June 23, 2017.
On April 25, 2017, NYSE MKT LLC (the “Exchange” or “NYSE MKT”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) 
and Rule 19b-4 thereunder,
a proposed rule change to harmonize the periodic reporting requirements of the NYSE MKT Company Guide (the “Company Guide”) with those of the New York Stock Exchange LLC (“NYSE”). The proposed rule change was published for comment in the Federal Register on May 12, 2017.
The Commission received no comments regarding the proposal. This order approves the proposed rule change.
II. Description of the Proposal
The Exchange has proposed to harmonize the requirements of the Company Guide with respect to (i) periodic reporting and (ii) semi-annual reporting by foreign private issuers, with those of the NYSE Listed Company Manual (“NYSE Manual”).
A. Amendment to Annual Report Requirements
Currently, under Section 610(a) of the Company Guide, listed companies must provide specific enumerated disclosures with regard to outstanding options.
The Start Printed Page 29593Exchange proposes to remove these requirements because such companies are already required to include disclosures in their Form 10-K regarding options available under equity compensation plans, pursuant to Item 201(d) of Regulation S-K, and options issued as executive compensation, pursuant to Item 402 of Regulation S-K.
The Exchange believes that it is appropriate to defer to the Commission in determining what disclosures should be required of a listed company with respect to its outstanding options.
Section 610(a) also currently specifies that a company that fails to file its annual report on Forms 10-K, 20-F, 40-F or N-CSR with the Commission in a timely manner would be subject to delisting pursuant to Section 1002(d).
The Exchange proposes to amend this provision to provide that companies delayed in making these filings would be subject to the compliance procedures set forth in proposed Section 1007 of the Company Guide, which establishes compliance procedures for companies that are delayed in filing their annual and quarterly reports with the Commission, as further discussed below.
Section 610(b) currently makes reference to providing notice of material news to the Exchange's StockWatch and Listing Qualifications Departments. The Exchange proposes to delete these outdated references and proposes to include a statement that companies should comply with the Exchange's material news policies set forth in Sections 401 and 402 of the Company Guide by providing notice to the Exchange's Market Watch Group pursuant to the material news notification requirements of Sections 401 and 402.
Additionally, Section 610(b) of the Company Guide currently provides that a listed company that receives an audit opinion that contains a going concern “qualification” must make a public announcement through the news media disclosing the receipt of such qualified opinion. The Exchange proposes to replace the reference to a going concern “qualification” with a reference to a going concern “emphasis” as the Exchange states that this is a more accurate accounting characterization.
In addition, the Exchange proposes to provide that the public announcement of the existence of a going concern emphasis in an audit opinion must be made contemporaneously with the filing of such audit opinion with the Commission, rather than within seven calendar days of such filing as is currently the case. The Exchange believes a going concern emphasis is material to investors and should be immediately disclosed.
The Exchange states that prior to an amendment in 2009,
Section 610 of the Company Guide required a listed company to physically deliver its annual report filed with the Commission to shareholders each year.
The Exchange states that, as a result of the 2009 amendment, Section 610 no longer requires companies to physically deliver their annual reports but may instead rely on the fact that listed company annual reports are required to be made available on or through the public Web site of the Commission or the applicable listed company.
Accordingly, the Exchange proposes to delete Sections 611 (Time of Publication), 612 (Request for Extension) and 613 (Good Cause for Delay) of the Company Guide in their entirety.
Section 611 specifies timeframes within which a company's hard copy annual report must be filed with the Exchange and submitted to shareholders. The Exchange proposes to delete this provision as Section 610 no longer requires the delivery of hard copy annual reports and proposed Section 1007 will include detailed compliance requirements with respect to delayed annual report filings.
Similarly, Section 612 sets forth a process for companies to request an extension of time from the Exchange to distribute hard copy annual reports to their shareholders. The Exchange proposes to delete this requirement, as companies are not required to deliver hard copy annual reports under its current rules and proposed Section 1007 will establish a process for granting companies additional time when they are delayed in submitting their annual reports to the Commission.
Section 613 specifies circumstances under which good cause may exist for a company being delayed in the publication of its annual report. The Exchange proposes to delete this provision because all determinations as to the continued listing of companies that are delayed in their annual report filings will be made pursuant to the provisions of proposed Section 1007.
