Notice2025-13470
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Establishing Limited Underwriting Members
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
July 18, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 136 (Friday, July 18, 2025)</title>
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[Federal Register Volume 90, Number 136 (Friday, July 18, 2025)]
[Notices]
[Pages 34059-34067]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-13470]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103462; File No. SR-NYSEAMER-2025-40]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change
Establishing Limited Underwriting Members
July 15, 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 July 7, 2025, 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 (1) a new Section 208 (``Principal
Underwriter'') in the NYSE American Company Guide 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; (2) amendments to Rule 2--
Equities and a new Rule 310--Equities 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; and
(3) to delete certain rule references in Section 2.02 of the operating
agreement and make related technical, conforming and non-substantive
changes. 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 208 (``Principal Underwriter'')
of the NYSE American Company Guide (the ``Guide''), 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--Equities (``Member,''
``Membership,'' ``Member Firm,'' etc.) or a Limited Underwriting
Member, as defined in proposed Rule 2(k)--Equities. The Exchange also
proposes
[[Page 34060]]
amendments to Rule 2--Equities and a new Rule 310--Equities 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 208 of
the Guide. Proposed Section 208 is based on Section 108.00 (Principal
Underwriter) in the New York Stock Exchange (``NYSE'') Listed Company
Manual (``NYSE Manual'') and proposed Rule 310--Equities is based on
NYSE Rule 310 (Limited Underwriting Members and Associated Persons),
which in turn were based on Rule 5210 and General 3, Rule 1031 of the
rules of The Nasdaq Stock Market LLC (``Nasdaq''), respectively.
Finally, the Exchange proposes to delete certain rule references in
Section 2.02 of the Thirteenth Amended and Restated Operating Agreement
of the Exchange (the ``Operating Agreement'') and make related
technical, conforming and non-substantive changes.
Background and Proposed Rule Change
In 2024, Nasdaq 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 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 American
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.
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\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 and its
affiliate NYSE published a joint regulatory memorandum 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 American RM-22-10 and NYSE RM-22-18, dated November
17, 2022, available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-american/rule-interpretations/2022/NYSER_Reg_Memo_-_Regulatory_Scrutiny_in_Connection_with_IPOs_">https://www.nyse.com/publicdocs/nyse/markets/nyse-american/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.
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The Exchange's affiliate NYSE recently adopted a new Section 108.00
of the NYSE 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 NYSE
Rule 2 or a Limited Underwriting Member, as defined in NYSE Rule 2(k),
as well as a new NYSE Rule 310 establishing a category of market
participant that is a FINRA member and that would qualify as a
``Limited Underwriting Member'' for purposes of proposed Section 108.00
of the NYSE Manual. Section 108.00 of the NYSE Manual was based on
Nasdaq Rule 5210 and NYSE Rule 310 was based on General 3, Nasdaq Rule
1031.\7\
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\7\ See Securities Exchange Act Release No. 102877 (April 17,
2025), 90 FR 17107 (April 23, 2025) (SR-NYSE-2025-14) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change of New
Section 108.00 in the NYSE Listed Company Manual) (``Release No.
102877'').
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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 \8\ (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 and
NYSE rules, 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)--Equities, insofar as only a
registered broker or dealer qualified and approved as a ``member
organization'' pursuant to Rule 311--Equities (Formation and Approval
of Member Organizations) can acquire and hold an Exchange-issued equity
trading permit (``ETP'') under Rule 2.2E (Qualification of
Applicants).\9\
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\8\ ``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.
\9\ An ``ETP Holder'' means a member organization that has been
issued an ETP. See Rule 1.1E (Definitions). A Limited Underwriting
Member cannot be an ETP Holder.
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Rather, Limited Underwriting Members would fall within Rule
2(b)(ii)--Equities, 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.\10\ For the
avoidance of doubt, the Exchange proposes to amend Rule 2(b)(ii)--
Equities to make explicit that member organization as defined therein
would include a Limited Underwriting Member.\11\
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\10\ 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)--Equities, 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--Equities, Supplementary
Material .01, infra. Under Rule 2(a)--Equities, a ``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
floor of the Exchange or any facility thereof.
