[Federal Register Volume 75, Number 101 (Wednesday, May 26, 2010)]
[Notices]
[Pages 29592-29594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12551]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62135; File No. SR-NASDAQ-2010-060]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Require Companies To Provide Notification to Nasdaq of Any
Noncompliance With the Corporate Governance Requirements
May 19, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 14, 2010, The NASDAQ Stock Market LLC (``Nasdaq'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by Nasdaq. Nasdaq has designated the proposed rule
change as effecting a change described under Rule 19b-4(f)(6) under the
Act,\3\ which renders the proposal effective upon filing with the
Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Nasdaq proposes to require companies to provide notification to
Nasdaq of any noncompliance with the corporate governance requirements.
Nasdaq will implement the proposed rule change thirty days after the
date of the filing. The text of the proposed rule change is below.
Proposed new language is in italics; proposed deletions are in
[brackets].\4\
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\4\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at http://nasdaqomx.cchwallstreet.com.
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* * * * *
5250. Obligations for Companies Listed on The Nasdaq Stock Market
(a) Obligation to Provide Information to Nasdaq
(1) Nasdaq may request any additional information or documentation,
public or non-public, deemed necessary to make a determination
regarding a Company's continued listing, including, but not limited to,
any material provided to or received from the Commission or Other
Regulatory Authority. A Company may be denied continued listing if it
fails to provide such information within a reasonable period of time or
if any communication to Nasdaq contains a material misrepresentation or
omits material information necessary to make the communication to
Nasdaq not misleading. The Company shall provide full and prompt
responses to requests by Nasdaq or by FINRA acting on behalf of Nasdaq
for information related to unusual market activity or to events that
may have a material impact on trading of its securities in Nasdaq.
[ (1)] (2) As set forth in Rule 5625, a Company must provide Nasdaq
with prompt notification after an Executive Officer of the Company
becomes aware of any [material] noncompliance by the Company with the
requirements of the Rule 5600 Series.
(b)-(f) No change.
* * * * *
5615. Exemptions from Certain Corporate Governance Requirements
This rule provides the exemptions from the corporate governance
rules afforded to certain types of Companies, and sets forth the phase-
in schedules for initial public offerings, Companies emerging from
bankruptcy and Companies transferring from other markets. This rule
also describes the applicability of the corporate governance rules to
Controlled Companies and sets forth the phase-in schedule afforded to
Companies ceasing to be Controlled Companies.
(a) Exemptions to the Corporate Governance Requirements
(1) No change
IM-5615-1. No change.
(2) No change.
IM-5615-2. No change.
(3) Foreign Private Issuers
(A) A Foreign Private Issuer may follow its home country practice
in lieu of the requirements of the Rule 5600 Series, the requirement to
distribute annual and interim reports set forth in Rule 5250(d), and
the Direct Registration Program requirement set forth in Rules 5210(c)
and 5255, provided, however, that such a Company shall: Comply with the
Notification of [Material] Noncompliance requirement (Rule 5625), the
Voting Rights requirement (Rule 5640), have an audit committee that
satisfies Rule 5605(c)(3), and ensure that such audit committee's
members meet the independence requirement in Rule 5605(c)(2)(A)(ii).
Except as provided in this paragraph, a Foreign Private Issuer must
comply with the requirements of the Rule 5000 Series.
(B) No change
IM-5615-3. Foreign Private Issuers
A Foreign Private Issuer (as defined in Rule 5005) listed on Nasdaq
may follow the practice in such Company's home country (as defined in
General Instruction F of Form 20-F) in lieu of the provisions of the
Rule 5600 Series, Rule 5250(d), and Rules 5210(c) and 5255, subject to
several important exceptions. First, such an issuer shall comply with
Rule 5625 (Notification of [Material] Noncompliance). Second, such a
Company shall have an audit committee that satisfies Rule 5605(c)(3).
