[Federal Register Volume 85, Number 161 (Wednesday, August 19, 2020)]
[Notices]
[Pages 51107-51113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18101]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89549; File No. SR-CboeBYX-2020-022]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend the Fifth Amended and
Restated Bylaws of the Exchange's Parent Corporation, Cboe Global
Markets, Inc.
August 13, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 30, 2020, Cboe BYX Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission (the
``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 to solicit comments on the
proposed rule change from interested persons.
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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
Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') proposes to
amend the Fifth Amended and Restated Bylaws (the ``Parent Bylaws'') of
its parent corporation, Cboe Global Markets, Inc. (``Cboe'' or the
``Parent''). The text of the proposed amendments to the Parent Bylaws
is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/byx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change amends the Parent Bylaws to improve the
governance processes of Cboe, which is organized under the laws of the
State of Delaware, and to make certain provisions more consistent with
the Delaware General Corporation Law (``DGCL''). The proposed rule
change also makes clarifying and cleanup changes to the Parent Bylaws.
Proposed Changes to Article 2--Stockholders
The majority of the proposed changes are being made to amend
Section 2.11 (Nomination of Directors) and Section 2.12 (Notice of
Business at Annual Meetings) and are generally designed to provide the
Board with the most information and advance notice possible in
connection with business and nominations at annual and special
meetings. Additionally, the Exchange notes the proposed changes reflect
the most up-to-date disclosure requirement practices. The proposed
changes also combine the existing separate provisions for director
nominations and stockholder proposals into one provision. Particularly,
the proposed rule change combines current Sections 2.11 and 2.12 into
one provision: proposed Section 2.11 titled ``Notice of Business and
Nomination of Directors at Meetings of Stockholders.'' \3\
Specifically, the proposed rule change delineates proposed Section 2.11
into paragraph (a) governing notice requirements for annual meetings,
paragraph (b) governing notice requirements for special meetings \4\,
and paragraph (c), which provides for other general procedures and
practices in connection with notices. The proposed delineation does not
alter the process or definition of either type of meeting, but instead
provides for significantly more detailed written notice requirements as
well as updates to the manner and timeliness of notices.
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\3\ The proposed rule change also updates the subsequent section
numbering (current 2.13 through 2.16) to reflect this change
(proposed 2.12 through 2.15).
\4\ See Section 2.3 of the Parent Bylaws for a description of
Special Meetings.
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First, the proposed change to Section 2.11(a)(i) relocates the
provisions regarding ``properly brought'' business from current Section
2.12, and streamlines such provisions to clearly state that the only
business that will be conducted at an annual meeting of the
stockholders is business that has properly been brought before the
meeting and specifies to be ``properly brought'' such business must be
included in the Corporation's notice of the meeting and brought
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, (the
``Exchange Act'') (or any successor provision of law) and included in
the Corporation's properly brought business. It also proposes to
specify the a precise time that the notices must be made by (i.e.,
delivered to or mailed and received by the Secretary of the
Corporation), which is not later than 5:00 p.m. Eastern Time on the
90th day nor earlier than the 120th day (which are the time frames
currently in place) prior to such annual meeting.
Next, the proposed rule change adds greater detail regarding the
requirements for proper written notice. Particularly, for notice for
stockholder proposals for business other than nominations, (proposed
Section 2.11(a)(iii)(A)), the proposed rule change provides that such
notice must essentially set forth the same information that would be
disclosed in a proxy statement, including:
A reasonably brief description of the business desired to
be brought before the meeting; the text of the proposal or business
(including the text of any resolutions proposed for consideration and,
in the event that such business includes a proposal to amend the
Certificate of Incorporation or the Bylaws of the Corporation, the
language of the proposed amendment);
the reasons for conducting such business at the meeting; a
complete and accurate description of any material interest in such
business of such stockholder and any Stockholder Associated Person,
individually or in the aggregate, including any anticipated benefit to
the stockholder and any Stockholder Associated Person therefrom; and
all other information relating to such proposed business
that would be required to be disclosed in a proxy statement or other
filing required to be made by the stockholder or any Stockholder
Associated Person in connection with the solicitation of proxies in
support of such proposed business pursuant to Regulation 14A under the
Exchange Act.
