Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24549 

6See Securities Exchange Act Release No. 66725 

(April 3, 2012), 77 FR 21120 (April 9, 2012) (SR– 

NYSEArca–2012–26). 

7For a description of the proposed contract 

methodology for the mini option product proposed 

by NYSE Arca, see id. 8 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 66159 

(January 13, 2012), 77 FR 3021 (January 20, 2012) 

(‘‘Notice’’). 

4See letter from David A. Donohoe, Jr., Donohoe 

Advisory Associates LLC, to Elizabeth M. Murphy, 

Secretary, Commission, dated February 10, 2012 

(‘‘Donohoe Letter’’). 

5See Securities Exchange Act Release No. 66499 

(March 1, 2012), 77 FR 13680 (March 7, 2012). 

6 In Amendment No. 1, Nasdaq modified the 

proposal by, among other things: (1) Changing the 

alternative minimum price requirement from a bid 

price to a closing price that must be maintained for 

at least five consecutive business days; (2) stating 

that in the event a security listed under the 

alternative standard reaches a $4 closing price, in 

determining whether the security qualifies for 

listing under the existing Nasdaq Capital Market 

listing requirement Nasdaq would review the 

security to ensure that it meets both the quantitative 

and qualitative listing standards and would require 

that the security maintain the closing price for five 

Continued 

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 

the 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. In 

particular, the Commission seeks 

comment on the following: 

1. NYSE Arca, Inc. recently proposed 

to allow the listing and trading of a 

‘‘mini’’ option product.6 The Exchange’s 

proposal would allow the listing and 

trading of Mini Options contracts with 

contract specifications that differ from 

the similar product proposed by NYSE 

Arca. Due to the differences in contract 

specifications, these two similar 

products, even if on the same 

underlying security, would not 

necessarily be fungible. The 

Commission requests comment on 

whether the listing and trading of two 

distinct and non-fungible ‘‘mini’’ 

options products, particularly if on the 

same underlying security, would create 

investor confusion or raise any other 

issues or concerns for market 

participants. 

2. As discussed above, the Exchange’s 

proposal would provide for contract 

specifications for Mini Options that 

include: (i) The strike prices would be 

set at the same level for Mini Options 

as for corresponding standard contracts; 

(ii) the premium multiplier would be 10 

for Mini Options (rather than 100 as for 

the standard contract) and the premium 

would be expressed in terms of dollars 

per 1/10th part of the total value of the 

contract; and (iii) the Exchange would 

designate Mini Options with different 

trading symbols than the standard 

contract. The Commission requests 

comment regarding the Exchange’s 

proposed contract methodology.7

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 rulecomments@sec.gov. Please include File 

No. SR–ISE–2012–26 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2012–26. 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 

a.m. and 3 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–ISE– 

2012–26 and should be submitted on or 

before May 15, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9771 Filed 4–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66830; File No. SR– 

NASDAQ–2012–002] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Amendment No. 1 and Order 

Granting Accelerated Approval to 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Adopt an 

Alternative to the $4 Per Share Initial 

Listing Bid Price Requirement for the 

Nasdaq Capital Market of Either $2 

Closing Price Per Share or $3 Closing 

Price Per Share, if Certain Other 

Listing Requirements are Met 

April 18, 2012. 

I. Introduction 

On January 3, 2012, The NASDAQ 

Stock Market LLC (‘‘Exchange’’ or 

‘‘Nasdaq’’) 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 

proposal to adopt an alternative to the 

$4 minimum bid price initial listing 

requirement for the Nasdaq Capital 

Market of either $2 or $3, if certain other 

listing requirements are met. The 

proposed rule change was published for 

comment in the Federal Register on 

January 20, 2012.3 The Commission 

received one comment on the proposal.4

On March 1, 2012, the Commission 

extended to April 19, 2012 the time 

period in which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved.5 Nasdaq filed Amendment 

No. 1 to the proposed rule change on 

April 16, 2012.6 The Commission is 

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24550 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

consecutive business days unless Nasdaq extends 

this five-day period to a longer period based on the 

facts and circumstances (Nasdaq would notify the 

issuer of any such qualification); (3) specifying that 

in determining whether a $4 closing price has been 

maintained for at least five consecutive business 

days in order to qualify for listing under the 

existing Nasdaq Capital Market listing requirement 

Nasdaq would use the Nasdaq Official Closing 

Price, if available, or the consolidated closing price; 

and (4) specifying that Nasdaq will update on a 

daily basis the list that it has proposed to publish 

on its Web site of securities that subsequently 

become penny stocks. 

