Notice2025-06910
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change of New Section 108.00 in 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
April 23, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 77 (Wednesday, April 23, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 77 (Wednesday, April 23, 2025)]
[Notices]
[Pages 17107-17113]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-06910]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102877; File No. SR-NYSE-2025-14]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change of
New Section 108.00 in the NYSE Listed Company Manual
April 17, 2025.
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 10, 2025, 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes (1) a new Section 108.00 (``Principal
Underwriter'') in the NYSE Listed Company Manual establishing
requirements for the engagement of the principal underwriter by an
issuer seeking approval for initial listing in connection with a
transaction involving an underwriter; and (2) amendments to Rule 2 and
a new Rule 310 establishing a category of market participant granted
access to the Exchange for the limited purpose of performing
underwriting activity as a principal underwriter and imposing related
requirements for principal underwriting activity. 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 a new Section 108.00 (``Principal
Underwriter'') of the NYSE Listed Company Manual (the ``Manual''),
requiring that any issuer applying to list in connection with a
transaction involving an underwriter must have a principal underwriter
that is a member organization as defined in Rule 2 of the rules of the
Exchange or a Limited Underwriting Member, as defined in proposed Rule
2(k) of the rules of the Exchange. The Exchange also proposes
amendments to Rule 2 (``Member,'' ``Membership,'' ``Member Firm,''
etc.) and a new Rule 310 titled ``Limited Underwriting Members and
Associated Persons'' establishing a category of market participant that
is a member of the Financial Industry Regulatory Authority (``FINRA'')
and that would qualify as a ``Limited Underwriting Member'' for
purposes of proposed Section 108.00 of the Manual. Proposed Section
108.00 is based on Rule 5210 and proposed Rule 310 is based on General
3, Rule 1031 of the rules of The Nasdaq Stock Market LLC (``Nasdaq'').
Background and Proposed Rule Change
Nasdaq recently created a new, non-trading limited underwriter
membership class and imposed related requirements for principal
underwriting activity.\4\ The impetus for the rule change came from the
critical role underwriters play as gatekeepers to the capital markets
in connection with the trading of newly issued securities.\5\
Generally, exchanges
[[Page 17108]]
rely on underwriters to select the selling syndicate and ensure that
the shares are placed in a way that is reasonably designed to allow
liquid trading, consistent with exchange listing requirements and the
successful introduction of the company to the market place.\6\ There is
currently no requirement that underwriters of companies going public on
the Exchange be NYSE member organizations and, unless the underwriter
is also an Exchange member organization, the Exchange currently does
not have authority to require responses to investigative inquiries or
to enforce its rules directly against non-member underwriters.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 99846 (March 22,
2024), 89 FR 21629 (March 28, 2024) (SR-NASDAQ-2023-022) (Notice of
Filing of Amendment No. 3 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To
Create a New, Non-Trading Limited Underwriter Membership Class and
Impose Related Requirements for Principal Underwriting Activity)
(``Release No. 99846'').
\5\ See id., 89 FR at 21629-30. In 2022, the Exchange published
a regulatory notice highlighting the important role of underwriters
as gatekeepers in the IPO process and the applicability of market
rules and the federal securities laws. See NYSE RM-22-18, November
17, 2022, available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/rule-interpretations/2022/NYSER_Reg_Memo_-_Regulatory_Scrutiny_in_Connection_with_IPOs_">https://www.nyse.com/publicdocs/nyse/markets/nyse/rule-interpretations/2022/NYSER_Reg_Memo_-_Regulatory_Scrutiny_in_Connection_with_IPOs_</a>(2022.11.17_final).pdf.
FINRA and Nasdaq published similar bulletins around the same time.
See <a href="https://www.finra.org/rules-guidance/notices/22-25">https://www.finra.org/rules-guidance/notices/22-25</a>; <a href="https://www.nasdaqtrader.com/MicroNews.aspx?id=ERA2022-9">https://www.nasdaqtrader.com/MicroNews.aspx?id=ERA2022-9</a>.
\6\ See Release No. 99846, 89 FR at 21630.
---------------------------------------------------------------------------
The Exchange similarly proposes to establish a category of market
participant known as ``Limited Underwriting Member'' that would be
granted access to the Exchange for the limited purpose of acting as a
principal underwriter \7\ (an ``Initial Listing Principal
Underwriter'') of an underwritten public offering in connection with
which a company seeks to list on the Exchange. As with the Nasdaq rule,
access to the Exchange for this limited purpose would not confer
trading privileges on Limited Underwriting Members. As a result, this
category of market participant would not constitute a traditional
Exchange membership under Rule 2(b)(i), insofar as only a registered
broker or dealer qualified and approved as a ``member organization''
pursuant to Rule 311 (Formation and Approval of Member Organizations)
can acquire and hold an Exchange-issued trading license under Rule 300
(Trading Licenses).
---------------------------------------------------------------------------
\7\ ``Principal underwriter'' will have the same definition used
in Rule 405 promulgated under the Securities Act of 1933
(``Securities Act''), i.e., an underwriter in privity of contract
with the issuer of the securities as to which he is underwriter. The
term ``issuer'' in the definition of ``principal underwriter'' has
the meaning given in Sections 2(4) and 2(11) of the Securities Act.
