[Federal Register Volume 76, Number 220 (Tuesday, November 15, 2011)]
[Notices]
[Pages 70799-70803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29412]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65708; File No. SR-NASDAQ-2011-073]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice and Order Granting Accelerated Approval to Proposed Rule Change,
as Modified by Amendment No. 1, Adopting Additional Listing
Requirements for Companies Applying To List After Consummation of a
``Reverse Merger'' With a Shell Company
November 8, 2011.
I. Introduction
On May 26, 2011, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') 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 adopt additional listing requirements for a
company that has become an Act reporting company by combining with a
public shell, whether through a reverse merger, exchange offer, or
otherwise (a ``Reverse Merger'').\3\ The proposed rule change was
published for comment in the Federal Register on June 14, 2011.\4\ On
July 25, 2011, the Commission extended the time period in which to
either approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether the proposed rule
change should be disapproved to September 12, 2011.\5\ The Commission
received two comment letters on the proposal.\6\ On September 12, 2011,
the
[[Page 70800]]
Commission issued an order instituting proceedings to determine whether
to disapprove the proposed rule change.\7\ The Commission received
three comments in connection with the proceedings to determine whether
to disapprove the proposed rule change.\8\ Nasdaq filed Amendment No. 1
to the proposed rule change on November 4, 2011.\9\ This order approves
the proposed rule change, as modified by Amendment No. 1, on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The Commission notes that this proposed rule change replaced
a previous proposed rule change filed by Nasdaq regarding additional
listing standards for Reverse Merger companies, which had included
an exception for a Reverse Merger company that was listing in
connection with a substantial firm commitment, underwritten public
offering. See Securities Exchange Act Release No. 64371 (April 29,
2011), 76 FR 25730 (May 5, 2011) (SR-NASDAQ-2011-056). Nasdaq
withdrew SR-NASDAQ-2011-056 on May 26, 2011. The Commission received
one comment letter on this previous proposal. See Letter from Paul
Gillis, Visiting Professor of Accounting, Peking University dated
May 3, 2011 (``Gillis Letter'').
\4\ See Securities Exchange Act Release No. 64633 (June 8,
2011), 76 FR 34781 (``Notice'').
\5\ See Securities Exchange Act Release No. 64956 (July 25,
2011), 76 FR 45636 (July 29, 2011).
\6\ See Letter from David Feldman, Partner, Richardson and Patel
LLP dated August 20, 2011 (``Feldman Letter'') and Letter to
Elizabeth M. Murphy, Secretary, Commission, from WestPark Capital,
Inc. dated September 2, 2011 (``WestPark Letter'').
\7\ See Securities Exchange Act Release No. 65319 (September 12,
2011), 76 FR 57791 (September 16, 2011) (``Order Instituting
Disapproval Proceedings''). Among other things, the Commission
instituted disapproval proceedings to allow the Commission to
consider the Nasdaq proposal together with proposals by NYSE and
NYSE Amex to enhance their respective listing standards for Reverse
Merger companies that differed in certain material respects from the
Nasdaq proposal. See Securities Exchange Act Release No. 65034
(August 4, 2011), 76 FR 49513 (August 10, 2011) (SR-NYSE-2011-38)
and Securities Exchange Act Release No. 65033 (August 4, 2011), 76
FR 49522 (August 10, 2011) (SR-NYSEAmex-2011-55).
\8\ See Letter to Elizabeth M. Murphy, Secretary, Commission,
from Locke Lord LLP dated October 17, 2011 (``Locke Lord Letter'');
Letter to Elizabeth M. Murphy, Secretary, Commission, from James N.
Baxter, Chairman and General Counsel, New York Global Group dated
October 17, 2011 (``New York Global Group Letter''); and Letter to
Elizabeth M. Murphy, Secretary, Commission, from David A. Donohoe,
Jr., Donohoe Advisory Associates LLC dated October 18, 2011
(``Donohoe Letter'').
