Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices 45359 

1See Release No. 34–53128 (January 13, 2006) [71 

FR 3550]. 2 15 U.S.C. 78l(g). 3 15 U.S.C. 78l(b). 4 15 U.S.C. 78a et seq. 5 15 U.S.C. 78l(g)(2)(G). Section 12(g)(2)(G) 

provides that any security issued by an insurance 

company is exempt from registration if all of the 

following conditions are met: 

• Such insurance company is required to and 

does file an annual statement with the 

Commissioner of Insurance (or other officer or 

agency performing a similar function) of its 

domiciliary State, and such annual statement 

conforms to that prescribed by the National 

Association of Insurance Commissioners or in the 

determination of such State commissioner, officer 

or agency substantially conforms to that so 

prescribed. 

• Such insurance company is subject to 

regulation by its domiciliary State of proxies, 

consents, or authorizations in respect of securities 

issued by such company and such regulation 

conforms to that prescribed by the National 

Association of Insurance Commissioners. 

• After July 1, 1966, the purchase and sales of 

securities issued by such insurance company by 

beneficial owners, directors, or officers of such 

company are subject to regulation (including 

reporting) by its domiciliary State substantially in 

the manner provided in Section 16. 

6See 17 CFR 240.12g3–2(b). 

7 15 U.S.C. 78l(a). 

8 15 U.S.C. 78c(a)(12). 

9Letter from Edward S. Knight to Nancy M. 

Morris (July 31, 2006). The Nasdaq Application is 

included in accompanying Release No. 34–54240 

(July 31, 2006). 

10 15 U.S.C. 78mm. 

11 17 CFR 240.0–12. Exchange Act Rule 0–12 sets 

forth procedures for filing applications for orders 

for exemptive relief pursuant to Section 36. 12See the Nasdaq Application. 

[FR Doc. 06–6708 Filed 8–7–06; 8:45 am] 

BILLING CODE 8010–01–C 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–54241] 

In the Matter of the Application of the 

Nasdaq Stock Market, Inc. and the 

NASDAQ Stock Market LLC for an 

Exemption From Section 12(a) 

Allowing Trading of Certain 

Unregistered Securities 

July 31, 2006. 

I. Introduction 

On January 13, 2006, the Commission 

approved the application of the Nasdaq 

Stock Market, Inc. (‘‘Nasdaq’’) to register 

one of its subsidiaries, the NASDAQ 

Stock Market LLC (‘‘Nasdaq Exchange’’) 

as a national securities exchange.1 Prior 

to Nasdaq’s submission of the 

application to become an exchange, 

Nasdaq was a wholly-owned subsidiary 

of the National Association of Securities 

Dealers, Inc. (‘‘NASD’’) that operated as 

an interdealer quotation system. 

Historically under NASD rules, a 

company’s securities were eligible for 

listing on Nasdaq if the security was 

registered under either Section 12(g) 2 or 

Section 12(b) 3 of the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’).4 However, in certain 

circumstances, NASD rules also 

permitted the trading of securities that 

are exempt from registration under 

Section 12(g) of the Exchange Act. 

Among other exempt securities, 

NASD rules allow the trading of any 

security of an insurance company that is 

exempt from registration under Section 

12(g)(2)(G) of the Exchange Act 5 and the 

securities of certain foreign private 

issuers that are exempt from Section 

12(g) registration pursuant to Exchange 

Act Rule 12g3–2(b).6

Once the Nasdaq Exchange begins to 

operate as a national securities 

exchange, Section 12(a) of the Exchange 

Act 7 would prohibit any Nasdaq 

Exchange member, broker, or dealer 

from effecting any transaction in any 

security, other than an ‘‘exempted 

security’’ as defined in Section 3(a)(12) 

of the Exchange Act,8 on the Nasdaq 

Exchange, unless the security is 

registered under Section 12(b) of the 

Exchange Act. There are no exemptions 

from Section 12(b) registration afforded 

to insurance companies and foreign 

private issuers that correspond to the 

exemptions available to these issuers 

under Section 12(g)(2)(G) of the 

Exchange Act and Exchange Act Rule 

12g3–2(b). Accordingly, the securities of 

these issuers would need to be 

registered under Section 12(b) of the 

Exchange Act before transactions in 

those securities could be effected by 

Nasdaq Exchange members, brokers and 

dealers, consistent with Section 12(a) on 

the Nasdaq Exchange, absent the 

exemption provided by this order. 

II. Request by Nasdaq and the Nasdaq 

Exchange for an Exemption From 

Section 12(a) of the Exchange Act 

On July 31, 2006, the Commission 

received an application (the ‘‘Nasdaq 

Application’’) 9 from the Nasdaq and the 

Nasdaq Exchange for an exemption 

pursuant to Section 36 of the Exchange 

Act,10 in accordance with the 

procedures set forth in Exchange Act 

Rule 0–12.11 Section 36 of the Exchange 

Act gives the Commission the authority 

to exempt any person, security or 

transaction from any Exchange Act 

provision by rule, regulation or order, to 

the extent that the exemption is 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors. Nasdaq and the 

Nasdaq Exchange have requested a 

three-year exemption from Section 12(a) 

of the Exchange Act, with respect to 

transactions in securities of the issuers 

listed in Exhibit C to the Nasdaq 

Application that are currently exempt 

from registration under Section 12(g) of 

the Exchange Act. According to Nasdaq 

and the Nasdaq Exchange, the securities 

of four insurance companies and nine 

foreign private issuers currently are 

trading on Nasdaq in reliance on these 

exemptions.12

An exemption from Section 12(a) 

would permit Nasdaq Exchange 

members and brokers or dealers to effect 

transactions in these securities on the 

Nasdaq Exchange without registration 

under Section 12(b) of the Exchange 

Act. Nasdaq and the Nasdaq Exchange 

believe that the three-year period will 

provide these issuers with adequate 

time to complete the Section 12(b) 

registration process and prepare 

financial statements should they choose 

to continue to have their securities 

traded on the Nasdaq Exchange after 

expiration of the three-year period. 

