A-3 under the Act applies to (i) 
companies listing only preferred or debt securities, or (ii) passive 
business organizations, such entities are required to comply with 
the requirements of Section 303A.06 (Audit Committee) and certain 
provisions of 303A.12(b) (Certification Requirements).
---------------------------------------------------------------------------

    Holders of non-voting preferred and debt securities, securities of 
passive business organizations (such as royalty trusts) and derivative 
and special purpose securities either do not have the right to elect 
directors at annual meetings or have the right to elect directors only 
in very limited circumstances. For example, holders of non-voting 
preferred securities may have the right to temporarily elect directors 
if dividends on such securities have not been paid for a specified 
period of time. Absent such special circumstances, in no event do 
holders of the securities listed above elect directors on an annual 
basis. Despite the fact that there is no matter with respect to which 
holders of these securities have an annual voting right under state law 
or their governing documents, NYSE rules currently do not exclude the 
issuers of

[[Page 23816]]

such securities from the requirement that they hold an annual meeting 
of shareholders.
    The Exchange now proposes to amend Section 302 to provide that 
issuers of these securities would not be required to hold an annual 
meeting. Specifically, Section 302 as amended would specify that the 
annual meeting requirement does not apply to companies whose only 
securities listed on the Exchange are non-voting preferred and debt, 
passive business organizations (such as royalty trusts), or securities 
listed pursuant to Rules 5.2(j)(2) (Equity Linked notes), 5.2(j)(3) 
(Investment Company Units), 5.2(j)(4) (Index-Linked Exchangeable 
Notes), 5.2(j)(5) (Equity Gold Shares), 5.2(j)(6) (Equity Index-Linked 
Securities, Commodity-Linked Securities, Currency-Linked Securities, 
Fixed Income Index-Linked Securities, Futures-Linked Securities and 
Multifactor Index-Linked Securities), 8.100 (Portfolio Depositary 
Receipts), 8.200 (Trust Issued Receipts), 8.201 (Commodity-Based Trust 
Shares), 8.202 (Currency Trust Shares), 8.203 (Commodity Index Trust 
Shares), 8.204 (Commodity Futures Trust Shares), 8.300 (Partnership 
Units), 8.400 (Paired Trust Shares), 8.600 (Managed Fund Shares) and 
8.700 (Managed Trust Securities). The Exchange is also amending the 
rule text to make clear that, if an issuer also lists common stock or 
voting preferred stock, or their equivalent, such issuer must still 
hold an annual meeting for the holders of that common stock or voting 
preferred stock, or their equivalent.\5\
---------------------------------------------------------------------------

    \5\ This proposed clarifying language is identical to that used 
in the NYSE Arca and NASDAQ annual meeting rule. See NYSE Arca Rule 
5.3-E(e) and NASDAQ Marketplace Rules IM-5620.
---------------------------------------------------------------------------

    The Exchange notes that the listing rules of NYSE Arca, Inc. 
(``NYSE Arca''), the NASDAQ Stock Market LLC (``NASDAQ''), Cboe BZX 
Exchange, Inc. (``Cboe BZX'') and NYSE American LLC (``NYSE American'') 
all provide exclusions for issuers of ETFs and other derivative 
securities products from the annual meeting requirements in their 
rules.\6\ The following are rules for derivative and special purpose 
securities listed on the Exchange and, in each case, a reference to a 
rule of either NYSE Arca, NYSE American or NASDAQ providing for the 
listing of similar securities on NYSE Arca, NYSE American or NASDAQ 
that are explicitly excluded from the annual meeting requirement on 
such exchange:
---------------------------------------------------------------------------

    \6\ See Exchange Act Release No. 83324 (SR-NYSEArca-2018-31) 
(May 24, 2018); 83 FR 25076 (May 31, 2018) (approving [sic] 
amendments to NYSE Arca Rule 5.3(e)-E). See also NASDAQ Marketplace 
Rules IM-5620, Cboe BZX Rule 14.10, Interpretations and Policies 15; 
and NYSE American Company Guide Section 704, Commentary .01.
---------------------------------------------------------------------------

