Notice2023-04876
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 313
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
March 10, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 47 (Friday, March 10, 2023)</title>
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[Federal Register Volume 88, Number 47 (Friday, March 10, 2023)]
[Notices]
[Pages 15106-15108]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-04876]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97048; File No. SR-NYSE-2023-15]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 313
March 6, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 27, 2023, 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\ 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 Rule 313 to eliminate text
reflecting outdated requirements. The proposed rule change is available
on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 Exchange proposes to amend Rule 313 to delete the current text
of Supplementary Material .22 and designate Rule 313.22 as
``Reserved.''
Rule 313 sets forth certain corporate, limited liability company,
or partnership documents that each member organization must submit to
the Exchange to enter into and continue in NYSE membership. The Rule
also sets forth certain restrictions on capital withdrawals and
distributions applicable to member corporations and partnerships.
Rule 313.22 currently provides that the certificate of
incorporation of a member corporation must contain provisions
authorizing the corporation to redeem or convert outstanding shares of
voting stock to a fixed income security when such shares are owned by
any person required to be approved by the Board of Directors of the
Exchange as a member or approved person and such person fails or ceases
to be so approved, as may be necessary to reduce such party's ownership
of voting stock in the member corporation below the level that would
enable such party to exercise controlling influence over the management
or policies of such member corporation.
Rule 313.22 also provides that, if the certificate of incorporation
of a member corporation subject to Rule 325 provides that a stockholder
may compel the redemption of his stock, such certificate must provide
that, unless such stockholder has prior written approval of the
Exchange, the redemption may
[[Page 15107]]
only be effected on a date not less than six months after receipt by
the member corporation of a written request for redemption, given no
sooner than six months after the date of the original issuance of such
shares (or any predecessor shares). Rule 313.22 also requires a member
corporation to promptly notify the Exchange of the receipt of any
request for redemption of any stock or if any redemption is not made
because prohibited under the provisions of Rule 15c3-1.\3\
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\3\ See 17 CFR 240.15c3-1.
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Finally, Rule 313.22 provides that each stock certificate of a
member corporation must state, on its face, the restrictions set forth
in Rule 15c3-1(e) relating to the redemption of stock or a full summary
thereof.
Proposed Rule Change
The Exchange proposes to delete the text of Rule 313.22 and
designate Rule 313.22 as ``Reserved.''
The Exchange believes that Rule 313.22, which was adopted in 1970
and last amended in 1976 to incorporate references to then newly
adopted Rule 15c3-1,\4\ requiring a member corporation's certificate of
incorporation to contain specific provisions relating to the redemption
and conversion of stock and requiring a member corporation's stock
certificate to include the restrictions set forth in Rule 15c3-1(e)
relating to the redemption of stock no longer serves a regulatory,
business or investor protection purpose and in fact poses an
unnecessary obstacle for prospective applicants for Exchange
membership. Specifically, the Exchange believes that the provisions of
Rule 313.22 are duplicative of the requirements of Rule 15c3-1, as well
as other Exchange and Financial Industry Regulatory Authority, Inc.
(``FINRA'') rules adopted subsequent to the implementation of Rule
313.22. The Exchange notes that the proposed change relates only to
Rule 313.22's requirements concerning the contents of a member
organization's certificate of incorporation or stock certificate and
would not otherwise impact a member organization's continuing
obligation to comply with the net capital requirements of Rule 15c3-1,
including pursuant to NYSE Rule 4110 and, for the large number of
member organizations that are also members of FINRA, FINRA Rule 4110.
Both NYSE Rule 4110 and FINRA Rule 4110 require, among other things,
that a member organization must suspend business operations during any
period in which it is not in compliance with applicable net capital
requirements set forth in Rule 15c3-1 and that no equity capital of a
member organization may be withdrawn for a period of one year from the
date such equity capital is contributed.\5\
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\4\ See SR-NYSE-75-11. Prior to the change, proprietors had been
able to withdraw all of their capital even where such action would
result in a capital ratio or minimum dollar capital in violation of
the net capital rule.
\5\ See NYSE Rule 4110 (Capital Compliance); FINRA Rule 4110
(Capital Compliance), available at: <a href="https://www.finra.org/rules-guidance/rulebooks/finra-rules/4110">https://www.finra.org/rules-guidance/rulebooks/finra-rules/4110</a>. The Exchange adopted Rule 4110
in 2010 to harmonize its rules with FINRA Rule 4110. See Securities
Exchange Act Release No. 61557 (February 22, 2010), 75 FR 9472
(March 2, 2010) (SR-NYSE-2010-10) (Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by New York
Stock Exchange LLC Changing Certain NYSE Rules and Rule
Interpretations To Correspond With Rule Changes Filed by the
Financial Industry Regulatory Authority, Inc.).