See 17 CFR 230.405.
---------------------------------------------------------------------------
Rather, Limited Underwriting Members would fall within Rule
2(b)(ii), which provides that a member organization also includes any
registered broker or dealer which does not own a trading license and
agrees to be regulated by the Exchange as a member organization and
which the Exchange has agreed to regulate.\8\ For the avoidance of
doubt, the Exchange proposes to amend Rule 2(b)(ii) to make explicit
that member organization as defined therein would include a Limited
Underwriting Member.\9\
---------------------------------------------------------------------------
\8\ Because the proposed rules would establish the authority for
the Exchange to require responses to investigative inquiries and
take appropriate enforcement action when a Limited Underwriting
Member violates one of the rules enumerated in proposed Rule
310(c)(1), Limited Underwriting Members would be ``members'' of a
national securities exchange under the Act based on their agreement
to be regulated by the Exchange in connection with underwriting
activity. See 15 U.S.C. 78c(a)(3)(A)(iv) (``The term `member' when
used with respect to a national securities exchange means . . . any
other registered broker or dealer which agrees to be regulated by
such exchange and with respect to which the exchange undertakes to
enforce compliance with the provisions of this chapter, the rules
and regulations thereunder, and its own rules.''). See the
discussion of Rule 310, Supplementary Material .01, infra. Rule
2(a), however, provides that ``member,'' when used to denote a
natural person, means a natural person associated with a member
organization who has been approved by the Exchange and designated by
such member organization to effect transactions on the trading floor
of the Exchange (the ``Floor'') or any facility thereof.
\9\ The Fourteenth Amended and Restated Operating Agreement of
the New York Stock Exchange LLC (``Operating Agreement'') would
include Limited Underwriting Members as Member Organizations. See
Operating Agreement Article II, Section 2.02 (Rules; Supervision of
Member Organizations) (defining ``Member Organizations'' as
``members, and member organizations of the [Exchange]''). Limited
Underwriting Members would therefore have the right to nominate, and
vote for, petition candidates for election as Non-Affiliated
Directors under the Operating Agreement, as do all other current
Member Organizations. See Operating Agreement, Article II, Section
2.03(a) (Board). Given that the existing Operating Agreement
provisions apply equally to Limited Underwriting Members, the
proposal provides for the fair representation of members in the
selection of directors and the administration of the Exchange
consistent with the requirements of section 6(b)(3) of the Act. See
15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------
To effectuate these changes, the Exchange would amend Rule 2 as
follows. First, the Exchange would add the clause ``, including Limited
Underwriting Members as defined herein'' at the end of Rule 2(b)(ii).
As amended, Rule 2(b)(ii) would provide (additions italicized):
The term ``member organization'' also includes any registered
broker or dealer which does not own a trading license and agrees to be
regulated by the Exchange as a member organization and which the
Exchange has agreed to regulate, including Limited Underwriting Members
as defined herein.
Second, the Exchange would add a new subsection (k) that would
provide that the term ``Limited Underwriting Member'' means a
registered broker or dealer that is subject to the jurisdiction of the
Exchange solely for purposes of Rule 310 and the rules enumerated in
Rule 310(c)(1). The proposed definition is substantially similar to
General 1, Nasdaq Rule 1(b)(20) defining a ``Limited Underwriting
Member'' as a broker or dealer admitted to limited underwriting
membership in Nasdaq. The Exchange does not propose to adopt language
similar to General 3, Nasdaq Rule 1031(c)(1), which provides that for
purposes of interpreting and applying its rules relating to Limited
Underwriting Members, references to ``Member,'' ``Members,'' or
``membership'' shall be functionally equivalent to ``Limited
Underwriting Member,'' ``Limited Underwriting Members,'' or ``limited
underwriting membership'' respectively. The Exchange believes that the
proposed amendments to Rule 2(b)(ii) render it unnecessary for the
Exchange to adopt the language from the Nasdaq rule.
The Exchange would also add a new Rule 310 titled ``Limited
Underwriting Members and Associated Persons'' governing eligibility,
access and rules applicable to proposed Limited Underwriting Members.
As proposed, any registered broker or dealer with a disciplinary
history satisfactory to the Exchange would be eligible for approval by
the Exchange to operate as a Limited Underwriting Member, except such
registered brokers or dealers as are excluded under Rule 346 (Statutory
Disqualification--Association of Member Organizations, and Persons
Associated With Member Organizations).\10\ The proposed language is
substantially the same as General 3, Nasdaq Rule 1031(a)(1) and (c)(2)
except for the explicit requirement that proposed Limited Underwriting
Members have a disciplinary history acceptable to the Exchange.\11\
Additionally, the associated persons of Limited Underwriting Members
that will be responsible for activity of the Limited Underwriting
Member as an Initial Listing Principal Underwriter for purposes of
Section 310(b) must be identified on the application. Like the Nasdaq
rule, any person shall be eligible
[[Page 17109]]
to become an Associated Person of a Limited Underwriting Member, except
such persons as are excluded under Rule 346.\12\ Once again, the
proposed language is substantially the same as General 3, Nasdaq Rule
1031(a)(2) and (c)(2).
