Notice2025-01549
Self-Regulatory Organizations; NYSE American LLC; Order Granting Approval of a Proposed Rule Change To Amend Section 1003 of the NYSE American LLC Company Guide To Provide for the Suspension and Delisting of Any Company That: (i) Has Effected One or More Reverse Stock Splits Over the Prior Two-Year Period With a Cumulative Ratio of 200 Shares or More to One; or (ii) Has Effectuated a Reverse Stock Split and the Effectuation of Such Reverse Stock Split Results in the Company's Security Falling Below Any of the Continued Listing Requirements of Section 1003
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
January 23, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 14 (Thursday, January 23, 2025)</title>
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[Federal Register Volume 90, Number 14 (Thursday, January 23, 2025)]
[Notices]
[Pages 8073-8076]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-01549]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102220; File No. SR-NYSEAMER-2024-61]
Self-Regulatory Organizations; NYSE American LLC; Order Granting
Approval of a Proposed Rule Change To Amend Section 1003 of the NYSE
American LLC Company Guide To Provide for the Suspension and Delisting
of Any Company That: (i) Has Effected One or More Reverse Stock Splits
Over the Prior Two-Year Period With a Cumulative Ratio of 200 Shares or
More to One; or (ii) Has Effectuated a Reverse Stock Split and the
Effectuation of Such Reverse Stock Split Results in the Company's
Security Falling Below Any of the Continued Listing Requirements of
Section 1003
January 16, 2025.
I. Introduction
On October 16, 2024, NYSE American LLC (``NYSE American'' or
``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 1003 of the NYSE American LLC
Company Guide (``Company Guide'') to provide for the suspension and
delisting of any listed company that (i) has effected one or more
reverse stock splits over the prior two-year period with a cumulative
ratio of 200 shares or more to one or (ii) has effectuated a reverse
stock split and the effectuation of such reverse stock split
[[Page 8074]]
results in the company's security falling below any of the continued
listing requirements of Section 1003 of the Company Guide. The proposed
rule change was published for comment in the Federal Register on
November 4, 2024.\3\
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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. 101457 (Oct. 29,
2024), 89 FR 87661 (``Notice''). Comments on the Notice are
available at: <a href="https://www.sec.gov/comments/sr-nyseamer-2024-61/srnyseamer202461.htm">https://www.sec.gov/comments/sr-nyseamer-2024-61/srnyseamer202461.htm</a>.
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On December 16, 2024, pursuant to Section 19(b)(2) of the Act,\4\
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ This order approves the proposed rule change.
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\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 101929, 89 FR 104253
(Dec. 20, 2024) (designating February 2, 2025, as the date by which
the Commission shall either approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change).
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II. Description of the Proposed Rule Change
Section 1003(f)(v) of the Company Guide (Low Selling Price Issues)
currently provides that in the case of a listed common stock selling
for a substantial period of time at a low price per share, the Exchange
may suspend and delist a company if such company shall fail to effect a
reverse split of such shares within a reasonable time after being
notified that the Exchange deems such action to be appropriate under
all the circumstances. In its review of the question of whether it
deems a reverse split of a given issue to be appropriate, the Exchange
will consider all pertinent factors, including market conditions in
general, the number of shares outstanding, plans which may have been
formulated by management, applicable regulations of the state or
country of incorporation or of any governmental agency having
jurisdiction over the issuer, the relationship to other Exchange
policies regarding continued listing, and, in respect of securities of
foreign issuers, the general practice in the country of origin of
trading in low-selling price issues.\6\
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\6\ See Section 1003(f)(v) of the Company Guide.