[[Page 51108]]
Regarding proposed proper written notice for director nominations
(proposed Section 2.11(a)(iii)(B)), the notice must include:
The name, age, business address and residence address of
such nominee, (``Proposed Nominee'') (which, the Exchange notes is
currently the case);
the principal occupation or employment of such nominee
(which, the Exchange notes is currently the case)
a completed written questionnaire with respect to the
background and qualifications of such Proposed Nominee, which must be
completed in a form required by the Corporation and provided to such
stockholder within ten days of receiving such request;
the Proposed Nominee's executed written consent to being
named in the proxy statement for the meeting as a director nominee;
the Proposed Nominee's completed written representation
and agreement, which must be completed in a form required by the
Corporation and provided to such stockholder within ten days of
receiving such request. Importantly, the Proposed Nominee must
represent and agree (1) to a ``Voting Commitment'' that the Proposed
Nominee is not and will not become party to any agreement, arrangement
or understanding with, and has not given any commitment or assurance
to, any person or entity as to how such Proposed Nominee, if elected as
a director, will act or vote on any issue or question (that has not
been disclosed to the Corporation). or any Voting Commitment that could
limit or interfere with the Proposed Nominee's ability to comply with
fiduciary duties under applicable law, (2) that the Proposed Nominee is
not and will not become a party to any agreement, arrangement, or
understanding with any person or entity other than the Corporation with
respect to any direct or indirect compensation, reimbursement, or
indemnification in connection with service or action as a director that
has not been disclosed to the Corporation, (3) would comply with all
applicable rules of the exchange and Corporation and fiduciary duties
under state law, (4) would comply with certain Articles of
Incorporation with respect to activities related to any of the
Exchanges, (5) intends to serve a full term if elected, and (6) will
provide true and correct information in communications to the
Corporation and its stockholders and will not omit material information
or provide misleading information;
a description of all direct and indirect compensation and
other material monetary agreements, arrangements and understandings
during the past three years, and any other material relationships; and
any other information that would be required to be
disclosed statement or other filing required to be made in connection
with solicitations of proxies for election of directors in a contested
election pursuant to Section 14 of the Exchange Act (which, the
Exchange notes is currently the case).
As to the stockholder providing notice, any Stockholder Associated
Person and any Proposed Nominee, (proposed Section 2.11(a)(iii)(C)) the
proposed proper written notice must provide:
Name and address of such person (as they appear on the
Corporation's books, if applicable) (which, the Exchange notes is
currently the case);
class (which is currently the case) or series and number
of shares of capital stock of the Corporation (``Shares'') which are,
directly or indirectly, owned beneficially and/or of record by such
person, the dates such shares were acquired and the investment intent
of such acquisition;
the name of each nominee holder for, and any pledge by
such person or any number of, securities of the Corporation owned
beneficially, but not of record;
short interest, including a definition of what constitutes
short interest, wherein a person shall be deemed to have a short
interest in a security if such person, directly or indirectly, through
any contract, arrangement, understanding, or relationship or otherwise
has an opportunity to profit or share in profit derived from decreased
value of the subject security;
a description of any agreement, arrangement or
understanding, whether written or oral, (including any derivative or
short positions, profit interests, options, warrants, convertible
securities, stock appreciation or similar rights, hedging transactions,
and borrowed or loaned shares (which, the Exchange notes, is currently
the case) or similar rights with an exercise or conversion privilege or
a settlement payment or mechanism at a price related to any class or
series of capital stock of the Corporation or with a value derived in
whole or in part from the value of any class or series of capital stock
of the Corporation (a ``Derivative Instrument'')), in order to mitigate
loss to, manage risk or benefit of share price changes for, or increase
or decrease voting power with respect to Shares;
any rights to dividends on the Shares owned beneficially
by such person;
any proportionate interest \5\ in Shares or Derivative
Instruments by a general or limited partnership or similar entity in
which such person (1) is a general partner or beneficially owns an
interest in a general partner, or (2) is the manager, managing member,
or beneficially owns an interest in such management, of a limited
liability company or similar entity;
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\5\ Interest referred to throughout the proposed stockholder
proper written notice may be direct or indirect.