7See Nasdaq Rule 5505(a)(1). The term ‘‘bid 

price’’ refers to the closing bid price. See Nasdaq 

Rule 5005(a)(3). 

8See Nasdaq Rule 5505(b)(1) and Nasdaq Rule 

5505(b)(3). Under the Equity Standard, an issuer 

would need to meet, among other things: (A) 

stockholders’ equity of at least $5 million; (B) 

market value of publicly held shares of at least $15 

million; and (C) two year operating history. Under 

the Net Income Standard, an issuer would have to 

meet, among other things: (A) Net income from 

continuing operations of $750,000 in the most 

recently completed fiscal year or in two of the three 

most recently completed fiscal years; (B) 

stockholders’ equity of at least $4 million; and (C) 

market value of publicly held shares of at least $5 

million. 

9See Nasdaq Rule 5505(b)(2). Under the Market 

Value of Listed Securities Standard, an issuer 

would need to meet, among other things: (A) Market 

value of listed securities of at least $50 million 

(current publicly traded issuers must meet this 

requirement and the price requirement for 90 

consecutive trading days prior to applying for 

listing if qualifying to list only under the market 

value of listed securities standard); (B) 

stockholders’ equity of at least $4 million; and (C) 

market value of publicly held shares of at least $15 

million. Nasdaq proposes to revise Nasdaq Rule 

5505(b)(2) in order to make it consistent with the 

proposal. In particular, Nasdaq Rule 5505(b)(2)(A) 

would be revised to delete the specific reference to 

$4 bid price requirement, since an issuer seeking to 

initially list its securities under the Market Value 

of Listed Securities Standard using the proposed 

alternative price requirement would have to 

maintain a closing price of at least $2 per share for 

90 consecutive trading days. See email from Arnold 

Golub, Vice President, Office of the General 

Counsel, Nasdaq, to Sharon Lawson, Senior Special 

Counsel, Division of Trading and Markets, 

Commission, on April 18, 2012. 

10Nasdaq would define net tangible assets or 

average revenues based on the issuer’s most 

recently filed audited financial statements that 

satisfy the requirements of the Commission or Other 

Regulatory Authority, so long as such financial 

statements are dated less than 15 months prior to 

the date of listing. Nasdaq Rule 5005(a)(31) defines 

‘‘Other Regulatory Authority’’ as ‘‘(i) in the case of 

a bank or savings authority identified in Section 

12(i) of the Act, the agency vested with authority 

to enforce the provisions of Section 12 of the Act; 

or (ii) in the case of an insurance company that is 

subject to an exemption issued by the Commission 

that permits the listing of the security, 

notwithstanding its failure to be registered pursuant 

to section 12(b), the Commissioner of Insurance (or 

other officer or agency performing a similar 

function) of its domiciliary state.’’ 

11See 17 CFR 240.3a51–1. 

12See Amendment No. 1, note 6, supra. As 

provided in proposed Amendment No. 1 to IM– 

5505, Nasdaq may extend this five-day period based 

on any fact or circumstance, including the margin 

of compliance, the trading volume, the Market 

Maker montage, the trend of the security’s price, or 

information or concerns raised by other regulators 

concerning the trading of the security. 

13 In Amendment No. 1 Nasdaq also clarified that, 

for purposes of satisfying the Market Value of Listed 

Securities Standard to be no longer treated as listed 

under the alternative standard, a company would be 

required to maintain for 90 consecutive trading 

days the market value of their listed securities at 

$50 million and a $4 bid price, although this 90- 

day period may overlap with the five-consecutivebusiness-day period during which the company 

must maintain a $4 closing price. The company 

would, of course, also have to meet the other 

remaining quantitative and qualitative listing 

standards to no longer be considered listed under 

the alternative standard and therefore no longer 

subject to the penny stock rules. See Nasdaq Rule 

5505(b)(2)(A). 

14See Nasdaq Rule 4754(b)(4) and Amendment 

No. 1, supra note 6. In Amendment No. 1, Nasdaq 

stated that the Nasdaq Official Closing Price is set 

by the Nasdaq Closing Cross process, using an 

algorithm to find a price to match all eligible buy 

and sell orders at the close. Nasdaq stated that a 

closing cross occurs for every security listed on 

Nasdaq. If no trades occur as a result of the closing 

cross, then the Nasdaq Official Closing Price is the 

last matched trade that occurred that day on 

Nasdaq. 