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The Exchange proposes to amend Section 1003(f) of the Company Guide
(Other Events) to add two circumstances relating to effectuating
reverse stock splits under which the Exchange would immediately suspend
and delist a listed company. First, proposed Section 1003(f)(vi) of the
Company Guide would provide that if a listed issuer has effectuated one
or more reverse stock splits over the prior two-year period with a
cumulative ratio of 200 shares or more to one, the Exchange would
commence immediate suspension and delisting procedures in accordance
with the procedures set out in Section 1010 of the Company Guide.\7\ In
addition, proposed Section 1003(f)(vii) of the Company Guide would
provide that if a listed issuer has effectuated a reverse stock split
and the effectuation of such reverse stock split results in the
company's security falling below any of the continued listing
requirements of Section 1003 of the Company Guide,\8\ the Exchange
would commence immediate suspension and delisting procedures in
accordance with the procedures set out in Section 1010 of the Company
Guide. In either case, the issuer would not be eligible to follow the
procedures outlined in Section 1009 of the Company Guide.\9\
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\7\ Part 12 of the Company Guide provides that companies may
seek review of a delisting determination from the Committee for
Review of the Board of Directors of the Exchange.
\8\ Section 1003 of the Company Guide sets forth certain
quantitative requirements for continued listing on the Exchange,
including criteria relating to stockholders' equity, market
capitalization, and number of shareholders. Section 1003 of the
Company Guide also sets forth certain non-quantitative requirements
for continued listing on the Exchange, such as maintaining an
effective registration under the Act.
\9\ Section 1009 of the Company Guide sets forth specific
procedures for listed companies that are identified as being below
the continued listing criteria. In general, Section 1009 of the
Company Guide provides that if the Exchange identifies a company as
being below the Exchange's continued listing criteria, the Exchange
will notify the company within 10 business days and provide the
company with an opportunity to submit a plan to regain compliance
with the continued listing standards within 18 months. If the
company does not submit a plan within the specified deadline, or if
the Exchange does not accept the plan, the Exchange will initiate
delisting procedures. If the Exchange accepts the plan, the Exchange
will review the company on a quarterly basis for compliance with the
plan.
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The Exchange states that many companies seek to address low selling
price issues under Section 1003(f)(v) of the Company Guide by
effectuating a reverse stock split.\10\ However, the Exchange has
observed that some companies, typically those in financial distress or
experiencing a prolonged operational downturn, engage in a pattern of
repeated reverse stock splits.\11\ The Exchange states that such
behavior is often indicative of deep financial or operational distress
within such companies rendering them inappropriate for trading on the
Exchange for investor protection reasons.\12\ The Exchange states that
it has observed that the challenges facing such companies, generally,
are not temporary and may be so severe that a company is not likely to
remain compliant with Exchange listing standards after curing its low
selling price by means of a reverse stock split.\13\ Accordingly, the
Exchange states the proposal protects investors and the public interest
by immediately commencing suspension and delisting procedures with
respect to any listed company that (i) has effected one or more reverse
stock splits over the prior two-year period with a cumulative ratio of
200 shares or more to one or (ii) conducts a reverse stock split that
causes the company to fall below any of the continued listing
requirements of Section 1003 of the Company Guide.\14\ The Exchange
states that the proposal enhances the Exchange's listing requirements
and would limit the ability of listed companies with a history of
having a low stock price to use reverse stock splits to remain
qualified for listing.\15\
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\10\ See Notice at 878661-62.
\11\ See id. at 87662.
\12\ See id.
\13\ See id. The Exchange further states that the price concerns
with these companies can be a leading indicator of other listing
compliance concerns, and these companies often become subject to
delisting for other reasons within a short period of time. See id.
\14\ See id.
\15\ See id.
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The Exchange also states that the proposal is consistent with the
provisions of Section 1003(f)(v) of the Company Guide related to common
stock selling for a substantial period of time at a low price,\16\ as
well as with the Exchange's consistent policy that it would immediately
suspend and delist a listed company if the company effects a reverse
stock split to cure a low selling price issue under Section 1003(f)(v)
of the Company Guide and the company would fall below another
quantitative continued listing standard as a direct result of effecting
that reverse stock split.\17\
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\16\ See supra note 6 and accompanying text.