B. Amendment to Timely Filing Criteria
Currently, the Exchange provides listed companies that are delinquent in submitting required periodic filings with a compliance plan under its general provisions for companies that are non-compliant with Exchange rules, as set forth in Section 1009 (Continued Listing Evaluation and Follow-Up) of the Company Guide. Section 1009(b) gives the Exchange the sole discretion to grant companies a time period of up to 18 months to regain compliance and does not provide specific guidance on how compliance periods should be administered for companies delinquent in submitting their periodic filings.
In contrast, Section 802.01E of the NYSE Manual limits companies to a maximum cure period of 12 months to submit all delayed filings and includes specific provisions for determining the period of time companies should be given to regain compliance within the context of that maximum 12 month period and what is required to be eligible for that additional time.
Accordingly, the Exchange believes that the NYSE's procedures for dealing with delinquent filings is more stringent and transparent than its own and believes that it is appropriate to harmonize its own process with Section 802.01E of the NYSE Manual to avoid confusion among investors, companies, and their service providers about the applicable rules.
Specifically, the Exchange has proposed to adopt new Section 1007 (“Late Filer Rule”) 
to explicitly state Start Printed Page 29594that, for purposes of remaining listed on the Exchange, a company would incur a filing delinquency and be subject to the procedures set forth in the amended rule on the date on which any of the following occurs:
- The company fails to file its annual report (Forms 10-K, 20-F, 40-F or N-CSR) or its quarterly report on Form 10-Q or semi-annual report on Form N-CSR (“Semi-Annual Form N-CSR”) with the Commission by the date such report was required to be filed by the applicable form, or if a Form 12b-25 was timely filed with the Commission, the extended filing due date for the annual report, Form 10-Q, or Semi-Annual Form N-CSR (for purposes of this Section 1007, the later of these two dates, along with any Semi-Annual Report Filing Due Date as defined below, will be referred to as the “Filing Due Date” and the failure to file a report by the applicable Filing Due Date, a “Late Filing Delinquency”); 
- a listed foreign private issuer fails to file the Form 6-K containing semi-annual financial information required by proposed Section 110(e) (the “Semi-Annual Report”) by the date specified in that rule (the “Semi-Annual Report Filing Due Date”);
- the company files its annual report without a financial statement audit report from its independent auditor for any or all of the periods included in such annual report (a “Required Audit Report” and the absence of a Required Audit Report, a “Required Audit Report Delinquency”);
- the company's independent auditor withdraws a Required Audit Report or the company files a Form 8-K with the Commission pursuant to Item 4.02(b) thereof disclosing that it has been notified by its independent auditor that a Required Audit Report or completed interim review should no longer be relied upon (a “Required Audit Report Withdrawal Delinquency”); or
- the company files a Form 8-K with the Commission pursuant to Item 4.02(a) thereof to disclose that previously issued financial statements should no longer be relied upon because of an error in such financial statements or, in the case of a foreign private issuer, makes a similar disclosure in a Form 6-K filed with the Commission or by other means (a “Non-Reliance Disclosure”) and, in either case, the company does not refile all required corrected financial statements within 60 days of the issuance of the Non-Reliance Disclosure (an “Extended Non-Reliance Disclosure Event” and, together with a Late Filing Delinquency, a Required Audit Report Delinquency and a Required Audit Report Withdrawal Delinquency, a “Filing Delinquency”) (for purposes of the cure periods described below, an Extended Non-Reliance Disclosure Event would be deemed to have occurred on the date of original issuance of the Non-Reliance Disclosure); if the Exchange believes that a company is unlikely to refile all required corrected financial statements within 60 days after a Non-Reliance Disclosure or that the errors giving rise to such Non-Reliance Disclosure are particularly severe in nature, the Exchange may, in its sole discretion, determine earlier than 60 days that the applicable company has incurred a Filing Delinquency as a result of such Non-Reliance Disclosure.
Additionally, under the proposed rule, the Exchange would deem a company to have incurred a Filing Delinquency if the company submits an annual report, Form 10-Q, or Semi-Annual Form N-CSR to the Commission by the applicable Filing Due Date, but such filing fails to include an element required by the applicable form and the Exchange determines in the Exchange's sole discretion that such deficiency is material in nature.
A company that has an uncured Filing Delinquency will not incur an additional Filing Delinquency if it fails to file a subsequent annual report, Form 10-Q, Semi-Annual Form N-CSR or Semi-Annual Report (a “Subsequent Report”) by the applicable Filing Due Date for such Subsequent Report.
However, in order for the company to cure its initial Filing Delinquency, no Subsequent Report may be delinquent or deficient on the date by which the initial Filing Delinquency is required to be cured.