\11\ The 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).
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To effectuate these changes, the Exchange would amend Rule 2--
Equities as follows. First, the Exchange would add the clause ``,
including Limited Underwriting Members as defined herein'' at the end
of Rule 2(b)(ii)--Equities. As amended, Rule 2(b)(ii)--Equities would
provide (additions italicized):
The term ``member organization'' also includes any registered
broker or dealer which does not own a trading license and
[[Page 34061]]
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--Equities and the rules
enumerated in Rule 310(c)(1)--Equities. The proposed definition is the
same as NYSE Rule 2(k) and 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)--Equities render it unnecessary for the
Exchange to adopt the language from the Nasdaq rule.
The Exchange would also add a new Rule 310--Equities 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 342(e) (Association of Members, Member Organizations, and Persons
Associated With Member Organizations) of the Office Rules.\12\ The
proposed language is the same as NYSE Rule 310(a)(1) and 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.\13\ 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)--
Equities must be identified on the application. Like the NYSE and
Nasdaq rule, any person shall be eligible to become an Associated
Person of a Limited Underwriting Member, except such persons as are
excluded under Rule 342(e) of the Office Rules.\14\ Once again, the
proposed language is the same as NYSE Rule 310(a)(ii) and substantially
the same as General 3, Nasdaq Rule 1031(a)(2) and (c)(2).
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\12\ See proposed Rule 310(a)(i)--Equities (Eligibility to
Become Limited Underwriting Members and Associated Persons).
\13\ In order to make a determination of the firm's eligibility
for purposes of proposed Rule 310(a)--Equities, 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 Rule 310(b)--
Equities would be similarly identified and vetted as part of the
application process. Pursuant to proposed Rule 310(c)(2)--Equities
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.
\14\ See proposed Rule 310(a)(ii)--Equities.
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Pursuant to proposed Rule 310(b)--Equities (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 the same as NYSE Rule 310(b) and similar to Nasdaq Rule General 3,
Nasdaq Rule 1031(b).
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 the NYSE and 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, like its affiliate NYSE, 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)--Equities (Rules Applicable to Limited Underwriting Members)
that Limited Underwriting Members and their associated persons would be
subject only to the following rules:
Definitions and Powers of the Board of Directors
General and Floor Rules
Definitions
<bullet> Rule 0 (Regulation of the Exchange and its Member
Organizations)
<bullet> Rule 1 (Affiliation between Exchange and a Member
Organization)
Part I--General Rules
<bullet> Rule 16 (Business Conduct)
<bullet> Rule 41 (Collection of and Failure to Pay Exchange Fees)
Office Rules
Section 4. Employees and Admission of Members and Member Organizations
<bullet> Rule 342(e) (Association of Members, Member Organizations, and
Persons Associated With Member Organizations)
Section 10. Disciplinary Rules
<bullet> Rules 8000-8330 (Disciplinary Rules (Investigations and
Sanctions)), with the exception of Rule 8211 (Automated Submission of
Trading Data Requested by the Exchange)
<bullet> Rules 9000-9870 (Disciplinary Rules (Procedural)) with the
exception of Rule 9557 (Procedures for Regulating Activities Under
Rules 470, 471, 4110--Equities, 4120--Equities and 4130--Equities
Regarding a Member or Member Organization Experiencing Financial or
Operational Difficulties)
Section 16. Exchange Distributions and Exchange Acquisitions
<bullet> Rule 570A (Notification Requirements for Offerings of Listed
Securities)
Section 18. Offenses and Sanctions Guidelines
<bullet> Rule 600 (Other Offenses)
Equities Rules
<bullet> Rule 2B--Equities (No Affiliation between Exchange and any
Member Organization)
[[Page 34062]]
<bullet> Rule 308--Equities (Acceptability Proceedings)
<bullet> Rule 2010--Equities (Standards of Commercial Honor and
Principles of Trade)
<bullet> Rule 2020--Equities (Use of Manipulative, Deceptive or Other
Fraudulent Devices)
<bullet> Rule 3110--Equities (Supervision)
<bullet> Rule 3120--Equities (Supervisory Control Systems)
<bullet> Rule 3220--Equities (Influencing or Rewarding Employees of
Others)
<bullet> Rule 5190--Equities (Notification Requirements for Offering
Participants)
<bullet> Rule 6140--Equities (Other Trading Practices)
Proposed Rules Applicable to Limited Underwriting Members
The Exchange proposes to apply Rule 0 (Regulation of the Exchange
and its Member Organizations) to Limited Underwriting Members 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 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 16 (Business Conduct) so that
Limited Underwriting Members would be subject at all times to the
requirement to adhere to the principles of good business practice in
the conduct of business affairs.
