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Federal Register / Vol. 71, No.

236 / Friday, December 8, 2006 / Notices 71201

should supplement the quarterly reports notice to solicit comments on the officer [Chairman or CEO*] (provided
made available to the Commission proposed rule change, as amended, from the interim employment did not last
under the new budget rule with periodic interested persons and to approve the longer than one year) (See Commentary
reports on the progress and results of proposal on an accelerated basis. .08);
those reviews and with monthly reports (b) a director who accepted[s] or has
I. Self-Regulatory Organization’s
showing variances of actual or estimated an immediate family member who
Statement of the Terms of Substance of
expenditures from budgeted amounts, to accepted[s] any [payments]
the Proposed Rule Change
the extent such progress reports and compensation from the company [or any
monthly reports are prepared for The Exchange proposes to amend parent or subsidiary of the company] in
internal purposes. Section 121 of the Amex Company excess of $60,000 during any period of
Based on the foregoing, the Guide (‘‘Company Guide’’) to clarify and twelve consecutive months within the
Commission has determined that the modify certain corporate governance three years preceding the determination
PCAOB’s 2007 budget and annual standards applicable to companies of independence [the current or any of
accounting support fee are consistent listed on the Amex, including the the past three fiscal years], other than
with Section 109 of the Act. definition of ‘‘independent director,’’ the following:
Accordingly, and audit committee requirements. The [(1)] (i) compensation for board or
It is ordered, pursuant to Section 109 text of the proposed rule change is board committee service,
of the Act, that the PCAOB budget and below.4 Proposed new language is in [(2) payments arising solely from
annual accounting support fee for italics; proposed deletions are in investments in the company’s securities,
calendar year 2007 are approved. [brackets]. (3)] (ii) compensation paid to an
* * * * * immediate family member who is [a
By the Commission.
non-executive] an employee (other than
Nancy M. Morris, Company Guide an executive officer) of the company [or
Secretary. Independent Directors and Audit of a parent or subsidiary of the
[FR Doc. E6–20878 Filed 12–7–06; 8:45 am] Committee company],
BILLING CODE 8011–01–P [(4)] (iii) compensation received for
Sec. 121. A. Independent Directors:
former service as an interim executive
(1) Each [listed company] issuer must officer [Chairman or CEO] (provided the
SECURITIES AND EXCHANGE have a sufficient number of independent interim employment did not last longer
COMMISSION directors on its [B]board of [D]directors than one year) (See Commentary .08), or
[(1)] (a) such that at least a majority of [(5)] (iv) benefits under a tax-qualified
[Release No. 34–54851; File No. SR-Amex-
2006–48] such directors are independent directors retirement plan, or [(6)] non-
(subject to the exceptions set forth in discretionary compensation;[,]
Self-Regulatory Organizations; Section 801 and, with respect to small [(7) loans permitted under Section
American Stock Exchange LLC; Notice business issuers, Section 121B(2)(c)), 13(k) of the Exchange Act
of Filing and Order Granting and [(2)] (b) to satisfy the audit (8) loans from a financial institution
Accelerated Approval to Proposed committee requirement set forth below. provided that the loans (i) Were made
Rule Change and Amendment No. 1 (2) ‘‘Independent director’’ means a in the ordinary course of business, (ii)
Thereto Modifying the Exchange’s person other than an executive officer or were made on substantially the same
Independent Director and Audit employee of the company [or any parent terms, including interest rates and
Committee Corporate Governance or subsidiary]. No director qualifies as collateral, as those prevailing at the time
Standards independent unless the issuer’s for comparable transactions with the
[B]board of [D]directors affirmatively general public, (iii) did not involve
November 30, 2006. determines that the director does not more than a normal degree of risk or
Pursuant to Section 19(b)(1) of the have a [material] relationship [with the other unfavorable factors, and (iv) were
Securities Exchange Act of 1934 listed company] that would interfere not otherwise subject to the specific
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 with the exercise of independent disclosure requirements of SEC
notice is hereby given that on May 17, judgment in carrying out the Regulation S–K, Item 404, or
2006, the American Stock Exchange LLC responsibilities of a director. In addition (9) payments from a financial
(‘‘Amex’’ or ‘‘Exchange’’) filed with the to the requirements contained in this institution in connection with the
Securities and Exchange Commission Section 121A, directors serving on[,] deposit of funds or the financial
(‘‘Commission’’) the proposed rule audit committees [members] must also institution acting in an agency capacity,
change as described in Items I and II comply with the additional, more provided such payments were (i) Made
below, which Items have been stringent requirements set forth in in the ordinary course of business, (ii)
substantially prepared by the Exchange. Section [paragraph] 121B(2) below. The made on substantially the same terms as
Amex filed Amendment No. 1 with the following is a non-exclusive list of those prevailing at the time for
Commission on September 25, 2006.3 persons who shall not be considered comparable transactions with the
The Commission is publishing this independent: general public, and (iii) not otherwise
(a) a director who is, or during the subject to the disclosure requirements of
1 15 U.S.C. 78s(b)(1). past three years was, employed by the SEC Regulation S–K, Item 404.*]
2 17 CFR 240.19b–4. company [or by any parent or subsidiary (c) a director who is an immediate
3 Amendment No. 1 replaced and superseded the
of the company], other than prior family member of an individual who is,
original filing in its entirety. Amendment No. 1
clarified certain details of the Exchange’s initial employment as an interim executive or at any time during [has been in any
of] the past three years was, employed
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proposal, and conformed it with recent revisions to

