[Federal Register Volume 77, Number 203 (Friday, October 19, 2012)]
[Notices]
[Pages 64369-64372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-25736]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68053; File No. SR-NASDAQ-2012-118]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Modify Certain Disclosure
Requirements To Require Listed Companies To Publicly Describe the
Specific Basis and Concern Identified by Nasdaq When a Company Does Not
Meet a Listing Standard and Give Nasdaq the Authority To Make Such
Public Announcement When a Listed Company Fails To Do so
October 15, 2012.
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 October 3, 2012, 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. 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 the
Substance of the Proposed Rule Change
Nasdaq proposes to modify certain disclosure requirements
surrounding a company's non-compliance with the listing rules. Nasdaq
will implement the proposed rule upon approval.
The text of the proposed rule change is below. Proposed new
language is in italics; proposed deletions are in brackets.\3\
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\3\ 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) No change.
(b) Obligation To Make Public Disclosure
(1) No change.
(2) Disclosure of Notification of Deficiency
As set forth in Rule 5810(b) and IM-5810-1, a Company that receives
a notification of deficiency from Nasdaq is required to make a public
announcement by filing a Form 8-K, where required by SEC rules, or by
issuing a press release disclosing receipt
[[Page 64370]]
of the notification and the Rule(s) upon which the deficiency is based,
and describing each specific basis and concern identified by Nasdaq in
reaching its determination that the Company does not meet the listing
standard. However, note that in the case of a deficiency related to the
requirement to file a periodic report contained in Rule 5250(c)(1) or
(2), the Company is required to make the public announcement by issuing
a press release. As described in Rule 5250(b)(1) and IM-5250-1, the
Company must notify Nasdaq's MarketWatch Department about the
announcement through the electronic disclosure submission system
available at www.nasdaq.net, except in emergency situations when
notification may instead be provided by telephone or facsimile. If the
public announcement is made during Nasdaq market hours, the Company
must notify MarketWatch at least ten minutes prior to the announcement.
If the public announcement is made outside of Nasdaq market hours, the
Company must notify MarketWatch of the announcement prior to 6:50 a.m.
ET.
(c)-(f) No change.
5810. Notification of Deficiency by the Listing Qualifications
Department
When the Listing Qualifications Department determines that a
Company does not meet a listing standard set forth in the Rule 5000
Series, it will immediately notify the Company of the deficiency. As
explained in more detail below, deficiency notifications are of four
types:
(1) Staff Delisting Determinations, which are notifications of
deficiencies that, unless appealed, subject the Company to immediate
suspension and delisting;
(2) Notifications of deficiencies for which a Company may submit a
plan of compliance for staff review;
(3) Notifications of deficiencies for which a Company is entitled
to an automatic cure or compliance period; and
(4) Public Reprimand Letters.
Notifications of deficiencies that allow for submission of a
compliance plan or an automatic cure or compliance period may result,
after review of the compliance plan or expiration of the cure or
compliance period, in issuance of a Staff Delisting Determination or a
Public Reprimand Letter.
(a) No change.
(b) Company Disclosure Obligations
A Company that receives a notification of deficiency, Staff
Delisting Determination, or Public Reprimand Letter is required to make
a public announcement disclosing receipt of the notification and the
Rule(s) upon which the deficiency is based, and describing each
specific basis and concern identified by Nasdaq in reaching its
determination that the Company does not meet the listing standard. [A
Company that receives a notification of] If the deficiency or Staff
Delisting Determination [related] relates to the requirement to file a
periodic report contained in Rule 5250(c)(1) or (2), the Company is
required to make the public announcement by issuing a press release
[disclosing receipt of the notification and the Rule(s) upon which the
deficiency is based], in addition to filing any Form 8-K required by
SEC rules. In all other cases, the Company may make the public
announcement either by filing a Form 8-K, where required by SEC rules,
or by issuing a press release. Additional information about this
disclosure obligation is provided in IM-5810-1.
