[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20744-20747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8914]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64263; File No. SR-NASDAQ-2011-050]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify an Initial Listing Standard for the Nasdaq Global Select Market
April 8, 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 April 1, 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 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
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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 modify an initial listing standard for the
Nasdaq Global Select Market. Nasdaq will implement the proposed rule
change immediately.
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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5310. Definitions and Computations
(a)-(i) No change.
(j) In computing total assets and stockholders' equity for purposes
of Rule 5315(f)(3)(D), Nasdaq will rely on a Company's most recent
publicly reported financial statements subject to the adjustments
described below:
(1) Application of Use of Proceeds--If a company is in registration
with the SEC and is in the process of an equity offering, adjustments
should be made to reflect the net proceeds of that offering, and the
specified intended application(s) of such proceeds to:
(A) Pay off existing debt or other financial instruments: The
adjustment will include elimination of the actual historical interest
expense on debt or other financial instruments classified as
liabilities under generally accepted accounting principles being
retired with offering proceeds of all relevant periods or by conversion
into common stock at the time of an initial public offering occurring
in conjunction with the company's listing. If the event giving rise to
the adjustment occurred during a time-period such that pro forma
amounts are not set forth in the SEC registration statement (typically,
the pro forma effect of repayment of debt will be provided in the
current registration statement only with respect to the last fiscal
year plus any interim period in accordance with SEC rules), the company
must prepare the relevant adjusted financial data to reflect the
adjustment to its historical financial data, and its outside audit firm
must provide a report of having applied agreed-upon procedures with
respect to such adjustments. Such report must be prepared in accordance
with the standards established by the American Institute of Certified
Public Accountants.
(B) Fund an acquisition:
(i) The adjustments will include those applicable with respect to
acquisition(s) to be funded with the proceeds. Adjustments will be made
that are disclosed as such in accordance with Rule 3-05 ``Financial
Statements of Business Acquired or to be Acquired'' and Article 11 of
Regulation S-X. Adjustments will be made for all the relevant periods
for those acquisitions for which historical financial information of
the acquiree is required to be disclosed in the SEC registration
statement; and (ii) Adjustments applicable to any period for which pro
forma numbers are not set forth in the registration statement shall be
accompanied by the relevant adjusted financial data to combine the
historical results of the acquiree (or relevant portion thereof) and
acquiror, as disclosed in the company's SEC filing. Under SEC rules,
the number of periods disclosed depends upon the significance level of
the acquiree to the acquiror. The adjustments will include those
necessary to reflect (a) the allocation of the purchase price,
including adjusting assets and liabilities of the acquiree to fair
value recognizing any intangibles (and associated amortization and
depreciation), and (b) the effects of additional financing to complete
the acquisition. The company must prepare the relevant adjusted
financial data to reflect the adjustment to its historical financial
data, and its outside audit firm must provide a report of having
applied agreed-upon procedures with respect to such adjustments. Such
report must be prepared in accordance with the standards established by
the American Institute of Certified Public Accountants.
(2) Acquisitions and Dispositions--In instances other than
acquisitions (and related dispositions of part of the acquiree) funded
with the use of proceeds, adjustments will be made for those
acquisitions and dispositions that are disclosed as such in a company's
financial statements in accordance with Rule 3-05 ``Financial
Statements of Business Acquired or to be Acquired'' and Article 11 of
Regulation S-X. If the disclosure does not specify pre-tax earnings
from continuing operations, minority interest, and equity in the
earnings or losses of investees, then such data must be prepared by the
company's outside audit firm for the Exchange's consideration. In this
regard, the audit firm would have to issue an independent accountant's
report on applying agreed-upon procedures in accordance with the
standards established by the American Institute of Certified Public
Accountants.
5315. Initial Listing Requirements for Primary Equity Securities
Rule 5310 provides guidance about computations made under this Rule
5315.
(a)--(e) No change.
(f)
(1)-(2) No change
(3) Valuation Requirement
A Company, other than a closed end management investment company,
shall meet the requirements of sub-paragraph (A), (B), (C), or (D)
below:
(A)-(C) No change.
(D) (i) Market capitalization of at least $160 million, (ii) total
assets of at least $80 million [for the most recently completed fiscal
year], and (iii) stockholders' equity of at least $55 million.
* * * * *
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 recently adopted an initial listing standard for the Nasdaq
Global Select Market that permits listing if the company has: (i) $80
million in total assets; (ii) $55 million in stockholders' equity; and
(iii) $160 million of market capitalization.\5\ Companies qualifying
under this standard also have to meet all other requirements of Rule
5315, including the ownership and market value requirements contained
in Rule 5315(f) and, upon listing, are subject to the Global Market
continued listing standards.