15See Notice, supra at Note 3. 

16 17 CFR 240.3a51–1(a)(1). 

17See Notice, supra at Note 3; NYSE Amex 

Company Guide Section 102(b). Nasdaq filed a 

petition seeking an exemption from Rule 3a51– 

1(a)(2)(i)(C) to allow Nasdaq to adopt initial listing 

standards identical to NYSE Amex’s or, in the 

alternative, elimination of the grandfather 

provision. See Notice, supra at Note 3; see also 

Request for Rulemaking to Allow the Nasdaq 

publishing this notice to solicit 

comments on Amendment No. 1 from 

interested persons and is approving the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

II. Description of the Amended 

Proposal 

Currently, issuers seeking to list their 

securities on the Nasdaq Capital Market 

must meet, among other things, the 

initial listing standards of the Nasdaq 

Capital Market. The initial listing 

standards include quantitative and 

qualitative requirements. To qualify for 

listing on the Nasdaq Capital Market, an 

issuer’s security must, among other 

things, have a minimum bid price of at 

least $4 per share.7

Nasdaq proposes to add an alternative 

to the $4 minimum bid price per share 

requirement. Under the proposed 

alternative, a security would qualify for 

listing on the Nasdaq Capital Market if, 

for at least five consecutive business 

days prior to approval, the security has 

a minimum closing price of at least $3 

per share, if the issuer meets the Equity 

or Net Income standards,8 or at least $2 

per share, if the issuer meets the Market 

Value of Listed Securities standard.9

Further, for issuers to qualify their 

securities under this alternative price 

requirement, the issuer must 

demonstrate that it has net tangible 

assets in excess of $2 million if the 

issuer has been in continuous operation 

for at least three years. If the issuer has 

been in continuous operation for less 

than three years, then the issuer must 

demonstrate net tangible assets in 

excess of $5 million. The issuer could 

also be listed under the alternative, 

lower $2 or $3 price requirement if the 

issuer has average revenue of at least $6 

million for the last three years.10

Nasdaq is proposing to add new 

interpretative material in connection 

with this alternative price requirement. 

Proposed IM–5505 states that an issuer 

that qualifies its securities for initial 

listing under the alternative price 

requirement could become a ‘‘penny 

stock’’ if the issuer fails the net tangible 

assets and revenue tests after listing and 

does not satisfy any of the other 

exclusions from being a penny stock 

contained in Rule 3a51–1 under the 

Act.11 Nasdaq would monitor issuers 

whose securities are listed under the 

alternative price requirement, and 

publish on its Web site on a daily basis 

a list of those companies that no longer 

satisfy the net tangible assets or revenue 

tests, nor any other exclusions from 

being a penny stock under Rule 3a51– 

1. Moreover, the proposed IM–5505, as 

amended, would provide that if an 

issuer initially lists its securities under 

the proposed alternative price 

requirement and the securities 

subsequently achieve a $4 closing price 

over at least five consecutive business 

days 12 and satisfy all other initial listing 

criteria, the securities would no longer 

be considered as having listed under the 

alternative price requirement, and 

would no longer be monitored for 

compliance with that requirement.13 In 

Amendment No. 1, Nasdaq amended the 

proposal to state that the $4 closing 

price would be the Nasdaq Official 

Closing Price,14 or if such price is not 

available, the consolidated closing price 

distributed under the applicable 

National Market System Plan. In 

Amendment No. 1, Nasdaq also stated 

that it would notify a company that 

initially lists its securities under the 

alternative standard of its subsequent 

qualification for listing under the $4 

price requirement of Rule 5505(a)(1)(A). 

Nasdaq’s stated purpose for its 

proposal is to compete with NYSE 

Amex for initial listings of companies 

with securities priced between $2 and 

$4.15 Currently, NYSE Amex is able to 

list companies priced between $2 and 

$4 without their securities being 

considered ‘‘penny stocks,’’ because 

NYSE Amex benefits from the 

‘‘grandfather’’ exclusion set forth in 

Rule 3a51–1(a)(1) under the Act,16

which does not apply to Nasdaq.17 As 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24551 

Capital Market to Adopt Initial Listing Price 

Requirements Identical to NYSE Amex, File No. 4– 

604 (May 25, 2010). 

