Securities Regulation:

Improvements Needed in the Amex Listing Program

GAO-02-18: Published: Nov 27, 2001. Publicly Released: Dec 20, 2001.

Additional Materials:


Thomas J. McCool
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The Securities and Exchange Commission (SEC) has indicated that one-third of Amex's new listings did not meet the exchange's equity listing standards. Amex's listing guidelines address factors that are the same or similar to those addressed by other U.S. stock markets. Quantitative requirements addressed share price, stockholders' equity, income, and market value of publicly held shares. However, the minimum thresholds for meeting these requirements varied to reflect the differences in the companies that each market targeted for listing. The most significant difference between Amex's guidelines and the listing standards of other U.S. stock markets was that Amex was one of only two markets that retained discretion to initially list companies that did not meet all of its quantitative requirements. Amex had not implemented the Office of Compliance Inspections and Examinations' (OCIE) recommendations on the exchange's discretionary listing decisions. OCIE officials told GAO that in the absence of an Amex agreement to address the recommendations, they would include them among the open significant recommendations to be reported to the SEC Commissioners as a result of a 1998 GAO recommendation. The Commission can require Amex to implement OCIE's recommendations. Amex officials said that the exchange was fulfilling its self-regulatory organization responsibilities by individually monitoring the status of companies that did not meet its continued listing guidelines and by summarizing information in monthly reports to management.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On May 8, 2002, SEC approved Amex's proposed rules to adopt firm quantitative listing standards. In approving the change, SEC stated that the adoption of these standards would enhance the transparency of the exchange's listing program and provide clarity to investors. SEC also approved Amex's less-stringent "alternative" listing standards, under which Amex could list a company subject to the company notifying the public that its listing was under the alternative standards.

    Recommendation: As part of SEC's ongoing efforts to ensure that Amex addresses weaknesses in the management of its equity listing program, the Chairman of SEC should direct Amex to implement mandatory quantitative equity listing requirements or provide ongoing public disclosure of noncompliant companies.

    Agency Affected: United States Securities and Exchange Commission

  2. Status: Closed - Implemented

    Comments: In a proposed rule, approved by SEC on May 8, 2002, Amex stated that it had augmented its management reporting system to alert senior exchange management of any developing trends emerging from the listing process with respect to recently approved companies and companies failing to meet, or in jeopardy of failing to meet, continued listing standards. The quarterly reporting system encompasses companies listed under the regular and alternative standards. Amex filed its first quarterly report with SEC on May 28, 2002. Amex anticipates refining the report as it gains more experience with it.

    Recommendation: As part of SEC's ongoing efforts to ensure that Amex addresses weaknesses in the management of its equity listing program, the Chairman of SEC should require Amex to report quarterly to its Board of Governors on the operating results of its equity listing program and make these reports available to OCIE for review. Such reports should contain sufficient information to demonstrate the overall effectiveness of the Amex equity listing program, including, at a minimum, that of its exceptions-granting policies and its initial and continued listing guidelines.

    Agency Affected: United States Securities and Exchange Commission


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