Notice2021-25755
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
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 26, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 225 (Friday, November 26, 2021)</title>
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[Federal Register Volume 86, Number 225 (Friday, November 26, 2021)]
[Notices]
[Pages 67507-67509]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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
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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
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