[Federal Register Volume 75, Number 71 (Wednesday, April 14, 2010)]
[Notices]
[Pages 19436-19437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8469]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61876; File No. SR-NASDAQ-2010-025]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Order Approving Proposed Rule Change, as Modified by Amendment No. 1,
To Amend the By-Laws of The NASDAQ OMX Group, Inc.
April 8, 2010
On February 24, 2010, The NASDAQ Stock Market LLC (``Nasdaq'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend the By-Laws of its parent corporation, The NASDAQ OMX Group, Inc.
(``NASDAQ OMX''). The proposed rule change was published for comment in
the Federal Register on March 4, 2010.\3\ The Commission received no
comment letters on the proposed rule change. On March 24, 2010, Nasdaq
filed Amendment No. 1 to the proposed rule change. Because Amendment
No. 1 is technical in nature, the Commission is not publishing it for
comment.\4\ This order approves the proposed rule change, as modified
by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 61582 (February 25,
2010), 75 FR 9985 (``Notice'').
\4\ In Amendment No. 1, Nasdaq noted that the Board of Directors
(``Board'') of NASDAQ OMX originally approved the proposed rule
change on December 16, 2009 and, on March 23, 2010 approved a
portion of the proposed rule change that had not been previously
approved.
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On behalf of its parent company, Nasdaq proposed to make certain
amendments to the NASDAQ OMX By-Laws to modify its direct election
procedures set forth in Article IV, Section 4.4 of the NASDAQ OMX By-
Laws. Under the existing NASDAQ OMX By-Laws, 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.\5\ The NASDAQ OMX Corporate
Governance Guidelines, however, provide a different standard for
uncontested elections and also set forth additional election
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procedures and practices.\6\ Nasdaq proposed to amend the NASDAQ OMX's
By-Laws to codify the majority voting standard for uncontested
elections contained in the Corporate Governance Guidelines; contested
elections would remain subject to the plurality standard.
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\5\ In the Notice, Nasdaq stated that this is derived from
Section 216 of the General Corporation Law of the State of Delaware,
which provides that in the absence of the specification in the
certificate of incorporation or bylaws of a Delaware corporation (as
is the case with NASDAQ OMX), the directors of a Delaware
corporation shall be elected by a plurality of the shares present in
person or represented by proxy at the meeting and entitled to vote
on the election of directors. See Notice, supra note 3.
\6\ The proposed rule change incorporates a modified version of
the election procedures and practices contained in the NASDAQ OMX
Corporate Governance Guidelines.
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For uncontested elections, Nasdaq proposed to amend Article IV,
Section 4.4 of the NASDAQ OMX By-Laws to impose a majority voting
standard, instead of the plurality voting standard, that would require
directors to be elected by the holders of a majority of the votes cast
at any meeting for the election of directors at which a quorum is
present. However, because a director holds office until his or her
successor is duly elected and qualified, any incumbent director-nominee
who fails to receive the requisite vote would not automatically cease
to be a director. Instead, NASDAQ OMX would have such director continue
as a ``holdover director'' until such director's death, resignation or
removal, or until his or her successor is duly elected and qualified.
To this end, the proposal also includes a provision that would require
any incumbent nominee, as a condition to his or her nomination for
election, to submit in writing an irrevocable resignation, the
effectiveness of which would be 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 would be
considered by the Nominating & Governance Committee and acted upon by
the Board in the same manner as a resignation tendered under current
rules.\7\ Acceptance of that resignation by the Board would be in
accordance with the policies and procedures adopted by the Board for
such purpose.\8\
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\7\ See NASDAQ OMX By-Law Article IV, Section 4.5.
\8\ In the Notice, Nasdaq stated that NASDAQ OMX's policies and
procedures pertaining to the acceptance of the resignation of its
directors are specified in By-Law Article IV, Section 4.4, and that
there are no additional policies and procedures other than the
provisions in the By-Laws. See Notice, supra note 3.
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After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\9\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(1) of the Act,\10\ which requires an
exchange to be so organized and have the capacity to carry out the
purposes of the Act and to comply and to enforce compliance by its
members and persons associated with its members with the Act. The
Commission also finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\11\ which requires that the rules of the
exchange be designed, among other things, to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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.
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\9\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78(b)(1).
\11\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the proposed rule change to amend the
NASDAQ OMX By-Laws to adopt a majority vote standard for uncontested
elections is consistent with the Act. The Commission believes that the
proposed rule change is designed to allow the members of NASDAQ OMX's
Board of Directors to be elected in a manner that closely reflects the
desires of its shareholders, while also providing a process for
addressing the circumstance when a director fails to receive a majority
of votes in an uncontested election.\12\ The Commission notes that
Nasdaq explained that the process for contested elections is to remain
unchanged 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.
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\12\ The Commission notes that Nasdaq represented that the
proposed change would not affect NASDAQ OMX's general election
requirements, specifically the voting limitations contained in
NASDAQ OMX's certificate of incorporation. The Commission also notes
that Nasdaq represented that if NASDAQ OMX seeks to further amend
its By-Laws with respect to director elections, including the
adoption of any policies and procedure with respect to such
elections, it will file a proposed rule change with the Commission.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NASDAQ-2010-025), as modified by
Amendment No. 1, be, and it hereby is, approved.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8469 Filed 4-13-10; 8:45 am]
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