\9\ See Amendment No. 1, dated November 4, 2011. In Amendment
No. 1, Nasdaq made several changes to the proposed rule change, some
in response to the comment letters received. The changes proposed by
Nasdaq include: (i) Lengthening the proposed seasoning period from
six months to one year; (ii) including an exemption from the rule
for firm commitment underwritten public offerings that meet a
substantial size requirement; (iii) added a new exception from
certain requirements contained in the rule for companies that
conducted their reverse merger a substantial length of time before
applying to list; (iv) applying the price requirement using closing
prices, both prior to submission of the listing application and
prior to listing, and for a sustained period of time; and (v) other
additional changes to clarify the rule and harmonize it with a
similar proposal by NYSE and NYSE Amex.
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II. Description of the Original Proposal
The Exchange proposes to adopt additional listing requirements for
companies that become public through a Reverse Merger,\10\ to address
significant regulatory concerns including accounting fraud allegation
that have arisen with respect to Reverse Merger companies. In its
filing, Nasdaq noted, among other things, that there have been
widespread allegations of fraudulent behavior by Reverse Merger
companies, leading to concerns that their financial statements cannot
be relied upon.\11\ Nasdaq also stated that it was aware of situations
where it appeared that promoters and others intended to manipulate
prices of Reverse Merger companies' securities higher to help meet
Nasdaq's initial listing bid price requirement, and where companies
have gifted stock to artificially satisfy Nasdaq's public holder
listing requirement.\12\ As a result of these concerns, Nasdaq believes
certain ``seasoning'' requirements in connection with the listing of
Reverse Merger companies are appropriate.
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\10\ For purposes of the Nasdaq proposal, Nasdaq would treat as
a Reverse Merger any transaction whereby an operating company
becomes an Act reporting company by combining, either directly or
indirectly, with a shell company which is an Act reporting company
whether through a reverse merger, exchange offer, or otherwise.
However, a Reverse Merger would not include the acquisition of an
operating company by a listed company satisfying the requirements of
IM-5101-2 (relating to companies whose business plan is to complete
one or more acquisitions) or a business combination described in
Rule 5110(a) (relating to a listed company that combines with a non-
Nasdaq entity, resulting in a change of control of the Company and
potentially allowing the non-Nasdaq entity to obtain a Nasdaq
Listing, sometimes called a ``back-door listing''). A Reverse Merger
would also not include a Substitution Listing Event, as defined in
Rule 5005(a)(39) (proposed to be renumbered as Rule 5005(a)(40),
such as the formation of a holding company to replace the listed
company or a merger to facilitate a re-incorporation, because in
these cases the operating company is already a listed entity.
\11\ See Notice.
\12\ Id.
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Specifically, as originally filed, Nasdaq proposed to prohibit a
Reverse Merger company from applying to list until the combined entity
has traded in the U.S. over-the-counter market, on another national
securities exchange, or on a foreign exchange, for at least six months
following the filing of all required information about the Reverse
Merger transaction, including audited financial statements, with the
Commission. Further, Nasdaq proposed to require that the Reverse Merger
company maintain a minimum of a $4 bid price on at least 30 of the 60
trading days immediately prior to submitting the listing application.
Finally, under the proposed rule, Nasdaq would not approve any Reverse
Merger company for listing unless the company has timely filed its two
most recent financial reports with the Commission if it is a domestic
issuer or comparable information if it is a foreign issuer.
III. Comment Summary
The Commission received five comment letters on the proposal.\13\
Two of the commenters objected broadly to the proposed additional
listing requirements for Reverse Merger companies,\14\ while three
commenters suggested discrete changes to the proposal.\15\
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\13\ See supra notes 6 and 8. See also, note 3 (referencing the
comment received on Nasdaq's previous proposal).
\14\ See Feldman Letter and New York Global Group Letter.
\15\ See WestPark Letter; Donohoe Letter; and Locke Lord Letter.
