Notice2024-08802
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Section 802.01D of the NYSE Listed Company Manual Concerning the Suspension and Delisting of a Listed Company That Has Changed its Primary Business Focus
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
April 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 81 (Thursday, April 25, 2024)</title>
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[Federal Register Volume 89, Number 81 (Thursday, April 25, 2024)]
[Notices]
[Pages 31783-31785]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08802]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99992; File No. SR-NYSE-2024-21]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
1, To Amend Section 802.01D of the NYSE Listed Company Manual
Concerning the Suspension and Delisting of a Listed Company That Has
Changed its Primary Business Focus
April 19, 2024.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on April 4, 2024, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. On April 17,
2024, the Exchange filed Amendment No. 1, which supersedes the original
filing in its entirety. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 1, 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 Section 802.01D of the NYSE Listed
Company Manual (``Manual'') to provide the Exchange with discretion to
commence suspension and delisting proceedings with respect to a listed
company that has changed its primary business focus to a new area of
business that it was not engaged in at the time of its original
listing, or which was immaterial to its operations at the time of its
original listing. The text of the proposed rule change is set forth in
Exhibit 5. This Amendment No. 1 to SR-NYSE-2024-21 replaces SR-NYSE-
2024-21 as originally filed and supersedes such filing in its
entirety.\4\
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\4\ See note 5 infra.
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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
This Amendment No. 1 to SR-NYSE-2024-21 replaces SR-NYSE-2024-21 as
originally filed and supersedes such filing in its entirety.\5\
Amendment No.1 amends the original filing to: (i) insert a new sentence
in the proposed new paragraph in Section 802.01D stating that the
Exchange would focus its analysis of a company's suitability for
continued listing after a change in operations on whether it would have
accepted the listed company for initial listing if it had been engaged
in its modified business at the time of original listing; (ii) amend
the lead-in language to Section 802.01D and the description in the
Purpose section of the filing to include a parenthetical that specifies
that, instead of applying the procedures outlined in Sections 802.02
and 802.03, the Exchange will instead commence immediate suspension and
delisting procedures if the individual paragraph of Section 802.01D so
specifies; (iii) insert a sentence in the Purpose section noting that
the Exchange's analysis of a company's change in business operations
will focus on the qualitative aspects of the company's suitability for
listing and will not entail an application of the quantitative
standards for initial listing; (iv) amend the proposed new paragraph of
Section 802.01D under the heading ``Change in Primary Business Focus''
to clarify that the proposed paragraph will apply only where the
company has changed its primary business focus to a new area of
business that is ``substantially different'' from the business it was
engaged in at the time of its original listing or, as provided in the
original filing, which was immaterial to its operations at the time of
its original listing; (v) clarify that any
[[Page 31784]]
suspension and delisting resulting from a change in operations will be
undertaken in accordance with the procedures set out in Section 804.00
of the Manual; and (vi) make conforming changes to the Statutory Basis
section.
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\5\ See SR-NYSE-2024-21 (April 4, 2024).
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It has been the Exchange's experience that listed companies
occasionally change the focus of their operations from the business
they were engaged in at the time of initial listing to a business line
that is completely unrelated or that was not material at the time of
its original listing. The Exchange is concerned that, in such
circumstances, investors who acquired the company's stock prior to this
change in operations (including, in many cases, in connection with the
company's initial public offering) may have made their investment
decision based on the company's disclosure about its original business
and might not have made their investment if they had been aware of how
the company would change. In addition, a wholesale change in business
operations may give rise to a concern about the suitability for listing
of the company had it been in engaged in that line of business at the
time of its application for listing. The Exchange notes that, in some
circumstances, there has been significant downward price movement
subsequent to such a change in business focus, which resulted in
significant investor losses and an inability to meet exchange continued
listing standards.\6\
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\6\ For example, Bit Brother, a company listed on Nasdaq,
initially focused on selling tea products but ultimately changed its
business line to crypto. After three reverse splits, one of which
was quite large (1000:1), the company was still unable to regain
sustained compliance with listing standards. The stock was delisted
from Nasdaq in February 2024. See <a href="https://www.wsj.com/finance/stocks/as-trading-frenzies-grip-penny-stocks-criticism-of-nasdaq-grows-8bd4118b">https://www.wsj.com/finance/stocks/as-trading-frenzies-grip-penny-stocks-criticism-of-nasdaq-grows-8bd4118b</a> (Feb 23, 2024).
