Notice2024-27021
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Section 1003 of the NYSE American LLC Company Guide 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
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 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 224 (Wednesday, November 20, 2024)</title>
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[Federal Register Volume 89, Number 224 (Wednesday, November 20, 2024)]
[Notices]
[Pages 91840-91843]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27021]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101619; File No. SR-NYSEAMER-2024-67]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Section
1003 of the NYSE American LLC Company Guide 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
November 14, 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 November 4, 2024, NYSE American LLC (``NYSE American'' 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. 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\ 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 1003 of the NYSE American
LLC Company Guide 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 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,
[[Page 91841]]
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
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.\4\
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\4\ 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
1003 (``Application of Policies'') of the Guide to add proposed Section
1003(i) (``Change in Primary Business Focus'') providing that the
Exchange may in its sole discretion subject a listed company to
immediate suspension and delisting 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. The proposed
rule text provides that any company that undertakes a change in its
primary business focus must promptly provide notice of such change in
writing to the Exchange. The Exchange will undertake the continued
listing analysis and potentially take delisting action under the
proposed provision regardless of whether the listed company complies
with its obligation to provide written notification to the Exchange.
Listed companies who would meet the requirements to provide written
notification to the Exchange under the new provision but do not do so
would be considered non-compliant with the notification requirement. If
the Exchange determines that a listed company is unsuitable for
continued listing due to a change in its primary business focus, the
Exchange will commence suspension and delisting procedures immediately
in accordance with the procedures set out in Section 1010.\5\ A listed
company is not eligible to follow the procedures outlined in Section
1009 with respect to proposed Section 1003(h). The Exchange notes that
any company delisted under proposed Section 1003(h) will be entitled to
avail itself of the due process rights provided by the appeal process
set forth in Chapter 12.
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\5\ Section 1010(b) states that whenever the Exchange
determines, in accordance with Section 1009 or otherwise, that a
class of securities should be removed from listing (or unlisted
trading) for reasons other than the reasons specified in 1010(a), it
will follow the procedures contained in Part 12.
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The opening paragraph of Section 1003 states that companies that
are noncompliant may utilize the cure periods set forth in Section
1009. The Exchange proposes to qualify this provision to clarify that
companies are not eligible for the cure provisions if the text of the
applicable provision in Section 1003 provides otherwise. This proposed
change is to distinguish the treatment of companies under proposed
Section 1003(h) which would subject such companies to immediate
suspension and delisting without recourse to the cure provisions in
Section 1009.
Upon becoming aware of such a change in the company's primary
business focus, by notification from the listed company or otherwise,
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. In conducting this
analysis, the Exchange would take into consideration other changes that
may have occurred in connection with the change in the company's
primary business focus, including in all cases, but not limited to, any
changes in the management, board of directors, voting power, ownership,
and financial structure of the company. The Exchange notes that the
additional factors enumerated in the proposed rule text are consistent
with areas that would be part of any initial listing review and are
therefore a necessary part of any consideration of whether the company
would have been suitable for initial listing in the form it took after
its change of primary business focus. As discussed above, the
Exchange's Staff would conduct a thorough assessment of the company's
suitability for continued listing in light of such change. In addition,
continued listing quantitative standards will continue to apply to a
company that is being reviewed under the new standard just as with any
company already listed on the Exchange.
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 Exchange also notes that the proposal rule change is
substantially similar to a recent amendment adopted by the NYSE to
Section 802.01D of the NYSE Listed Company Manual that was approved by
the Commission as consistent with the Act.\6\
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\6\ See Securities Exchange Act Release No. 100585 (July 24,
2024) (SR-NYSE-2024-21).
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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
[[Page 91842]]
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 1003 to provide the Exchange with the
discretion to immediately commence suspension and delisting procedures
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 Exchange believes that the proposed
requirement that any listed company that undertakes a change in its
primary business focus must promptly provide notice of such change in
writing to the Exchange will enable the Exchange to more systematically
identify circumstances where it is necessary to consider the
appropriateness for continued listing of such companies.
Finally, the Exchange also notes that a company that is subject to
suspension and delisting under this new provision would be entitled to
a review of the delisting determination under the procedures set forth
in Part 12 of the Company Guide. The Exchange believes that this will
provide, consistent with Section 6(b)(7) of the Act, a fair procedure
for review of a suspension and delisting of a company under the new
provision.
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
Because the foregoing 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 for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) \10\ thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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 the 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 to
determine whether the proposed rule should be approved or 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
<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#b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2"><span class="__cf_email__" data-cfemail="becccbd2db93ddd1d3d3dbd0cacdfecddbdd90d9d1c8">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-67 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-NYSEAMER-2024-67. 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-NYSEAMER-2024-67 and should
be submitted on or before December 11, 2024.
[[Page 91843]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-27021 Filed 11-19-24; 8:45 am]
BILLING CODE 8011-01-P
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