The Exchange proposes applying Rule 41 to facilitate the Exchange's
ability to collect fees for Limited Underwriting Members.\15\
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\15\ The Exchange proposes to establish fees for Limited
Underwriting Members in a separate rule filing once proposed Rule
310--Equities is operative. Proposed Limited Underwriting Members
would be subject to the same requirements of Rule 41(b) of the
Office Rules 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.
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The Exchange would apply Rule 342(e) (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)--Equities, registered brokers or
dealers subject to Rule 342(e) would be ineligible to become a Limited
Underwriting Member. Under proposed Rule 310(a)(ii)--Equities, persons
subject to Rule 342(e) would similarly be ineligible to be associated
with a Limited Underwriting Member. Applying Rule 342(e) 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.
Rules 8000-8330 and Rules 9000-9870 \16\ 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 470, 471, 4110--
Equities, 4120--Equities and 4130--Equities. Rules 470 and 4110--
Equities relate to member organizations capital compliance; Rule 471
sets forth restrictions to business expansion while certain net capital
conditions continue to exist; and Rules 4120--Equities and 4130--
Equities relate to carrying or clearing members. Rule 8211 and Rule
9557 are thus not relevant to underwriting activity.
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\16\ These rules, as well as Rule 600 discussed below, also
apply to ``covered persons.'' NYSE American Rule 9120(g) defines
``covered person'' to mean a ``member, principal executive, approved
person, registered or non-registered employee of a member
organization or an ATP Holder, 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. 77241 (February 26,
2016), 81 FR 11311, 11318 (March 3, 2016) (SR-NYSEMKT-2016-30)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Adopting Investigation, Disciplinary, Sanction, and Other
Procedural Rules That Are Modeled on the Rules of the New York Stock
Exchange LLC and Certain Conforming and Technical Changes). Under
NYSE American Rule 2(a)--Equities, 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.
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Rule 570A (Notification Requirements for Offerings of Listed
Securities) requires a member or member organization that acts as the
lead underwriter of any offering in a listed security to make certain
notifications to the Exchange within specified timeframes.
Rule 600 (Other Offenses) of the Office Rules provides that a
member organization, among others, 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\
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\17\ See Rule 600(4), (6) & (7), respectively. Member
organizations also violate Rule 600 if they violate any provision of
the Act 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)).
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Rule 2B--Equities (No Affiliation between Exchange and any 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--Equities (Acceptability
Proceedings) to proposed Limited Underwriting Members in order to
permit challenges to Exchange disapprovals of Limited Underwriting
Member applications.
The Exchange also proposes to apply certain rules to Limited
Underwriting Members and their associated persons that set forth the
general standards by which members, member organizations must abide.
Specifically, Rule 2010--Equities 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,
[[Page 34063]]
Rule 2020--Equities 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.
Rule 3110--Equities 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--Equities 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--Equities 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--Equities 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--Equities, 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--Equities to Limited
Underwriting Members would be appropriate given the important role Rule
5190--Equities plays in maintaining the quality of and public
confidence in the Exchange's marketplace and the initial public
offering (``IPO'') process and the prevention of fraudulent and
manipulative acts and practices.
Finally, Rule 6140--Equities 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 designated security unless such joint account is promptly
reported to the Exchange.
Proposed Rule 310(c)(1)--Equities 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)--Equities 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.
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 the NYSE and 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.