18 17 CFR 240.3a51–1(g). 

19See Notice, supra at Note 3. 

20 17 CFR 240.3a51–1(g). 

21See Donohoe Letter. 

22 Id. 

23 Id. 

24 Id. 

25 Id. 

26 Id. 

27 Id. 

28 Id. 

29 In approving this proposed rule change, as 

modified by Amendment No. 1, the Commission 

has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

30 15 U.S.C. 78f(b)(5). 

31 17 CFR 240.3a51–1. 

32 17 CFR 240.15g–1 et seq. 

33 17 CFR 240.3a51–1(a)(2). 

34See 17 CFR 240.3a51–1(a)(1). 

a result, in order to compete with NYSE 

Amex for listing securities priced 

between $2 and $4, and avoid their 

being considered ‘‘penny stocks,’’ 

Nasdaq’s proposed Rule 5505(a)(1)(B) 

incorporates the net tangible assets and 

average revenue tests contained in the 

alternative penny stock exclusion set 

forth in Rule 3a51–1(g) under the Act 18

so that Nasdaq can initially list 

companies priced between $2 and $4 on 

the Nasdaq Capital Market that are not 

considered ‘‘penny stocks.’’ 19 As noted 

above, however, ongoing monitoring of 

listed companies relying on this 

alternative penny stock exclusion is 

required in order to assure they 

continue to meet the net tangible assets 

and average revenue tests set forth in 

that exclusion. 

III. Comment Summary 

The Commission received one 

comment letter on the proposal, in 

which the commenter recommended 

that the Commission initiate a process 

to amend Rule 3a51–1 under the Act 20

and then approve Nasdaq’s proposal.21

The commenter noted that NYSE 

Amex’s initial listing price 

requirements—$3 per share under three 

of NYSE Amex’s listing standards and 

$2 per share under a fourth listing 

standard—are lower than Nasdaq’s 

current $4 per share initial listing price 

requirement.22 The commenter stated 

his belief that this disparity is the main 

reason securities of companies trading 

between $2 and $4 per share list on 

NYSE Amex instead of the Nasdaq 

Capital Market.23 The commenter also 

expressed his belief that the 

Commission should ‘‘level the playing 

field’’ between NYSE Amex and 

Nasdaq.24 The commenter urged the 

Commission to focus on what changes 

to the penny stock rules must be made 

in order to eliminate the purported 

regulatory inequality between the two 

exchanges and carry out its mandate to 

ensure fair competition among the 

exchanges.25

Further, the commenter stated that the 

list of issuers published on Nasdaq’s 

Web site would be ‘‘unwieldy and 

certain to be less than fully 

transparent.’’ 26 The commenter 

suggested that this aspect of Nasdaq’s 

proposal would ‘‘allow the NYSE Amex 

to maintain a competitive advantage 

over Nasdaq’’ because issuers listing on 

Nasdaq would risk being deemed a 

‘‘penny stock’’ in the future whereas 

issuers listing on NYSE Amex incur no 

such risk.27 Again, the commenter 

suggested that the solution to this 

purported regulatory inequality is to 

amend the penny stock rules.28

IV. Discussion and Commission’s 

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.29 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,30 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 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; and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers. 

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, 

assuring compliance with its listing 

standards and detecting and deterring 

manipulative trading activity. 

Rule 3a51–1 under the Act 31 defines 

‘‘penny stock’’ as any equity security 

that does not satisfy one of the 

exceptions enumerated in 

subparagraphs (a) through (g) under the 

Rule. If a security is a penny stock, 

Rules 15g-1 through 15g-9 under the 

Act 32 impose certain additional 

disclosure and other requirements on 

brokers and dealers when effecting 

transactions in such securities. 

Currently, Nasdaq-listed securities are 

not considered penny stocks because 

they comply with the requirements in 

Rule 3a51–1(a)(2) under the Act,33

which excepts from the definition of 

penny stock securities registered on a 

national securities exchanges that have 

initial listing standards that meet certain 

requirements, including a $4 bid price 

at the time of listing. Nasdaq listing 

standards currently include all the 

requirements to qualify for the penny 

stock exception under Rule 3a51–1(a)(2) 

so that today, once a security is initially 

listed on Nasdaq, the security will not 

be considered a penny stock for so long 

as it is listed on Nasdaq. 