Third, members of such audit committee shall meet the criteria for
independence referenced in Rule 5605(c)(2)(A)(ii) (the criteria set
forth in Rule 10A-3(b)(1) under the Act, subject to the exemptions
provided in Rule 10A-3(c) under the Act). Fourth, a Foreign Private
Issuer must comply with Rules 5210(c) and 5255 (Direct Registration
Program) unless prohibited from complying by a law or regulation in its
home country. Finally, a Foreign Private Issuer that elects to follow
home country practice in lieu of a requirement of Rules 5600, 5250(d),
5210(c) or 5255 shall submit to Nasdaq a written statement from an
independent counsel in such Company's home country
[[Page 29593]]
certifying that the Company's practices are not prohibited by the home
country's laws and, in the case of a Company prohibited from complying
with Rules 5210(c) and 5255, certifying that a law or regulation in the
home country prohibits such compliance. In the case of new listings,
this certification is required at the time of listing. For existing
Companies, the certification is required at the time the Company seeks
to adopt its first noncompliant practice. In the interest of
transparency, the rule requires a Foreign Private Issuer to make
appropriate disclosures in the Company's annual filings with the
Commission (typically Form 20-F or 40-F), and at the time of the
Company's original listing in the United States, if that listing is on
Nasdaq, in its registration statement (typically Form F-1, 20-F, or 40-
F); alternatively, a Company that is not required to file an annual
report on Form 20-F may provide these disclosures in English on its
website in addition to, or instead of, providing these disclosures on
its registration statement or annual report. The Company shall disclose
each requirement that it does not follow and include a brief statement
of the home country practice the Company follows in lieu of these
corporate governance requirement(s). If the disclosure is only
available on the website, the annual report and registration statement
should so state and provide the web address at which the information
may be obtained. Companies that must file annual reports on Form 20-F
are encouraged to provide these disclosures on their Web sites, in
addition to the required Form 20-F disclosures, to provide maximum
transparency about their practices.
(4) Limited Partnerships
(A)-(I) No change.
(J) Notification of [Material] Noncompliance.
Each Company that is a limited partnership must provide Nasdaq with
prompt notification after an Executive Officer of the Company, or a
person performing an equivalent role, becomes aware of any [material]
noncompliance by the Company with the requirements of this Rule 5600
Series.
(5) No change.
IM-5615-4. No change.
(b)-(c) No change.
IM-5615-5. No change.
* * * * *
5625. Notification of [Material] Noncompliance
A Company must provide Nasdaq with prompt notification after an
Executive Officer of the Company becomes aware of any [material]
noncompliance by the Company with the requirements of this Rule 5600
Series.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq 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. Nasdaq 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 rules require that a listed company notify Nasdaq when an
executive officer of the company becomes aware of any material
noncompliance with Nasdaq's corporate governance requirements contained
in the Rule 5600 Series.\5\ Nasdaq has consistently interpreted this
requirement such that any noncompliance with these rules would be
considered material and now proposes to modify the rule to make this
clear by requiring notification of any noncompliance. When Nasdaq
receives notice of noncompliance, it will review the matter in
accordance with the Rule 5800 Series, which provides the procedures
applicable when a company fails to meet a listing standard, and provide
appropriate notice on www.nasdaq.com.\6\
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\5\ Rule 5615(a)(4)(J) imposes this requirement on limited
partnerships and Rule 5625 imposes this requirement on all other
listed entities.
\6\ Nasdaq also monitors public filings made by listed companies
and will review any noncompliance it discovers in the same manner.
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Nasdaq also proposes to make conforming changes to Rule 5615(a)(3)
and IM-5615-3, which, among other things, require a foreign private
issuer to provide notice of noncompliance, and to Rule 5250, which
cross references the requirement to provide notice of noncompliance.
2. Statutory Basis
Nasdaq believes the proposed rule change is consistent with the
provisions of Section 6 of the Act,\7\ in general and with Section
6(b)(5) of the Act,\8\ in particular, which requires that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest. The
proposed rule change is consistent with these requirements in that it
will assure that Nasdaq receives notice of any noncompliance with the
corporate governance requirements, thereby helping to protect investors
and the public interest.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change is effective upon filing pursuant to
Section 19(b)(3)(A) of the Act and paragraph (f)(6) of Rule 19b-4
thereunder, in that the proposed rule change: (i) Does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) does not 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;
provided the self-regulatory organization has given the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of 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.\9\
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\9\ The Commission notes that Nasdaq has satisfied the pre-
filing requirement.
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The proposed rule change will clarify the notice required from
listed companies regarding noncompliance
[[Page 29594]]
with the corporate governance requirements, consistent with Nasdaq's
historical interpretation of that requirement, and is closely modeled
after similar rules of another national securities exchange.\10\
Therefore Nasdaq believes it does not significantly affect the
protection of investors or the public interest or raise any novel or
significant regulatory issues.
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\10\ Section 303A.12(b) of the NYSE Listed Company Manual
requires a listed company's CEO to ``promptly notify the NYSE in
writing after any executive officer of the listed company becomes
aware of any non-compliance with any applicable provisions of this
Section 303A.''
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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-2010-060 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-2010-060. 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, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
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-2010-060 and should be submitted on or before June 16, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12551 Filed 5-25-10; 8:45 am]
BILLING CODE 8010-01-P