[Federal Register Volume 75, Number 85 (Tuesday, May 4, 2010)]
[Notices]
[Pages 23831-23833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10301]
[[Page 23831]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61992; File No. SR-NASDAQ-2010-048]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by The NASDAQ Stock Market, LLC
To Amend the By-Laws of The NASDAQ OMX Group, Inc.
April 27, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on April 9, 2010, The NASDAQ Stock Market LLC (the ``NASDAQ
Exchange'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the NASDAQ 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
The NASDAQ Exchange is filing with the Securities and Exchange
Commission (``Commission'') a proposed rule change relating to the By-
Laws of its parent corporation, The NASDAQ OMX Group, Inc. (``NASDAQ
OMX'').
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaq.cchwallstreet.com, at the principal
office of the NASDAQ Exchange, on the Commission's Web site at http://www.sec.gov, 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 NASDAQ 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 NASDAQ 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ OMX has proposed making certain amendments to its By-Laws to
make improvements in its governance. In SR-NASDAQ-2010-025, The NASDAQ
Stock Market LLC (``NASDAQ Exchange'') sought Commission approval to
adopt these By-Laws changes as part of the rules of NASDAQ Exchange,
and the Commission granted approval to these changes in an order dated
April 8, 2010.\3\ The NASDAQ Exchange is now submitting this filing on
an immediately effective basis to adopt the same By-Law changes as
rules of the Exchange.
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\3\ See Securities Exchange Act Release No. 61876 (April 8,
2010), 75 FR 19436 (April 14, 2010) (SR-NASDAQ-2010-025).
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The NASDAQ OMX By-Laws previously provided that each director
receiving a plurality of the votes at any election of directors at
which a quorum is present is duly elected to the Board. Under Corporate
Governance Guidelines adopted by the Board, however, any director in an
uncontested election who received a greater number of votes
``withheld'' from his or her election than votes ``for'' such election
was required to tender his or her resignation promptly following
receipt of the certification of the stockholder vote. The NASDAQ OMX
Nominating & Governance Committee then considered the resignation offer
and recommended to the Board whether to accept it. Within 90 days after
the certification of the election results, the Board determined whether
to accept or reject the resignation. Promptly thereafter, the Board
announced its decision by means of a press release. In a contested
election (i.e., where the number of nominees exceeds the number of
directors to be elected), the unqualified plurality standard controls.
Uncontested Election
NASDAQ OMX recently amended its By-Laws to adopt a majority vote
standard, specifically By-Law Article IV, Section 4.4 of the By-Laws
was amended to provide that, in an uncontested election, directors
shall be elected by holders of a majority of the votes cast at any
meeting for the election of directors at which a quorum is present.\4\
Under the majority voting standard, a nominee who fails to receive the
requisite vote will not be duly elected to the Board. The By-Laws
require that any incumbent nominee, as a condition to his or her
nomination for election, must submit in writing an irrevocable
resignation, the effectiveness of which is conditioned upon the
director's failure to receive the requisite vote in any uncontested
election and the Board's acceptance of the resignation. The resignation
will be considered by the Nominating & Governance Committee and acted
upon by the Board in the same manner described above.\5\ Acceptance of
that resignation by the Board shall be in accordance with the policies
and procedures adopted by the Board for such purpose. NASDAQ OMX
specifies its policies and procedures pertaining to the election of its
directors in its By-Laws. Specifically, the policies and procedures for
the acceptance of the resignation of a director, by the Board, are
proposed to be specified in By-Law Article IV, Section 4.4. There are
no additional policies and procedures other than what is indicated in
the By-Laws. In the event that NASDAQ OMX proposes to further amend its
By-Laws with respect to the election of directors, including the
adoption of any policies and procedure with respect to such election,
NASDAQ OMX shall file a proposed rule change with the Commission to
seek approval of those amendments.
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\4\ NASDAQ OMX also amended its Corporate Governance Guidelines
to reflect the majority vote standard for uncontested director
elections.
\5\ See NASDAQ OMX By-Law Article IV, Section 4.5.
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Contested Election
NASDAQ OMX codified its process for a contested election. The
directors will continue to be elected by a plurality vote in a
contested election. There is no change to the process for contested
elections because if a majority voting standard were to apply in a
contested election, the likelihood of a ``failed election'' (i.e., a
situation in which no director receives the requisite vote) would be
more pronounced. Moreover, the rationale underpinning the majority
voting policy does not apply in contested elections where stockholders
are offered a choice among competing candidates. Directors are elected
by a plurality of votes present in person or represented by proxy at a
meeting. The directors who receive the greatest number of votes cast
for election of directors at the meeting will be elected.
General Election Requirements
The following applies to elections of directors and were not
amended. Each share of common stock has one vote,\6\ subject to the
voting limitation in
[[Page 23832]]
NASDAQ OMX's certificate of incorporation that generally prohibits a
holder from voting in excess of 5% of the total voting power of NASDAQ
OMX.\7\ In addition, each note holder is entitled to the number of
votes equal to the number of shares of common stock into which such
note could be converted on the record date, subject to the 5% voting
limitation contained in the certificate of incorporation.
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\6\ See NASDAQ OMX Certificate of Incorporation at Article IV,
C.1(a).
\7\ See NASDAQ OMX Certificate of Incorporation at Article IV,
C.1(b)2.
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The presence of owners of a majority (greater than 50%) of the
votes entitled to be cast by holder of NASDAQ OMX voting securities
constitutes a quorum. Presence may be in person or by proxy. Any
securities not voted, by abstention, will not impact the vote.
2. Statutory Basis
The NASDAQ Exchange believes that the proposed rule change is
consistent with the provisions of Section 6 of the Act,\8\ in general,
and with Sections 6(b)(1) and (b)(5) of the Act,\9\ in particular, in
that the proposal enables the NASDAQ Exchange to be so organized as to
have the capacity to be able to carry out the purposes of the Act and
to comply with and enforce compliance by members and persons associated
with members with provisions of the Act, the rules and regulations
thereunder, and self-regulatory organization rules, and is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The proposed amendments
adopting a majority vote standard would enable the directors to be
elected in a manner reflective of the desires of shareholders and
provide a mechanism to protect against the election of directors by
less than a majority vote of the shareholders.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(2)[sic], (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NASDAQ Exchange does not believe that the proposed rule change
will impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, if consistent with the
protection of investors and the public interest, it has become
effective pursuant to 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)
\11\ thereunder.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The NASDAQ Exchange has satisfied this requirement.
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The NASDAQ Exchange has noted that the proposed rule change is
identical to a proposed rule change recently approved by the Commission
with respect to the NASDAQ Exchange \12\ and has requested that the
Commission waive the 30-day operative delay to ensure that NASDAQ OMX
is able to implement the proposed rule change without undue delay. The
Commission has determined that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because such waiver will enable NASDAQ OMX to implement the proposed
rule change without undue delay in a manner consistent with a proposed
rule change previously approved by the Commission.\13\ Therefore, the
Commission designates the proposal operative upon filing.\14\
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\12\ See Securities Exchange Act Release No. 61876 (April 8,
2010), 75 FR 19436 (April 14, 2010) (SR-NASDAQ-2010-025).
\13\ Id.
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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 e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-048 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2010-048. This
file number should be included on the subject line if e-mail 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 Web site (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 Web site
viewing and printing in the Commission's Public Reference Room, on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of the filing also will be available for inspection and copying at the
principal office of the NASDAQ Exchange. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2010-048 and should be submitted
on or before May 25, 2010.
[[Page 23833]]
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-10301 Filed 5-3-10; 8:45 am]
BILLING CODE 8010-01-P