---------------------------------------------------------------------------
\10\ See proposed Rule 310(a)(i) (Eligibility to Become Limited
Underwriting Members and Associated Persons).
\11\ In order to make a determination of the firm's eligibility
for purposes of proposed Rule 310(a), as part of the application
process to become a Limited Underwriting Member, the Exchange would
determine whether the Limited Underwriting Member was a FINRA member
in good standing and examine the prospective applicant's relevant
regulatory history, which would include an assessment of any open or
ongoing disciplinary or other regulatory matters by FINRA, the
Commission or any other regulator. Associated persons of Limited
Underwriting Members that would be responsible for the Limited
Underwriting Member's activity on the Exchange as an Initial Listing
Principal Underwriter for purposes of Section 310(b) would be
similarly identified and vetted as part of the application process.
Pursuant to proposed Rule 310(c)(2) discussed below, Limited
Underwriting Members must at all times be FINRA members and
associated persons of Limited Underwriting Members must at all times
be properly qualified and registered under FINRA rules.
\12\ See proposed Rule 310(a)(ii).
---------------------------------------------------------------------------
Pursuant to proposed Rule 310(b) (Access to the Exchange), approval
by the Exchange to operate as a Limited Underwriting Member provides no
rights to transact on the Exchange. As proposed, approval by the
Exchange of a firm to operate as a Limited Underwriting Member would
solely permit such firm to act as a principal underwriter (an ``Initial
Listing Principal Underwriter'') of an underwritten public offering in
connection with which a company seeks to list on the Exchange. A firm
that is not an Exchange member organization cannot act as an Initial
Listing Principal Underwriter unless such firm is a Limited
Underwriting Member. These requirements are similar to Nasdaq Rule
General 3, Nasdaq Rule 1031(b), except, as noted, proposed Limited
Underwriting Members would not be Exchange member organizations.
The Exchange proposes to apply a limited ruleset to Limited
Underwriting Members and their associated persons aimed at maintaining
the fairness and integrity of the underwriting process on the Exchange.
Like Nasdaq, the Exchange proposes to apply: (1) conduct rules relevant
to underwriting activity; (2) supervision rules; (3) applicable fee-
related rules; and (4) disciplinary rules. Finally, although Nasdaq
applied certain administrative, business continuity, and registration-
related rules (for example, certain rules set forth in Nasdaq General 2
and 4), the Exchange does not propose applying analogous Exchange rules
(where such rules exist), because Limited Underwriting Members already
would be subject to similar requirements under FINRA rules.
Specifically, the Exchange proposes to provide in proposed Rule
310(c)(1) (Rules Applicable to Limited Underwriting Members) that
Limited Underwriting Members and their associated persons would be
subject only to the following rules: Rule 0 (Regulation of the Exchange
and its Member Organizations); Rule 2B.1 (Affiliation between Exchange
and a Member Organization); Rule 308 (Acceptability Proceedings); Rule
309 (Collection of and Failure to Pay Exchange Fees); Rule 345.14
(Payment of fees); Rule 346 (Statutory Disqualification--Association of
Member Organizations, and Persons Associated With Member
Organizations); Rule 2010 (Standards of Commercial Honor and Principles
of Trade); Rule 2020 (Use of Manipulative, Deceptive or Other
Fraudulent Devices); Rule 2050 (Other Offenses); Rule 6140 (Other
Trading Practices) (to be grouped together in proposed Rule 310(c) as
``Conduct Rules''); Rule 3110 (Supervision); Rule 3120 (Supervisory
Control Systems); Rule 3220 (Influencing or Rewarding Employees of
Others); Rule 5190 (Notification Requirements for Offering
Participants); Rules 8000-8330 (Disciplinary Rules (Investigations and
Sanctions)), with the exception of Rule 8211(Automated Submission of
Trading Data Requested by the Exchange) and Rule 9557 (Procedures for
Regulating Activities Under Rules 4110, 4120 and 4130 Regarding a
Member Organization Experiencing Financial or Operational
Difficulties); and Rules 9000-9870 (Disciplinary Rules (Procedural)).
The Exchange proposes to apply Rule 0 (Regulation of the Exchange
and its Member Organizations) in order to apply requirements related to
the Exchange's Regulatory Services Agreement with FINRA set forth in
subsection (a) as well as the requirements in subsection (b) that
Exchange Rules apply to all member organizations and persons associated
with member organizations, and that persons associated with a member
organization have the same duties and obligations as a member
organization under Exchange Rules.
The Exchange proposes to apply Rule 2B.1 (Affiliation between
Exchange and a Member Organization) in order to apply the limitations
on affiliation between the Exchange and a Limited Underwriting Member.
The Exchange proposes to apply Rule 308 (Acceptability Proceedings)
to proposed Limited Underwriting Members in order to permit challenges
to Exchange disapprovals of Limited Underwriting Member
applications.\13\
---------------------------------------------------------------------------
\13\ See note 9, supra.
---------------------------------------------------------------------------
The Exchange proposes to apply Rule 309 to facilitate the
Exchange's ability to collect fees for Limited Underwriting
Members.\14\ Relatedly, the Exchange proposes to apply Supplementary
Material .14 of Rule 345, which provides that members and member
organizations shall pay registration, maintenance, filing, and other
related fees as prescribed by the Exchange.
