Self-Regulatory Organizations; Notice of Filing and Order Granting Partial Accelerated Approval of Proposed Rule Change by the New York Stock Exchange, Inc. Instituting a Pilot Program Relating to the Listing Eligibility Criteria for Closed-End Management Investment Companies Registered Under The Investment Company Act of 1940

Full text

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40979; File No. SR-NYSE-99-02]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Partial Accelerated Approval of Proposed Rule Change by the 
New York Stock Exchange, Inc. Instituting a Pilot Program Relating to 
the Listing Eligibility Criteria for Closed-End Management Investment 
Companies Registered Under The Investment Company Act of 1940

January 26, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 26, 1999, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice and order to solicit 
comments on the proposed rule change from interested persons and to 
grant accelerated approval to the portion of the proposal instituting a 
pilot program relating to the listing eligibility criteria for closed-
end investment companies registered under the Investment Company Act of 
1940.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to implement a pilot program (``Pilot'') 
amending Section 1 of its Listed Company Manual (``Manual'') to codify 
the specific eligibility listing criteria as applied to certain 
investment companies registered under the Investment Company Act of 
1940. The proposed three-month Pilot would expire on April 29, 1999, or 
such earlier time as the Commission approves the Exchange's request for 
permanent approval of the program.\3\ The text of the proposed rule 
change is available at the Office of the Secretary, NYSE and at the 
Commission.
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    \3\ Telephone conversation between N. Amy Bilbija, Counsel, 
NYSE, and Richard Strasser, Assistant Director, Division of Market 
Regulation, SEC, on January 26, 1999.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposed to codify a policy regarding the listing of 
newly organized closed-end management investment companies (``Funds''). 
The Exchange generally lists Funds either in connection with an initial 
public offering or shortly thereafter, when the Fund does not have a 
three-year operating history and is thus considered newly formed.
    If the Fund has at least $60 million in net assets, as evidenced by 
a firm underwriting commitment, the Exchange will generally authorize 
the listing of the Fund. In this regard, the Exchange notes that this 
requirement is the minimum net asset requirement for listing. The 
Exchange retains the discretion to deny listing to a Fund if it 
determines that, based upon a comprehensive financial analysis, it is 
unlikely that the particular Fund will be able to maintain its 
financial status. Any Fund with less than $60 million in net assets 
will not be considered for listing.
    In applying this test, the Exchange recognizes that in most cases 
the applicant Fund is not a traditional operating entity. Thus, it 
would not be possible to apply the earnings standards specified in the 
Listed Company Manual at the time of listing. Of course, Funds are 
subject to continued financial listing criteria, as are all NYSE-listed 
companies. In this regard, an exception report is generated monthly to 
identify companies below the Exchange's continued listing standards. If 
a Fund is so identified by the Exchange's Financial Compliance 
Department, it will be subject to the same compliance and monitoring 
procedures imposed upon any other NYSE-listed company so identified.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) \4\ that an Exchange have rules that 
are designed to promote just and equitable principles of trade, to 
remove impediments to, and perfect the mechanism of a free and open 
market and, in general, to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange represents that the proposed rule change will not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange has requested that the Commission find good cause, 
pursuant to Section 19(b)(2) \5\ of the Act, for approving the 
establishment of the Pilot for a three-month period ending on April 29, 
1999 (or until such earlier time as the Commission grants the 
Exchange's request for permanent approval of the program), prior to the 
thirtieth day after publication in the Federal Register.
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    \5\ 15 U.S.C. 78s(b)(2).

--------------------------------------------------------------------------- IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. Copies 
of the submission, all subsequent amendments, all written statements 
with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-NYSE-99-02 and 
should be submitted by February 24, 1999.

V. Commission's Findings and Order Granting Partial Accelerated 
Approval of Proposed Rule Change

    The Commission finds that the proposed rule change relating to the 
establishment of the Pilot is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange. Specifically, the Commission believes the proposal 
is consistent with the Section 6(b)(5) \6\ requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system, and, in general, to 
protect investors and the public.\7\
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    \6\ 15 U.S.C. 78f(b)(5).
    \7\ In approving this rule change, 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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    The Commission finds good cause for approving the Pilot prior to 
the thirtieth day after the date of publication of notice thereof in 
the Federal Register. The Commission believes that the Exchange's 
listing standard serves as a means for a marketplace to screen Funds 
and to provide listed status only to bona fide Funds with sufficient 
net assets. The Commission further believes that the proposed Pilot 
strikes a reasonable balance between the Exchange's obligation to 
protect investors and their confidence in the market and the Exchange's 
obligation to perfect the mechanism of a free and open market by 
listing Funds on the Exchange. In addition, the Commission believes 
that accelerated approval of the Pilot will enable the Exchange to 
minimize the interruption in its listing of these securities while 
allowing the Commission adequate time to consider the Exchange's 
proposal seeking permanent approval of the Pilot.\8\
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    \8\ Approval of the three-month Pilot should not be interpreted 
as suggesting that the Commission is predisposed to approving the 
proposal on a permanent basis.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the Pilot program proposed by the Exchange (File No. SR-
NYSE-99-02) is approved until April 29, 1999, or until the Commission 
approves the proposal permanently.

    \9\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2534 Filed 2-2-99; 8:45 am]
BILLING CODE 8010-01-M  

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