[Federal Register Volume 76, Number 16 (Tuesday, January 25, 2011)]
[Notices]
[Pages 4401-4403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1436]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63732; File No. SR-NASDAQ-2011-007]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Impose a Quarterly Maximum on the Listing of Additional Shares Fees
Payable by Closed-End Funds
January 19, 2011.
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 January 6, 2011, The NASDAQ Stock Market LLC (``Nasdaq'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II, which Items have been
prepared by Nasdaq. 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
Nasdaq proposes to impose a quarterly maximum on the listing of
additional shares fees payable by Closed-End Funds. Nasdaq will
implement the proposed rule change immediately.
The text of the proposed rule change is below. Proposed new
language is in italics.
5910. The NASDAQ Global Market
(a) No change.
(b) Additional Shares
(1)-(5) No change.
(6) The maximum fee charged to an issuer that is a Closed-End Fund
in any quarter is $25,000 per Company.
(c)-(f) No change.
5920. The Nasdaq Capital Market
(a) No change.
(b) Additional Shares
(1)-(5) No change.
(6) The maximum fee charged to an issuer that is a Closed-End Fund
in any quarter is $25,000 per Company.
(c)--(e) No change.
* * * * *
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 currently assesses a fee for listing additional shares of an
already listed class in the amount of $5,000 or $0.01 per additional
share, whichever is higher, up to an annual maximum of $65,000 per
listed company.\3\ There is no fee assessed for issuances of less than
50,000 shares per quarter.\4\ This fee applies to both operating
companies and closed-end companies (``Closed-End Funds'').
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\3\ See Nasdaq Listing Rule 5910(b), applicable to Nasdaq Global
and Global Select Market companies and Nasdaq Listing Rule 5920(b),
applicable to Nasdaq Capital Market companies.
\4\ Id.
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A Closed-End Fund is a type of company regulated under the
Investment Company Act of 1940.\5\ Generally, a Closed-End Fund sells a
fixed number of shares and invests the proceeds in investments chosen
by its investment adviser to achieve the funds stated investment
objectives. Shareholders have an interest in the fund's investments,
but generally cannot redeem shares from the fund. Instead, the Closed-
End Fund's shares are listed and trade at a value which may be greater
or less than the fund's assets. Unlike operating companies, a Closed-
End Fund is not taxed on its income so long as it generates at least
90% of its income from permissible sources, including dividends on and
gains from the sale of stock or securities, and distributes that income
to its shareholders.\6\ As a consequence, a Closed-End Fund generally
distributes all of its income annually and does not have access to
retained earnings for new investment opportunities. A Closed-End Fund,
therefore, frequently needs to issue additional shares to raise new
capital in order to fund such opportunities. This is in contrast to
operating companies, which generally have access to retained earnings
to acquire new assets, and as a consequence are not limited to issuing
shares.
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\5\ 15 U.S.C. 80a-5.
\6\ 26 U.S.C. 851--856.
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Given the unique nature of Closed-End Funds, Nasdaq believes it is
appropriate to provide them relief from the fee for listing additional
shares in the form of a $25,000 quarterly limit. The quarterly maximum
will reduce the likelihood of reaching the existing $65,000 annual
limit and eliminate the possibility of reaching the annual maximum with
a single capital raise or
[[Page 4402]]
in a single quarter. Nasdaq previously had a fee schedule for listing
additional shares that, like the proposed amended rule, included both
an annual and quarterly fee cap, but was applicable to operating
companies and Closed-End Funds alike.\7\ As such, and for the reasons
discussed above, we believe it is appropriate to adopt a quarterly
maximum on the listing of additional shares fees payable by closed-end
funds in addition to the current annual maximum.
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\7\ Securities Exchange Act Release No. 48631 (October 15,
2003), 68 FR 60426 (October 22, 2003) (SR-NASD-2003-127)
(eliminating the quarterly fee cap for listing additional shares
while retaining the annual fee cap).
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While Nasdaq believes the proposed quarterly cap is appropriate,
Nasdaq continues to believe that it is also appropriate to charge
Closed-End Funds a listing of additional shares fee. In that regard,
Nasdaq notes that it must review share issuances by Closed-End Funds
for compliance with the shareholder approval rules. In addition, other
markets also charge fees for the listing of additional Closed-End Fund
shares, separate from operating companies.\8\
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\8\ The New York Stock Exchange assesses a Closed-End Fund
listing of additional securities fee. See NYSE Listed Company Manual
Sections 902.03 and 902.04.
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2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\9\ in general, and with
Sections 6(b)(4) and (b)(5) of the Act,\10\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility or system which Nasdaq operates or controls, and it does not
unfairly discriminate between customers, issuers, brokers or dealers.
Nasdaq is instituting a quarterly maximum on the listing of additional
shares fees applicable to Closed-End Funds based on their unique
characteristics and their need to issue shares as a primary means by
which they may expand their businesses. As such, Nasdaq believes that
Closed-End Funds are differently impacted than operating companies by
the current listing of additional shares fees, and believes that the
proposed quarterly fee cap will serve to lessen the adverse impact of
the current fees. In light of these considerations, Nasdaq believes
that the proposed rule change will promote a more equitable allocation
of listing fees by reducing the impact of listing of additional share
fees on a class of issuers that must issue shares as a primary means by
which to expand their business, and, accordingly, consistent with
Section 6(b)(5) of the Act \11\ will not unfairly discriminate between
issuers.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4) and (b)(5).
\11\ 15 U.S.C. 78f(b)(5).
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Nasdaq also believes that the proposed rule change is consistent
with the provisions of Section 6(b)(5) of the Act \12\ because it 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 facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system. As noted above,
Nasdaq is implementing the quarterly fee cap because it believes that
Closed-End Funds are differently impacted than operating companies by
the current listing of additional shares fees. The proposed quarterly
fee cap will serve to lessen the adverse impact of the current fee,
and, as noted above, does not unfairly discriminate between issuers. As
such, Nasdaq believes that the proposed rule change promotes just and
equitable principles of trade.
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\12\ Id.
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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 foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \13\ and paragraph (f)(2) of Rule 19b-4
thereunder,\14\ because it establishes a due, fee, or other charge
imposed by Nasdaq.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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-2011-007 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-2011-007. 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 No. SR-NASDAQ-
2011-007 and should be submitted on or before February 15, 2011.
[[Page 4403]]
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. 2011-1436 Filed 1-24-11; 8:45 am]
BILLING CODE 8011-01-P