---------------------------------------------------------------------------
\14\ The Exchange proposes to establish fees for Limited
Underwriting Members in a separate rule filing once proposed Rule
310 is operative. Proposed Limited Underwriting Members would be
subject to the same requirements of Rule 309(b) for failure to pay a
fee or any other sum due to the Exchange within forty-five days
after the same becomes payable, including suspension or denial of
access to some or all of the facilities of the Exchange.
---------------------------------------------------------------------------
In addition, the Exchange would apply Rule 346 (Statutory
Disqualification--Association of Member Organizations, and Persons
Associated With Member Organizations) to Limited Underwriting Members
and their associated persons. As noted above, under proposed Rule
310(a)(i) registered brokers or dealers subject to Rule 346 would be
ineligible to become a Limited Underwriting Member. Under proposed Rule
310(a)(ii), persons subject to Rule 346 would similarly be ineligible
to be associated with a Limited Underwriting Member. Applying Rule 346
to Limited Underwriting Members and their associated persons would
cover statutory disqualifications that could arise after a broker or
dealer becomes a Limited Underwriting Member.
The Exchange also proposes to apply certain conduct rules \15\ to
Limited
[[Page 17110]]
Underwriting Members and their associated persons which set forth the
general standards by which members, member organizations and covered
persons \16\ must abide. Specifically, Rule 2010 requires members and
member organizations to observe high standards of commercial honor and
just and equitable principles of trade in the conduct of their
business. Similarly, Rule 2020 prohibits members and member
organizations from effecting any transaction in, or inducing the
purchase or sale of, any security by means of any manipulative,
deceptive or other fraudulent device or contrivance. Further, Rule 2050
provides that a member organization or covered person violates the
provisions of the Rule if it commits any of the 10 enumerated offenses
which include, among other things, making a material misstatement to
the Exchange, failing to observe high standards of commercial honor and
just and equitable principles of trade, and committing acts detrimental
to the interest or welfare of the Exchange.\17\ Finally, Rule 6140
prohibits manipulation of NMS securities (a ``designated security'')
involving wash sales, excessive trading or manipulative operations
involving a pool, syndicate or joint account as well as the making or
circulation and dissemination of any statement or information
concerning a designated security that the member or member organization
knows or has reasonable grounds for believing is false or misleading or
would improperly influence the market price of such security. The Rule
further prohibits the holding of any interest or participation in any
joint account for buying or selling a designated security, unless such
joint account is promptly reported to the Exchange.
---------------------------------------------------------------------------
\15\ The Exchange's Conduct Rules encompass Rules 2010-7470. The
Exchange does not propose to apply the following Rules unrelated to
underwriting activity to Limited Underwriting Members: Rule 2040
(Payments to Unregistered Persons); Rule 2070 (Transactions
Involving Exchange Employees); Rule 2090 (Know Your Customer); Rule
2111 (Suitability); Rule 2150 (Improper Use of Customers' Securities
or Funds; Prohibition Against Guarantees and Sharing in Accounts);
Rule 2210 (Communications with the Public); Rule 2212 (Use of
Investment Companies Rankings in Retail Communications); Rule 2232
(Customer Confirmations); Rule 2262 (Disclosure of Control
Relationship with Issuer); Rule 2266 (SIPC Information); Rule 2269
(Disclosure of Participation or Interest in Primary or Secondary
Distribution); Rule 3130 (Annual Certification of Compliance and
Supervisory Processes); Rule 3150 (Holding of Customer Mail); Rule
3170 (Tape Recording of Registered Persons by Certain Firms); Rule
3220 (Influencing or Rewarding Employees of Others); Rule 3230
(Telemarketing); Rule 3240 (Borrowing From or Lending to Customers);
Rule 3250 (Designation of Accounts); Rule 3270 (Outside Business
Activities of Registered Persons); Rule 3310 (Anti-Money Laundering
Compliance Program); Rule 4110 (Capital Compliance); Rule 4120
(Regulatory Notification and Business Curtailment); Rule 4130
(Regulation of Activities of Section 15C Member Organizations
Experiencing Financial and/or Operational Difficulties); Rule 4140
(Audit); Rule 4150 (Guarantees by, or Flow Through Benefits for,
Member Organizations); Rule 4311 (Carrying Agreements); Rule 4360
(Fidelity Bonds); Rule 4370 (Business Continuity Plans and Emergency
Contact Information); Rule 4521 (Notifications, Questionnaires and
Reports); Rule 4522 (Periodic Security Counts, Verifications and
Comparisons); Rule 4523 (Assignment of Responsibility for General
Ledger Accounts and Identification of Suspense Accounts); Rule 4530
(Reporting Requirements); Rule 4560 (Short-Interest Reporting); Rule
5190 (Notification Requirements for Offering Participants); Rule
5210 (Publication of Transactions and Quotations); Rule 5220
(Disruptive Quoting and Trading Activity Prohibited); Rule 5290
(Order Entry and Execution Practices); Rule 5320 (Prohibition
Against Trading Ahead of Customer Orders); Rule 6140 (Other Trading
Practices); Rule 6800 (Consolidated Audit Trail Compliance Rule);
and Rule 6900 (Consolidated Audit Trail--Fee Dispute Resolution).