Upon the occurrence of a Filing Delinquency, the Exchange would promptly send written notification to a company of the procedures relating to late filings (the “Filing Delinquency Notification”). Within five days of the date of the Filing Delinquency Notification, the company would be required to contact the Exchange to discuss the status of the Delinquent Report and issue a press release disclosing the occurrence of the Filing Delinquency, the reason therefor, and (if known) the anticipated date such Filing Delinquency will be cured via the filing or refiling of the applicable report, as the case may be.
During the six-month period from the date of the Filing Delinquency (the “Initial Cure Period”), the Exchange would monitor the company and the status of the Delinquent Report and any Subsequent Reports, including through contact with the company, until the Filing Delinquency is cured.
If the company fails to cure the Filing Delinquency within the Initial Cure Period, the Exchange may, in its sole discretion, allow the company's securities to be traded for up to an additional six-month period (the “Additional Cure Period”) depending on the company's specific circumstances.
If the Exchange determines that an Additional Cure Period is not appropriate, suspension and delisting procedures would commence in accordance with the procedures set out in Section 1010 (Procedures for Delisting and Removal) of the Company Guide.
A company would not be eligible to follow the procedures outlined in Section 1009 Start Printed Page 29595with respect to these criteria.
Notwithstanding the foregoing, however, under the proposed rule the Exchange may in its sole discretion decide: (i) Not to afford a company any Initial Cure Period or Additional Cure Period, as the case may be, at all; or (ii) at any time during the Initial Cure Period or Additional Cure Period, as the case may be, to truncate the Initial Cure Period or Additional Cure Period and immediately commence suspension and delisting procedures if the company is subject to delisting pursuant to any other provision of the Company Guide, including if the Exchange believes, in the Exchange's sole discretion, that continued listing and trading of a company's securities on the Exchange is inadvisable or unwarranted in accordance with Sections 1001-1006 of the Company Guide.
The Exchange may also commence suspension and delisting procedures if it believes, in its sole discretion, that it is advisable to do so based on an analysis of all relevant factors, including, but not limited to:
- Whether there are allegations of financial fraud or other illegality in relation to the company's financial reporting;
- the resignation or termination by the company of the company's independent auditor due to a disagreement;
- any extended delay in appointing a new independent auditor after a prior auditor's resignation or termination;
- the resignation of members of the company's audit committee or other directors;
- the resignation or termination of the company's chief executive officer, chief financial officer or other key senior executives;
- any evidence that it may be impossible for the company to cure its Filing Delinquency within the cure periods otherwise available under the Late Filer Rule; and
- any past history of late filings.
In determining whether an Additional Cure Period after the expiration of the Initial Cure Period is appropriate, the Exchange would consider the likelihood that the Delinquent Report and all Subsequent Reports can be filed or refiled, as applicable, during the Additional Cure Period, as well as the company's general financial status, based on information provided by a variety of sources, including the company, its audit committee, its outside auditors, the staff of the Commission and any other regulatory body.
Further, the Exchange would strongly encourage companies to provide ongoing disclosure on the status of the Delinquent Report and any Subsequent Reports to the market through press releases, and would also take the frequency and detail of such information into account in determining whether an Additional Cure Period is appropriate.
As proposed, if the Exchange determines that an Additional Cure Period is appropriate and the company fails to file the Delinquent Report and all Subsequent Reports by the end of such additional period, suspension and delisting procedures would commence immediately in accordance with the procedures set out in Section 1010.
In no event would the Exchange continue to trade a company's securities if: (i) It has failed to cure its Filing Delinquency; or (ii) it is not current with all Subsequent Reports, on the date that is twelve months after its initial Filing Delinquency.
The Exchange also proposed to include a cross-reference to proposed Section 1007 in Section 1101 of the Company Guide, which discusses general Commission filing obligations of listed companies. In addition, the Exchange proposed to remove a reference to a company's Listing Qualifications analyst in Section 1101 and replace it with a reference to Exchange staff, as the Exchange no longer has a department under the Listings Qualification title.
C. Amendment to Semi-Annual Reporting by Foreign Private Issuers
The Exchange has proposed to amend Section 110 (Securities of Foreign Companies) by adding new paragraph (e), which provides that each listed foreign private issuer will be required, at a minimum, to submit to the Commission a Form 6-K that includes (i) an interim balance sheet as of the end of its second fiscal quarter and (ii) a semi-annual income statement that covers its first two fiscal quarters.