---------------------------------------------------------------------------
\18\ See Release No. 99846, 89 FR at 21631; Release No. 102877,
90 FR at 17111.
---------------------------------------------------------------------------
Rules Inapplicable to Limited Underwriting Members
The Exchange does not propose to apply the following Rules to
Limited Underwriting Members at this time because they relate to
trading, settlement and/or operational matters on the Exchange and/or
are otherwise not relevant to underwriting activity:
General and Floor Rules Under Definition and Powers of the Board of
Directors
<bullet> Definitions (Rules 0-37)
<bullet> Part I-General Rules (Rules 3-31, 40-41, 50, 60-65) \19\
---------------------------------------------------------------------------
\19\ The Rules in Part II were deleted.
---------------------------------------------------------------------------
Office Rules
Section 1 (Organizations)
<bullet> Rules 300-319
Section 2 (Member Offices)
<bullet> Rules 320-324
Section 3 (Fidelity Bonds)
<bullet> Rule 330
Section 4 (Employees and Admissions of Members and Member
Organizations)
<bullet> Rules 340-349
Section 4A (Registration) \20\
---------------------------------------------------------------------------
\20\ Rules 300-319 (Organizations), Rules 320-324 (Member
Offices), Rules 340-349 (Employees and Admission of Members and
Member Organization), Rules 350-359B (Admission of Members and
Member Organizations) and Rules 2.1210-2.1230 (Registration) govern
the operation of a member organizations and its offices and
employees, including continuing education requirements for
registered persons (Rule 341A), that are not relevant to the
activities of Limited Underwriting Members and generally duplicative
of relevant FINRA membership requirements. 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 2.1210-2.1230
Section 5 (Joint Accounts)
<bullet> Rules 360-365
Section 6 (Collection of Commission and Fees)
[[Page 34064]]
<bullet> Rules 380-401
Section 7 (Conduct of Accounts)
<bullet> Rules 410-432
Section 8 (Reports of Financial Condition)
<bullet> Rules 440-449
Section 9 (Margin Rules)
<bullet> Rules 460-472
Section 10. Disciplinary Rules
<bullet> Rule 8211 (Automated Submission of Trading Data Requested by
the Exchange)
<bullet> Rule 9557 (Procedures for Regulating Activities Under Rules
470, 471, 4110--Equities, 4120--Equities and 4130--Equities Regarding a
Member or Member Organization Experiencing Financial or Operational
Difficulties)
Section 11. Advertising
<bullet> Rules 480-485
Section 12. Wires and Other Means of Communication
<bullet> Rules 500-507
Section 13. Reports
<bullet> Rules 520-521 \21\
---------------------------------------------------------------------------
\21\ Rules 466--Equities--Rule 471--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
Section 14. Secondary Distributions
<bullet> Rules 550-552 \22\
---------------------------------------------------------------------------
\22\ Rule 560 under Section 15 (Special Offerings and Special
Bids) was rescinded.
---------------------------------------------------------------------------
Section 16. Exchange Distributions and Exchange Acquisitions
<bullet> Rule 570A \23\
---------------------------------------------------------------------------
\23\ Rule 570 was rescinded.
---------------------------------------------------------------------------
Section 17. Proxies
<bullet> Rules 574-585
Rule 6800. Consolidated Audit Trail Compliance Rule
<bullet> Rules 6810-6900
Arbitration Rules
<bullet> Rules 600-624
Contracts in Securities Rules
Section 1. General Rules on Securities Contracts
<bullet> Rules 700-704
Section 2. Exchange of Tickets and Comparisons
<bullet> Rules 719-731A
Section 3. Delivery of Securities
<bullet> Rules 748-778
Section 4. Closing Contracts
<bullet> Rules 780-798
Section 5. Marking to the Market and Mutual Deposits
<bullet> Rules 810-817
Section 6. Dividends and Interest
<bullet> Rules 830-832
Section 7. Reclamation
<bullet> Rule 850
Section 7A. Interest--Added to Contract Price
<bullet> Rules 858-859
Section 8. Money and Security Loans
<bullet> Rules 860-890
Equities Rules
<bullet> Rule 0--Equities (Applicability and Phase-In);
<bullet> Rules 1E--13E (Cash Equities Pillar Platform Rules);
<bullet> Rule 2--Equities--Rule 14--Equities (Definition of Terms);
<bullet> Rule 2A--Equities (Jurisdiction);
<bullet> Rule 22--Equities (Disqualification Because of Personal
Interest);
<bullet> Rule 56--Equities (Unit of Trading--Rights);
<bullet> Rule 63--Equities--Rule 86--Equities (Auction Market-Bids and
Offers); \24\
---------------------------------------------------------------------------
\24\ Rules 500-507 (Wires and Other Means of Communication) were
rescinded.