\16\ NYSE Rule 9120(g) defines ``covered person'' to mean a
``member, principal executive, approved person, registered or non-
registered employee of a member organization, or other person
(excluding a member organization) subject to the jurisdiction of the
Exchange.'' The term was drafted to appropriately capture all
persons subject to the legacy disciplinary rules and preserve the
Exchange's scope of jurisdiction at the time the Rule 8000 and Rule
9000 Series were adopted. See Securities Exchange Act Release No.
68678 (January 16, 2013), 78 FR 5213, 5219 (January 24, 2013) (SR-
NYSE-2013-02) (Notice of Filing of Proposed Rule Change Adopting
Investigation, Disciplinary, Sanction, and Other Procedural Rules
That Are Modeled on the Rules of the Financial Industry Regulatory
Authority and To Make Certain Conforming and Technical Changes).
Under NYSE Rule 2(a), the term ``member'' means a natural person
associated with a member organization who has been approved by the
Exchange and designated by such member organization to effect
transactions on the floor of the Exchange or any facility thereof.
See id.
\17\ See Rule 2050 (4), (6) & (7), respectively. Member
organizations or covered persons also violate Rule 2050 if they
violate any provision of the Securities Exchange Act of 1934 or any
rule or regulation thereunder (id. at (1)); any of its agreements
with the Exchange (id. at (2)); any provision of any Rule adopted by
the Exchange's Board of Directors (id. at (3)); effects any
transaction in, or induces the purchase or sale of, any security by
means of any manipulative, deceptive or other fraudulent device or
contrivance (id. at (5)); makes any purchases or sales or offers of
purchase or sale of securities for the purpose of upsetting the
equilibrium of the market or bringing about a condition in which
prices will not fairly reflect market values, or assisting in making
any such purchases or sales with knowledge of such purpose, or
being, with such knowledge, a party to or assisting in carrying out
any plan or scheme for the making of such purchases or sales or
offers of purchase or sale (id. at (8)); makes a misstatement or
omission of fact on its application for membership or approval, or
on any financial statement, report, or other submission filed with
the Exchange (id. at (9)); or refuses or fails to comply with a
request of the Exchange to submit its books and records (including
those books and records with respect to which such member
organization or covered person has access and control) to the
Exchange, any other self-regulatory organization, any contract
market, any registered futures association, or any foreign self-
regulatory organization or association with which the Exchange has
entered into an agreement or to furnish information to or to appear
or testify before the Exchange or such other organization or
association, as specified above, or fails to take any of the
foregoing actions on the date or within the time period that the
Exchange requires (id. at (10)).
---------------------------------------------------------------------------
Rule 3110 requires each member organization to establish and
maintain a system to supervise the activities of each associated person
that is reasonably designed to achieve compliance with applicable
securities laws and regulations and with applicable Exchange rules.
Rule 3120 requires each member organization to have a system of
supervisory control policies and procedures that tests and verifies
that member organization's supervisory procedures are reasonably
designed with respect to the activities of the member organization and
its associated persons, to achieve compliance with applicable
securities laws and regulations, and with applicable Exchange rules.
The Exchange believes it is important to apply these provisions on
supervision as it would provide the Exchange with authority to assess
whether a Limited Underwriting Member has adequate supervisory systems
and written supervisory procedures in place.
Rule 3220 prohibits members, member organizations, or persons
associated with a member organization from directly or indirectly
giving or permitting to be given anything of value, including
gratuities, in excess of one hundred dollars per individual per year to
any person, principal, proprietor, employee, agent or representative of
another person where such payment or gratuity is in relation to the
business of the employer of the recipient of the payment or gratuity.
Under the rule, a gift of any kind is considered a gratuity. The
Exchange believes that applying these provisions against a Limited
Underwriting Member would mitigate the risks of bribery and undue
influence that the rule was intended to address.
Rule 5190 sets forth notice requirements applicable to all member
organizations participating in offerings of securities for purposes of
monitoring compliance with the provisions of SEC Regulation M. In
addition to the requirements under Rule 5190, member organizations also
must comply with all applicable rules governing the withdrawal of
quotations in accordance with SEC Regulation M. The Exchange believes
that applying Rule 5190 to Limited Underwriting Members would be
appropriate given the important role Rule 5190 plays in maintaining the
quality of and public confidence in the Exchange's marketplace and the
initial public offering (``IPO'') process as well as the prevention of
fraudulent and manipulative acts and practices.
Rules 8000-8330 and Rules 9000-9870 contain the Exchange's
disciplinary rules, which would govern the initiation of disciplinary
proceedings against proposed Limited Underwriting Members for
violations of the rules set forth in proposed Rule 310(c)(1). The
Exchange proposes to specifically exclude Rule 8211 and Rule 9557. Rule
8211 relates to members submission of trade data. Rule 9557 relates to
procedures for regulating activities under Rules 4110, which relates to
member organizations capital compliance, and Rules 4120 and 4130, which
relate to carrying or clearing members. Rule 8211 and Rule 9557 are
thus not relevant to underwriting activity.
Proposed Rule 310(c)(1) would provide that these rules would apply
to all Limited Underwriting Members and their associated persons in the
same manner that these rules apply to member organizations and persons
associated with a member organization. Persons associated with a
Limited Underwriting Member would also have the same duties and
obligations under these rules as a Limited Underwriting Member under
these rules.
