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Self-Regulatory Organizations; Order Approving Proposed Rule Change by the American Stock Exchange LLC Relating to Procedures for the Review of Initial Listing Decisions

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Start Preamble September 20, 2000.

I. Introduction

On February 28, 2000, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] a proposed rule change relating to procedures for the review of initial listing determinations. The proposed rule change was published for comment in the Federal Register on July 13, 2000.[3] This order approves the proposed rule change.

II. Description of the Proposal

Amex original listing criteria, set forth in Part 1 of the Amex Company Guide, provide quantitative and qualitative criteria for the original listing of securities on the Exchange. Section 101 of the Amex Company Guide currently provides that the approval of a listing application is a matter solely within the discretion of the Exchange. Thus, the Exchange currently has the discretion to list the securities of an applicant that may not satisfy each of the listing guidelines and to deny the listing of an applicant's securities that do satisfy those guidelines.[4]

Proposed Part 12 codifies the procedures for the review of Amex Staff listing determinations by a subcommittee of the Committee on Securities (as defined in Section 1204) and also sets forth the procedures with respect to appeals from the subcommittee to the Amex Adjudicatory Council (as defined in Section 1205) or the Amex Board of Governors. Under Start Printed Page 58137Section 1202, the Exchange will notify applicants of a decision to deny a application, citing the specific quantitative or qualitative standards in Part 1 of the Amex Company Guide that were not met. The Exchange will notify the applicant that, upon request, the applicant will be provided an opportunity for a hearing under these procedures. An applicant may request a written or oral hearing within 7 days of the date of the Staff's determination to deny the application.[5] Section 1203 specifies written materials that the applicant may submit in connection with a hearing.

Section 1204 provides that all hearings will be conducted before a subcommittee of the Committee on Securities (“Subcommittee”) consisting of at least two persons. Following the hearing, the Subcommittee must issue a written decision (“Subcommittee Decision”) citing specific grounds for the Subcommittee's determination. The Subcommittee will promptly provide its decision to the applicant and will also provide notice that the applicant may request review by the Adjudicatory Council [6] within 15 days of the date of the Subcommittee Decision.[7] The applicant will also be notified that the Adjudicatory Council may call for review of the Subcommittee Decision within 45 days, at the request of one or more of the Council's members, as provided in Section 1205.

The Adjudicatory Council will consider the written record and can hold additional hearings. It may also recommend that the Amex Board consider the matter. The Adjudicatory Council will set forth specific grounds for its decision and provide notice that the Amex Board may call the decision for review at any time before its next meeting which is at least 15 days after the decision. If the Amex Board conducts a discretionary review, the applicant will be provided with a written decision affirming, modifying, reversing, or remanding the Adjudicatory Council's decision.[8] The Board's decision constitutes final action of the Exchange and will take immediate effect unless it specifies to the contrary.[9]

Section 1207 describes the documents included in the written record. Section 1208 provides for the maintenance of the written record of review, as well as any documents excluded from the written record.

Section 1211 prohibits the Amex Staff or an applicant from making any communication relevant to the merits of a proceeding with anyone who is participating in or advising in the consideration of a matter unless the applicant and the appropriate Amex Staff have been provided notice and an opportunity to participate in the communication. The Exchange currently expects that Amex Staff generally will waive their rights under this provisions in the interest of providing a non-adversarial business forum for listing decisions.[10]

III. Discussion

The Commission finds that the Exchange's proposal is consistent with the requirements of Section 6 of the Act,[11] and furthers the objectives of Section 6(b)(5) [12] in particular because 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 regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, and, in general, to protect investors and the public interest.

The Commission believes that the proposed rule change, by establishing procedures for the review of initial listing determinations, will provide clarity and transparency to issuers concerning the Amex's decisionmaking process. The new rules require the Exchange to notify applicants of a decision to deny listing and set forth the specific grounds for the determination at each level of review.

The proposed rules also provide a fair and independent review for issuers, with provisions detailing the maintenance of the record on review and prohibiting communications outside of the official proceeding. The Commission further notes that the proposed rules are modeled on the Nasdaq listing process.[13] Similar to the rules proposed herein, the rules of the National Association of Securities Dealers, Inc. codify the procedures for the review of initial listing determinations.[14]

IV. Conclusion

For the reasons discussed above, the Commission finds that the proposal is consistent with the Act and the rules and regulations thereunder.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[15] that the proposed rule change, SR-Amex-00-12, be and hereby is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[16]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  Securities Exchange Act Release No. 43013 (July 13, 2000), 65 FR 43386.

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4.  The Commission believes these provisions should be invoked by the Exchange only under circumstances that would be consistent with the public interest. Since investors rightfully presume that the companies listed on the Amex meet the quantitative and qualitative guidelines, these provisions should not be used by the Exchange as a way to permit issuers to bypass the numerical requirements for listing. The Commission would be concerned to find the Amex routinely approving listing for issuers that have not met the quantitative guidelines.

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5.  The Amex will not charge a hearing fee to appeal the Exchange Staff's listing determination. Telephone conservation between Michael Cavalier, Associate General Counsel, Amex, and Susie Cho, Attorney, Division of Market Regulation (“Division”), Commission, April 19, 2000.

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6.  The Amex Adjudicatory Council, is established by the Amex Board pursuant to Article II, Section 6 of the Amex Constitution. The Council consists of six individuals, all of whom are nominated by the Amex Nominating Committee and elected by the regular and options principal members voting together as a single class. Three of the Council's members are Floor Governors and three are Public Governors.

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7.  The Amex will not charge a hearing fee to appeal the Subcommittee's determination. Telephone conservation between Michael Cavalier, Associate General Counsel, Amex, and Susie Cho, Attorney, Division, Commission, April 19, 2000.

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8.  See Section 1206(c).

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9.  The Commission notes that any applicant aggrieved by a final action of the Amex may apply for review to the Commission in accordance with Section 19 of the Act.

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10.  Although members of the Amex Staff may waive their rights under Section 1211, the Commission expects that the record on review will include all of the information used as the basis for the Amex's decision.

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11.  In approving this rule, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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13.  See NASD 4800 Series Rules.

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14.  Securities Exchange Act Release No. 41367 (May 13, 1999), 64 FR 25942.

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[FR Doc. 00-24735 Filed 9-26-00; 8:45 am]