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One commenter who objected broadly to the proposal expressed the
view that it could have a ``chilling effect of discouraging exciting
growth companies from pursuing all available techniques to obtain the
benefits of a public listed stock and greater access to capital.'' \16\
The commenter further noted, in response to Nasdaq's justifications for
the proposed rule change, that virtually all of the suggestions of
wrongdoing involve Chinese companies that completed reverse mergers,
but that a number of other Chinese companies that completed full
traditional initial public offerings face the very same allegations, so
that focusing on the manner in which these companies went public may
not be appropriate. Rather than imposing a seasoning requirement, the
commenter suggests Nasdaq review regulatory histories and financial
arrangements with promoters, and refrain from listing companies where
the issues are great. In any event, the commenter recommends an
exemption from the seasoning requirement for a company coming to the
Exchange with a firm commitment underwritten public offering. In
addition, the commenter expressed concern that the requirement to
maintain a $4 trading price for 30 days prior to the listing
application is unfair, and unrealistic to expect companies to achieve
in the over-the-counter markets, and suggest it be eliminated.\17\
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\16\ See Feldman Letter.
\17\ Id.
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The other commenter that objected broadly to the proposal believed
that the proposal would harm capital formation and hinder small
companies' access to the capital markets.\18\ The commenter expressed
the view that no objective research or hard data has been published
that supports the notion that Reverse Merger companies bear additional
scrutiny, and that the Commission should not approve the proposal until
an independent and comprehensive study concludes that (i) Exchange
listed reverse merger companies tend to fail more often than IPO
companies, thus necessitating the additional scrutiny, (ii) the
proposed six to twelve month ``seasoning'' for reverse merger companies
will indeed deter corporate frauds, and (iii) the exchanges do not
already have sufficient rules in place to discourage corporate frauds
in both reverse merger and IPO companies.\19\ Based on its research,
the
[[Page 70801]]
commenter believes that more Chinese companies have been delisted that
have gone public through an IPO than through a Reverse Merger, and that
they were delisted more than three years after they became public,
which is well beyond the seasoning period proposed by Nasdaq.\20\
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\18\ See New York Global Group Letter.
\19\ Id.
\20\ Id.
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A third commenter expressed support for the proposed rule change's
objective to protect investors from potential accounting fraud,
manipulative trading, abusive practices or other inappropriate behavior
on the part of companies, promoters and others.\21\ The commenter,
however, recommended that, in order to avoid unnecessary burdens on
smaller capitalization issuers, the proposed rule change be modified to
exclude Form 10 share exchange transactions from the reverse merger
definition, or provide an exception for a reverse merger company
listing in connection with a firm commitment underwritten public
offering.\22\ This commenter also recommended that Nasdaq consider
requiring companies listing on the Exchange to engage a recognized
independent diligence firm to conduct a forensic audit and issue a
forensic diligence report prior to approval of the listing
application.\23\
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\21\ See WestPark Letter.
\22\ Id.
\23\ Id.
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Another commenter, while it did not believe the Exchange had
presented a sufficient rationale or data to support the need for a
Reverse Merger seasoning period, agreed that a reasonable seasoning
period for Reverse Merger companies could be beneficial, and was of the
view that the six-month seasoning period proposed by Nasdaq was
preferable to the one-year seasoning period proposed by NYSE and NYSE
Amex.\24\ The commenter also believed that Nasdaq's proposed
requirement that a Reverse Merger company maintain the requisite stock
price for at least 30 of the 60 trading days immediately preceding the
filing of the listing application was lacking because, among other
things, it would not apply to the period during which the listing
application was under review.\25\ In addition, this commenter expressed
support for an underwritten public offering exception, regardless of
size, from the proposed rule's additional listing requirement.\26\
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\24\ See Donohoe Letter.
\25\ Id.
\26\ Id.
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A fifth commenter also expressed the view that there should be an
exception where the securities issued in the Reverse Merger were
registered with the Commission, so that the additional listing
standards would be directed toward those transactions that have not
been subjected to full Commission review.\27\ This commenter also
suggested that, if a Reverse Merger company is controlled by a non-U.S.
person, the control person should be required to execute a consent to
service of process in the U.S.\28\
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\27\ See Locke Lord Letter.
\28\ Id.
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IV. Nasdaq Amendment No. 1 and Response to Comments
In Amendment No. 1 Nasdaq made several modifications to the
proposed rule change and responded to comments received on the
proposal. Specifically, Nasdaq proposed to extend the trading period
contemplated in the original filing from six months to one year and
require that, prior to listing, the company timely file all required
periodic financial reports for the prior year, including at least one
annual report. Such annual report must contain audited financial
statements for a full fiscal year following the filing of all required
information about the reverse merger transaction. In Nasdaq's view,
this would allow additional time for FINRA and other regulators to
review trading patterns and uncover potentially manipulative trading.