Finally, proposed Rule 310(c)(2) would provide that Limited
Underwriting Members must at all times be FINRA members in good
standing and that associated persons of Limited Underwriting Members
must at all times be properly qualified and registered under FINRA
rules.
[[Page 17111]]
The proposed list of rules applicable to Limited Underwriting
Members is not intended to be comprehensive or foreclose the
possibility of modifying the list in the future. The Exchange
represents that it will consider whether additional existing rules that
are not proposed in the limited ruleset for Limited Underwriting
Members or new rules are warranted as the Exchange gains more
experience in applying the rules proposed.
Like Nasdaq, the Exchange proposes to apply only those rules it
deems appropriate to a firm serving as a principal underwriter,
including those rules it deems critical to such firms, in an effort to
impose minimal burden on Limited Underwriting Members, while still
allowing the Exchange to have regulatory authority over such
Members.\18\ The Exchange acknowledges that there are additional rules
that the Exchange does not propose to apply to proposed Limited
Underwriting Members. However, since proposed Limited Underwriting
Members do not have trading privileges on the Exchange, the Exchange
has sought to avoid applying all those Exchange rules applicable to
member organizations that primarily relate to trading activity and thus
not relevant to the activities of Limited Underwriting Members or are
duplicative of FINRA requirements. Specifically, in addition to the
excluded rules described above,\19\ the Exchange does not propose to
apply the following rules to Limited Underwriting Members at this time
because they are unrelated to underwriting activity:
---------------------------------------------------------------------------
\18\ See Release No. 99846, 89 FR at 21631.
\19\ See note 15, supra.
---------------------------------------------------------------------------
<bullet> Rules 1P-13P govern trading on the Pillar trading
platform, including the listing of exchange traded products. These
rules are not relevant to underwriting activity;
<bullet> Rules 1-18 \20\ govern various aspects of Exchange
operations that are not relevant to under underwriting activity, with
the exception of Rule 2B.1, discussed below. The remaining rules are
either not applicable to trading on Pillar or concern trading activity
(Rules 3, 12, 17 and 18), are definitional jurisdictional rules that do
not impose obligations on Limited Underwriting Members (Rules 2, 2A, 5-
11), or were rescinded (Rule 15B(T);
---------------------------------------------------------------------------
\20\ There is no Rule 19.
---------------------------------------------------------------------------
<bullet> Rules 20-28 are miscellaneous rules that are not relevant
to underwriting activity. Specifically, Rule 20 is reserved; Rules 21
and 22 govern Board of Directors disqualification requirements; Rules
23 and 24 concern time zones and trading hours; Rules 25 addresses
Exchange liability for legal costs; Rule 26 was rescinded; Rule 27
concerns Exchange regulatory cooperation agreements; and Rule 28
concerns employee fingerprint requirements;
<bullet> Rules 35-38 (Access to and Communications with the Floor)
govern requirements and limitations for members and member
organizations on the Floor, which are not relevant to the activities of
Limited Underwriting Members due to their lack of access to trading on
the Exchange;
<bullet> Rules 45-299C (Dealing and Settlements) relate to trading
and settlement issues on the Exchange, which are similarly not relevant
to the non-trading activities of Limited Underwriting Members;
<bullet> Rules 300-324 (Admission of Members), with the exception
of Rule 308 and 309 governing acceptability proceedings and collection
of and failure to pay Exchange fees discussed above. Proposed Rule 310
would govern Limited Underwriting Members while the other rules
governing trading licenses (Rule 300) and qualification and Floor
access rules applicable to members and member organizations engaged in
trading on the Exchange would be inapplicable to Limited Underwriting
Members and generally duplicative of relevant FINRA membership
requirements;
<bullet> Rules 325-465 (Operation of Member Organizations) govern
capital requirements and the operation of a member organization and its
offices and employees, including continuing education requirements for
registered persons (Rule 345A), that are not relevant to the activities
of Limited Underwriting Members and generally duplicative of relevant
FINRA membership requirements.\21\ Rule 346 governing statutory
disqualification and Rule 345.14 regarding payment of fees would apply
to Limited Underwriting Members as discussed above;
---------------------------------------------------------------------------
\21\ See e.g., FINRA Rules 1210 (Registration Requirements) and
1240 (Continuing Education). The Exchange has harmonized its
continuing education requirements and related registration
requirements with FINRA's rules. See Securities Exchange Act Release
No. 95061 (June 7, 2022), 87 FR 35806 (June 13, 2022) (SR-NYSE-2022-
23).
---------------------------------------------------------------------------
<bullet> Rules 471-474B (Communications with the Public) govern
approval and communication of research reports by member organizations.
Limited Underwriting Members would be subject to similar rules directly
by virtue of their FINRA membership; \22\
---------------------------------------------------------------------------
\22\ See e.g., FINRA Rule 2210 (Communications with the Public).
