March 25, 2019

March 25, 2019

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SEC Approves NYSE Delay on Release of Material After-Market News

As we begin 2018, companies listed on the New York Stock Exchange should take note of the new mandatory delay when announcing material news at the end of the day. In early December 2017, the Securities and Exchange Commission (SEC) approved a NYSE proposed rule change to prevent companies from releasing material end-of-day news for up to five minutes after the markets close. The rule change is intended to prevent investor confusion and price discrepancies that can occur in the minutes after the official market close each day.

While the NYSE market close generally is at 4:00 p.m. Eastern Time (other than on certain days, when trading closes early at 1:00 p.m.), it typically takes up to five minutes to complete closing auctions on the exchange. The closing auctions determine the official daily closing price for a NYSE-listed company’s shares. In the meantime, trading on other exchange and non-exchange venues (“away markets”) occurs after the NYSE market close. The release of material news immediately after 4:00 p.m. but before the closing auctions on NYSE are completed could lead to significant price differences between the prices at which trades are executed on away markets and the NYSE official closing price, despite those trades occurring nearly contemporaneously.

In approving the rule change, the SEC noted that while it is important for listed companies to release material news to the public as quickly as possible, the mandatory delay is consistent with investor protection and would reduce the likelihood of confusion. The amendment is reasonably designed to ensure that “participants in the closing auction on the Exchange do not have their trades executed at a price that is different from essentially contemporaneous trades being executed on away markets.”

The rule change, which is now effective, amends Section 202.06 of the NYSE Listed Company Manual to prevent listed companies from releasing after-market material news until the earlier of (i) the publication of such company’s official closing price on the NYSE or (ii) five minutes after the NYSE official closing time (i.e., 4:05 p.m. on most trading days). This rule does not apply to public disclosures of material information made by a company following a non-intentional disclosure in order to comply with Regulation FD under the Securities Act of 1933, as amended. A company is never expected to withhold material information in violation of Regulation FD, even if the closing auction on the NYSE has not yet been completed. Irrespective of the up-to-five-minute required delay, the NYSE continues its advisory that companies wait to release material after-market news until the earlier of (i) publication of its official closing price or (ii) fifteen minutes after market close (i.e., 4:15 p.m. on most trading days), to prevent investor confusion.

The SEC Release is available here and the NYSE blast email can be found here.

Charles Lange assisted in the preparation of this article.

©2019 Drinker Biddle & Reath LLP. All Rights Reserved

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Bonnie Barsamian, Drinker Biddle Law Firm, New York, Corporate and Finance Law Attorney
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Bonnie A. Barsamian is a seasoned legal and business advisor with more than 25 years of experience advising public and private companies, investment banks, financial sponsors, executive leadership and boards of directors in complex securities/capital markets, mergers and acquisitions and other corporate transactional, advisory and regulatory matters.

Bonnie represents issuers, underwriters and financial sponsors in the full range of public and private securities offerings and other corporate finance transactions, including IPOs...

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Elizabeth A. Diffley, Corporate, Securities Attorney, Drinker Biddle, Law Firm
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Elizabeth A. Diffley is an accomplished and pragmatic advisor to public and private clients on corporate and securities matters, including corporate governance, capital raising transactions, public company reporting and compliance, and mergers and acquisitions, as well as general corporate matters. Knowledgeable across a broad range of industries, Beth has particular experience advising insurance and other financial services companies on a variety of securities, mergers and acquisitions, governance and general corporate matters.

Beth joined Drinker Biddle from the Paris office of a New York law firm, where her practice primarily involved cross-border securities offerings and compliance with U.S. securities laws and reporting obligations. She previously worked in audit services for PricewaterhouseCoopers, and offers sound business judgment and valuable insight on matters related to accounting and financial reporting issues. She is a certified public accountant in New York and fluent in French.

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JR Lanis, Securities Attorney, Drinker Biddle
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JR Lanis assists clients with public securities offerings and reporting, private equity and venture capital financings, mergers and acquisitions, and fund formation and representation. He structures, negotiates and closes multimillion and billion-dollar transactions, including public stock and debt offerings, tender offers, distressed company acquisitions and sales, mergers, licensing and other commercial arrangements, for both buyers and sellers. He also serves as outside counsel to several registered investment companies.

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Marc Leaf, Corporate lawyer, Drinker Biddle
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Marc A. Leaf is Regional Partner in Charge of the New York office of Drinker Biddle, and a trusted counselor and adviser to senior government officials, corporate leaders, and independent directors. An experienced and practical dealmaker with a proven record of success, Marc helps issuers and investors in technology, media, telecom and other industries achieve their goals in capital raising transactions, business combinations, and joint ventures.

Prior to joining Drinker Biddle, Marc served on the Executive Staff of the U.S....

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Douglas Raymond, Securities Attorney, Drinker Biddle Law Firm
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Doug Raymond has 30 years’ experience advising clients on mergers and acquisitions, securities offerings and joint ventures. He focuses on understanding his clients' businesses and industries, their objectives and how to achieve them most effectively. He is dedicated to helping his clients accomplish their goals effectively and efficiently. Doug is a managing partner of the firm and served as chair of the Corporate and Securities Group for more than 10 years.

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