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any substantial interest (including, without limitation,
any existing or prospective commercial, business or contractual
relationship with the Corporation), by security holdings or otherwise,
in the Corporation or any of its affiliates;
a complete and accurate description of all agreements,
arrangements or understandings, written or oral, and formal or
informal, between or among the stockholder providing notice and any of
the Stockholder Associated Persons (collectively, the
``Stockholders''), or the Stockholders with any Proposed Nominee and
any other person in connection with (1) any proxy, contract,
arrangement, understanding or relationship where either of the
Stockholders have the right to vote any Shares, (2) that such
individuals may have reached with any stockholder of the Corporation
regarding how such stockholder will vote its shares, take other action
in support of any Proposed Nominee, or other action by either of the
Stockholders, and (3) any other agreements that would be required to be
disclosed by either of the Stockholders or any other person or entity
pursuant to a Schedule 13D filed pursuant to the Exchange Act
a complete and accurate description of any performance-
related fees to which such person may be entitled as a result of any
increase or decrease in the value of Shares or any Derivative
Instruments;
any investment strategy or objective of those who are not
an individual and a copy of the prospectus (and other like documents);
a complete and accurate description of any pending or
threatened legal proceeding in which such person is a party or
participant involving the Corporation;
if any agreement, arrangement or understanding has been
made to increase or decrease the voting power of such person with
respect to any Shares; and
any other information relating to such person that would
be required to be disclosed in a proxy statement or
[[Page 51109]]
other filing required to be made in connection with solicitations of
proxies for such business or the election of any Proposed Nominee, or
is otherwise required, pursuant to Section 14 of the Exchange Act.
Further, regarding proposed proper written notice, proposed Section
2.11(a)(iii)(D) simplifies the language in connection with the current
requirement that the Stockholders must represent if they intend to
deliver a proxy statement and/or form of proxy to holders to approve or
adopt the proposed business, elect the Proposed Nominee, and/or
otherwise solicit proxies or votes from stockholders in support of such
proposed business or Proposed Nominee, making it easier to understand.
Proposed Section 2.11(a)(iii)(E) provides for the current
requirement that the stockholder providing notice must represent that
it is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person, and adds that ``in
person'' may be virtually, in the case of a meeting held solely by
means of remote communication) or by proxy at the meeting to bring such
proposed business and/or nominate one or more Proposed Nominee.
Proposed Section 2.11(a)(iii)(F) requires that proper written
notice include an acknowledgment that the Corporation does not have to
present the business or nomination being brought at the meeting by the
stockholder proposing such, if such stockholder does not appear. The
proposed rule change also adds that, in addition to the proper written
notice information, the Corporation may require any Proposed Nominee to
furnish certain other information as the Corporation may reasonably
require to determine the eligibility or independence of a Proposed
Nominee.
Proposed Section 2.11(b), which, as stated, delineates the
provisions governing special meetings of stockholders, amends the
procedures governing advance notice of director nominations at a
special meeting called by the Board for the election of directors.
Currently, notices of a special meeting must be made not less than
ninety (90) days nor more than one hundred twenty (120) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that if the annual meeting is not held
within thirty (30) days before or more than seventy (70) days after
such anniversary date, then such nomination shall have been delivered
to or mailed and received by the Secretary not later than the close of
business on the 10th day following the date on which public
announcement of the annual meeting date was made. The proposed rule
change updates this notice procedure to mirror the same procedural
language in proposed Section 2.11(a)(ii) (maintaining the same 90- to
120-day notice requirement), but updates the timing requirements to
remove the language regarding the 30-day and 70-day time frames around
the anniversary date and provides that, if public announcement of the
special meeting and the nominees proposed by the Board of Directors to
be elected at such meeting is first made less than ninety (90) days
prior to the date of the special meeting, notice must be made the tenth
(10th) day following the day on which such public announcement is first
made. The Exchange believes this proposed timing provision simplifies
the timing requirement, making it easier to understand and follow, and
also provides ample time to provide notice in advance to stockholders
of any scheduled special meeting. Proposed Section 2.11(b) also
provides that proper written notice of a special meeting must comply
with the requirements, as proposed, laid out in Section 2.11(a)(iii).
