January 13, 2006

NYSE Considers Dumping Treasury Stock Exception

Last week, the NYSE published a notice requesting comment regarding whether to retain, modify or eliminate the “treasury stock exception” to 312.03 of the NYSE’s Listed Company Manual, which requires shareholder approval as a prerequisite to listing additional shares in certain situations (e.g., generally if the newly listed shares represent 20% or more of the currently outstanding shares).

As the notice acknowledges, because of the way the rule is drafted, the issuance of shares from treasury (i.e., shares that were previously listed and issued but subsequently reacquired by the issuer) is not typically counted in determining whether the 20% threshold has been crossed triggering application of the shareholder approval requirement of 312.03. Though widely known, this “treasury share exception” has recently received increased attention – and some criticism from activist shareholders – in connection with transactions contemplated by Sovereign Bancorp.

The elimination or modification of the treasury share exception from 312.03 would require approval of the SEC following a public comment period. The NYSE has not yet determined to make any such proposal at this time – but, in a manner reminiscent of the way in which the NASD initially solicited comments on whether to propose new rules regarding fairness opinions, is first seeking comment from listed companies and their stockholders on the topic. Comments are due by January 20th.

By the way, the notice is also interesting for the additional detail it provides regarding the way in which the NYSE has historically interpreted 312.03. Thanks to Kevin Miller of Alston & Bird for providing the analysis above – also see the Davis Polk memo in our “NYSE Guidance” Practice Area!

The SEC’s Push for XBRL Intensifies

It is clear that implementing XBRL is a top priority for Chairman Cox, as this is the topic he has publicly spoken about the most so far. With this press release, the SEC has reached out even more to the corporate community in an effort to entice them to volunteer for the ongoing XBRL pilot program.

For those that volunteer by February 10th, the SEC now promises expedited reviews of registration statements that the Staff has selected for review. And the carrot for WKSIs is that the Staff will inform volunteers whether their 10-Ks have been selected for review within 30 days after filing – and will undertake to provide any comments on that filing within 45-60 days of filing. I would hold out for the cash prizes…

Section 404 and Non-Accelerated Status

Referring to my December 22nd blog, a number of members have been kind enough to tell me that they have confirmed with the SEC Staff that an issuer whose non-affiliate float dropped below $50m can exit – and not file a 404 report in their next 10-K – even though they filed a 404 report last year.

I had neglected to go back and reword that old blog’s soft language on this topic to reflect the Staff’s confirmation, even though we had written about it a few weeks back in the most recent issue of The Corporate Counsel as well as in this site’s Q&A Forum (see #1391).