---------------------------------------------------------------------------
<bullet> Rules 496-501A govern listing and delisting requirements
for listed companies. All of the rules have been removed except Rule
497, which governs additional requirements for listed securities issued
by Intercontinental Exchange, Inc., or its affiliates and is not
relevant to underwriting activity;
<bullet> Rules 600A-639 (Arbitration Rules) relate to disputes,
claims or controversies between or among member organizations and/or
associated persons. The rules only apply to NYSE arbitration cases
pending prior to the effective date of the consolidation of the member
firm regulation function of NYSE Regulation, Inc. with the National
Association of Securities Dealers, Inc. in 2007, and are thus
inapplicable to Limited Underwriting Members; \23\
---------------------------------------------------------------------------
\23\ See Securities Exchange Act Release No. 56208 (August 6,
2007), 72 FR 45077, 45077-78 (August 10, 2007) (SR-NYSE-2007-48).
---------------------------------------------------------------------------
<bullet> Rules 1210-1230 (Registration) govern qualification,
registration and continuing education requirements applicable to
members or member organizations. These rules are based on and are
substantially similar to FINRA Rules 1210-1230, and are thus generally
duplicative of relevant FINRA membership requirements; \24\ and
---------------------------------------------------------------------------
\24\ See Securities Exchange Act Release No. 84336 (October 2,
2018), 83 FR 50727 (October 9, 2018) (SR-NYSE-2018-44).
---------------------------------------------------------------------------
<bullet> Rules 1400-1401 (Trading of Debt Securities) set forth
trading rules for debt securities on the Exchange, which are not
relevant to the activities of Limited Underwriting Members.
Proposed Rule 310 would include two supplementary material.
First, Rule 310, Supplementary Material .01 would provide that,
consistent with the definition of ``member'' in the Securities Exchange
Act of 1934, a Limited Underwriting Member agrees to be regulated by
the Exchange and is subject to the jurisdiction of the Exchange for
purposes of interpreting and applying the above rules to Limited
Underwriting Members and their associated persons.
Second, proposed Rule 310, Supplementary Material .02 would provide
that, for the purposes of this rule, the term ``associated person''
shall have the same meaning as the terms ``person associated with a
member'' or ``associated person of a member'' as defined in Article I
(rr) of the FINRA ByLaws.
The Exchange would avoid applying any Exchange rules not specified
in proposed Rule 310(c)(1). As previously noted, the Exchange does not
propose to apply rules that would apply to member organizations, such
as registration, qualification, and continuing education requirements,
including requirements
[[Page 17112]]
for persons engaged in the securities business of a member, that Nasdaq
applies to its Limited Underwriting Members and their associated
persons. Further, the Exchange does not propose to apply the Rule 6800
Series to Limited Underwriting Members because those govern
consolidated audit trail compliance and would not apply to underwriting
activity. The Exchange's arbitration rules, which only apply to NYSE
arbitration cases pending prior to 2007, would also be inapplicable to
Limited Underwriting Members. The additional Exchange rules that
Limited Underwriting Members would not be subject to under the proposal
primarily relate to trading activity and are, therefore, not relevant
to the activities of Limited Underwriting Members due to their lack of
access to trade on the Exchange. While there are additional rules that
it could propose to apply to Limited Underwriting Members, the Exchange
only proposes a limited ruleset intended primarily to provide the
Exchange with the authority to require information directly from the
Limited Underwriting Members and enhance its tools for oversight with
respect to the role the underwriter plays in connection with a company
listing on the Exchange. The Exchange does not intend to create
comprehensive rules to regulate underwriting activity.
In addition, the Exchange would impose a new requirement in its
Listed Company Manual based on Nasdaq Rule 5210(l)(ii) in a new Section
108.00 requiring each Company applying for initial listing in
connection with a transaction involving an underwriter to have a
principal underwriter that is a member organization as defined in Rule
2 of the rules of the Exchange or a Limited Underwriting Member, as
defined in Rule 2(k) of the rules of the Exchange. In proposed Section
108.00(i), the Exchange would also specify that ``principal
underwriter'' shall have the same definition used in Rule 405
promulgated under the Securities Act of 1933.\25\ Proposed Section
108.00(i) would be substantially similar to Nasdaq Rule 5210(l)(i).
---------------------------------------------------------------------------
\25\ See note 7, supra.
---------------------------------------------------------------------------
The rule would cross reference the definition of ``Limited
Underwriting Member,'' which would be added to Rule 2(k) and would
define Limited Underwriting Member to mean a registered broker or
dealer that is subject to the jurisdiction of the Exchange solely for
purposes of Rule 310 and the rules enumerated in Rule 310(c)(1).
Finally, the Exchange would establish fees for Limited Underwriting
Members pursuant to a separate fee filing. The Exchange proposes that
the instant filing would become operative 30 days following the
effective day of the fee filing. The Exchange will announce the
implementation date by Trader Update.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\26\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\27\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in 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 by strengthening the
Exchange's ability to oversee and police its marketplace. In addition,
the Exchange believes that the proposed rule change is designed to
provide a fair procedure for prohibiting or limiting any person with
respect to access to services offered by the Exchange or a member
thereof consistent with the objectives of Section 6(b)(7).\28\
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
\28\ 15 U.S.C. 78f(b)(7).