---------------------------------------------------------------------------
<bullet> Rule 137--Equities (Written Contracts);
<bullet> Rule 137A--Equities (Samples of Written Contracts);
<bullet> Rule 138--Equities (Give-Ups);
<bullet> Rule 139--Equities (Recording);
<bullet> Rule 140--Equities (Members Closing Contracts--Conditions);
<bullet> Rule 141--Equities (Fail to Deliver' Confirmations);
<bullet> Rule 142--Equities (Effect on Contracts of Errors in
Comparison, etc.); \25\
---------------------------------------------------------------------------
\25\ Rule 143- Equities--Rule 164--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 165--Equities--Rule 168--Equities (Marking to Market);
\26\
---------------------------------------------------------------------------
\26\ Rule 167--Equities--Rule 174--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 175--Equities--Rule 227--Equities (Settlement of
Contracts); \27\
---------------------------------------------------------------------------
\27\ Rule 228--Equities--Rule 234--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rules 236--Equities--251--Equities (Dividends, Interest,
Rights, etc.);
<bullet> Rule 255--Equities--Rule 259--Equities (Due-Bills); \28\
---------------------------------------------------------------------------
\28\ Rule 260--Equities--Rule 264--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 265--Equities--Rule 275--Equities (Reclamation); \29\
---------------------------------------------------------------------------
\29\ Rule 274--Equities and Rule 276--Equities--Rule 279--
Equities are marked ``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 280--Equities--Rule 295--Equities (Closing Contracts);
<bullet> Rule 296--Equities (Liquidation of Securities Loans and
Borrowings); \30\
---------------------------------------------------------------------------
\30\ Rule 295--Equities and Rule 297--Equities--Rule 299--
Equities are marked ``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 297--Equities--Rule 299C--Equities (Miscellaneous Floor
Procedure);
<bullet> Rule 304--Equities--Rule 324--Equities (Admission of Members);
<bullet> Rule 341--Equities--Rule 387--Equities (Offices and
Employees);
<bullet> Rule 402--Equities--Rule 412--Equities (Conduct of Accounts);
\31\
---------------------------------------------------------------------------
\31\ Rule 403--Equities is marked ``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 416--Equities--Rule 422--Equities (Financial Statements
and Reports);
<bullet> Rules 430--Equities--434--Equities (Margins);
<bullet> Rule 435--Equities (Miscellaneous Prohibitions); \32\
---------------------------------------------------------------------------
\32\ Rule 436--Equities--Rule 437--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 440C--Equities (Short Sale Borrowing and Delivery
Requirements);
<bullet> Rule 450--Equities--Rule 459--Equities (Proxies);
<bullet> Rule 465--Equities (Company Report to Stockholders); \33\
---------------------------------------------------------------------------
\33\ Rules 466--Equities--Rule 471--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 471--Equities--Rule 496--Equities (Communications With
The Public); \34\
---------------------------------------------------------------------------
\34\ It should be noted that Limited Underwriting Members would
be subject to similar rules directly by virtue of their FINRA
membership. See e.g., FINRA Rule 2210 (Communications with the
Public). Note that Rule 473--Equities--Rule 496--Equities are marked
``Reserved.''
