NYSE Proposes to Streamline Listing Application Materials and Processes

On May 13, 2013, the Securities and Exchange Commission published proposed changes to the New York Stock Exchange Listed Company Manual and listing application materials. The NYSE is proposing to remove the forms of listing agreements and listing applications from the Manual, adopt simplified listing application materials that will be posted on the NYSE’s website and adopt new rules that will codify existing NYSE policies. The proposed changes are an effort to streamline the NYSE’s existing listing application process, remove requirements that are duplicative of NYSE and SEC rules and remove obsolete provisions from the Manual.

Comments on the proposal were due by June 7, 2013. The proposing release does not mention a transition period, and it is possible that the changes will take effect immediately upon SEC approval. Companies that are planning to list securities on the NYSE should monitor the status of this proposal to ensure that they are using the listing materials and processes that are in effect at the time of listing.

Changes to the Listing Agreements

The forms of listing agreements for equity securities of U.S. companies and equity securities of foreign private issuers are currently included in Section 901 of the Manual, as well as on the NYSE website. The NYSE is proposing to remove the forms of listing agreements from the Manual and make them available only on the NYSE website or upon request from the NYSE.

In addition, the NYSE is proposing to simplify the forms of listing agreements. The current form of listing agreement for equity securities of U.S. companies includes 31 separate provisions, each of which places a specific obligation upon the listed company, such as requiring a company to notify the NYSE about certain events, comply with certain financial statement and accounting practices, maintain certain corporate governance practices and voting processes and perform other undertakings. The form of listing agreement for equity securities of foreign private issuers contains similar provisions, but is subject to certain home country practice exemptions.

The NYSE explains in the proposing release [1] that many of the provisions in the current forms of listing agreements are identical to existing rules in the Manual or are otherwise duplicative of NYSE or SEC rules. In addition, some of the provisions are outdated and not reflective of current NYSE practices. Thus, the NYSE is proposing to remove substantially all of the provisions and replace them with more general obligations. For example, the newly proposed forms of listing agreements will require a listed company to agree to comply with all current and future rules, listing standards, procedures and policies of the NYSE, file all required periodic financial reports with the SEC, comply with federal securities law and SEC rules, furnish information to the NYSE when requested, pay all listing fees and maintain a transfer agent and registrar, among other obligations. While the proposed changes will result in a substantially modified form of listing agreement, the listed company obligations will remain essentially the same. The main effect of the proposed changes is that a listed company will need to ensure familiarity with the Manual and other applicable rules and regulations, rather than rely on the listing agreement as a means of understanding its specific NYSE obligations. The proposed rule changes will also allow the listing agreement forms to be more flexible, in that changes to the NYSE rules, federal securities laws or SEC rules will not also require changes to the forms of listing agreements.

Section 901 of the Manual also currently includes forms of listing agreements for depositories of foreign private issuers and voting trusts, as well as a free share distribution understanding for Japanese companies. These forms will be removed from Section 901 and posted on the NYSE’s website, but no changes will be made to these forms.

Changes to the Listing Application

The form of original listing application and form of supplemental listing application are currently included in Section 903 of the Manual as well as on the NYSE website. As with the listing agreements, the NYSE is proposing to remove the listing applications from the Manual and make them available only on the NYSE website or upon request from the NYSE.

In addition, the NYSE has proposed substantially simplifying the original listing application by removing most of the information requirements. The NYSE notes in the proposing release that the current listing application form has been in use for many years. During that time, the SEC disclosure requirements have dramatically increased, which has significantly reduced the benefit of many of the information requirements in the current listing application. For example, the current original listing application requires a description of the business of the company, a description of the company’s physical properties, information regarding affiliated companies, information regarding the management of the company and delivery of financial statements. All of this information is also required to be disclosed in SEC reports. Removing these, as well as many of the other information requirements, from the form of original listing agreement will eliminate the need for listing applicants to prepare duplicative disclosure or cross – reference SEC filings.

The NYSE is also proposing to revise the sections of the Manual that discuss the listing application process and has proposed a listing application checklist that lists the supplemental documentation required to accompany a listing application. Under the proposed rules, Section 702.00 of the Manual will be revised to replace the information currently in that section with a more general description of the listing process, which the NYSE believes will be more informative for listing applicants. Sections 702.01 through 702.05 of the Manual, which describe the listing process, will be deleted and instead applicants will rely upon the listing checklist described above. Certain supplemental documentation currently required to be submitted with a listing application will no longer be required, such as a prospectus and financial statements, since these are available on the SEC website.

Section 703 of the Manual, which contains provisions relating to the filing of supplemental listing applications, will also be revised to reflect that the forms of supplemental listing applications for various types of issuances, and information regarding documents required in connection with a supplemental listing application, will be available on the NYSE website or from the NYSE upon request. The supplemental listing applications will not otherwise be revised.

Other Changes to the Listed Company Manual

In addition to the changes to the listing application materials, the NYSE has proposed a number of other revisions to the Manual, including the following:

• The NYSE has proposed discontinuing the Listed Securities Fee Agreement and the Transfer Agent Registrar Agreement. Instead, the proposed form of listing agreement contains provisions that require a listed company to pay all fees associated with its listing and to maintain a transfer agent and a registrar that satisfy the requirements of Section 601.00 of the Manual.
• The NYSE has proposed adding language to Section 104.00 of the Manual regarding the free confidential review of listing eligibility. The proposed language clarifies that a company may submit an original listing application only after it has been cleared to do so by the NYSE after completion of a free confidential eligibility review. In addition, the NYSE is proposing to delete the requirement that companies must certify charter documents and by-laws submitted in connection with a confidential review.
• The proposed rules include a new Section 107.00 called “Financial Disclosure and Other Information Requirements”, which codifies some of the NYSE’s existing policies regarding auditing standards, auditor registration, SEC compliance and NYSE information requests.
• A proposed amendment to Section 802.01D of the Manual provides that the NYSE may delist a company’s securities for breach of its listing agreement. The NYSE feels that its broad discretion already allows it to delist securities in such a circumstance, but is proposing to make this authority explicit.
• A number of other changes have been proposed throughout the Manual to remove or replace cross-references that will no longer be relevant and to remove obsolete requirements relating to share certificates and other matters.

Endnotes:

[1] See Notice of Filing of Proposed Rule Change Proposing To: (i) Delete the Sections in the Listed Company Manual (the “Manual”) Containing the Listing Application Materials (Including the Listing Application and the Listing Agreement) and Adopt Updated Listing Application Materials that will be Posted on the Exchange’s Website; and (ii) Adopt As New Rules Certain Provisions that are Currently Included in the Various Forms of Agreements That Are in the Manual, As Well As Some Additional New Rules that Make Explicit Existing Exchange Policies with Respect to Initial Listings, SEC Rel. No.34-69565; File No. SR-NYSE-2013-33 (May 13, 2013), available at http://www.sec.gov/rules/sro/nyse/2013/34-69565.pdf.
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