the corporate governance standards of The 4 With the Exchange’s consent, a few technical
by the company [or any parent or
NASDAQ Stock Market LLC (‘‘Nasdaq’’). See spacing changes have been made to the text of the subsidiary of the company] as an
Securities Exchange Act Release No. 54583 (October proposed rule change. Telephone conversation
6, 2006), 71 FR 60782 (October 16, 2006) (approving between Kristie Diemer, Special Counsel, Division executive officer;[*]
SR–NASDAQ–2006–021) (‘‘Nasdaq Corporate of Market Regulation, Commission and Courtney (d) a director who is, or has an
Governance Order’’). McBride, Assistant General Counsel, Amex. immediate family member who is, a

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71202 Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Notices

partner in, or a controlling shareholder taking, or recommending that the full individual is required by the best
or an executive officer of, any board take, appropriate action to oversee interests of the [company] issuer and its
organization to which the company the independence of the outside auditor; shareholders, and the board discloses,
made, or from which the company [and] in the next annual meeting proxy
received, payments (other than those [(iii)](c) the audit committee’s statement (or in its next annual report
arising solely from investments in the purpose of overseeing the accounting on SEC Form 10–K or equivalent if the
company’s securities or payments under and financial reporting processes of the issuer does not file an annual proxy
non-discretionary charitable issuer and the audits of the financial statement) subsequent to such
contribution matching programs) that statements of the issuer; and determination, the nature of the
exceed 5% of the organization’s [(iv)](d) the specific audit committee relationship and the reasons for that
consolidated gross revenues for that responsibilities and authority set forth determination. A director appointed to
year, or $200,000, whichever is more, in in [paragraph (4) of this subs]Section the [A]audit [C]committee pursuant to
any of the most recent three fiscal 121B(4). this exception may not serve for in
years;[*] (2) Composition excess of two consecutive years and
(e) a director [of the listed company] may not chair the [A]audit
who is, or has an immediate family (a) Each issuer must have, and certify [C]committee.
member who is, employed as an that it has and will continue to have, an (c) Small Business Issuers—Small
executive officer of another entity where [A]audit [C]committee of at least three Business Issuers (as defined in SEC
at any time during the most recent three members, each of whom: Regulation S–B) are subject to all
(i) satisfies the independence requirements specified in this Section
fiscal years any of the [listed company’s]
standards specified in Section 121A and 121B(2), except that such issuers are
issuer’s executive officers serve on [that
Rule 10A–3 under the Securities only required to maintain a [B]board of
entity’s] the compensation committee of
Exchange Act of 1934; [and] [D]directors comprised of at least 50%
such other entity;[*] or (ii) must not have participated in the
(f) a director who is, or has an independent directors, and an [A]audit
preparation of the financial statements [C]committee of at least two members,
immediate family member who is, a of the issuer or any current subsidiary
current partner of the company’s comprised solely of independent
of the issuer at any time during the past directors who also meet the
outside auditor, or was a partner or three years; and
employee of the company’s outside requirements of Rule 10A–3 under the
(iii) is able to read and understand Securities Exchange Act of 1934.
auditor who worked on the company’s fundamental financial statements,
audit at any time during any of the past including a company’s balance sheet, (3) Meeting Requirements
three years.[*] income statement, and cash flow
