NYSE Rule Change on Dividend-Related Announcements Made Outside Market Hours Now Effective

Lori Zyskowski is a partner at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn publication by Ms. Zyskowski and Gillian McPhee.

The New York Stock Exchange (“NYSE”) has amended its rules on companies’ notifications to the NYSE about upcoming dividends. The rule changes were approved by the Securities and Exchange Commission on Monday, August 14 and took effect immediately. The amended rules require companies that intend to make announcements outside market hours that involve dividends or stock distributions to notify the NYSE at least ten minutes before making the announcement. The NYSE has not made any changes to the requirements for announcements made during market hours. A blackline of the changes to the text of the Listed Company Manual is available here. A chart prepared by the NYSE in anticipation of the rule change comparing the requirements that will apply during and outside of market hours is available here.

Under the NYSE’s policy on the immediate release of material news, found in Section 202.05 of the Listed Company Manual, NYSE companies must release quickly to the public any news or information that might reasonably be expected to materially affect trading in their securities. Under Section 202.06, which details the procedures for public release of information under this policy, a listed company must alert the NYSE at least ten minutes in advance when its intends to release news between the hours of 7:00 a.m. (eastern) and the close of trading on the NYSE (generally 4:00 p.m. eastern).

Listed companies announcing dividend or stock distributions during these hours must comply with the immediate release policy. Accordingly, companies that publicly announce a dividend or distribution during market hours must call the NYSE’s Market Watch team, and email Market Watch a copy of the proposed announcement, at least ten minutes in advance of issuing the announcement. Companies must have NYSE approval before issuing a dividend or distribution announcement.

As a result of the rule changes, companies will have to notify the NYSE at least ten minutes in advance of an announcement involving a dividend or stock distribution made at any time, rather than just during the hours when the immediate release policy is in effect. Companies providing this advance notification to the NYSE outside of the immediate release policy timeframe will not have to wait for NYSE approval before making their announcements. However, in filing the rule proposal, the NYSE stated that it intends to have staff available at all times to review dividend and stock distribution notices immediately upon receipt by the NYSE, “regardless of what time or day of the week they are provided.” NYSE staff will contact a listed company “immediately” if there is a problem with the notification. The NYSE “strongly encourages” companies to submit their dividend notifications through Listing Manager, the NYSE’s web portal.

The rule changes do not alter other requirements relating to dividends and distributions, including: (1) the requirement in Section 204.12 that companies give notice to the NYSE promptly, and at least ten days in advance of the record date, of any action relating to a dividend or stock distribution, including notice of the omission or postponement of a dividend action at the customary time, and declaration of a dividend; and (2) the requirement in Section 204.21 that companies give prompt notice to the NYSE of the fixing of a record date for dividends and stock distributions.

According to the NYSE, the purpose of the rule changes is to enable NYSE staff to work with listed companies in addressing any issues that may arise in relation to announcements involving dividends or stock distributions. Among other things, the NYSE will be able to confirm that a company’s proposed dividend schedule complies with NYSE requirements, and that the company’s disclosure about application of the NYSE’s ex-dividend trading policy is accurate. The ex-dividend date is the last date on which a buyer can purchase a company’s stock and still be entitled to receive a dividend that has already been declared. As a reminder, with the upcoming transition from a T+3 to T+2 settlement cycle, which will occur on September 5, 2017, the NYSE has announced that no securities will be ex-dividend on September 5, 2017 to avoid confusion about the proper time frame for settlement. The change to T+2 will also shorten the time period for which transactions in stocks will be ex-dividend to the business day before the record date for the dividend (from two business days before the record date).

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