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NYSE Proposes Changes to Evaluation of Issuer SEC Compliance Prior to Listing
Practical Law Legal Update 1-579-7465 (Approx. 3 pages)
NYSE Proposes Changes to Evaluation of Issuer SEC Compliance Prior to Listing
by Practical Law Corporate & Securities
| Published on 02 Sep 2014 • USA (National/Federal) |
The NYSE proposed to amend Section 107.03 of its Listed Company Manual to clarify how it will evaluate an issuer's compliance with SEC reporting requirements when considering whether to approve the issuer for listing on the exchange.
On August 28, 2014, the NYSE proposed amendments to Section 107.03 of its Listed Company Manual to clarify how it will evaluate an issuer's compliance with SEC reporting requirements when considering whether to approve the issuer for listing on the exchange. Currently, Section 107.03 provides that the NYSE will not approve a security for listing if the issuer has not, for the 12 months immediately preceding the date of listing, filed on a timely basis all periodic reports required to be filed with the SEC. The proposal states that Section 107.03 as currently written could be read to impose requirements on issuers that the NYSE did not intend. The proposal is also intended to make the NYSE's standards comparable to those in NASDAQ Rule 5210(e).
Under the proposal, Section 107.03 would be amended to provide that the NYSE will not approve a security for listing that is delinquent in its filing obligations with the SEC. The NYSE would take a two-pronged approach in determining whether an issuer is delinquent in its filing obligations:
- First, the NYSE would always deem an issuer to be delinquent and would not authorize it for listing if the issuer has not filed by the date it seeks to list on the NYSE:
- all subsequent quarterly reports (on Form 10-Q).
- If the issuer satisfies the first prong, then the NYSE would undertake a qualitative review of the issuer's past (prior to its annual report for its most recent fiscal year) compliance with SEC reporting requirements. If the issuer failed to file any historical annual or quarterly reports (Omitted Filing), there would be a rebuttable presumption that the issuer is delinquent in its filing obligations. However, the NYSE would have the discretion to decide that an Omitted Filing is not a bar to listing on the exchange if it is satisfied that:
- there is evidence that the SEC does not intend to take action against the issuer as a result of the company's failure to submit the Omitted Filing; or
- a sufficient period of filing compliance has passed since the due date of the Omitted Filing such that the information required to be included in the Omitted Filing would be of little relevance to investors at the time of listing.
By creating a rebuttable presumption of delinquency, the proposal would rectify situations where the NYSE believes that not approving a listing would be disproportionately punitive and would not provide any meaningful investor protection benefits, such as when:
- An issuer was late by a de minimis amount in filing a periodic report during the preceding 12 months.
- An issuer was late in filing a Form 10-Q but subsequently filed an annual report for a fiscal year that included the period covered by the Form 10-Q.
The proposed amendments take effect on filing with the SEC.
Update: On September 10, 2014, the SEC published the proposed amendments on its website.
To learn more about listing on the NYSE and other securities exchanges, see Practice Note, Selecting a US Securities Exchange.