[(g)] (3)[i]In the case of an investment The [A]audit [C]committee of each
statement. Additionally, each issuer [listed company] issuer must meet on at
company, in lieu of [paragraphs] must certify that it has, and will least a quarterly basis, except that with
Sections 121A(2)(a) through (f), a continue to have, at least one member respect to [listed] registered closed-end
director who is an ‘‘interested person’’ of the audit committee who is management investment companies, the
of the investment company as defined in financially sophisticated, in that he or [A]audit [C]committee must meet on a
Section 2(a)(19) of the Investment she has past employment experience in regular basis as often as necessary to
Company Act of 1940, other than in his finance or accounting, requisite fulfill its responsibilities, including at
or her capacity as a member of the board professional certification in accounting, least annually in connection with
of directors or any board committee. or any other comparable experience or issuance of the investment company’s
B. Audit Committee background which results in the audited financial statements.
individual’s financial sophistication,
(1) Charter including but not limited to being or (4) Audit Committee Responsibilities
Each [I]issuer must certify that it has having been a chief executive officer, and Authority
adopted a formal written audit chief financial officer, other senior The [A]audit [C]committee of each
committee charter and that the [A]audit officer with financial oversight [listed company] issuer must have the
[C]committee has reviewed and responsibilities. A director who specific audit committee
reassessed the adequacy of the formal qualifies as an audit committee financial responsibilities, authority and
written charter on an annual basis. The expert under Item 401(h) of Regulation procedures necessary to comply with
charter must specify the following: S–K, Item 401(e) of Regulation S–B or Rule 10A–3(b)(2), (3), (4) and (5) under
[(i)](a) the scope of the audit Item 3 of Form N–CSR (in the case of the Securities Exchange Act of 1934
committee’s responsibilities, and how it a registered management investment (subject to the exemptions provided in
carries out those responsibilities, company) is presumed to qualify as Rule 10A–3(c) under the Securities
including structure, processes, and financially sophisticated. Exchange Act of 1934), concerning
membership requirements; (b) Notwithstanding [paragraph] responsibilities relating to: ([i]a)
[(ii)](b) the audit committee’s Section 121B(2)(a), one director who is registered public accounting firms,
responsibility for ensuring its receipt not independent as defined in Section ([ii]b) complaints relating to accounting,
from the outside auditors of a formal 121A, but who satisfies the internal accounting controls or auditing
written statement delineating all requirements of Rule 10A–3 under the matters, ([iii]c) authority to engage
relationships between the auditor and Securities Exchange Act of 1934 (see advisors, and ([iv]d) funding as
the [company] issuer, consistent with [sub-paragraph] Section 121B(2)(a)(i)), determined by the audit committee.
Independence Standards Board and is not a current officer or employee Audit committees for investment
Standard 1, and the audit committee’s or an immediate family member of such companies must also establish
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responsibility for actively engaging in a officer or employee, may be appointed procedures for the confidential,
dialogue with the auditor with respect to the [A]audit [C]committee, if the anonymous submission of concerns
to any disclosed relationships or board, under exceptional and limited regarding questionable accounting or
services that may impact the objectivity circumstances, determines that auditing matters by employees of the
and independence of the auditor and for membership on the committee by the investment adviser, administrator,