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In light of the foregoing, the Exchange proposes to amend Section
802.01D of the Manual (``Other Criteria'') to include a new paragraph
(``Change in Primary Business Focus'') providing that the Exchange may
in its sole discretion subject a listed company to immediate suspension
and delisting in accordance with the procedures set forth in Section
804.00 of the Manual if that listed company has changed its primary
business focus to a new area of business that it was not engaged in at
the time of its original listing or which was immaterial to its
operations at the time of its original listing. If the Exchange becomes
aware of such a change in the company's primary business focus, the
Exchange's Staff would conduct a thorough assessment of the company's
suitability for continued listing in light of such change. The Exchange
would focus its analysis on whether it would have accepted the listed
company for initial listing if it had been engaged in its modified
business at the time of original listing. The Exchange notes that this
analysis will focus on the qualitative aspects of the company's
suitability for listing and will not entail an application of the
quantitative standards for initial listing. For example, the Exchange
would, where appropriate, take into consideration other changes that
may have occurred in connection with the change in the company's
primary business focus, including, but not limited to, changes in the
management, board of directors, voting power, ownership, and financial
structure of the company. The Exchange acknowledges that seeking to
suspend and delist a company's stock under this revised rule would be
an extraordinary action. The Exchange therefore anticipates seldom
relying on this new discretionary authority, and only after thorough
analysis of all relevant facts and circumstances.
The lead-in to Section 802.01D provides that if any of the factors
set forth in 802.01D apply to a listed company, the Exchange may in its
sole discretion subject the company to the procedures outlined in
Paras. 802.02 and 802.03, which provide noncompliant companies with an
opportunity to cure their deficiencies. The Exchange proposes to add a
parenthetical to this lead-in language to specify that, instead of
applying the procedures outlined in Paras. 802.02 and 802.03, the
Exchange will instead commence immediate suspension and delisting
procedures if the individual paragraph of Section 802.01D so
specifies). This proposed parenthetical provision in the lead-in to
Section 802.01D will make the lead-in consistent with the Exchange's
proposal to include a provision in the proposed new paragraph of that
rule providing that any listed company that is deemed to be unsuitable
for continued listing because of a change of business operations will
be subject to immediate suspension and delisting procedures.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \8\ 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes it is consistent with the protection of
investors to amend Section 802.01D to provide the Exchange with the
discretion to immediately commence suspension and delisting procedures
in accordance with Section 804.00 of the Manual with respect to a
listed company that has changed its primary business focus to a new
area of business that it was not engaged in at the time of its original
listing or which was immaterial to its operations at the time of its
original listing. The Exchange notes that investors who acquired the
company's stock prior to this change in operations (including, in many
cases, in connection with the company's initial public offering) may
have made their investment decision based on the company's disclosure
about its original business and might not have made their investment if
they had been aware of how the company would change. In addition, the
Exchange is concerned that a listed company may change its business
operations to a line of business that would have given rise to a
concern about the suitability for listing of the company had it been in
engaged in that line of business at the time of its application for
listing. The Exchange notes that taking delisting action in such cases
would be discretionary and that the Exchange would undertake such
action only after a careful analysis of the company's suitability for
continued listing, taking into account all relevant factors, including,
but not limited to, changes in the management, board of directors,
voting power, ownership, and financial structure of the company. In
making these determinations, the Exchange would focus its analysis on
whether it would have accepted the listed company for initial listing
if it had been engaged in its modified business at the time of original
listing. The Exchange notes that this analysis will focus on the
qualitative aspects of the company's suitability for listing and will
not entail an application of the quantitative standards for initial
listing.
The proposed inclusion of new parenthetical language in the lead-in
to Section 802.01D makes that lead-in consistent with the proposed new
paragraph with respect to a company's change in business, as it
provides that
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he Exchange can immediately suspend and delist a company under Section
802.01D where the applicable paragraph of the rule so provides, as is
the case with the proposed new provision with respect to changes in
business operations.
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 notes that
there are several listing venues and that any company that the Exchange
deemed unsuitable for continued listing under the proposed rule could
apply for listing on one or more other exchanges.
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 within such longer period up 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, as
modified by Amendment No. 1, or
(B) institute proceedings to determine whether the proposed rule
change as modified by Amendment No. 1, 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, as modified by Amendment No. 1, 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="9ae8eff6ffb7f9f5f7f7fff4eee9dae9fff9b4fdf5ec">[email protected]</span></a>. Please include
file number SR-NYSE-2024-21 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-2024-21. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSE-2024-21 and should be
submitted on or before May 16, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-08802 Filed 4-24-24; 8:45 am]
BILLING CODE 8011-01-P
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