The amendment also seeks to clarify that, during the trading period,
the foreign exchanges on which trading may take place must be
``regulated'' foreign exchanges.
In addition, Amendment No. 1 would supplement the proposed
additional standard to maintain the minimum $4 price by requiring that
it be maintained for ``a sustained period,'' as well for at least 30 of
the most recent 60 trading days, and to apply that requirement to the
date of listing, as well as to the date of the listing application.
Nasdaq stated its belief that these changes would clarify its ability
to consider a longer period of time for purposes of evaluating the
minimum price requirement, if necessary in light of the security's
trading volume, frequency of trading, and the trend of the company's
stock price during the applicable periods.\29\ Nasdaq also changed the
$4 price reference from the bid price to the closing price.
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\29\ Nasdaq also noted that the proposed minimum period was
supported by the Donohoe Letter.
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Amendment No. 1 also includes two new exceptions from the proposed
additional listing requirement for Reverse Merger companies. First, a
Reverse Merger company completing a firm commitment underwritten public
offering at, or about, the time of listing, where the gross proceeds to
the company will be at least $40 million, would not be subject to the
proposed additional listing requirements. Nasdaq noted that such an
exception was supported by several of the commenters,\30\ and would be
consistent with the approach proposed by NYSE and NYSE Amex. Second,
Nasdaq proposed an exception for a Reverse Merger company that has
filed at least four annual reports with the Commission following the
one year trading period. Nasdaq stated its belief that it is
appropriate, after the passage of such a period of more than four
years, to treat a company that became public through a Reverse Merger
just like any other company.
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\30\ See, e.g., WestPark Letter; Donohoe Letter; and Feldman
Letter. While these commenters indicated a preference for a smaller
threshold for the exception, Nasdaq stated its belief that the
proposed $40 million level is appropriate to protect investors and
the public interest.
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Finally, Nasdaq proposed several technical changes in Amendment No.
1, including clarifying that a Reverse Merger is any transaction where
an operating company becomes an ``Exchange Act reporting company''
(rather than a ``public company'' as in the original filing) by
combining with a shell company which is an Act reporting company, and
that this could occur ``directly or indirectly.'' \31\
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\31\ Nasdaq also stated that this definition would include a
company that engages in a ``Form 10 share exchange transaction.''
While the WestPark Letter suggested that such transactions should
not be included, Nasdaq stated its belief that it is appropriate to
impose the proposed additional requirements on such a transaction to
allow review of the trading activity following the Reverse Merger.
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In Amendment No. 1, Nasdaq noted that any Reverse Merger company
must also meet all other applicable requirements for listing on
Nasdaq.\32\ In response to commenters that stated that problems
frequently occur when companies go public through an IPO or other
method, and that Reverse Mergers should not be singled out, Nasdaq did
not believe that the existence of broader concerns should preclude it
from taking more discrete steps to protect investors from potential
abuses.\33\ Nasdaq further
[[Page 70802]]
stated that it would continue to review all applicants for potential
public interest concerns. If Nasdaq observes problems with other types
of companies, it may seek to adopt additional enhancements to its
listing standards, or modify these proposed requirements, to address
those problems.\34\
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\32\ Nasdaq noted in Amendment No. 1 that these requirements
include the corporate governance requirements contained in the
Nasdaq Listing Rule 5600 Series, as well as the applicable
quantitative and liquidity measures contained in the Rule 5300, 5400
and 5500 Series governing listing on the Nasdaq Global Select,
Global, and Capital Markets, respectively.
\33\ See, e.g., WestPark Letter; Donohoe Letter; and New York
Global Group Letter. Nasdaq stated that it does not agree with the
view expressed by some of these commenters that it can adopt
requirements applicable to Reverse Merger Companies only if it now
also addresses those other types of companies. Rather, the Exchange
believes that the proposed rule change is consistent with the Act in
that it is designed to protect investors and the public interest
from abuses that Nasdaq has observed in connection with Reverse
Merger Companies.
