[Federal Register Volume 75, Number 127 (Friday, July 2, 2010)]
[Notices]
[Pages 38576-38579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16106]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62377; File No. SR-NYSEArca-2010-55]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by NYSE Arca, Inc. To Amend the Bylaws of NYSE Euronext To Adopt
a Majority Voting Standard in Uncontested Elections of Directors
June 25, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on June 14, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. 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 is submitting this rule filing in connection with the
proposal of its ultimate parent, NYSE Euronext (the
``Corporation''),\4\ to amend its bylaws (``Bylaws'') to replace the
plurality vote standard for election of directors in uncontested
elections that is currently
[[Page 38577]]
in the Bylaws with a majority vote standard for such elections. The
existing plurality vote standard will be retained in connection with
contested elections for directors. The proposed rule change is
identical to a rule change filed by the New York Stock Exchange LLC
(``NYSE'') that was recently approved by the Commission.\5\ The text of
the proposed rule change is available at the Exchange, the Commission's
Web site at http://www.sec.gov, the Commission's Public Reference Room,
and http://www.nyse.com.
---------------------------------------------------------------------------
\4\ NYSE Arca, a Delaware corporation, is an indirect wholly-
owned subsidiary of NYSE Euronext.
\5\ Securities Exchange Act Release No. 61947 (April 20, 2010),
75 FR 22169 (April 27, 2010) (SR-NYSE-2010-18).
---------------------------------------------------------------------------
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 is submitting this rule filing in connection with the
Corporation's proposal to amend its Bylaws to replace the plurality
vote standard for election of directors in uncontested elections that
is currently in the Bylaws with a majority vote standard for such
elections. Specifically, the Bylaws currently provide that ``directors
shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on
the election of directors.'' Under the Corporation's corporate
governance guidelines previously adopted by the Board of Directors of
the Corporation (``Board''), however, any director nominee in an
uncontested election (being an election in which the number of nominees
equals the number of directors to be elected) who receives a greater
number of ``withheld'' votes than ``for'' votes (including any
``against'' votes if that option were to be made available on the proxy
card) must immediately tender his or her resignation from the Board.
The Board will then decide, through a process managed by the Nominating
and Governance Committee and excluding the nominee in question, whether
to accept the resignation. In a contested election (being an election
in which the number of nominees exceeds the number of directors to be
elected), the unqualified plurality vote standard controls.
Uncontested Election:
The Corporation is proposing to add an explicit majority voting
provision for uncontested director elections to the Bylaws, thereby
replacing the plurality vote standard for election of directors in such
elections that is currently in the Bylaws. The existing plurality vote
standard will be retained in connection with contested elections for
directors. Under the proposed amendment to the Bylaws, the proxy card
would change for an uncontested election, and the stockholders would be
given the choice to vote ``for,'' ``against'' or ``abstain'' with
respect to each director nominee individually.\6\ In such an election,
each director would be elected by the vote of the majority of the votes
cast with respect to such director's election, meaning that the number
of votes cast ``for'' such director's election exceeded the number of
votes cast ``against'' that director's election (with ``abstentions''
not counted as a vote cast either ``for'' or ``against'' such
director's election). In the event that any incumbent director fails to
receive a majority of the votes cast, such director would be required
to tender his or her resignation to the Nominating and Governance
Committee of the Board (or another committee designated by the Board),
and such committee would make a recommendation to the Board as to
whether to accept or reject such resignation or whether other action
should be taken. The Board would then act on the recommendation of such
committee and publicly disclose its decision regarding the tendered
resignation and the rationale behind the decision.
---------------------------------------------------------------------------
\6\ Stockholders are currently given three choices when voting
for a slate of director nominees: They can vote (1) ``for'' all
nominees, (2) ``withheld'' for all nominees or (3) ``withheld'' for
certain nominees and ``for'' the remaining nominees.
---------------------------------------------------------------------------
The proposed amendment to the Bylaws also provides that a director
who tenders his or her resignation as described above will not
participate in the recommendation by the Nominating and Governance
Committee or the Board of Directors action regarding whether to accept
the tendered resignation. In the event that each member of the
Nominating and Governance Committee fails to receive a majority of the
votes cast in the same uncontested election, then the independent
directors who received a majority of the votes cast in such election
must appoint a committee among themselves to consider the tendered
resignation and recommend to the Board whether to accept it. However,
if the only directors who received a majority of the votes cast in such
election constitute three or fewer directors, all directors may
participate in the action regarding whether to accept the tendered
resignation.
Pursuant to the proposed amendment to the Bylaws, if the Board
accepts a director's resignation as part of the process described above
for uncontested elections, or if a nominee for director is not elected
and the nominee is not an incumbent director, the Board may (i) fill
the remaining vacancy as provided in Section 3.6 of the Bylaws and
Article VI, Section 6 of the Certificate of Incorporation (involving a
majority vote of the remaining directors then in office, though less
than a quorum, or by the sole remaining director) or (ii) decrease the
size of the Board as provided in Section 3.1 of the Bylaws and Article
VI, Section 3 of the Certificate of Incorporation (involving adoption
of a resolution by two-thirds of the directors then in office).