Proposed Section 2.11(c) provides, generally, for other procedures
and practices in connection with notices, as well as certain defined
terms. Proposed Section 2.11(c)(i) provides that a stockholder
providing notice must update any notice, if necessary, so that the
information provided or required to be provided in a notice is be true
and correct (A) as of the record date for determining the stockholders
entitled to receive notice of the meeting and (B) as of the date that
is ten business days prior to the meeting (or any postponement,
adjournment or recess thereof). If an update is required to be made as
of the record date for determining the stockholders entitled to receive
notice of the meeting then the notice of update must be made not later
than five business days after the record date for determining the
stockholders entitled to receive notice of such meeting. If an update
is required to be made as of the date that is ten business days prior
to the meeting (or any postponement, adjournment or recess thereof),
then the notice of update must be made no later than seven business
days prior to the date for the meeting, if practicable, or, if not
practicable, on the first practicable date prior to the meeting or any
adjournment, recess or postponement thereof Proposed Section
2.11(c)(ii) provides that if any information submitted pursuant to
Section 2.11 is inaccurate in any respect, such information may be
deemed not to have been provided in accordance with the Parent Bylaws.
As proposed, the stockholder providing the notice has an obligation to
notify the Secretary in writing at the principal executive offices of
the Corporation of any inaccuracy or change in any such information
within two business days of becoming aware of such inaccuracy or
change. Additionally, within seven days upon delivery of a written
request by the Secretary, the Board of Directors (or a duly authorized
committee thereof), any such stockholder is obliged to provide: (A)
Written verification, reasonably satisfactory to the Board of
Directors, any committee thereof or any authorized officer of the
Corporation, to demonstrate the accuracy of any information submitted
by the stockholder pursuant to Section 2.11, and (B) a written update
of any information pursuant to Section 2.11 as of an earlier date. If
the stockholder fails to provide such written verification within such
period, the information as to which written verification was requested
may be deemed not to have been provided in accordance with Section
2.11. Proposed Section 2.11(c)(iii) provides that a stockholder
providing notice must also comply with all applicable requirements of
state law and all applicable requirements of the Exchange Act and the
rules and regulations thereunder, however, references to the Exchange
Act and its rules and regulations will not limit the requirements
applicable to stockholder proposals or director nominations pursuant to
Section 2.11. Proposed Section 2.11(c)(iv) updates current language
governing failure for the proposing stockholder to appear by adding
that virtual appearances are acceptable when such meeting is being held
remotely, as well as the flexibility for the Corporation to waive the
appearance requirement. The rule change updates this provision and adds
this flexibility in light of the ongoing Covid-19 pandemic and the
consequential remote working status for many companies, including Cboe.
Proposed Section 2.11(c)(v) adds the definition of key terms, along
with current definitions, for clarity. Specifically, the proposed rule
change defines an ``affiliate'' and ``associate'' as having the
respective meanings set forth in Rule 12b-2 under the Exchange Act and
``Stockholder Associated Person'' to mean: Any person who is a member
of a ``group'' (used in Rule 13d-5 under the Exchange Act) with or
otherwise acting in concert with such stockholder
[[Page 51110]]
providing notice; any beneficial owner of shares of stock of the
Corporation owned of record or beneficially by such stockholder (other
than a stockholder that is a depositary); any person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such stockholder or
such Stockholder Associated Person and beneficially owns, directly or
indirectly, shares of stock of the Corporation; any person that
directly, or indirectly through one or more intermediaries, controls
such stockholder or any Stockholder Associated Person; and any
participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to
Item 4 of Schedule 14A, or any successor instructions) with such
stockholder or other Stockholder Associated Person in respect of any
proposals or nominations, as applicable.
The Exchange notes that many of the proposed rule changes to
proposed Section 2.11 are consistent with the bylaws of Cboe's peer
financial market/services corporations, Nasdaq, Inc (``Nasdaq''),\6\
Intercontinental Exchange (``ICE''),\7\ and/or the CME Group, Inc.
(``CME''),\8\ including:
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\6\ See By-laws of Nasdaq, Inc., available at https://listingcenter.nasdaq.com/assets/RuleBook/NASDAQ/rules/Nasdaq_Inc_Corporate_Organization_Nasdaq_Inc.pdf.
\7\ See Eighth Amended and Restated Bylaws of Intercontinental
Exchange, Inc., available at https://s2.q4cdn.com/154085107/files/doc_downloads/intercontinental_exchange/bylaws-eighth-amended.pdf.
\8\ See Fifteenth Amended and Restated Bylaws of CME Group Inc.,
available at https://www.cmegroup.com/rulebook/files/CME-Bylaws.pdf.