     NYSE Rule 5.2(j)(2) (Equity Linked Notes): NYSE Arca Rule 
5.2-E(j)(2) (Equity Linked Notes) and NYSE American Company Guide 
Section 107B (Equity Linked Term Notes);
     NYSE Rule 5.2(j)(3) (Investment Company Units): NYSE Arca 
Rule 5.2-E(j)(3) (Investment Company Units) and NYSE American Rule 
1002A (Index Fund Shares);
     NYSE Rule 5.2(j)(4) (Index-Linked Exchangeable Notes): 
NYSE Arca Rule 5.2-E(j)(4) (Index Linked Exchangeable Notes) and NYSE 
American Company Guide Section 107C (Index Linked Exchangeable Notes);
     NYSE Rule 5.2(j)(5) (Equity Gold Shares): NYSE Arca Rule 
5.2-E(j)(5) (Equity Gold Shares) and NASDAQ Marketplace Rule 5711(b) 
(Equity Gold Shares);
     NYSE Rule 5.2(j)(6) (Equity Index-Linked Securities, 
Commodity-Linked Securities, Currency-Linked Securities, Fixed Income 
Index-Linked Securities, Futures-Linked Securities and Multifactor 
Index-Linked Securities): NYSE Arca Rule 5.2-E(j)(6) (Index Linked 
Securities) and NYSE American Company Guide Sections 107D (Index-Linked 
Securities, 107E (Commodity-Linked Securities), 107F (Currency-Linked 
Securities), 107G (Fixed Income-Linked Securities), 107H (Futures-
Linked Securities), and 107I (Combination-Linked Securities);
     NYSE Rule 8.100 (Portfolio Depositary Receipts): NYSE Arca 
Rule 8.100-E (Portfolio Depositary Receipts) and NYSE American Rule 
1000A [sic] (Portfolio Depository Receipts);
     NYSE Rule 8.200 (Trust Issued Receipts): NYSE Arca Rule 
8.200-E (Trust Issued Receipts) and NYSE American Rule 1202 (Trust 
Issued Receipts);
     NYSE Rule 8.201 (Commodity-Based Trust Shares): NYSE Arca 
Rule 8.201-E (Commodity Based Trust Shares) and NYSE American Rule 
1200A (Commodity Based Trust Shares);
     NYSE Rule 8.202 (Currency Trust Shares): NYSE Arca Rule 
8.202-E (Currency Trust Shares) and NYSE American Rule 1202B (Currency 
Trust Shares);
     NYSE Rule 8.203 (Commodity Index Trust Shares): NYSE Arca 
Rule 8.203-E (Commodity Index Trust Shares) and NASDAQ Marketplace Rule 
5711(f) (Commodity Index Shares);
     NYSE Rule 8.204 (Commodity Futures Trust Shares): NYSE 
Arca Rule 8.204-E (Commodity Futures Trust Shares) and NASDAQ 
Marketplace Rule 5711(g)(Commodity Futures Trust Shares);
     NYSE Rule 8.300 (Partnership Units): NYSE Arca Rule 8.300-
E (Partnership Units) and NYSE American Rule 1502 (Partnership Units);
     NYSE Rule 8.400 (Paired Trust Shares): NYSE Arca Rule 
8.400-E (Paired Trust Shares) and NYSE American Rule 1402 (Paired Trust 
Shares);
     NYSE Rule 8.600 (Managed Fund Shares): NYSE Arca Rule 
8.600-E;
     NYSE Rule 8.700 (Managed Trust Securities): NYSE Arca Rule 
8.700-E.
    Shareholders of ETFs and derivative securities products listed on 
the Exchange receive regular disclosure documents describing the 
pricing mechanism for their securities and detailing how they can value 
their holdings. Moreover, the net asset value of the categories of ETFs 
and other derivative securities products listed above is determined by 
the market price of each fund's underlying securities or other 
reference asset. Because shareholders can value their investments on an 
ongoing basis, the Exchange believes that there is less need for 
shareholders to engage management at an annual meeting. In addition, 
while holders of such securities may have the right to vote in certain 
limited circumstances, they do not have the right to vote on the annual 
election of a board of directors, further eliminating the need for an 
annual meeting.
    Notwithstanding the existence of an exemption from the Exchange's 
annual shareholder meeting requirement as proposed to be amended, 
issuers of listed securities will remain subject to any applicable 
state and federal securities laws with respect to the holding of annual 
meetings; as a result, an issuer that lists one or more of the types of 
securities that the Exchange proposes to exclude from its annual 
meeting requirement may still be required to hold annual shareholder 
meetings in accordance with such state and federal securities laws. In 
addition, the Exchange notes that issuers of NYSE-listed securities, 
including the types of securities that the Exchange proposes to exclude 
from its annual meeting requirement, remain subject to state and 
federal securities laws that may require other types of shareholder 
meetings, such as special meetings of shareholders. For example, 
exchange-traded funds are registered under, and remain subject to, the 
Investment Company Act of 1940 (``Investment Company Act''), which 
imposes various shareholder-voting requirements that may be applicable 
to such funds.\7\
---------------------------------------------------------------------------