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Notices 71203

principal underwriter, or any other (e) and (f) commence on the date the for example, it is not on terms generally
provider of accounting related services relationship ceases. For example, a available to the public.
for the investment company, as well as director employed by the company is * * * * *
employees of the investment company. not independent until three years after
such employment terminates. II. Self-Regulatory Organization’s
(5) Exception Statement of the Purpose of, and
.08 For purposes of Section
At any time when an issuer has a Statutory Basis for, the Proposed Rule
121A(2)(a), employment by a director as
class of common equity securities (or Change
an executive officer on an interim basis
similar securities) that is listed on shall not disqualify that director from In its filing with the Commission,
another national securities exchange or being considered independent following Amex included statements concerning
national securities association subject to such employment, provided the interim the purpose of and basis for the
the requirements of SEC Rule 10A–3 employment did not last longer than proposal and discussed any comments it
under the Securities Exchange Act of one year. A director would not be received on the proposal. The text of
1934, the listing of classes of securities considered independent while serving these statements may be examined at
of a direct or indirect consolidated as an interim officer. Similarly, for the places specified in Item IV below.
subsidiary or an at least 50% purposes of Section 121A(2)(b), Amex has prepared summaries, set forth
beneficially owned subsidiary of the compensation received by a director for in Sections A, B, and C below, of the
issuer (except classes of equity former service as an interim executive most significant aspects of such
securities, other than non-convertible, officer need not be considered as statements.
non-participating preferred securities, of compensation in determining A. Self-Regulatory Organization’s
such subsidiary) shall not be subject to independence after such service, Statement of the Purpose of, and
the requirements of this Section 121B. provided such interim employment did
See Also Section 803. Statutory Basis for, the Proposed Rule
not last longer than one year. Change
[* With respect to independent Nonetheless, the issuer’s board of
directors who are not members of the directors still must consider whether 1. Purpose
Audit Committee, the applicable ‘‘look- such former employment and any In 2003, the Commission approved
back’’ period will be only one year for compensation received would interfere broad enhancements to the corporate
the first year after the amendment or with the director’s exercise of governance standards applicable to
adoption (as applicable) of Sections independent judgment in carrying out issuers listed on the Amex.5 The
121A(1), 121B(2)(c) and 802(a) with the responsibilities of a director. In enhancements related to, among other
respect to board of director composition. addition, if the director participated in things, board of director composition
With respect to independent directors the preparation of the company’s and independence standards, as well as
who are members of the Audit financial statements while serving as an audit committee composition, authority,
Committee, the applicable ‘‘look-back’’ interim executive officer, Section and disclosure obligations. These
period will be only one year for the first 121B(2)(a)(ii) would preclude service on revisions also included new tests to
year after the amendment or adoption the issuer’s audit committee for three determine the independence of
(as applicable) of paragraphs (b), (e) and years. directors. Comparable standards were
(f) of Section 121A. The applicable adopted by Nasdaq and by the New
.09 Section 121A(2)(b) is generally
three-year ‘‘look-back’’ periods specified York Stock Exchange (‘‘NYSE’’).6
intended to capture situations where
in Section 121A will begin to apply only Since implementing the enhanced
compensation is made directly to (or for
from and after December 1, 2004.] corporate governance standards, the
the benefit of) the director or an
* * * Commentary immediate family member of the Exchange has proposed various changes
director. For example, consulting or to these standards based upon its
.01 No change. experience administering the corporate
.02 ‘‘Company’’ includes any parent personal service contracts with a
director or an immediate family member governance program. The Exchange now
or subsidiary of the issuer listed on the proposes several changes to the
Exchange. ‘‘Parent’’ or ‘‘subsidiary’’ of the director would be analyzed under
Section 121A(2)(b). In addition, political independent director and audit
includes entities that are consolidated committee requirements applicable to
with the issuer’s financial statements as contributions to the campaign of a
director or an immediate family member listed issuers that, according to the
filed with the SEC (but not if the issuer Exchange, are designed to: (i) Eliminate
reflects such entity solely as an of the director would be considered
indirect compensation under Section unnecessary restrictions; (ii) clarify
investment in its financial statements). certain aspects of the Exchange’s
.03–.05 No change. 121A(2)(b). Non-preferential payments
.06 In order to affirmatively made in the ordinary course of corporate governance requirements; and
determine that an independent director providing business services (such as (iii) make these requirements consistent
does not have a material relationship payments of interest or proceeds related with those of Nasdaq and NYSE.
to banking services or loans by an issuer Section 121A of the Company Guide
with the [listed company] issuer that
that is a financial institution or payment (Independent Directors) requires most
would interfere with the exercise of
of claims on a policy by an issuer that listed issuers to have a board of
independent judgment, as specified in
is an insurance company), payments directors comprised of a majority of
[paragraph] Section 121A, the board of
arising solely from investments in the independent directors. It also specifies
directors of each [listed company] issuer
must obtain from each such director full company’s securities and loans 5 See Securities Exchange Act Release No. 48863
disclosure of all relationships which permitted under Section 13(k) of the (December 1, 2003), 68 FR 68432 (December 8,
could be material in this regard[, Securities Exchange Act of 1934 will not
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2003) (approving SR–Amex–2003–65).

including but not limited to any preclude a finding of director 6 See Securities Exchange Act Release No. 48745

payments specified in paragraphs (b)(8) independence as long as the payments (November 4, 2003), 68 FR 64154 (November 12,
2003) (approving SR–NYSE–2002–33, SR–NASD–
and (9)]. are non-compensatory in nature. 2002–77, SR–NASD–2002–80, SR–NASD–2002–
.07 The three year look-back periods Depending on the circumstances, a loan 138, SR–NASD–2002–139, and SR–NASD–2002–
referenced in Sections 121A(2)(a), (c), or payment could be compensatory if, 141).