As described in Rule 5250(b)(1) and IM-5250-1, the Company must
notify Nasdaq's MarketWatch Department about the announcement through
the electronic disclosure submission system available at
www.nasdaq.net, except in emergency situations when notification may
instead be provided by telephone or facsimile. If the public
announcement is made during Nasdaq market hours, the Company must
notify MarketWatch at least ten minutes prior to the announcement. If
the public announcement is made outside of Nasdaq market hours, the
Company must notify MarketWatch of the announcement prior to 6:50 a.m.
ET. The Company should make the public announcement as promptly as
possible but not more than four business days following receipt of the
notification.
IM-5810-1. Disclosure of Written Notice of Staff Determination
Rule 5810(b) requires that a Company make a public announcement by
filing a Form 8-K, where required by SEC rules, or by issuing a press
release disclosing the receipt of (i) a notice that the Company does
not meet a listing standard set forth in the Rule 5000 Series, (ii) a
Staff Delisting Determination to limit or prohibit continued listing of
the Company's securities under Rule 5810 as a result of the Company's
failure to comply with the continued listing requirements, or (iii) a
Public Reprimand Letter; provided, however, that if the notification
relates to a failure to meet the requirements of Rules 5250(c)(1) or
(2), the Company must make the public announcement by issuing a press
release. Such public announcement shall be made as promptly as
possible, but not more than four business days following the receipt of
the notification, Staff Delisting Determination, or Public Reprimand
Letter, as applicable. In addition to containing all disclosure
required by Form 8-K, if applicable, the public announcement must
describe each specific basis and concern identified by Nasdaq in its
determination that the Company does not meet the listing standard and
identify the Rules upon which the deficiency is based. For example, if
the Listing Qualifications Department determines to delist a Company
based on its discretionary authority under Rule 5101, the Company must
include in its public announcement the specific concerns cited in the
Staff Delisting Determination. In addition, a Company may provide its
own analysis of the issues raised in the Staff Delisting Determination.
If the public announcement is not made by the Company within the
time allotted or does not include all of the required information,
trading of its securities shall be halted (if not already halted), even
if the Company appeals the Staff Delisting Determination or Public
Reprimand Letter as set forth in Rule 5815, and Nasdaq may make a
public announcement with the required information. If the company's
failure to make this public announcement is the only basis for a
trading halt, Nasdaq would ordinarily resume trading if Nasdaq makes
the public announcement. If the Company fails to make the public
announcement by the time that the Hearings Panel issues its Decision,
that Decision will also determine whether to delist the Company's
securities for failure to make the public announcement.
Rule 5810(b) does not relieve a Company of its disclosure
obligation under the federal securities laws, nor should it be
construed as providing a safe harbor under the federal securities laws.
It is suggested that the Company consult with corporate/securities
counsel in assessing its disclosure obligations under the federal
securities laws.
(c) No change.
IM-5810-2. No change.
(d) No change.
* * * * *
5840. Adjudicatory Process: General Information
(a)-(k) No change.
(l) Disclosure by Nasdaq
In order to maintain the quality of and public confidence in its
market and
[[Page 64371]]
to protect investors and the public interest, Nasdaq may, at any level
of a proceeding under this Rule 5800 Series, make a public
announcement, including by press release, describing a notification,
Public Reprimand Letter, Staff Delisting Determination, Adjudicatory
Body Decision, or other event involving a Company's listing or trading
on Nasdaq.
* * * * *
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 company that receives a Staff Delisting
Determination, Public Reprimand Letter or a notice that the company
does not meet a listing standard (collectively, a ``Staff
Determination'') make a public announcement, either by filing a Form 8-
K, where required by SEC rules, or by issuing a press release
disclosing its receipt of the notification.\4\ These rules also require
that this disclosure identify ``the Rule(s) upon which the deficiency
is based.''
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\4\ See Nasdaq Listing Rules 5250(b)(2) and 5810(b).