General Election Requirements:
The following applies to elections of directors and is not being
amended. Section 2.7 of the Bylaws provides that, unless otherwise
provided in the Certificate of Incorporation of the Corporation, each
stockholder entitled to vote at any meeting of stockholders shall be
entitled to one vote for each share of stock held by such stockholder
that has voting power upon the matter in question. This entitlement,
however, is subject to the voting limitation in the Certificate of
Incorporation that generally prohibits a beneficial owner, either alone
or together with related parties, from voting or causing the voting of
shares of stock of the corporation, in person or by proxy or through
any voting agreement or other arrangement, to the extent that such
shares represent in the aggregate more than 10% of the then outstanding
votes entitled to be cast on such matter. Any votes purported to be
cast in excess of this limitation will be disregarded.\7\
---------------------------------------------------------------------------
\7\ See NYSE Euronext Amended and Restated Certificate of
Incorporation at Article V, Section 1(A).
---------------------------------------------------------------------------
Relative to the foregoing, if any beneficial owner of the
Corporation's stock, either alone or together with related parties, is
party to any agreement, plan or other arrangement with any other person
or entity relating
[[Page 38578]]
to shares of stock of the Corporation entitled to vote on any matter
under circumstances in which (i) the result would be that shares of
stock of the Corporation that would be subject to such agreement, plan
or other arrangement would not be voted on any matter, or any proxy
relating thereto would be withheld and (ii) the effect of the
agreement, plan or arrangement would be to enable a beneficial owner
(but for these provisions), either alone or together with related
parties, to vote, possess the right to vote or cause the voting of
shares of the Corporation's stock to exceed 10% of the then outstanding
votes entitled to be cast (assuming that all shares of stock of the
Corporation that are subject to the agreement, plan or other
arrangement are not outstanding votes entitled to be cast on such
matter), then this recalculated 10% voting limitation will be
applicable. Any votes purported to be cast in excess of this
recalculated voting limitation will be disregarded.\8\
---------------------------------------------------------------------------
\8\ See id.
---------------------------------------------------------------------------
At each meeting of stockholders of the Corporation, except as
otherwise provided by law or the Certificate of Incorporation of the
Corporation, the holders of a majority of the voting power of the
outstanding shares of stock of the Corporation entitled to vote on a
matter at the meeting, present in person or represented by proxy, will
constitute a quorum (it being understood that any shares in excess of
the applicable voting limitation discussed above will not be counted as
present at the meeting and will not be counted as outstanding shares of
stock of the Corporation for purposes of determining whether there is a
quorum, unless and only to the extent that such voting limitation shall
have been duly waived as provided in the Certificate of
Incorporation).\9\
---------------------------------------------------------------------------
\9\ See NYSE Euronext Amended and Restated Certificate of
Incorporation at Article VIII, Section 2.
---------------------------------------------------------------------------
As noted above, the proposed rule change is identical to a rule
change filed by the NYSE (the ``NYSE Rule Change'') that was recently
approved by the Commission.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \10\ of
the Act, in general, and furthers the objectives of Section 6(b)(1)
\11\ of the Act, which requires a national securities exchange to be so
organized and have the capacity to carry out the purposes of the Act
and to comply, and to enforce compliance by its members and persons
associated with its members, with the provisions of the Act. The
proposed rule change is also consistent with, and furthers the
objectives of, Section 6(b)(5) \12\ of the Act, 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. Specifically, the Exchange
believes that the proposed rule change will protect investors and the
public interest by codifying in the Bylaws the existing policy of the
Corporation aimed at ensuring better corporate governance and
accountability to stockholders by means of a voting procedure leading
to election results that more accurately reflect the views of
stockholders on the qualifications and suitability of individual
director nominees, even if there are no alternative director nominees
to vote for on the ballot.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(1).
\12\ 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.
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 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, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) \14\ thereunder.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change 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.
---------------------------------------------------------------------------
The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative on the date of its
approval by the Euronext College of Regulators, which approval the
Exchange believes is imminent. The Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest because such waiver will enable the Exchange to
implement the proposed rule change immediately upon receiving the
approval of the Euronext College of Regulators. In addition, as noted
by the Exchange, the proposal is identical to the recently approved
NYSE Rule Change.\15\ For these reasons, the Commission designates the
proposed rule change as operative upon filing.\16\
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 61947 (April 20,
2010), 75 FR 22169 (April 27, 2010) (SR-NYSE-2010-18) (order
approving identical proposal submitted by NYSE).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.
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
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-55 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2010-55. This
file number should be included on the subject line if e-mail is used.
To help the
[[Page 38579]]
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
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 Web site viewing and printing in
the Commission's Public Reference Room, 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. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEArca-2010-55 and should be submitted on or before June 23, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16106 Filed 7-1-10; 8:45 am]
BILLING CODE 8011-01-P