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The proposed disclosures required under Regulation 14A for
proposed business other than director nominations; director
questionnaires;
consent to be named in the proxy statement as a director
nominee;
a Voting Commitment;
disclosure of compensation arrangements in connection with
service as a director;
agreement to comply with applicable regulations,
organizational documents and policies;
representation of intent to serve a full term; commitment
to provide true and correct facts and to not omit material facts;
nominee disclosures for contested elections under Section
14;
required disclosure by a proposing stockholder's 13D group
members and related parties;
disclosure of rights to dividends, short interest,
interests held through controlled partnerships or LLCs, and in the
Company other than Company common stock;
disclosure of agreements/arrangements in connection with
conferring proxy authority, with any other stockholder regarding voting
or supporting the proposal/nominee, with increasing or decreasing
voting power, and agreements required to be disclosed on Schedule 13D;
disclosure of performance-related fees related to the
Company's performance;
disclosure of investment strategy and inclusion of
prospectus/offering memorandum;
disclosure of pending or threatened litigation;
Special meeting provisions;
Obligation to update and correct disclosures; and
Express obligation to appear to present the proposal/
nominee.
Additionally, the proposed rule change moves language currently in
Section 2.10 providing that the number of nominees for director may not
exceed the number of directors to be elected at any meeting to proposed
Section 2.11(a) (annual meetings) and Section 2.11(b) (special
meetings), therefore adding clarity to the updated Section 2.11 format
that this provision continues to apply for both annual and special
meetings. The proposed rule change to Section 2.10 also simplifies
current language that provides an election may proceed if proper notice
is made and received and adds language that nominations may be
withdrawn on or prior to the tenth day before the date the Corporation
first mails its notice of meeting for such election.
The proposed rule change also amends Section 2.1 (Place of
Meetings) by removing language that requires stockholder meetings to be
held at the principal place of business of the Company if no location
is designated. The Exchange believes that it is appropriate for the
Board to retain both control and flexibility over the location and
timing of stockholder meetings. The proposed rule change amends Section
2.2 (Annual Meeting) and Section 2.3 (Special Meeting) to provide that
the Board may postpone, reschedule or cancel any previously-scheduled
annual meeting or special meeting, respectively. The proposed rule
change also updates Section 2.7 (Adjournments) to provide that only the
presiding person of a stockholder meeting can adjourn the meeting in
the absence of a quorum. The proposed changes are intended to provide
the Board the flexibility to postpone, recess, reschedule or cancel a
stockholder meeting. The Exchange also notes that the proposed rule
changes to Sections 2.2, 2.3, and 2.7 are consistent with the bylaws of
Cboe's peer corporation, Nasdaq.\9\
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\9\ See supra note 6.
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The proposed rule change also makes updates to reflect the current
best corporate governance practices to certain Sections under Article
2. In particular, it updates the language in Section 2.5 (Voting List)
regarding who is required to prepare the voting list. Section 2.5
currently provides that officer who has charge of the stock ledger
prepares the voting list and the proposed rule change updates this to
provide that the Corporation prepares the voting list. The proposed
rule change is consistent with the DGCL and reflects current best
practice. The proposed rule change also amends current Section 2.13
(Organization) (proposed Section 2.12), which currently states that
that the Board of Directors may appoint any stockholder to act as
chairman of any meeting in the absence of the Chairman of the Board, to
instead provide that that the Board of Directors may appoint any
director of the Corporation to act as chairman of any meeting in the
absence of the Chairman of the Board. Also, current Section 2.16
(Conduct of Meetings) (proposed Section 2.15) makes certain changes to
expand the procedural authority of the presiding officer of any
stockholder meeting, including the right to recess and/or adjourn
meetings for any or no reason, and the determination of when the polls
will open and close for any given matter to be voted on at the meeting,
the removal of any stockholder or individual who refuses to comply with
meeting procedures, rules, or guidelines, the restrictions on the use
of audio and/or video recording devices and cell phones. This is
consistent with best practice and ensures that the presiding officer
has the flexibility to take measures, as needed, that ensure meetings
are conducted in the most appropriate manner.