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Nasdaq's intent in adopting this requirement was to ensure that the
public is provided with adequate information whenever a company is
deficient under Nasdaq's rules. However, Nasdaq has observed that some
companies merely disclose the rule number and a description of the
rule, without providing additional disclosure to enable the public to
understand the deficiency or the underlying basis for it. While this
may be sufficient in most cases where the deficiency is related to a
quantitative requirement, such as a bid price deficiency, it is
insufficient when qualitative issues are raised. For example, a company
may disclose that Nasdaq has determined to delist it for ``public
interest concerns under Rule 5101'' without describing the nature of
Nasdaq's concerns. Nasdaq believes that disclosure made without a
description of the specific underlying concerns that gave rise to the
delisting proceeding will prevent investors from making fully informed
investment decisions. Furthermore, since the remedy for failing to make
this disclosure is for Staff to halt trading in the company's
securities, Nasdaq is concerned that a company that has already been
halted by Staff due to regulatory concerns may decline altogether to
make the required disclosure.
Accordingly, Nasdaq proposes to modify IM-5810-1 to specifically
require that the company's public announcement of receipt of a Staff
Determination describe each of the bases and specific concerns
underlying Nasdaq's determination. The IM would also provide that the
company may include its own analysis of the issues raised.\5\ The IM
would also be modified to specify that Nasdaq may itself make a public
announcement, such as by issuing a press release, in the circumstance
that the company makes insufficient disclosure or refuses to make the
required disclosure altogether. If the company's failure to make this
required disclosure is the only basis for a trading halt, Nasdaq would
ordinarily resume trading after issuing its disclosure. If, on the
other hand, the company's securities were already subject to a trading
halt for another reason, such as the failure to respond to a request
for information to Nasdaq, the halt would remain in effect
notwithstanding the disclosure made by Nasdaq.
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\5\ For example, the company could choose to describe its plan
to regain compliance, or describe why it believes the concerns
identified by Nasdaq should not result in delisting. However, if the
company's analysis or description is inaccurate or misleading,
Nasdaq could use the authority in proposed Rule 5840(l) to issue a
clarifying public announcement. In this event, the Hearings Panel
would also consider the inaccurate or misleading disclosure when
determining whether it is appropriate to continue the company's
listing. Nasdaq could also halt trading under Rule 4120(a)(5) based
on the inaccurate or misleading disclosure.
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Similarly, Nasdaq also proposes to provide that it may make a
public announcement, including by press release, describing an action
involving a company's listing or trading on Nasdaq. This authority
could be used, for example, where a company that is late in filing its
periodic reports is not granted an extended stay of delisting by the
Hearings Panel pursuant to Rule 5815(a)(1)(B), and is therefore trading
in the over-the-counter market pending a final decision by a hearings
Panel. If the Panel ultimately determines to delist this company, its
securities would continue to trade in the over-the-counter market and,
unless the company chose to issue its own public announcement,
investors would not know that the Panel had determined to delist the
Company until Nasdaq filed a Form 25 with the Commission to formally
delist the Company some months later.\6\ If the company does not make
this disclosure, proposed Rule 5840(l) would allow Nasdaq to make a
public announcement to provide transparency to the Panel's decision and
the change in the status of the company's Nasdaq listing.\7\
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\6\ Rule 5815(d)(2) provides that when a Hearings Panel issues a
decision to delist a company's securities, Nasdaq will File a Form
25 after the Nasdaq Listing and Hearing Council has determined not
to call the decision [sic] review. The Listing Council has 45 days
to call the decision for review pursuant to Rule 5820(b). In
addition, if the Company appeals the Panel's decision to the Listing
Council, the Form 25 would not be filed until after the Listing
Council issues its decision and the Nasdaq Board of Directors has
had an opportunity to call that decision for review. Rule
5820(e)(6).
\7\ See, also, footnote 5, supra, for another example where
Nasdaq may use the authority in proposed Rule 5840(l).
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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,\8\ in general and with Sections
6(b)(5) of the Act,\9\ 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
will require disclosure to the public of the specific bases for Staff's
determination to delist or reprimand the company, thereby helping
assure adequate information for investors and potential investors. In
addition, it will allow Nasdaq to provide information to the public
about a company's listing status. As such, it is designed to protect
investors and the public interest.
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\8\ 15 U.S.C. 78f.
\9\ 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
[[Page 64372]]
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be 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 email to [email protected]. Please include
File Number SR-NASDAQ-2012-118 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-2012-118. 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, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 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-2012-118 and should
be submitted on or before November 9, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-25736 Filed 10-18-12; 8:45 am]
BILLING CODE 8011-01-P