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71204 Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Notices

the criteria the board of directors must being considered independent. The independence if a director, or an
utilize in determining whether a Exchange proposes to expand both immediate family member of the
director can be considered independent exceptions to cover the former service director, accepts any payments from the
and sets forth certain ‘‘bright line’’ tests and compensation of all interim company or any parent or subsidiary of
that preclude a finding of executive officers, not just the Chairman the company in excess of $60,000
independence. Section 121B of the and CEO. Amex believes that the during the current or any of the past
Company Guide (Audit Committee) sets proposed rule change will enable three fiscal years preceding the
forth the requirements for the issuers to more easily fill director seats determination of independence. Certain
composition of an issuer’s audit by broadening the pool of prospective types of payments that are unlikely to
committee, which must consist of, independent directors to include taint a director’s independence are
among other things, at least three interim executive officers and others excluded from the $60,000 test.15
directors who satisfy the independence with particular expertise. The Exchange notes that over the
standards in Section 121A. Such However, the Exchange proposes to course of administering Section
independence standards are limit the ability to exclude such past 121A(b), additional types of payments
substantially the same as Nasdaq service and compensation as an interim have been identified that should be
standards 7 and are conceptually similar executive officer to one year, in order to excepted from the test because they are
to NYSE standards.8 prevent potential abuse of the unlikely to taint a director’s
(i) Definition of Independent exceptions. The Exchange also proposes independence. Rather than continuing
Director 9 to clarify in new Commentary .08 that to codify examples of ‘‘payments’’ that
Section 121A of the Company Guide current service as an interim officer should be excluded from the test as they
currently provides that an independent would preclude a director from being arise, the Exchange believes that the
director of a listed company may not be considered independent. In addition, if, more effective approach is to amend
an officer or employee of the company while acting as an interim officer, a Section 121A(b) to focus on
or any parent or subsidiary thereof, or director participated in the preparation ‘‘compensation.’’ As a result, the
have a material relationship with the of the financial statements of an issuer Exchange proposes to modify Section
listed company that would interfere or current subsidiary of the issuer, the 121A(b) to provide that a finding of
with the exercise of independent director would be precluded from independence is precluded if a director
judgment. The Exchange proposes to serving on such issuer’s audit accepts, or has an immediate family
clarify that any relationship, not just a committee for three years. Of course, member who accepts, any
material relationship, that would depending upon the magnitude of the compensation, with certain exceptions,
interfere with the exercise of judgment compensation and the length of service from a company or its affiliates in
in specifically carrying out the as a former interim executive officer, a excess of $60,000 during any
responsibilities of a director may board could still determine on its own— consecutive twelve-month period
preclude a determination of without regard to a ‘‘bright line’’ test— within the three years prior to the
independence. According to the that an individual should not be independence determination.
Exchange, this clarifying change will considered independent. In this respect, To provide further guidance, the
make the Amex’s definition of the proposed new Commentary .08 to Exchange proposes adding new
independent director consistent with Section 121 specifies the board’s Commentary .09, which would specify
the Nasdaq’s definition of independent obligation to consider such former that Section 121A(b) is intended to
director.10 service and related compensation in capture situations where compensation
(ii) Service as a Compensated Interim making an independence determination. is made directly to (or for the benefit of)
Officer 11 In its proposal, Amex notes that the the director or the director’s immediate
Pursuant to current Section 121A(a) of Commission recently published notice family member. In order to illustrate
the Company Guide, a director who is, of a filing by Nasdaq in which Nasdaq such intention, proposed Commentary
or during the past three years was, proposed similar changes to its .09 provides specific examples of direct
employed by a company or by a parent corporate governance standards.12 and indirect compensation that would
or subsidiary of such company as an According to the Exchange, NYSE preclude a finding of director
interim Chairman or CEO is not standards also provide that independence, such as contributions
automatically precluded from being compensated service as an interim made to the political campaign of a
considered independent. Further, officer does not disqualify a director director or an immediate family member
compensation received in excess of from being considered independent of the director.16 The Exchange also
$60,000 during the current or past three proposes modifying Section 121A(b) to
following such service.13 In Amex’s
fiscal years for former service as an clarify that compensation for service on
view, the proposed rule change would
interim Chairman or CEO does not a board committee will not preclude a
result in more uniformity across market
automatically preclude a director from centers with respect to how interim 15 Exceptions in the current rule, for example,
service by directors is treated for include payments from a financial institution (e.g.,
7 Nasdaq Rule 4200(a)(15) and IM–4200. See also independence purposes. interest on a savings account), payments arising
Nasdaq Corporate Governance Order, supra note 3. (iii) Compensation over $60,000 14 solely from investments in the company’s
8 Section 303A.02 of the NYSE Listed Company
Section 121A(b) of the Company securities, and loans permitted under Section 13(k)
Manual. of the Act.
9 The change described in this subsection relates Guide currently precludes a finding of 16 Proposed Commentary .09 further clarifies that,
to a provision in the preamble to current Section in general, under the proposed rule, non-
121A of the Company Guide that would become the 12 The Commission notes that the Nasdaq
preferential payments made in the ordinary course
preamble to Section 121A(2) as part of Amex’s proposal has since been approved. See Nasdaq of providing business services (such as payments of
proposed numbering scheme. Corporate Governance Order, supra note 3.
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interest or proceeds related to banking services or