\34\ The Exchange noted that several of the commenters suggested
additional enhancements or changes that go beyond the scope of this
proposed rule change. For example, the Locke Lord Letter proposed a
consent of service requirement for entities controlled by non-U.S.
residents. The Exchange stated that it does not believe it is
appropriate to include such a requirement in connection with this
filing, as the concern identified is not unique to Reverse Merger
companies and could involve any company controlled by non-U.S.
residents. Moreover, the Exchange believes that such a requirement
would be better considered by the Commission in connection with a
review of the requirements to access the U.S. capital markets.
Similarly, the Gillis Letter supported the proposed rule, but also
suggested additional Commission rulemaking, which, Nasdaq stated, is
beyond its ability to implement.
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V. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing and whether Amendment No. 1 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 email to [email protected]. Please include
File Number SR-NASDAQ-2011-073 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-2011-073. This
file number should be included on the subject line if email 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 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 Number SR-NASDAQ-2011-073, and should be submitted on or before
December 6, 2011.
VI. Discussion and Commission Findings
The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rule and regulations thereunder applicable to a national securities
exchange,\35\ and, in particular, Section 6(b)(5) of the Act,\36\
which, among other things, requires that the rules of a national
securities exchange be 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.
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\35\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\36\ 15 U.S.C. 78f(b)(5).
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The development and enforcement of meaningful listing standards for
an exchange is of substantial importance to financial markets and the
investing public. Among other things, listing standards provide the
means for an exchange to screen issuers that seek to become listed, and
to provide listed status only to those that are bona fide companies
with sufficient public float, investor base, and trading interest
likely to generate depth and liquidity sufficient to promote fair and
orderly markets. Meaningful listing standards also are important given
investor expectations regarding the nature of securities that have
achieved an exchange listing, and the role of an exchange in overseeing
its market and assuring compliance with its listing standards.
Nasdaq proposed to make more rigorous its listing standards for
Reverse Merger companies, given the significant regulatory concerns,
including accounting fraud allegations, that have recently arisen with
respect to these companies. As noted above, NYSE and NYSE Amex filed
similar proposals for the same reasons.\37\ Among other things, the
proposals seek to improve the reliability of the reported financial
results of Reverse Merger companies by requiring a pre-listing
``seasoning period'' during which the post-merger public company would
have produced financial and other information in connection with its
required Commission filings. The proposals also seek to address
concerns that some might attempt to meet the minimum price test
required for exchange listing through a quick manipulative scheme in
the securities of a Reverse Merger company, by requiring that minimum
price to be sustained for a meaningful period of time.
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\37\ See Securities Exchange Act Release No. 65034 (August 4,
2011), 76 FR 49513 (August 10, 2011) and Securities Exchange Act
Release No. 65033 (August 4, 2011), 76 FR 49522.
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The Commission believes the proposed one-year seasoning requirement
for Reverse Merger companies that seek to list on the Exchange is
reasonably designed to address concerns that the potential for
accounting fraud and other regulatory issues is more pronounced for
this type of issuer. As discussed above, these additional listing
requirements will assure that a Reverse Merger company has produced and
filed with the Commission at least one full year of audited financial
statements following the Reverse Merger transaction before it is
eligible to list on Nasdaq. The Reverse Merger company also must have
timely filed all required Commission reports since the consummation of
the Reverse Merger, which should help assure that material information
about the issuer has been filed with the Commission and that the issuer
has a demonstrated track record of meeting its Commission filing and
disclosure obligations. In addition, the requirement that the Reverse
Merger company have traded for at least one year in the over-the-
counter market or on another exchange could make it more likely that
analysts have followed the company for a sufficient period of time to
provide an additional check on the
[[Page 70803]]
validity of the financial and other information made available to the
public.
Although certain commenters expressed concern that the proposal
might inhibit capital formation and access by small companies to the
markets, the Commission notes that the enhanced listing standards apply
only to the relatively small group of Reverse Merger companies--where
there have been numerous instances of fraud and other violations of the
federal securities laws--and merely requires those entities to wait
until their first annual audited financial statements are produced
before they become eligible to apply for listing on the Exchange. While
fraud and other illegal activity may occur with other types of issuers,
as noted by certain commenters, the Commission does not believe this
should preclude Nasdaq from taking reasonable steps to address these
concerns with Reverse Merger companies.