    \7\ See, e.g., Section 16 of the Investment Company Act, which 
requires, among other things, an investment company's initial board 
of directors to be elected by the shareholders at an annual or 
special meeting. 15 U.S.C. 80a-16(a).

---------------------------------------------------------------------------

[[Page 23817]]

    Lastly, the Exchange notes that any security listed under Section 
703.19 of the Manual (``Other Securities'') that has the attributes of 
common stock or voting preferred stock, or their equivalents will still 
be subject to the Exchange's annual meeting requirements.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act,\8\ 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 and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed amendment is consistent 
with the protection of investors, as the holders of non-voting 
preferred stock, bonds, the listed shares of passive business 
organizations (such as royalty trusts), ETFs and certain other 
derivative and special purpose securities do not have voting rights 
with respect to the election of directors except in very limited 
circumstances as required by state law or their governing documents. In 
addition, the net asset value of the categories of ETFs and other 
derivative securities products that the Exchange proposes to exclude 
from its annual meeting requirement is determined by the market price 
of each fund's underlying securities or other reference asset. 
Shareholders of such ETFs and derivative securities products listed on 
the Exchange receive regular disclosure documents describing the 
pricing mechanism for their securities and detailing how they can value 
their holdings. Accordingly, holders of such securities can value their 
investment on an ongoing basis. Because of these factors, the Exchange 
believes there is no need for the issuers of such securities to hold 
annual shareholder meetings.
    Further, notwithstanding the existence of an exemption from the 
Exchange's annual shareholder meeting requirement as proposed to be 
amended, issuers of listed securities will remain subject to any 
applicable state and federal securities laws with respect to the 
holding of annual meetings; as a result, an issuer that lists one or 
more of the types of securities that the Exchange proposes to exclude 
from its annual meeting requirement may still be required to hold 
annual shareholder meetings in accordance with such state and federal 
securities laws. In addition, the Exchange notes that issuers of NYSE-
listed securities, including the types of securities that the Exchange 
proposes to exclude from its annual meeting requirement, remain subject 
to state and federal securities laws that may require other types of 
shareholder meetings, such as special meetings of shareholders.
    Lastly, the Exchange notes that any security listed under Section 
703.19 of the Manual (``Other Securities'') that has the attributes of 
common stock or voting preferred stock, or their equivalents will still 
be subject to the Exchange's annual meeting requirements.

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 amendments will 
not impose any burden on competition, as they simply conform the 
Exchange's rules to those of its competitors in the market for the 
listing of the specified types of securities.

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 [sic] 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-2019-20 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-2019-20. 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 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-2019-20 and should be submitted on 
or before June 13, 2019.


[[Page 23818]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10753 Filed 5-22-19; 8:45 am]
 BILLING CODE 8011-01-P