10 Nasdaq Rule 4200(a)(15). 13 Commentary to Sections 303A.02(b)(i) and (ii)
loans by an issuer that is a financial institution or
11 The change described in this subsection relate of the NYSE Listed Company Manual. payment of claims on a policy by an issuer that is
to current Sections 121A(a) and 121A(b)(4) of the 14 The change described in this subsection relate an insurance company) will not preclude a finding
Company Guide, which would become Sections to current Section 121A(b) of the Company Guide, of director independence as long as the payments
121A(2)(a) and 121A(2)(b)(iii), respectively, in which would become Section 121A(2)(b) in the new are non-compensatory in nature. See Company
Amex’s proposed numbering scheme. numbering scheme Amex proposes in this filing. Guide, Section 121, proposed Commentary .09.

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Notices 71205

finding of independence. The Amex First, the Exchange proposes to clarify 2. Statutory Basis
indicates that, while the current that the term ‘‘non-executive employee’’ The Amex believes that the proposed
provision carves out compensation for in current Section 121A(b)(3) (proposed rule change is consistent with Section
board service and was meant to cover Section 121A(2)(b)(ii)) means an 6(b) of the Act,25 in general, and furthers
compensation for service on board employee other than an executive the objectives of Section 6(b)(5) of the
committees, there appears to be some officer, a term defined by reference to Act,26 in particular, in that it is designed
confusion in this regard among Commission Rule 16a–1(f) under the to promote just and equitable principles
companies. Act.21 Second, the Exchange proposes to of trade, to remove impediments to and
The Exchange believes that a revised clarify that references to ‘‘the company’’ perfect the mechanism of a free and
rule based on compensation rather than in Section 121 include any parent or open market and a national market
payments will better capture the types subsidiary of the listed issuer. Third, the system, and, in general, to protect
of compensation that bear on a Exchange proposes to clarify in investors and the public interest.
director’s independence. Amex notes proposed new Section 121B(5) that an
that a similar proposed rule change exception to the audit committee B. Self-Regulatory Organization’s
recently filed by Nasdaq 17 and requirements contained in Commission Statement on Burden on Competition
published by the Commission, and a Rule 10A–3(c)(2) under the Act 22 for The Exchange believes that the
comparable NYSE provision,18 preclude certain subsidiaries of listed issuers also proposed rule change does not impose
independence if a director or family is applicable to the Amex’s audit any burden on competition that is not
member has received direct committee requirements. The Amex necessary or appropriate in furtherance
compensation above a minimum states that such clarifying revisions will of the purposes of the Act. Instead, the
threshold. Accordingly, the Exchange make Section 121 consistent with Exchange believes that the proposed
believes that the proposed rule change Nasdaq’s recent proposed rule change.23 rule change will promote greater
will make Section 121A(b) consistent uniformity with the corporate
with the corresponding provisions of Finally, the Exchange proposes
several organizational and grammatical governance standards of other markets.
Nasdaq and NYSE, thereby creating
greater uniformity across market centers changes to Section 121 which, though C. Self-Regulatory Organization’s
with respect to the standards for non-substantive, are intended to Statement on Comments on the
evaluating a director’s independence. simplify reading of its corporate Proposed Rule Change Received From
(iv) Timeframes for Determining governance standards. Members, Participants, or Others
Independence 19 (vi) Transition No written comments were solicited
The Exchange proposes that the The Exchange will implement the or received with respect to the proposed
applicable one-year period or three-year proposed rule change immediately upon rule change.
period preceding the determination of approval by the Commission. In order to
independence set forth in current III. Solicitation of Comments
facilitate transition to the modified
Section 121A(b) of the Company Guide standards, any director that would be Interested persons are invited to
be measured chronologically rather than submit written data, views, and
considered independent under the
by fiscal year. Under the proposed rule, arguments concerning the foregoing,
current standards, but that would no
the look-back period would be any including whether the proposed rule
longer be deemed independent under
period of twelve consecutive months change, as amended, is consistent with
the modified standards, would be
within the three years preceding the the Act. Comments may be submitted by
permitted to continue serving on the
date independence is to be determined. any of the following methods:
board of directors as an independent
The Exchange believes that such
director until no later than 90 days after Electronic Comments
proposed modification is appropriate
the approval of this filing.24
because it introduces a simpler • Use the Commission’s Internet
calculation that is not dependent on a The Exchange believes that the comment form (
company’s particular fiscal year end. proposed rule change is responsive to rules/sro.shtml); or
Additionally, the Exchange proposes to concerns of its listed issuers and would • Send an e-mail to rule-
clarify in new Commentary .07 that the benefit investors and issuers by Please include File
three-year look-back periods referenced providing additional transparency and Number SR–Amex–2006–48 on the
in current paragraphs (a), (c), (e), and (f) clarity to Amex’s corporate governance subject line.
of Section 121A commence on the date standards. The Exchange notes that such
the relationship ceases. These proposed additional transparency and clarity also Paper Comments
rule changes would conform the would facilitate uniform application • Send paper comments in triplicate
Exchange’s look-back periods to the and ease administration of corporate to Nancy M. Morris, Secretary,
Nasdaq look-back periods.20 governance standards. Furthermore, the Securities and Exchange Commission,
(v) Other Changes Exchange believes that by making the 100 F Street, NE., Washington, DC
The Exchange also proposes to make Amex standards more consistent with 20549–1090.
other clarifying changes to Section 121. those of Nasdaq and NYSE, the All submissions should refer to File
proposed rule change would promote Number SR–Amex–2006–48. This file
17 The Nasdaq proposal has since been approved.
greater uniformity across listing number should be included on the
See Nasdaq Corporate Governance Order, supra markets.
note 3. subject line if e-mail is used. To help the
18 Section 303A.02(b)(2) of the NYSE Listed Commission process and review your
Company Manual. 21 17 CFR 240.16a–1(f). comments more efficiently, please use
22 17 CFR 240.10A–3(c)(2). only one method. The Commission will
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19 The changes described in this subsection relate