The Commission also believes the proposed requirement for a Reverse
Merger company to maintain the specified minimum share price for a
sustained period, and for at least 30 of the most recent 60 trading
days, prior to the date of the initial listing application and the date
of listing, is reasonably designed to address concerns that the
potential for manipulation of the security to meet the minimum price
requirements is more pronounced for this type of issuer. By requiring
that minimum price to be maintained for a meaningful period of time,
the proposal should make it more difficult for a manipulative scheme to
be successfully used to meet the Exchange's minimum share price
requirements.
In addition, the Commission believes that the proposed exceptions
to the enhanced listing requirements for Reverse Merger companies that
(1) Complete a substantial firm commitment underwritten public offering
at or about the time of listing,\38\ or (2) have filed at least four
annual reports containing all required audited financial statements
with the Commission following the filing of all required information
about the Reverse Merger transaction, and satisfying the one-year
trading requirement, reasonably accommodate issuers that may present a
lower risk of fraud or other illegal activity. The Commission believes
it is reasonable for the Exchange to conclude that, although formed
through a Reverse Merger, an issuer that (1) Undergoes the due
diligence and vetting required in connection with a sizeable
underwritten public offering, or (2) has prepared and filed with the
Commission four years of all required audited financial statements
following the satisfaction of the one year trading requirement,
presents less risk and warrants the same treatment as issuers that were
not formed through a Reverse Merger. Nevertheless, the Commission
expects the Exchange to monitor any issuers that qualify for these
exceptions and, if fraud or other abuses are detected, to propose
appropriate changes to its listing standards.
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\38\ The Commission notes that several commenters supported an
exception for issuers with underwritten public offerings. See
WestPark Letter; Donohoe Letter; and Locke Lord Letter.
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The Commission notes that certain commenters suggested the Exchange
impose specific additional requirements on Reverse Merger companies
that seek an exchange listing, such as the completion of an independent
forensic diligence report on the issuer, or the execution of a consent
to service of process in the U.S. by foreign controlling persons.
Although there may be merit in these or other potential ways to enhance
listing standards for Reverse Merger companies, the Commission believes
that the additional listing standards proposed by the Exchange should
help prevent fraud and manipulation, protect investors and the public
interest, and are otherwise consistent with the Act.
The Commission also notes that several of the changes proposed by
the Exchange in Amendment No. 1 were designed to make its proposal
consistent with the proposals submitted by NYSE and NYSE Amex. As
indicated in the Order Instituting Disapproval Proceedings, the
Commission believes that it is important to assure that the Exchanges
develop consistent and effective enhancements to their listing
standards, to best address the serious concerns that have arisen with
respect to the listing of Reverse Merger companies.
For the reasons discussed above, the Commission believes that
Nasdaq's proposal will further the purposes of Section 6(b)(5) of the
Act by, among other things, helping prevent fraud and manipulation
associated with Reverse Merger companies, and protecting investors and
the public interest.
The Commission also finds good cause, pursuant to Section 19(b)(2)
of the Act,\39\ for approving the proposed rule change, as modified by
Amendment No. 1, prior to the 30th day after the date of publication of
notice in the Federal Register. As noted above, the changes made in
Amendment No. 1 harmonize the proposed rule change with similar
proposals by NYSE and NYSE Amex that have been subject to public
comment, in addition to providing clarifying language consistent with
the intent of the original rule proposal. In addition, the Commission
believes it is in the public interest for Nasdaq to begin applying its
enhanced listing standards as soon as practicable, in light of the
serious concerns that have arisen with respect to the listing of
Reverse Merger companies.
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\39\ 15 U.S.C. 78s(b)(2).
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VII. Conclusion
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NASDAQ-2011-073), as amended, be, and
hereby is, approved, on an accelerated basis.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-29412 Filed 11-14-11; 8:45 am]
BILLING CODE 8011-01-P