[Federal Register Volume 86, Number 225 (Friday, November 26, 2021)]
[Notices]
[Pages 67507-67509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25755]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93629; File No. SR-NYSE-2021-53]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving of a Proposed Rule Change To Amend the Shareholder Voting 
Requirement Set Forth in Section 312.07 of the NYSE Listed Company 
Manual

November 19, 2021.

I. Introduction

    On September 15, 2021, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Section 312.07 of the NYSE Listed Company 
Manual (``Manual'') to address the calculation of votes cast where 
shareholder approval is required. The proposed rule change was 
published for comment in the Federal

[[Page 67508]]

Register on October 5, 2021.\3\ The Commission received no comment 
letters on the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 93192 (September 29, 
2021), 86 FR 55071 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to amend Section 312.07 of the Manual to 
address the calculation of ``votes cast'' when a matter requires 
shareholder approval, particularly as the calculation relates to 
abstention votes.\4\ Section 312.07 of the Manual currently provides 
that where shareholder approval is a prerequisite to the listing of any 
additional or new securities of a listed company, or where any matter 
requires shareholder approval, the minimum vote which will constitute 
shareholder approval for such purposes is defined as approval by a 
majority of votes cast on a proposal in a proxy bearing on the 
particular matter.\5\ The Exchanges states that the text of Section 
312.07 of the Manual does not specifically address a listed company's 
treatment of abstentions in the company's calculation of votes cast by 
shareholders.\6\ However, the Exchange states that it has historically 
advised companies that abstentions should be treated as votes cast for 
purposes of Section 312.07 of the Manual.\7\ According to the Exchange, 
under that approach a proposal is deemed approved under Section 312.07 
of the Manual only if the votes in favor of the proposal exceed the 
aggregate of the votes cast against the proposal plus abstentions.\8\ 
The Exchange states that its current treatment of abstentions has 
caused confusion among listed companies because the corporate laws of 
many states, including Delaware, allow companies to include in their 
governing documents that votes cast for purposes of a shareholder vote 
includes yes and no votes--but not abstentions--such that a proposal 
succeeds if the votes in favor exceed the votes cast against.\9\
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    \4\ See Notice, supra note 3, 86 FR 55072.
    \5\ According to the Exchange, shareholder approval is required 
for equity compensation plans under Sections 303A.08 of the Manual 
(``Shareholder Approval of Equity Compensation Plans'') and in the 
specific situations set out in 312.03 of the Manual (``Shareholder 
Approval''). See Id. The Exchange also notes that Item 21(b) of 
Schedule 14A requires companies soliciting proxies to disclose the 
method by which votes will be counted, including the treatment and 
effect of abstentions and broker non-votes under applicable state 
law as well as the company's charter and bylaw provisions. See Id.
    \6\ See Notice, supra note 3, at 55072.
    \7\ See Id.
    \8\ See Id.
    \9\ See Id. The Exchange added that, consistent with those state 
laws, many public companies have bylaws indicating that abstentions 
are not treated as votes cast. See Id.
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    To avoid further confusion, the Exchange proposes to amend Section 
312.07 to provide that with respect to a matter that requires 
shareholder approval subject to the minimum vote required for such 
shareholder approval under Section 312.07, a company must calculate the 
votes cast in accordance with its own governing documents and any 
applicable state law.\10\ The Exchange believes that this treatment of 
abstentions will avoid any complications engendered among issuers and 
shareholders when different voting standards are applied under the 
Exchange rule, a company's governing documents, and/or applicable state 
laws.\11\
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    \10\ See Id. The Exchange notes that while Nasdaq is silent on 
the treatment of abstentions in its rules, Nasdaq published a FAQ 
stating that companies must calculate voting in accordance with 
their own governing documents and applicable state law. See Id.
    \11\ See Id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\12\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\13\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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 are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange is proposing to amend Section 312.07 of the Manual to 
make clear how to calculate the votes cast when any matter requires 
shareholder approval to be approved by a majority of votes cast under 
Section 312.07, particularly to address the calculation as it relates 
to abstention votes. As described above, the Exchange is proposing to 
amend Section 312.07 of the Manual to provide that for purposes of 
calculating shareholder approval, a company must calculate the votes 
cast in accordance with its governing documents and any applicable 
state law.\14\ The Exchange's proposal, as it states in its filing, 
does not prescribe a particular way to calculate votes cast under 
Section 312.07 of the Manual but rather allows a listed company to rely 
on its governing documents and state law and is a change from the 
Exchange's historical interpretation on how to calculate abstentions 
for purposes of votes cast under Section 312.07 of the Manual. While 
the proposed amendment to Section 312.07 of the Manual does not address 
the treatment of abstentions explicitly, the Commission believes the 
proposed changes to Section 312.07 of the Manual provides clear 
guidance to a listed company that the company's own governing documents 
and the state law applicable to such listed company must govern the way 
that a company calculates votes cast on a matter for purposes of 
meeting the minimum vote requirements under the Exchange's rule. As 
such, the proposed rule language will make clear that the listed 
company's own governing documents and applicable state law also will 
govern how a listed company should count abstentions. As a result, the 
Commission believes that the proposed amendment is consistent with 
Section 6(b)(5) of the Act because it will add clarity to the 
Exchange's rules and help eliminate any confusion about what authority 
governs the treatment of votes cast in general and abstentions in 
particular, including the possibility that the Exchange's own guidance 
about the treatment of abstentions might conflict with the treatment of 
abstentions under the listed company's governing documents or state law 
applicable to such listed company.
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    \14\ The Exchange noted that Nasdaq has an FAQ that is also 
consistent with this approach. See supra note 10.
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    Finally, by setting forth in the Exchange's rules that corporate 
documents and applicable state law should be relied on by all listed 
companies and shareholders in determining how votes cast are 
calculated, including the treatment of abstentions, for purposes of 
determining whether a matter meets the minimum vote requirements (i.e., 
``a majority of votes cast'') of Section 312.07, the proposal should 
provide transparency to

[[Page 67509]]

market participants consistent with the Act.\15\
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    \15\ Shareholders should have access to a company's governing 
documents that indicate how abstentions are treated under the 
applicable voting standard, such as articles of incorporation and 
bylaws, as they are required to be filed as exhibits under Item 601 
of Regulation S-K for domestic issuers and under Form 20-F for 
foreign private issuers. See also supra note 5 and Item 21 of 
Schedule 14A that applies to domestic issuers.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NYSE-2021-53) be, and hereby 
is, approved.
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    \16\ Id.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25755 Filed 11-24-21; 8:45 am]
BILLING CODE 8011-01-P