Under the terms of the requested 

exemption, the insurance companies 

would have to continue to satisfy the 

conditions set forth in Section 

12(g)(2)(G) of the Exchange Act and the 

foreign private issuers would have to 

remain in compliance with the 

conditions set forth in Exchange Act 

Rule 12g3–2(b) to qualify for the 

exemption. 

Prior to submitting this request, 

Nasdaq and the Nasdaq Exchange 

notified the insurance companies and 

the foreign private issuers of their plan 

to request a Section 12(a) exemption on 

the issuers’ behalf and allowed each 

issuer that did not wish to be the subject 

of the request to opt-out of the process. 

Nasdaq and the Nasdaq Exchange 

provided these issuers a period of 10 

business days to notify Nasdaq of an 

opt-out preference. The issuers that 

chose to opt-out from the request are 

listed in Exhibit B to the Nasdaq 

Application. 

III. Order Granting Nasdaq’s 

Application for an Exemption Pursuant 

to Section 36 of the Exchange Act 

We believe that exempting Nasdaq 

Exchange members, brokers and dealers 

for a limited time from the requirements 

of Section 12(a) regarding the trading of 

the securities listed in Exhibit C to the 

Nasdaq Application is necessary and 

appropriate in the public interest, and is 

consistent with the protection of 

investors in order to afford these issuers 

time to comply with the Section 12(b) 

registration requirements. As 

represented by Nasdaq and the Nasdaq 

Exchange in their request, immediate 

registration under Section 12(b) could 

45360 Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices 

13 Issuers whose securities are exempt from 

Section 12(g) under Section 12(g)(2)(G) of the 

Exchange Act or Exchange Act Rule 12g3–2(b) 

would be required to prepare and file a registration 

statement on Form 10 for domestic companies or 

Form 20–F for foreign private issuers. Under Form 

20–F, foreign private issuers would have to restate 

their financial statements in accordance with U.S. 

generally accepted accounting principles, or 

provide a reconciliation of their primary financial 

statements to U.S. GAAP, for at least two fiscal 

years. Thus, the three year period would give these 

issuers sufficient time to prepare the required 

financial statements should they choose to continue 

to have their securities traded on the Nasdaq 

Exchange. 

force these issuers to withdraw from 

Nasdaq, consequently depriving U.S. 

investors of the accustomed market for 

the securities of those issuers and, in 

some cases, potentially reducing the 

depth and liquidity of the market for 

these securities. We believe that a threeyear exemption will serve the public 

interest by minimizing any unnecessary 

disruptions that could result from the 

sudden withdrawal of these securities 

from Nasdaq, thereby potentially 

exposing investors in these securities to 

a less liquid market, absence of market 

surveillance by an exchange, and delays 

in execution of transfers. 

We concur with Nasdaq and the 

Nasdaq Exchange that the requested 

three-year exemption period is 

appropriate and will provide the 

affected issuers with sufficient 

transition time to register their 

securities.13 Until the expiration of the 

exemption granted by this Order, 

Nasdaq Exchange members, brokers and 

dealers will be permitted to effect 

transactions in the securities subject to 

this exemption so long as the issuers of 

these securities continue to satisfy the 

conditions of Section 12(g)(2)(G) of the 

Exchange Act or Exchange Act Rule 

12g3–2(b), whichever is applicable. 

Accordingly, it is ordered pursuant to 

Section 36 of the Exchange Act that, 

under the terms and conditions set forth 

below, a Nasdaq Exchange member, 

broker or dealer may effect a transaction 

on the Nasdaq Exchange in a security of 

an issuer listed in Exhibit C to the 

Nasdaq Application that has not been 

registered under Section 12(b) of the 

Exchange Act without violating Section 

12(a) of the Exchange Act. This 

exemption shall take effect on August 1, 

2006, the same date as the start of 

Nasdaq Exchange’s operation, and shall 

expire on August 1, 2009. 

This exemption is limited to the 

securities of the issuers listed in Exhibit 

C to the Nasdaq Application and is 

conditioned on the continued 

satisfaction of the conditions set forth in 

Section 12(g)(2)(G) of the Exchange Act 

with respect to the securities of the 

insurance companies, or Exchange Act 

Rule 12g3–2(b) with respect to the 

securities of the foreign private issuers. 

As specified in the Nasdaq Application, 

Nasdaq will verify the satisfaction of 

these conditions. In addition, this 

exemption does not extend to any other 

section or provision of the Exchange 

Act. 

By the Commission (Chairman Cox and 

Commissioners Glassman, Atkins, Campos 

and Nazareth). 

Nancy M. Morris, 

Secretary. 

[FR Doc. 06–6707 Filed 8–7–06; 8:45 am] 

BILLING CODE 8010–01–P