to current Section 121A(b) of the Company Guide, 23 See Nasdaq Corporate Governance Order, supra
post all comments on the Commission’s
which would become Section 121A(2)(b), and to note 3.
current Sections 121A(a), (c), (e), and (f), which 24 The Commission notes that this transition
Internet Web site (
would become Sections 121A(2)(a), (c), (e), and (f) period does not affect an issuer’s obligation to
in Amex’s proposed numbering scheme. comply with the requirements relating to audit 25 15 U.S.C. 78f(b).
20 Nasdaq Rule 4200(a)(15) and IM–4200. committee composition. 26 15 U.S.C. 78f(b)(5).

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71206 Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Notices

rules/sro.shtml). Copies of the align the Amex rule with corresponding SECURITIES AND EXCHANGE
submission, all subsequent rules of Nasdaq and NYSE relating to COMMISSION
amendments, all written statements corporate governance standards of listed
[Release No. 34–54855; File No. SR–DTC–
with respect to the proposed rule issuers.30 The proposal also would 2006–15]
change that are filed with the revise various other provisions of
Commission, and all written Amex’s corporate governance standards, Self-Regulatory Organizations; The
communications relating to the including by amending several Depository Trust Company; Notice of
proposed rule change between the provisions to conform more closely with Filing of a Proposed Rule Change
Commission and any person, other than Nasdaq’s and NYSE’s corporate Relating to the Canadian Link Service
those that may be withheld from the governance standards for its listed
public in accordance with the issuers.31 December 1, 2006.
provisions of 5 U.S.C. 552, will be Pursuant to Section 19(b)(1) of the
The Commission finds good cause,
available for inspection and copying in Securities Exchange Act of 1934
consistent with Section 19(b)(2) of the
the Commission’s Public Reference (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
Act,32 for approving this proposal, as
Room. Copies of the filing also will be notice is hereby given that on October
amended, before the thirtieth day after
available for inspection and copying at 10, 2006, The Depository Trust
the publication of notice thereof in the
the principal office of the Exchange. All Company (‘‘DTC’’) filed with the
Federal Register. The Commission notes
comments received will be posted Securities and Exchange Commission
that the proposal raises no new issues
without change; the Commission does (‘‘Commission’’) the proposed rule
and believes that accelerating its
not edit personal identifying change as described in Items I, II, and
approval would harmonize corporate
information from submissions. You III, below, which Items have been
governance listing standards among
should submit only information that prepared by DTC. The Commission is
you wish to make available publicly. All publishing this notice to solicit
submissions should refer to File V. Conclusion comments on the proposed rule change
Number SR–Amex–2006–48 and should from interested persons.
be submitted on or before December 29, It is therefore ordered, pursuant to
2006. Section 19(b)(2) of the Act,33 that the I. Self-Regulatory Organization’s
proposed rule change, as amended (SR– Statement of the Terms of Substance of
IV. Commission’s Findings and Order Amex–2006–48), is hereby approved on the Proposed Rule Change
Granting Accelerated Approval of an accelerated basis. The proposed rule change would
Proposed Rule Change amend DTC’s Rule 30, Canadian-Link
For the Commission, by the Division of
The Commission finds that the Market Regulation, pursuant to delegated Service, to allow certain Canadian-Link
proposed rule change, as amended, is authority.34 transactions to settle in U.S. dollars.
consistent with the requirements of the
Act and the rules and regulations Florence E. Harmon, II. Self-Regulatory Organization’s
thereunder applicable to a national Deputy Secretary. Statement of the Purpose of, and