---------------------------------------------------------------------------
As discussed above, the proposal would create a new category of
market participant for registered broker-dealers with a disciplinary
history satisfactory to the Exchange that seek to act as a principal
underwriter of a transaction in connection with which an issuer seeks
to be admitted to listing on the Exchange. Firms approved by the
Exchange to operate as Limited Underwriting Members on the Exchange
would not have rights to transact on the Exchange. Rather, such firms
would submit to limited Exchange jurisdiction for the purpose of acting
as an underwriter on the Exchange. The Exchange believes that this is
reasonable because proposed Limited Underwriting Members would not be
admitted to the Exchange for trading or any other purpose than acting
as an Initial Listing Principal Underwriter.
As proposed, the Exchange would apply only those rules specified in
proposed Rule 310(c)(1) to Limited Underwriting FINRA Members, which
would include fees, business conduct standards, supervision,
notification requirements for offering participants as well
disciplinary rules. The Exchange believes that subjecting the proposed
new category of principal underwriters to Exchange jurisdiction for
such specified rules supports fair and orderly markets, which protects
investors and the public interest, consistent with Section 6(b)(5) of
the Act.\29\ In this regard, the proposal would subject Limited
Underwriting Members to the Exchange's disciplinary rules, which would
provide the Exchange with the authority to require documents and
information from such underwriters. In addition, these underwriters
would be subject to various conduct rules governing their activities on
the Exchange, including the requirements to observe just and equitable
principles of trade, establish and maintain a system to supervise the
activities of associated persons, and to test and verify that the
system is reasonably designed. The Exchange believes that imposing
these rules, as well as the other rules included in proposed Rule 310,
on principal underwriters will strengthen the Exchange's ability to
carry out its oversight responsibilities and deter potential violative
conduct, such as fraud or manipulation, thereby protecting investors
and the public interest. Further, the Exchange believes that it is
appropriate and consistent with the protection of investors and the
public interest that the rules specifically excluded from proposed Rule
310 not be imposed on proposed Limited Underwriting Members because
those rules are, as discussed above, either inapplicable to the
activities a principal underwriter would be permitted to conduct on the
Exchange and/or proposed Limited Underwriting Members would be subject
to similar rules by virtue of their FINRA membership. As noted above,
proposed Limited Underwriting Members must at all times be FINRA
members in good standing, and their associated persons must at all
times properly qualified and registered under FINRA rules, rendering
them at all times subject to FINRA rules, all applicable rules of the
Commission and the rules of any other self-regulatory organization of
which it is a member.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Finally, the Exchange believes that the proposed rule change is not
designed to permit unfair discrimination between customers, issuers,
brokers and dealers, consistent with Section 6(b)(5) \30\ of the Act.
The Exchange's proposal to subject Limited Underwriting Members to a
limited set of rules and exclude certain rules applicable to member
organizations is not designed to permit unfair discrimination between
brokers and dealers because being permitted to act as an underwriter on
the Exchange
[[Page 17113]]
under the proposed arrangement does not confer the same benefits as a
traditional Exchange membership under Rule 2(b)(i), and, therefore,
does not warrant application of the same ruleset. Moreover, all Limited
Underwriting Members would be subject to the same specified rules set
forth in proposed Rule 310(c)(1). In addition, the proposed changes
will apply equally to all similarly situated Limited Underwriting
Members, and therefore are not designed to permit unfair
discrimination. Similarly, the proposed changes to the Listed Company
Manual will apply equally to all similarly situated companies applying
for initial listing in connection with a transaction involving an
underwriter on the Exchange and therefore, are thus not designed to
permit unfair discrimination.
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 proposed rule change is
not intended to address competitive issues but rather is intended to
apply standards and qualifications to permit certain principal
underwriters to access to the Exchange for the sole purpose of acting
as a principal underwriter of an underwritten public offering in
connection with which a company seeks to list on the Exchange and to
apply a limited ruleset consistent with the purpose of a limited
underwriting membership that does not confer any access to trading on
the Exchange and only permits such member to act as a principal
underwriter for a company applying to initially list on the Exchange.
As noted above, although the Exchange proposes to subject Limited
Underwriting Members to a limited set of rules, being permitted to act
as an underwriter on the Exchange under the proposed arrangement and
for no other purpose does not confer the same benefits as a standard
Exchange membership and does not warrant application of the same
ruleset. Applying a limited ruleset to proposed Limited Underwriting
Members is therefore justified. All Limited Underwriting Members would
be subject to the same specified rules. Likewise, the proposed changes
to the Listed Company Manual will apply equally to all similarly
situated companies applying for initial listing in connection with a
transaction involving an underwriter on the Exchange. Moreover, the
Exchange does not expect that its proposal will have an adverse impact
on competition among exchanges for members. The Exchange believes the
proposed rule changes, taken together, will strengthen the Exchange's
ability to carry out its role and responsibilities as a self-regulatory
organization and deter potential violative conduct. As such, the
Exchange does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
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 from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \31\ and Rule 19b-
4(f)(6) thereunder.\32\
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
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.
---------------------------------------------------------------------------
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 change 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#f082859c95dd939f9d9d959e8483b0839593de979f86"><span class="__cf_email__" data-cfemail="a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1">[email protected]</span></a>. Please include
file number SR-NYSE-2025-14 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-2025-14. 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-2025-14 and should be
submitted on or before May 14, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------
\33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06910 Filed 4-22-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 23, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.