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\5\ Securities Exchange Act Release No. 61904 (April 14, 2010),
75 FR 20651 (April 20, 2010) (SR-NASDAQ-2010-047).
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Nasdaq based this listing standard on a listing standard adopted by
the New York Stock Exchange (``NYSE''), though the numeric requirements
of the Nasdaq standard are higher than those of the
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NYSE.\6\ However, unlike the NYSE requirement upon which the standard
is based, Nasdaq required that the total assets portion of the
requirement be met at the end of the prior fiscal year. As a result,
companies are only able to demonstrate compliance with the total assets
portion of this standard based on a single point in time each year--the
year-end financials. To conform with NYSE's treatment under their
comparable standard, Nasdaq proposes to delete the requirement in Rule
5315(f)(3)(D)(ii) that total assets be demonstrated as of the close of
the most recent fiscal year. Nasdaq also proposes to add a definition
in Rule 5310 explaining what adjustments will be made to total assets
and stockholders' equity to reflect the use of proceeds and
acquisitions and dispositions. These adjustments are identical to the
adjustments specified in the NYSE Listed Company Manual.\7\
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\6\ Securities Exchange Act Release No. 58934 (November 12,
2008), 73 FR 69708 (November 19, 2008) (SR-NYSE-2008-098, modifying
Section 102.01C of the Listed Company Manual). The NYSE listing
standard allows a company to list if it has total assets of at least
$75 million, stockholders' equity of at least $50 million, and a
global market capitalization of at least $150 million.
\7\ See Section 102.01C(IV)(ii) of the Listed Company Manual
noting that total assets and stockholders' equity are adjusted
pursuant to Sections 102.01C(I)(3)(a) and (b).
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Nasdaq believes that the proposed amendment to Rule 5315(f)(3)(D)
does not affect the status of Global Select Market-listed securities
under Securities Exchange Act Rule 3a51-1(a) (the ``Penny Stock
Rule''),\8\ as the amended standards satisfy the requirements of
Exchange Act Rule 3a51-1(a)(2).\9\ Rule 5315(f)(3)(D) requires
stockholders' equity of at least $55 million, which exceeds the
requirement in SEC Rule 3a51-1(a)(2)(i)(A)(1) of $5 million. Rule
5315(f)(3)(D) also requires a minimum market capitalization of $160
million. Nasdaq believes that this meets or exceeds the requirement of
SEC Rule 3a51-1(a)(2)(i)(B) that a company have a market value of
listed securities of at least $50 million, although these are not
identical standards. Nasdaq believes that its Global Select Market's
rules will also exceed the Penny Stock Rules remaining stock price and
distribution requirements. Rule 5315(e)(1) requires companies initially
listing on Nasdaq to have a minimum bid price of $4 per share, thereby
satisfying the $4 requirement of SEC Rule 3a51-1(a)(2)(i)(C). Rule
5315(f)(1) requires a company's securities to have either 450 round lot
holders or at least 2,200 total holders, although if a company is
publicly traded and has an average monthly trading volume over the
prior 12 months of at least 1.1 million shares per month, it can list
with 550 total holders. Nasdaq believes that these requirements are
comparable to, or more stringent than, the requirement of SEC Rule
3a51-1(a)(2)(i)(D) that a security have at least 300 round lot holders,
and satisfy the same objective by assuring adequate liquidity in the
security. Last, SEC Rule 3a51-1(a)(2)(i)(E) requires at least 1 million
publicly held shares with a market value of at least $5 million. Rule
5315(e)(2) requires all securities listing on the Nasdaq Global Select
Market to have at least 1.25 million publicly held shares and Rule
5215(f)(2) requires a minimum $45 million market value of publicly held
shares. As such, Nasdaq believes its initial listing standards for the
Global Select Market continue to meet or exceed the requirements of the
Penny Stock Rules.\10\
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\8\ 17 CFR 240.a51-1(a).
\9\ 17 CFR 240.a51-1(a)(2).
\10\ Nasdaq notes that each of these requirements exceed the
comparable requirements of the NYSE. See Securities Exchange Act
Release No. 58934, supra, note 6.
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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,\11\ in general and with
Sections 6(b)(5) of the Act,\12\ in particular in that 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 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 rule change is
consistent with the investor protection objectives of the Act in that
the proposed requirements modify and provide transparency to the
calculation of total assets, but maintain the requirement at a level
high enough so that only companies that are suitable for listing on the
Global Select Market will qualify to list.
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\11\ 15 U.S.C. 78f.
\12\ 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
Because 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, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and
Rule 19b-4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give 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.
The Commission notes that the Exchange has satisfied this
requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \15\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that companies may immediately take advantage of the proposed rule
change. In support of the waiver, Nasdaq believes that its proposal is
consistent with NYSE's rules, which were previously published for
public comment, and raise no new issues.
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest. In
making this determination, the Commission notes that Nasdaq's proposed
rule change is consistent with the NYSE's comparable listing standard
in Section 102.01C(IV) of the NYSE's Listed Company Manual (``Assets
and Equity Test'') and applicable adjustments as set forth in Section
102.01C(I) of the NYSE's Listed Company Manual.\17\ The Commission
believes that Nasdaq's proposed rule
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change does not raise any issues that were not previously considered by
the Commission in its approval of the NYSE's Assets and Equities Test
and does not otherwise raise any new regulatory issues. The Commission
also notes that the NYSE's proposal to adopt the Assets and Equity Test
listing standard, with the applicable adjustments noted above, was
subject to full notice and comment, and the Commission received no
comments on the NYSE's rule proposal. For these reasons, the Commission
designates, consistent with the protection of investors and the public
interest, that the proposed rule change become operative immediately
upon filing.\18\
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\17\ See supra notes 6 and 7.
\18\ 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. 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 summarily may temporarily suspend the 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 No. SR-NASDAQ-2011-050 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 No. SR-NASDAQ-2011-050. 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 NASDAQ. 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-2011-050 and should be
submitted on or before May 4, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8914 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P