securities exchange.27 In particular, the [FR Doc. E6–20804 Filed 12–7–06; 8:45 am] Statutory Basis for, the Proposed Rule
Commission believes that the proposal BILLING CODE 8011–01–P
is consistent with Section 6(b)(5) of the In its filing with the Commission,
Act,28 which requires that the rules of member of the director has accepted more than DTC included statements concerning
an exchange be designed to prevent $60,000 in payments from the company or its the purpose of and basis for the
fraudulent and manipulative acts and parent or subsidiary during the time period set forth proposed rule change and discussed any
in the rule. The proposed rule change would amend
practices, to promote just and equitable the rule to refer to compensation in excess of
comments it received on the proposed
principles of trade, to remove $60,000 from the company, rather than payments. rule change. The text of these statements
impediments to and perfect the 30 See Nasdaq’s IM–4200 to Nasdaq Rule 4200 may be examined at the places specified
mechanism of a free and open market and Section 303A.02(b)(ii) of the NYSE Listed in Item IV below. DTC has prepared
Company Manual. Proposed changes to Section summaries, set forth in sections A, B,
and a national market system, and in 121A of the Company Guide would provide
general to protect investors and the examples of non-compensatory payments, such as and C below, of the most significant
public interest. interest related to banking services, insurance aspects of such statements.
The Commission believes that the proceeds, and non-preferential loans from financial
institutions. At the same time, the proposed A. Self-Regulatory Organization’s
proposed rule change would provide
changes to Section 121A of the Company Guide Statement of the Purpose of, and
clarity and guidance to Amex listed would make clear that payments made by the Statutory Basis for, the Proposed Rule
companies, particularly with respect to company for the benefit of the director—such as
the determination of whether a director political contributions to the campaign of a director
is independent. In particular, the or a family member and loans to a director or family DTC’s Canadian-Link Service
member that are on terms not generally available to
proposed rule change would preclude a the public—could be considered indirect
currently allows participants of DTC
finding of independence if a director compensation so as to preclude a finding that the (‘‘DTC Participants’’) to clear and settle
accepts any compensation from the director was independent. two categories of securities transactions
company or its affiliates in excess of 31 These other changes relate to: status of
in Canadian dollars: (1) Transactions
independent directors who served as interim with participants of The Canadian
$60,000 during the prescribed time officers for a maximum one-year period; the
period.29 This proposed change would definition of ‘‘non-executive employee;’’ inclusion Depository for Securities Limited (‘‘CDS
of parent and subsidiary within the meaning of Participants’’) and (2) transactions with
27 In approving this proposal, the Commission has ‘‘company;’’ and an exception in Amex’s standards other DTC Participants. The Canadian-
considered its impact on efficiency, competition, relating to audit committees for certain issuers that Link Service also allows DTC
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and capital formation. See 15 U.S.C. 78c(f). 28 15 have a listed parent, consistent with a similar
U.S.C. 78f(b)(5). exception contained in Rule 10A–3 under the Act, Participants to transfer Canadian dollar
28 15 U.S.C. 78f(b)(5). 17 CFR 240.10A–3. funds to CDS Participants through the
29 Under current Section 121A of the Company 32 15 U.S.C. 78s(b)(2).
33 15 U.S.C. 78s(b)(2). 1 15 U.S.C. 78s(b)(1).
Guide, a director of a listed company would not be
considered independent if the director or a family 34 34 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.

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