---------------------------------------------------------------------------
<bullet> Rule 497--Equities (Additional Requirements for Listed
Securities Issued by ICE or its Affiliates);
<bullet> Rule 2040--Equities (Payments to Unregistered Persons);
<bullet> Rule 2070--Equities (Transactions Involving Exchange
Employees);
<bullet> Rule 2090--Equities (Know Your Customer);
<bullet> Rule 2111--Equities (Suitability);
<bullet> Rule 2150--Equities (Improper Use of Customers' Securities or
Funds; Prohibition Against Guarantees and Sharing in Accounts);
<bullet> Rule 2210--Equities (Communications with the Public);
<bullet> Rule 2212--Equities (Use of Investment Companies Rankings in
Retail Communications);
<bullet> Rule 2232--Equities (Customer Confirmations);
<bullet> Rule 2262--Equities (Disclosure of Control Relationship with
Issuer);
<bullet> Rule 2266--Equities (SIPC Information);
<bullet> Rule 2269--Equities (Disclosure of Participation or Interest
in Primary or Secondary Distribution);
<bullet> Rule 3130--Equities (Annual Certification of Compliance and
Supervisory Processes);
<bullet> Rule 3150--Equities (Holding of Customer Mail);
<bullet> Rule 3170--Equities (Tape Recording of Registered Persons by
Certain Firms);
<bullet> Rule 3220--Equities (Influencing or Rewarding Employees of
Others);
<bullet> Rule 3230--Equities (Telemarketing);
<bullet> Rule 3240--Equities (Borrowing From or Lending to Customers);
<bullet> Rule 3250--Equities (Designation of Accounts);
<bullet> Rule 3270--Equities (Outside Business Activities of Registered
Persons);
<bullet> Rule 3310--Equities (Anti-Money Laundering Compliance
Program);
<bullet> Rule 4110--Equities (Capital Compliance);
<bullet> Rule 4120--Equities (Regulatory Notification and Business
Curtailment);
[[Page 34065]]
<bullet> Rule 4130--Equities (Regulation of Activities of Section 15C
Member Organizations Experiencing Financial and/or Operational
Difficulties);
<bullet> Rule 4140--Equities (Audit);
<bullet> Rule 4150--Equities (Guarantees by, or Flow Through Benefits
for, Member Organizations);
<bullet> Rule 4311--Equities (Carrying Agreements);
<bullet> Rule 4360--Equities (Fidelity Bonds);
<bullet> Rule 4370--Equities (Business Continuity Plans and Emergency
Contact Information);
<bullet> Rule 4521--Equities (Notifications, Questionnaires and
Reports);
<bullet> Rule 4522--Equities (Periodic Security Counts, Verifications
and Comparisons);
<bullet> Rule 4523--Equities (Assignment of Responsibility for General
Ledger Accounts and Identification of Suspense Accounts);
<bullet> Rule 4530--Equities (Reporting Requirements);
<bullet> Rule 4560--Equities (Short-Interest Reporting);
<bullet> Rule 5210--Equities (Publication of Transactions and
Quotations);
<bullet> Rule 5220--Equities (Disruptive Quoting and Trading Activity
Prohibited);
<bullet> Rule 5290--Equities (Order Entry and Execution Practices); and
<bullet> Rule 5320--Equities (Prohibition Against Trading Ahead of
Customer Orders).
Proposed Supplementary Material
Proposed Rule 310--Equities would include two supplementary
material.
First, Rule 310--Equities, 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--Equities, 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)--Equities. 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 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 of the Office
Rules to Limited Underwriting Members because those govern consolidated
audit trail compliance and would not apply to underwriting activity.
The Exchange's arbitration rules would apply to Limited Underwriting
Members by virtue of their FINRA membership and would thus be
duplicative of FINRA requirements. 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
Guide based on Nasdaq Rule 5210(l)(ii) and Section 108 of the NYSE
Listed Company Manual in a new Section 208 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--Equities or a Limited Underwriting
Member, as defined in Rule 2(k)--Equities. In proposed Section 208(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.\35\ Proposed Section 208(i) would be
substantially similar to Nasdaq Rule 5210(l)(i).
---------------------------------------------------------------------------
\35\ See note 8, supra.
---------------------------------------------------------------------------
The rule would cross reference the definition of ``Limited
Underwriting Member,'' which would be added to Rule 2(k)--Equities 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--Equities and the rules enumerated in Rule
310(c)(1)--Equities.
Proposed Changes to the Operating Agreement
The Exchange would amend Operating Agreement Section 2.02 (Rules;
Supervision of Member Organizations) to remove references to Rules 2,
18, 24, and 25.
The first sentence of Section 2.02 provides that the Board shall
have general supervision over members and member organizations.