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The Exchange believes that the elimination of the requirements set
forth in current Rule 313.22 would simplify the membership application
process without impacting the Exchange's ability to ensure that member
organizations are qualified for Exchange membership and would be held
to the requirements of Exchange rules. Prospective member organizations
would continue to be subject to the membership application process,
which calls for applicants to submit materials including organizational
documents, financial statements, and records relating to the
organization's designated supervisors and principals.\6\ Approved
member organizations are bound to abide by Exchange rules, and the
Exchange would continue to have the authority to enforce member
organizations' obligations under Exchange rules (including compliance
with relevant net capital requirements pursuant to Rule 15c3-1, as
applicable).\7\
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\6\ The NYSE membership application is available at: <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Application_for_Membership.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Application_for_Membership.pdf</a>.
\7\ The Exchange notes that the proposed change would likewise
have no impact on FINRA's authority to enforce its rules with
respect to member organizations that are also FINRA members.
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The Exchange also believes that the requirements of Rule 313.22, to
the extent they necessitate modifications to a member corporation's
certificate of incorporation or stock certificate, may be burdensome to
prospective member organizations given the potential difficulty of
amending such documents and could deter organizations from seeking
Exchange membership. The Exchange thus believes that eliminating the
requirements of Rule 313.22 could make the membership application
process more accessible to prospective member organizations, thereby
encouraging additional corporations to consider and apply for Exchange
membership.
Finally, Rule 313.22 currently includes a provision referring to
member corporations subject to Rule 325, which rule was designated as
``Reserved'' in 2010.\8\ Accordingly, the Exchange believes that the
portion of Rule 313.22 setting forth requirements relating to
corporations subject to Rule 325 likewise no longer has application.
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\8\ See Securities Exchange Act Release No. 61557 (February 22,
2010), 75 FR 9472 (March 2, 2010) (SR-NYSE-2010-10) (Notice of
Filing and Order Granting Accelerated Approval of Proposed Rule
Change by New York Stock Exchange LLC Changing Certain NYSE Rules
and Rule Interpretations To Correspond With Rule Changes Filed by
the Financial Industry Regulatory Authority, Inc.).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that eliminating the requirements of Rule
313.22 with respect to member corporations would remove impediments to
and perfect the mechanism of a free and open market and a national
market system by simplifying the application process for prospective
member organizations and in turn encouraging organizations to apply for
Exchange membership. The Exchange believes that the requirements of
Rule 313.22 do not currently serve a regulatory or business purpose and
do not further investor protection interests, particularly since the
deletion of the requirements in Rule 313.22 would not impact the
Exchange's ability to make informed decisions with respect to
applicants for Exchange membership or to require member organizations
to abide by Exchange rules, including rules relating to their net
capital obligations pursuant to Rule 15c3-1. The Exchange further
believes that the issues that may have been contemplated when Rule
313.22 was adopted (such as ensuring that a member organization's
controlling persons are qualified and that member organizations comply
with the relevant provisions of Rule 15c3-1) are adequately addressed
by both the
[[Page 15108]]
application review process and the processes in place for the oversight
of member organizations' compliance with Exchange rules.
The Exchange also believes that the proposed change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system and is designed to protect investors and the
public interest because it would improve the efficiency of the
membership application process and the clarity of the Exchange's rules
by removing the outdated and unnecessarily burdensome requirements that
a member corporation's certificate of incorporation and stock
certificate contain specific language relating to the redemption. The
Exchange also notes that the proposed change to no longer require
specific language referencing Rule 15c3-1 in the certificate of
incorporation and stock certificate would not impact a member
organization's obligation to comply with the relevant net capital
requirements of Rule 15c3-1, including pursuant to NYSE Rule 4110 and
FINRA Rule 4110, as applicable. The Exchange further believes that
broadening the prospective Exchange membership pool by eliminating
requirements that no longer serve regulatory or business purposes and
do not offer a necessary investor protection would benefit investors
and the public interest by facilitating increased market participation
and depth at the Exchange.
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 Exchange believes that
the proposed rule change could promote competition by removing an
outdated requirement applicable to prospective member organizations
that are corporations. The Exchange believes that deleting the
requirements set forth in Rule 313.22 (particularly those calling for
modification of a corporation's certificate of incorporation and/or
stock certificate) could result in less burdensome and more efficient
standards for prospective member organizations to meet, thereby
encouraging additional corporations to consider pursuing Exchange
membership. Expanding the prospective Exchange membership pool by
eliminating a requirement that no longer appears to serve a business,
regulatory, or other purpose could promote competition by increasing
market participation and depth at the Exchange.
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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
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 \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). 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, along
with a brief description and text of 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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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) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\15\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1062657c753d737f7d7d757e6463506375733e777f66"><span class="__cf_email__" data-cfemail="cab8bfa6afe7a9a5a7a7afa4beb98ab9afa9e4ada5bc">[email protected]</span></a>. Please include
File Number SR-NYSE-2023-15 on the subject line.
Paper Comments
<bullet> 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-2023-15. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2023-15 and should be submitted on
or before March 31, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04876 Filed 3-9-23; 8:45 am]
BILLING CODE 8011-01-P
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