\17\ See id. at 87661.
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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.\18\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\19\ which
requires,
[[Page 8075]]
among other things, that the rules of an 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 not
be designed to permit unfair discrimination between customers, issuers,
brokers, or dealers; and with Section 6(b)(7) of the Act,\20\ which
requires, among other things, that the rules of a national securities
exchange provide a fair procedure for the prohibition or limitation by
the exchange of any person with respect to access to services offered
by the exchange.
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\18\ 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).
\19\ 15 U.S.C. 78f(b)(5).
\20\ 15 U.S.C. 78f(b)(7).
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The development and enforcement of meaningful listing standards
\21\ for an exchange is of critical importance to financial markets and
the investing public. Among other things, such listing standards help
ensure that exchange-listed companies will have sufficient public
float, investor base, and trading interest to provide the depth and
liquidity to promote fair and orderly markets. Meaningful listing
standards also are important given investor expectations regarding the
nature of securities that have achieved an exchange listing, and the
role of an exchange in overseeing its market and assuring compliance
with its listing standards.\22\
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\21\ The Commission notes that this reference to ``listing
standards'' is referring to both initial and continued listing
standards.
\22\ See, e.g., Securities Exchange Act Release Nos. 101271
(Oct. 7, 2024), 89 FR 82652, 82653 n.23 and accompanying text (Oct.
11, 2024) (SR-NASDAQ-2024-029) (Order Granting Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, to Modify the
Application of Bid Price Compliance Periods); 88716 (Apr. 21, 2020),
85 FR 23393 (Apr. 27, 2020) (SR-NASDAQ-2020-001) (Order Approving a
Proposed Rule Change To Modify the Delisting Process for Securities
With a Bid Price at or Below $0.10 and for Securities That Have Had
One or More Reverse Stock Splits With a Cumulative Ratio of 250
Shares or More to One Over the Prior Two-Year Period); 88389 (Mar.
16, 2020), 85 FR 16163 (Mar. 20, 2020) (SR-NASDAQ-2019-089) (Notice
of Filing of Amendment No. 1 and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend
Rule 5815 To Preclude Stay During Hearing Panel Review of Staff
Delisting Determinations in Certain Circumstances). See also
Securities Exchange Act Release No. 81856 (Oct. 11, 2017), 82 FR
48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31) (Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend the
Listed Company Manual To Adopt Initial and Continued Listing
Standards for Subscription Receipts) (stating that ``[a]dequate
standards are especially important given the expectations of
investors regarding exchange trading and the imprimatur of listing
on a particular market'' and that ``[o]nce a security has been
approved for initial listing, maintenance criteria allow an exchange
to monitor the status and trading characteristics of that issue . .
. so that fair and orderly markets can be maintained.'').
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The Exchange's proposal would provide that the Exchange would
immediately commence suspension and delisting procedures with respect
to a listed company that effectuates a reverse stock split in certain
circumstances. Specifically, proposed Sections 1003(f)(vi) and (vii) of
the Company Guide would provide for the immediate suspension and
delisting of any listed company that (i) has effectuated one or more
reverse stock splits over the prior two-year period with a cumulative
ratio of 200 shares or more to one or (ii) has effectuated a reverse
stock split and the effectuation of such reverse stock split results in
the company's security falling below any of the continued listing
requirements of Section 1003 of the Company Guide.
