Has The Secretary Of State Missed The Mark In Defining "Publicly Held Corporation"?


Yesterday, I noted that the California Secretary of State's office is mailing reminder letters to certain "publicly held" and "publicly traded" corporations.  The letter explains that these are two different categories:

"Publicly held corporations are a subset of publicly traded corporations. 'Publicly held' corporations are corporations with shares listed on the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ) or the NYSE American (formerly known as the American Stock Exchange or AMEX).  'Publicly traded' corporations are corporations with securities listed on the NYSE, NASDAQ, NYSE American, OTC Bulletin Board, or on the electronic service operated by OTC Markets Group Inc. Market."

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The letter misses the mark when it describes publicly held corporations as having shares listed on the NYSE, Nasdaq or NYSE American.  The Corporations Code does not define "publicly held corporation" by referring to these or any other specific stock exchanges.  Instead, a "publicly held corporation" is defined much more generally as "a corporation with outstanding shares on a major United States stock exchange".  Cal. Corp. Code §§ 301.3(f)(2) & 2115.5(b).  The General Corporation Law does not define "major United States stock exchange".  Currently, the Securities and Exchange Commission's website lists over 20 registered national securities exchanges. 

It is unknown what the legislature meant by "major United States stock exchange".  While the Secretary of State's definition is plausible, it constitutes an interpretation of the statute.  As such, it is a "regulation" that must be adopted through the notice and comment provisions of California's Administrative Procedure Act.