Proposed Changes to Article 3--Directors
The proposed rule change amends Section 3.5 (Vacancies) to provide
that that vacancies on the Board may be filled exclusively by a
majority of the directors. The Exchange notes that stockholders have a
common law right under Delaware law to fill director vacancies, unless
the Company's Charter or Bylaws explicitly give the Board exclusive
authority, therefore, the proposed change is designed to make this
right exclusive to the Board. The proposed rule change is consistent
with the bylaws of Cboe's peer corporations,
[[Page 51111]]
Nasdaq and ICE.\10\ The proposed rule change to Section 3.10 (Special
Meetings) would allow special meetings of the Board to be called with
less than 24 hours' notice. Currently, Section 3.10 requires at least
24 hours' notice to directors of special Board meetings. However, there
may be circumstances that necessitate an emergency meeting of the Board
with less than 24 hours' notice (e.g., in relation to a pending
transaction), and therefore, the proposed changes would allow notice on
a shorter time frame if necessary and appropriate under the
circumstances. The proposed changes to Section 3.13 (Action by Consent)
updates language regarding routine filing of consents following an
action by the Board. Specifically, the proposed change updates the
consents to reflect the same electronic form as minutes are maintained,
which is consistent with recent amendments to the DGCL, reflects
current best practice.
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\10\ See supra notes 6 and 7.
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The proposed change also adds Section 3.15 (Emergency Bylaws).
Specifically, the proposed Section 3.15 provides that, notwithstanding
anything to the contrary in the Certificate of Incorporation or these
Bylaws, in the event there is any emergency, disaster or catastrophe,
as referred to in Section 110 of the DGCL, or other similar emergency
condition (each, an ``emergency''), and a quorum of the Board of
Directors cannot readily be convened for action, this Section 3.15
shall apply, including:
Any director or Chief Executive Officer, President, Chief
Operating Officer, Chief Financial Officer, Treasurer or Secretary of
the Corporation may call a meeting of the Board of Directors by any
feasible means and with such advance notice as circumstances permit in
the judgment of the person calling the meeting. Neither the business to
be transacted nor the purpose of any such meeting need be specified in
the notice thereof.
One-third (\1/3\) of the directors shall constitute a
quorum, which may in all cases act by majority vote.
Directors may take action to appoint one or more of the
director or directors to membership on any standing or temporary
committees of the Board of Directors as they deem advisable. Directors
may also take action to designate one or more of the officers of the
Corporation to serve as directors of the Corporation while this Section
3.15 applies.
To the extent that it considers it practical to do so, the
Board of Directors shall manage the business of the Corporation during
an emergency in a manner that is consistent with the Certificate of
Incorporation and Bylaws. It is recognized, however, that in an
emergency it may not always be practical to act in this manner and this
Section 3.15 is intended to and does hereby empower the Board of
Directors with the maximum authority possible under the DGCL, and all
other applicable law, to conduct the interim management of the affairs
of the Corporation in an emergency in what it considers to be in the
best interests of the Corporation.
No director, officer or employee acting in good faith in
accordance with this Section 3.15 or otherwise pursuant to Section 110
of the DGCL shall be liable except for willful misconduct.
This Section 3.15 shall continue to apply until such time
following the emergency when it is feasible for at least a majority of
the directors of the Corporation immediately prior to the emergency to
resume management of the business of the Corporation.
The Board of Directors may modify, amend or add to the
provisions of this Section 3.15 in order to make any provision that may
be practical or necessary given the circumstances of the emergency.
The provisions of this Section 3.15 shall be subject to
repeal or change by further action of the Board of Directors or by
action of the stockholders, but no such repeal or change shall modify
the provisions of paragraph (e) of this Section 3.15 with regard to
action taken prior to the time of such repeal or change.
The Exchange notes that these proposed changes are largely
consistent with the DGCL and are designed to allow the Board and the
Corporation to continue to function in the case of an emergency, such
as a pandemic or an act of terrorism. The Exchange believes the ongoing
COVID-19 pandemic, as well as similar potential events, demonstrate the
need for Emergency Bylaws and notes that a number of companies are
adopting (or at least considering) emergency bylaws to relax Board
requirements when directors may be unavailable due to emergency
conditions, such as the pandemic.
Proposed Changes to Article 4--Committees
The proposed rule change to Section 4.1 (Designation of Committees)
adds language that provides the Board with additional rights in their
ability to designate committees and committee alternates and specifies
that such committees may exercise all powers and authority of the Board
in the management of the business. Specifically, the proposed language
provides that the Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of the committee, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at
the meeting in place of any such absent or disqualified member. Any
such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation, if any, to be affixed to all
papers which may require it. The proposed rule change provides
additional detail regarding the specific authority of the Board to
designate members of the committees and their general powers and
authority to manage the Corporation, as well as the power invested in
the voting members regarding the appointment of a member of the Board
to act in a circumstance of disqualification. The proposed language is
consistent with the DGCL and reflects current best practice.