The Exchange's proposal is reasonably designed to enhance its
continued listing standards, thereby protecting investors and the
public interest. In particular, the proposal is reasonably designed to
curtail the use of reverse stock splits to inappropriately delay
delisting and thereby allow a company's security to remain listed on
the Exchange for an extended period despite being inappropriate for
trading on the Exchange and not being able to maintain compliance with
the Exchange's listing standards. As discussed above, the Exchange
states that engaging in a pattern of repeated reverse stock splits is
often indicative of deep financial or operational distress that renders
a company inappropriate for trading on the Exchange for investor
protection reasons.\23\ The Exchange can reasonably conclude from its
experience that a listed company that has effected one or more reverse
stock splits over the prior two-year period with a cumulative ratio of
200 shares or more to one, or a listed company that effects a reverse
stock split that results in the company being unable to maintain
compliance with the continued listings requirements of Section 1003 of
the Company Guide, indicates serious difficulties within such company
that are likely to put continued downward pressure on the stock price,
such that the company is less likely to maintain or regain compliance
with the continued listing standards. In this respect, the proposal is
appropriately targeted to those listed companies' securities that are
more likely to have serious recurrent issues in regaining and
maintaining compliance with the Exchange's continued listing standards.
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\23\ See Notice at 87662.
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The Exchange's proposal is reasonably designed to further investor
protection by limiting the ability of listed companies with a history
of having a low stock price to use reverse stock splits to remain
qualified for listing.\24\ The Exchange states that it has observed
that the challenges facing such companies generally are not temporary
and may be so severe that a company is not likely to remain compliant
with Exchange listing standards after curing its low selling price by
means of a reverse stock split.\25\ In addition, the Exchange states
that the price concerns with such companies can be a leading indicator
of other listing compliance concerns, and that these companies often
become subject to delisting for other reasons within a short period of
time.\26\ Further, the continued listing of low-priced securities
raises concerns that these securities may not have sufficient public
float, investor base, and trading interest to promote fair and orderly
markets and relatedly may have heightened susceptibility to
manipulation. Given these concerns, the Exchange's proposal to
immediately suspend and delist a company that effectuates a reverse
stock split in the circumstances described above is appropriate and
consistent with Section 6(b)(5) of the Act.
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\24\ See id.
\25\ See id.
\26\ See id.
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While the Commission recognizes that the Exchange delisting process
is in part designed to allow listed companies experiencing temporary
financial and/or business issues to regain compliance with continued
listing standards, the proposal reasonably balances the intent of the
delisting process with the need to prevent companies from taking
advantage of the delisting process for an extended period of time
despite being inappropriate for trading on the Exchange and not being
able to comply with Exchange standards for continued listing, which is
contrary to the goal of protecting investors and the public interest.
The proposed rule change is also consistent with Section 6(b)(7) of
the Act \32\ in that it provides a fair procedure for the prohibition
or limitation by the Exchange of any person with respect to access to
services offered. A listed company whose securities are subject to
immediate suspension and delisting under the proposal would still be
able to seek review of a delisting determination from the Committee for
Review of the Board of Directors of the
[[Page 8076]]
Exchange as set forth in Part 12 of the Company Guide. Accordingly, the
proposal is appropriate in light of the need to protect investors and
the public interest and the Exchange's process for review of a
delisting determination will continue to provide a fair procedure for
the review of delisting determinations in accordance with Section
6(b)(7) of the Act.
In sum, the Exchange's proposal appropriately identifies securities
listed on its market that are more likely to have serious recurrent
issues in regaining and maintaining compliance with the Exchange's
continued listing standards, and proposes reasonable changes to shorten
the time that such non-compliant securities can remain trading on the
Exchange, thereby protecting investors and the public interest in
accordance with Section 6(b)(5) of the Act,\27\ while at the same time
maintaining a fair procedure for affected companies to seek review of a
delisting determination from the Committee for Review of the Board of
Directors of the Exchange in accordance with Section 6(b)(7) of the
Act.\28\ For these reasons, the Commission finds that the proposed rule
change is consistent with the requirements of the Act.\29\
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\27\ 15 U.S.C. 78f(b)(5).
\28\ 15 U.S.C. 78f(b)(7).
\29\ The Commission received one comment letter on the proposal
that was generally supportive. See Letter from Melody Brand, dated
Dec. 16, 2024.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-NYSEAMER-2024-61), be, and
it hereby is, approved.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-01549 Filed 1-22-25; 8:45 am]
BILLING CODE 8011-01-P
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