Self-Regulatory Organization Rule Alert! NYSE Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Term "Related Party Transactions" under Section 314.00 of the NYSE Listed Company Manual (Release No. 34-92770; File No. SR-NYS
NYSE: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Term "Related Party Transactions" under Section 314.00 of the NYSE Listed Company Manual (Release No. 34-92770; File No. SR-NYSE-2021-43); see also Exhibit 5
Section 314.00 of the Manual provides that a company’s audit committee or another independent body of the board of directors, shall conduct a reasonable prior review and oversight of all related party transactions for potential conflicts of interest and will prohibit such a transaction if it determines it to be inconsistent with the interests of the company and its shareholders. For purposes of this rule, the term “related party transaction” refers to transactions required to be disclosed pursuant to Item 404 of Regulation S-K under the Act (but without applying the transaction value threshold of that provision). In the case of foreign private issuers, the term “related party transactions” refers to transactions required to be disclosed pursuant to Item 7.B of Form 20-F (but without regard to the materiality threshold of that provision).
Related party transaction disclosures are required in a number of SEC filings, including annual reports and, in the case of domestic issuers, annual meeting proxy statements. Item 404 of Regulation S-K requires disclosure of a related party transaction when the amount involved in such transaction exceeds $120,000. Item 7.B of Form 20-F requires disclosure of transactions that are “material to the company or the related party, or any transactions that are unusual in their nature or conditions” and also of the amount of outstanding loans (including guarantees of any kind) made by the company, its parent or any of its subsidiaries to or for the benefit of a related party.
They want to change the rule to provide that the review and approval requirement of that rule will be applicable only to transactions that are required to be disclosed after taking into account the transaction value and materiality thresholds set forth in Item 404 of Regulation S-K or Item 7.B of Form 20-F.
However, the Exchange also specified in that amendment that related party transactions would be subject to review without regard to the transaction value or materiality thresholds included in the SEC’s disclosure rules.