The proposed rule changes to Section 4.2 (The Executive Committee)
removes language that lists out specific actions or matters that are
not to be handled by the Executive Committee under Delaware law,
including amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, approving a sale, lease or
exchange of all or substantially all of the Corporation's property and
assets, or approval of a dissolution of the Corporation or revocation
of a dissolution. The proposed change, instead, replaces this list with
reference to matters under the DGCL to be submitted to stockholders for
approval. The Exchange believes that the proposed change, while being
consistent with the DGCL, removes ambiguous and potentially
unnecessarily limiting language that lists the circumstances that could
not be handled by the Executive Committee that required stockholder
approval and replaces it with broader reference to the DGCL.
The proposed change to Section 4.5 (The Nominating and Governance
[[Page 51112]]
Committee) reduces the minimum size requirement of the Nominating and
Governance Committee (``N&G Committee'') from a minimum of five members
to three members. This proposed rule change is intended to provide the
Board additional flexibility when populating the N&G Committee and is
consistent with the minimum number of members required on other Board
committees.\11\
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\11\ See e.g., Sections 4.3 and 4.4 of the Parent Bylaws.
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Proposed Changes to Article 8--Notices
The proposed rule change in Section 8.1 (Notices) replaces language
in paragraph (e) that requires that stockholders opt-in to email notice
with language that instead allows stockholders to opt-out of email
notice or not receive email notice if such notice is prohibited by the
DGCL. The proposed rule change also updates Section 8.2 (Electronic
Notice) to reflect this change. The proposed rule change also removes
the provision in Section 8.1 paragraph (c) which provides that notice
may be given by messenger or overnight courier service if the delivery
method does not require payment of the messenger or courier service fee
to deliver the notice by the person to whom the notice is addressed.
The proposed rule change then adds to paragraph (c) that notice is
deemed to have been given via this method at the earlier of when the
notice is received or left at the stockholder's or director's address.
The proposed change is consistent with the DGCL.
Proposed Rule Changes to Article 11 (Forum for Adjudication of
Disputes)
The proposed rule changes to Article 11 add clarifying provisions
and additional detail regarding the exclusive forum. The proposed
changes are designed to update the exclusive forum bylaw to reflect
current best practices. Specifically, the proposed rule change adds
that, among the existing actions listed, the Court of Chancery of the
State of Delaware will be the sole and exclusive forum for any action
asserting an ``internal corporate claim'' (defined in the DGCL). The
proposed rule change also provides that, in the event that the Delaware
Court of Chancery lacks subject matter jurisdiction over any such
action or proceeding, the sole and exclusive forum for such action or
proceeding shall be another state or federal court located within the
State of Delaware. The proposed rule change provides that any person or
entity purchasing or otherwise acquiring any interest in shares of
capital stock of the Corporation is deemed to have notice of and
consented to the provisions of Article 1, including exclusive personal
jurisdiction in the Delaware Court or Chancery and having service of
process made, even if an action (within the scope of Article 11) is
filed in a court other than a court located within the State of
Delaware. Additionally, the proposed rule change makes clear that the
existence of any prior consent to, or selection of, an alternative
forum by the Corporation shall not act as a waiver of the Corporation's
ongoing consent right in Article 11 and that failure to enforce the
foregoing provisions would cause the Corporation irreparable harm and
the Corporation is entitled to equitable relief, including injunctive
relief and specific performance, to enforce Article 11. It also
clarifies that a claim may be made against the Corporation or any
current or former director, officer, other employee, agent or
stockholder of the Corporation, and may arise pursuant to the
Certificate of Incorporation or these Bylaws, in addition to the DCGL.
The proposed rule change is in line with current best practice, and,
additionally, the bylaws of Cboe's peer, CME,\12\ currently provide for
similar language related to foreign actions and specific performance.
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\12\ See supra note 8.
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Finally, the proposed rule change makes non-substantive edits
throughout the above listed Articles of the Parent Bylaws, including
updating paragraph lettering and numbering, simplifying language in
order to better align it with plain English, update the terms Board of
Directors and Exchange Act to be uniform throughout the bylaws (e.g.,
as opposed to just ``Board'', or ``Securities and Exchange Act'', and
the other versions of the Act's name).