This Form 6-K must be submitted no later than six months following the end of the company's second fiscal quarter.
Additionally, the financial information included in the Form 6-K must be presented in English, but does not have to be reconciled to U.S. GAAP.
The Exchange has stated that new Section 110(e) would provide a more specific interim reporting requirement for listed foreign private issuers and harmonize such rules with Section 203.03 of the NYSE Manual.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.
In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act,
which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
The Commission believes that the goal of ensuring that listed companies have filed accurate, up-to-date reports under the Exchange Act is of critical importance so that investors have reliable information upon which they can make informed investment decisions. For the same reason, it is also important that companies with stale or defective publicly filed financial information do not remain listed on a national securities exchange if such information is not brought up-to-date or the deficiency cured in a timely manner. As noted above, under the existing provisions of the Company Guide, a delinquent filer of Commission required periodic reports could receive up to 18 months to become up to date in its filings. While the Company Guide suggests a time period of less than 18 months to achieve compliance may be appropriate for late filers, there is no specific guidance in the Company Guide on how such a determination is made and for what time period. The Commission has also previously noted the importance of ensuring that companies listed on a national securities exchange are up to date in Start Printed Page 29596their filings so accurate and timely information is available to investors.
The Commission believes that the proposed rule change should help to prevent an undue amount of time from passing without the company's annual, quarterly or semi-annual reports, as applicable,
being provided to the marketplace. In addition, the Commission believes that harmonizing the requirements of the Company Guide with respect to periodic reporting with those of the NYSE Manual are reasonably designed to help investors and companies avoid confusion and achieve consistent results for the applicable rules.
The Commission also believes that proposed Section 1007 should help to ensure that companies cannot continue to trade for extended periods of time without making their annual and interim reports publicly available. In this regard, the Commission notes that the proposed rule change should help reduce those situations in which investors continuously have outdated or stale financial information upon which to base their investment decisions. As is discussed above, a company that has an uncured Filing Delinquency would not be able to cure the Filing Delinquency until all subsequent annual or interim reports that are delinquent have been filed.
In other words, once it is a delinquent filer, a company can only become current in its filings if all of its annual and interim filings have been submitted to the Commission within 12 months of the first Filing Delinquency. Furthermore, a listed company that demonstrates a history of delinquent filings could still be subject to delisting under the proposed rule change without the Exchange affording it any cure period at all (or at any time during an initial or additional cure period) as a result of the Exchange's ability to commence suspension and delisting procedures based on a company's “past history of late filings.” 
The Commission believes these provisions will enable the Exchange to delist those companies that have demonstrated a history of providing outdated or stale financial information to investors and help the Exchange address the situation where a company becomes current within 12 months and then a short while later, such as by the next Commission filing date, incurs another Filing Delinquency. In such a case, the Commission would be concerned that investors continue to rely on outdated information and do not have current financial information on a timely basis in which to make their trading and investment decisions. The Commission believes that the proposal is reasonably designed to further these goals of investor protection and therefore is consistent with the Exchange Act and Section 6(b)(5) thereunder.
Additionally, by clearly stating that the Exchange's Late Filer Rule applies to companies that file late or defective annual and interim reports, the Commission believes that the proposal should benefit the public interest and protect investors by helping to assure that a larger segment of the financial information investors may rely upon when deciding whether to invest in a company listed on the Exchange is up-do-date and accurate. Further, by detailing what the Exchange considers to be a defective annual or interim report and how the Exchange treats listed companies whose filed reports suffer from a deficiency, the Commission believes that the proposed rule change promotes just and equitable principles of trade by providing additional transparency to listed companies as to what could cause them to become subject to proposed Section 1007 for a late or deficient filing. For example, as noted above, Exchange rules will be clear that a company that files a Form 8-K pursuant to Item 4.02(b) thereof and has a Required Audit Report Withdrawal Delinquency will be subject to the procedures in proposed Section 1007 and can only be extended a maximum of 12 months to cure the delinquency. Moreover, and importantly, this additional transparency, as well as the more stringent requirements set forth in the proposed rule, could encourage listed companies to take extra care to ensure that their filed reports are timely and accurate, which would protect investors and the public interest. To the extent this occurs, the Commission believes that the proposal also has the potential to enhance the reliability of reports filed by companies listed on the Exchange as well as investor confidence in such reports, which should help to perfect the mechanism of a free and open market.