Parentheticals in that sentence say that ``members'' and ``member
organizations'' are defined in Rules 18 and 24, respectively, and
``approved persons'' is defined in Rule 25. However, Rules 18, 24 and
25 have been deleted. The references are therefore obsolete and are
proposed to be deleted and not replaced so that the Operating Agreement
would remain correct even if the numbering of the Rules changed.
The second sentence of Section 2.02 sets forth certain powers of
the Board. In it, it refers to the definition of a ``designated market
maker'' in ``Rule 2 of the Company Rules.'' Although the reference is
correct, the Exchange would similarly delete it for the sake of
consistency and so that the Operating Agreement would remain correct
even if the numbering of the Rules changed.
The proposed changes to Section 2.02 of the Operating Agreement
would be consistent with the same section in the operating agreement of
the New York Stock Exchange LLC, which does not include any references
to rules of the New York Stock Exchange.\36\
---------------------------------------------------------------------------
\36\ See Fourteenth Amended and Restated Operating Agreement of
New York Stock Exchange LLC, Section 2.02.
---------------------------------------------------------------------------
The Exchange proposes to make the following non-substantive
technical and conforming changes to the title, recitals, and signature
page of the Operating Agreement: \37\
---------------------------------------------------------------------------
\37\ See Securities Exchange Act Release No. 97057 (March 7,
2023), 88 FR 15484 (March 13, 2023) (SR-NYSEAMER-2023-15) (Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend
Article II, Section 2.03(b) of Its Operating Agreement).
---------------------------------------------------------------------------
<bullet> Update references to the ``Thirteenth Amended and Restated
Operating Agreement'' to the ``Fourteenth Amended and Restated
Operating Agreement.''
<bullet> Update the dates in the introduction and signature line.
<bullet> Update the recitals.
Implementation
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
[[Page 34066]]
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,\38\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\39\ 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).\40\
---------------------------------------------------------------------------
\38\ 15 U.S.C. 78f(b).
\39\ 15 U.S.C. 78f(b)(5).
\40\ 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)--Equities to Limited Underwriting FINRA
Members, which would include fees, business conduct standards,
supervision, notification requirements for offering participants and
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.\41\ 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--
Equities, 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--Equities 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.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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) \42\ 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 under the proposed arrangement does not confer the same
benefits as a traditional Exchange membership under Rule 2(b)(i)--
Equities, 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--Equities
(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 Guide 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.
---------------------------------------------------------------------------
\42\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Finally, the proposed changes to the Operating Agreement would
remove impediments to and perfect the mechanism of a free and open
market by removing obsolete references, ensuring that the Operating
Agreement remained correct even if there was a change in the rule
number for the definition of designated market maker, and making non-
substantive technical and conforming changes to the title, recitals and
signature page of the Operating Agreement, thereby ensuring that
persons subject to the Exchange's jurisdiction, regulators, and the
investing public can more easily navigate and understand the governing
documents. The proposed changes to the Operating Agreement also would
not be inconsistent with the public interest and the protection of
investors because investors will not be harmed and in fact would
benefit from increased transparency and clarity, thereby reducing
potential confusion.
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
[[Page 34067]]
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 Guide will apply equally to all similarly
situated companies applying for initial listing in connection with a
transaction involving an underwriter on the Exchange.
The proposed changes to the Operating Agreement are not meant to
have an impact on competition. They are meant solely to remove obsolete
references, ensure that the Operating Agreement remains correct even if
there is a change in the rule number for the definition of designated
market maker, and make non-substantive technical and conforming changes
to the title, recitals, and signature page.
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 \43\ and Rule 19b-
4(f)(6) thereunder.\44\
---------------------------------------------------------------------------
\43\ 15 U.S.C. 78s(b)(3)(A).
\44\ 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#1b696e777e36787476767e756f685b687e78357c746d"><span class="__cf_email__" data-cfemail="b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2025-40 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-2025-40. 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-2025-40 and should
be submitted on or before August 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
---------------------------------------------------------------------------
\45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-13470 Filed 7-17-25; 8:45 am]
BILLING CODE 8011-01-P
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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.