[Federal Register Volume 80, Number 34 (Friday, February 20, 2015)]
[Notices]
[Pages 9285-9286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03518]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74279; File No. SR-NASDAQ-2014-102]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval of Proposed Rule Change To Require That a Company
Publicly Disclose the Denial of a Listing Application
February 13, 2015.
I. Introduction
On December 11, 2014, 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 require companies to disclose the denial of an
initial listing application. The proposed rule change was published for
comment in the Federal Register on December 30, 2014.\3\ The Commission
received no comments on the proposed rule change. This order approves
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 73912 (December 22,
2014), 79 FR 78540 (December 30, 2014) (``Notice'').
---------------------------------------------------------------------------
II. Description of Proposed Rule Change
In its filing, Nasdaq stated that it processes between 200 and 300
applications each year from companies seeking to list securities on
Nasdaq. According to the Exchange, while most applicants meet the
listing requirements (or are prepared to take action to meet those
requirements before listing) in some cases a company does not meet the
requirements and is not willing, or able, to comply. Nasdaq may also
deny a listing application based on public interest concerns even
though the company meets all quantitative listing requirements.\4\ In
either case, Nasdaq will inform the company of the outcome, and the
company may withdraw its application before the application is formally
denied. If the company does not withdraw its application, then the
Nasdaq Listing Qualifications Department will issue a written denial to
the company.\5\ A company denied listing on Nasdaq may appeal the
denial to a Listing Qualifications Hearings Panel (``Hearings
Panel'').\6\
---------------------------------------------------------------------------
\4\ See Nasdaq Rule 5101 and 5101-1.
\5\ See Nasdaq Rule 5810.
\6\ See Nasdaq Rule 5815.
---------------------------------------------------------------------------
According to Nasdaq, investors view a company's decision to seek
initial listing on the Exchange as a positive development, and
companies often publicize their intention to apply for listing.\7\
Nasdaq believes that the public is therefore interested in the outcome
of an application for initial listing. Nasdaq proposes to require that
a company that receives a written determination denying its application
for listing must, within four business days, make a public announcement
in a press release or other Regulation FD compliant manner about the
receipt of the determination and the Nasdaq Rule(s) upon which the
determination is based. The company must describe each specific basis
and concern identified by Nasdaq in reaching the determination. If the
public announcement is not made by the company within the time allotted
or does not include all of the required information, Nasdaq will make a
public announcement with the required information and, if the company
appeals the determination as set forth in Nasdaq Rule 5815, the
Hearings Panel will consider the company's failure to make the public
announcement in considering whether to list the company. Nasdaq also
proposes to clarify in Rule 5205 that a company may withdraw its
application for initial listing at any time.
---------------------------------------------------------------------------
\7\ See Notice, supra note 3.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
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.\8\
In particular, the Commission finds that the proposed rule change is
consistent with section 6(b)(5) of the Act,\9\ which requires, among
other things, 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 remove impediments
to, and perfect the mechanism of, a free and open market and a national
market system and, in general, to protect
[[Page 9286]]
investors and the public interest and are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\8\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission notes that full and fair disclosure of information
by companies is of critical importance to financial markets and the
investing public. According to the Exchange, investors view a company's
decision to seek initial listing on the Exchange as a positive
development, and companies often publicize their intention to apply for
listing. The listing of a company on a national securities exchange
such as Nasdaq provides benefits including, among others, potential for
increased stock liquidity and capital raising benefits.\10\ However,
there appears to be no Exchange requirement for the company to
publicize when its listing application has been denied and therefore
that the company will not be receiving the benefits of an exchange
listing.
---------------------------------------------------------------------------
\10\ Section 18 of the Securities Act of 1933 (``Securities
Act'') provides federal preemption of state blue sky laws for
securities listed on certain national securities exchanges. 15
U.S.C. 77r. See also 17 CFR 230.146.
---------------------------------------------------------------------------
The Commission believes that the public, including potential future
investors, would find a denial of a company's listing application, just
as important as the decision to seek an exchange listing which, as
noted by Nasdaq, is often publicized. The significance of a denial of
listing is also underscored by the existence of both the right to
appeal the denial on Nasdaq and the right to obtain Commission review
of such appeals. Nasdaq rules provide, as noted above, for due process
to appeal a denial of listing.\11\ Denial of listings have also been
subject to Commission review under section 19(d) of the Exchange
Act.\12\
---------------------------------------------------------------------------
\11\ These appeal provisions have been adopted in accordance
with section 6(b)(7) of the Act. 15 U.S.C. 78f(b)(7).
\12\ Section 19(d) of the Act provides, among other things, for
Commission review of any action self-regulatory organization that,
among other things, prohibits or limits any person in respect to
access to service offered by such organization. See U.S.C. 78s(d).
---------------------------------------------------------------------------
The Commission therefore believes that the proposed rule change
will help provide transparency to future, as well as existing,
investors about the status of a company's listing application. The
Commission also believes that Nasdaq's proposal to require that such
disclosure be made by press release, or other Regulation FD compliant
manner, will permit companies to disseminate this important information
to the public in a broad and inclusive manner and should help to ensure
for broad public access to the denial of listing determination and the
reasons for the denial.
As described above, the proposal will also clarify in Nasdaq's
rules that a company may withdraw its application for initial listing
at any time during the review process.\13\ The decision to seek listing
and submit a listing application is generally a voluntary decision by a
company. Consistent with this, it is our understanding that companies
seeking listing on Nasdaq are allowed to withdraw their voluntary
application at any time during the process. The clarification in
Nasdaq's proposal codifies this concept in Nasdaq's rules. The
Commission also believes that for, the same reasons noted above,
companies should consider any applicable disclosure requirements under
the federal securities laws if a company withdraws its listing
application with Nasdaq for any reason.
---------------------------------------------------------------------------
\13\ See Notice, supra note 3.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered pursuant to section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-NASDAQ-2014-102) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(2).
\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-03518 Filed 2-19-15; 8:45 am]
BILLING CODE 8011-01-P