Proposed Section 1007 also gives the Exchange discretion in certain areas when a filing fails to include an element required by the applicable Commission form and the Exchange determines in its sole discretion that such deficiency is material in nature. Proposed Section 1007 provides a non-exclusive list of elements that, if missing from a filing, would cause the Exchange to deem the company to have incurred a Filing Delinquency. The Commission notes that any determination by the Exchange that a missing element is not material for purposes of a Filing Delinquency has no effect on the company's compliance with Commission rules. The Commission further notes that while there is a provision in the new rules concerning a listed company that files a Form 8-K or Form 6-K announcing a Non-Reliance Disclosure having 60 days to correct its financial statements, the proposal makes clear that the Filing Delinquency will date from the original announcement of the Non-Reliance Disclosure if it is not cured within 60 days. This will ensure that the period for curing a Non-Reliance Disclosure will not extend past the 12 month period given to listed companies that have had another type of Filing Delinquency.
The Commission notes that the time periods allowed to cure a Filing Delinquency are maximums for purposes of continued listing. The new provisions being adopted provide additional transparency to investors and the marketplace but also give the Exchange discretion to analyze the particular case and consider whether it is appropriate to commence suspension and delisting procedures immediately based on the particular facts, as well giving the Exchange discretion to grant an additional six month cure period, or shorten any time periods previously given. The new rules provide additional transparency by setting forth certain factors that may cause immediate delisting or shortened periods, such as resignation of a company's chief executive officer, financial officer or members of the audit committee; allegations of fraud or other illegality in relation to financial reporting; and past history of late filings. We expect the Exchange to carefully review each Filing Deficiency and ensure that the public interest is being served by continued trading. As noted above, the importance of timely and complete Commission filings to ensure that investors and the marketplace have accurate and up-to-date information about publicly traded companies is of extreme importance for confidence in our public markets.
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The Commission believes that the amendments to Chapter Six of the Company Guide will add clarity to the periodic reporting requirements in connection with proposed Section 1007. For example, as noted above, the deletion and replacement in Section 610(a) of a reference to Section 1002(d) regarding delisting procedures with proposed Section 1007 will avoid confusion among investors and companies about the applicable rules for failure to timely file an annual report with the Commission. In addition, the Commission believes the proposed modifications to delete Sections 611 through 613 of the Company Guide are reasonably designed to protect investors and the public interest by removing obsolete language that will be replaced with a more detailed compliance regime in proposed Section 1007.
The Commission further believes the Exchange's deletion of the specific enumerated disclosures with regard to outstanding options in Section 610(a) of the Company Guide is consistent with the Exchange Act since listed companies are already required to comply with the Commission's disclosure regime for options in the companies' Form 10-K. In this regard the Commission believes it is reasonable for the Exchange to determine it will defer to Commission disclosure requirements as to options, some of which are similar to the NYSE requirements.
Similarly, the deletion of outdated references to the Exchange's StockWatch and Listing Qualifications Departments in Section 610(b) of the Company Guide and their replacement with a statement that companies should comply with the Exchange's material news policies set forth in Sections 401 and 402 would provide additional transparency to a listed company on the disclosure steps that it must take when it receives an audit opinion that contains a going concern emphasis.
Additionally, the Commission believes that the amendment to require the public announcement of the existence of a going concern in an audit opinion be made contemporaneously with the filing of such audit opinion with the Commission furthers investor protection by ensuring that investors are made aware, as soon as possible, of material information that may impact their investment decisions. The Commission also notes that eliminating the possibility that a company can delay the public announcement of a going concern opinion for up to seven days, as currently permitted under the Company Guide, will help to further investor protection consistent with Section 6(b)(5) of the Exchange Act.
Finally, the Commission believes the proposed amendment to harmonize the semi-annual reporting requirement by foreign private issuers in new Section 110(e) with the applicable rule in the NYSE Manual would provide a more precise compliance guideline and establish a minimum interim reporting regime applicable to all listed foreign private issuers.
Additionally, the Commission believes the proposed amendment is consistent with the investor protection objectives of Section 6(b)(5) because it is reasonably designed to ensure that foreign private issuers provide timely financial information that is necessary to enable investors to make informed investment decisions.
It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,
that the proposed rule change (SR-NYSEMKT-2017-23) be, and hereby is, approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Eduardo A. Aleman,
[FR Doc. 2017-13590 Filed 6-28-17; 8:45 am]
BILLING CODE 8011-01-P