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\13\ Specifically, the Exchange believes the proposed rule change
is consistent with Section 6(b)(1) of the Act,\14\ which provides that
the Exchange be organized and have the capacity to be able to carry out
the purposes of the Act and to enforce compliance by the Exchange's
Trading Permit Holders and persons associated with its Trading Permit
Holders with the Act, the rules and regulations thereunder, and the
rules of the Exchange.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(1).
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In particular, the Exchange believes the proposed changes overall
are designed to improve the governance process of Cboe, as well as
update the Parent Bylaws, where applicable, to reflect and track the
DCGL and current best practices. Moreover, the Exchange does not
believe the proposed rule changes are controversial and indeed are
common among public companies, including its peers, Nasdaq, ICE and
CME.
Particularly, the proposed rule changes to proposed Section 2.11 in
connection with providing notice regarding business and director
nominations at annual and special meetings, will enable the Exchange to
continue to be organized and have the capacity to be able to carry out
the purposes of the Act, because such proposed changes are generally
designed to strengthen these provisions by requiring notices (including
updates to notices) to disclose to the Board more detailed information
than currently required. In this manner, the proposed detailed
disclosure requirements would provide the Board with substantially more
information by which they may make complete and informed decisions and
most appropriately address business before the Board. The Exchange also
believes that the proposed rule changes in connection with timely
notice, including the 10 days' advanced notice of director nominations
(via the required director questionnaire), procedures governing advance
notice of director nominations at a special meeting, an obligation to
update and correct the notice up to 7 days prior to a meeting, and
updated timing regarding the 10-day notice of a special meeting less
than 90 days from the scheduled meeting, will allow the Board the
appropriate time needed to consider and prepare to address all
business, nominations, and other issues to be presented before it. As
such, the proposed rule changes will ensure that the Board is able to
continue to oversee the orderly operation of the corporation, including
the Exchange, in a manner the it deems most appropriate. Additionally,
and as listed in detail above, the vast majority of the proposed notice
requirements are consistent with the bylaws of Cboe's peer
corporations, CME, ICE, and/or Nasdaq, as well as in line with current
best practices. The proposed changes are also all consistent with the
DCGL.
Moreover, the proposed changes are intended to provide the Board
with additional flexibility and more appropriate governance procedures
in
[[Page 51113]]
addressing various circumstances, which will enable the Exchange to
continue to be organized and have the capacity to be able to carry out
the purposes of the Act. In particular, the proposed rule changes would
allow the Board to retain both control and flexibility over the
location and timing of stockholder meetings, would allow the Board to
postpone, recess, reschedule or cancel a stockholder meeting, would
allow only the presiding person of a stockholder meeting to adjourn and
reset a stockholder meeting date in the absence of quorum, would allow
for shorter notice in order for the Board to call a special meeting,
would allow the Board and the Corporation to continue to function
(including remotely) in the case of an emergency, such as the ongoing
COVID-19 pandemic, and would provide the Board with increased
flexibility in populating the Nomination and Governance Committee. Each
of these proposed changes is designed to assist the Exchange in most
effectively and efficiently managing evolving corporate matters as they
arise, many of which are highly complex and may be time sensitive.
Additionally, as indicated above, a majority of the proposed changes
align certain Sections in the Parent Bylaws with current best practices
and with the DCGL (as well as a change in accordance with Delaware
common law) and are also consistent with bylaw provisions of Cboe's
peer corporations. Accordingly, the Exchange believes the proposed
changes are widely accepted as appropriate governance measures.
Lastly, the proposed nonsubstantive changes to the Parent Bylaws
provide additional clarity within the Parent Bylaws and make them
easier to understand. By making certain provisions read more in plain
English, updating paragraph lettering and numbering, making certain
terms uniform and simplifying language throughout, the proposed
nonsubstantive changes benefit investors by providing more clarity and
reduced complexity within the Parent Bylaws and making the Parent Bylaw
[sic] better organized and easier to follow thus reducing potential
investor confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather is concerned
solely with updating the Parent Bylaws to reflect the changes described
above.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange 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 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CboeBYX-2020-022 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBYX-2020-022. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBYX-2020-022 and should be submitted
on or before September 9, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18101 Filed 8-18-20; 8:45 am]
BILLING CODE 8011-01-P