As noted above, the penny stock rules 

also exclude from the definition of 

penny stock, under a ‘‘grandfather’’ 

provision, securities registered on a 

national securities exchange that has 

been continually registered as such 

since April 20, 1992, and has 

maintained quantitative listing 

standards that are substantially similar 

to or stricter than those listing standards 

that were in place on the exchange on 

January 8, 2004.34 NYSE Amex meets 

this standard, but Nasdaq, which was 

more recently registered as a national 

securities exchange, does not. 

Accordingly, NYSE Amex’s initial 

listing price requirements of either $2 or 

$3 are grandfathered under this 

provision. Nasdaq has proposed its 

alternative price listing requirement in 

order to compete with NYSE Amex for 

listings of securities priced between $2 

and $4. 

The Commission has carefully 

considered Nasdaq’s proposal under the 

Exchange Act requirements. Under 

Nasdaq’s proposed alternative price 

standard, companies that maintain a $2 

or $3 closing price for at least five 

consecutive business days would 

qualify for listing if, among other things, 

they meet the net tangible assets or 

average revenue tests of the alternative 

penny stock exclusion set forth in Rule 

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24552 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

35See 17 CFR 240.3a51–1(g). As set forth in note 

9, supra, a company seeking to qualify under only 

the Market Value of Listed Securities Standard 

would, among other things, also be required to 

maintain for 90 consecutive trading days the market 

value of their listed securities at $50 million and 

the $2 price requirement prior to applying to list 

under the alternative standard. 

36The Commission has previously noted the 

potential for abuse with respect to penny stocks. 

See, e.g., Securities Exchange Act Release No. 

49037 (January 16, 2004), 69 FR 2531 (January 8, 

2004) (‘‘Our original penny stock rules reflected 

Congress’ view that many of the abuses occurring 

in the penny stock market were caused by the lack 

of publicly available information about the market 

in general and about the price and trading volume 

of particular penny stocks’’). 

37The Commission notes that Nasdaq’s current 

rules only require a company to achieve a $4 bid 

price on a single day to qualify for initial listing, 

except for reverse merger companies, which have to 

maintain a closing price of $4 per share or higher 

for a sustained period of time, but in no event for 

less than 30 of the most recent 60 trading days. See 

Nasdaq Rule 5110(c)(1)(B) and (c)(2)(B). 

38We note that the commenter recommended that 

the Commission instead amend the penny stock 

rules to level the playing field between Nasdaq and 

NYSE Amex, and eliminate what he views as 

regulatory inequality between the two exchanges. 

The Commission, however, notes that the proposal 

before the Commission must be considered on its 

merits in accordance with the substantive and 

procedural requirements of Section 19(b) under the 

Act. 15 U.S.C. 78s(b). 

3a51–1(g).35 This presents novel issues 

since it is the first time that an 

exchange-listed security could become 

subject to the penny stock rules 

following initial listing if it no longer 

meets the net tangible assets or average 

revenue tests of the alternative 

exclusion, and does not qualify for 

another exclusion under the penny 

stock rules.36 Further, unlike securities 

listed under Nasdaq’s existing 

standards, which have a blanket 

exclusion from the penny stock rules, 

broker-dealers that effect recommended 

transactions in securities that originally 

qualified for listing under Nasdaq’s 

alternative price standard would, among 

other things, under Rule 3a51–1(g), need 

to review current financial statements of 

the issuer to verify that it meets the 

applicable net tangible assets or average 

revenue test, have a reasonable basis for 

believing they remain accurate, and 

preserve copies of those financial 

statements as part of its records. 

To facilitate compliance by brokerdealers, Nasdaq has committed to 

monitor the companies listed under the 

alternative price standard and to 

publish on its Web site, and update 

daily, a list of any such company that 

no longer meets the net tangible assets 

or average revenue tests of the penny 

stock exclusion, and which does not 

satisfy any other penny stock exclusion. 

Nasdaq also specifically reminds brokerdealers of their obligations under the 

penny stock rules. The Commission 

believes that, although the listing of 

securities that do not have a blanket 

exclusion from the penny stock rules 

and require ongoing monitoring may 

increase compliance burdens on brokerdealers, the additional steps proposed 

by Nasdaq to facilitate compliance 

should reduce those burdens and that, 

on balance, Nasdaq’s proposal is 

consistent with the requirement of 

Section 6(b)(5) of the Act that the rules 

of an exchange, among other things, be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade and, in general, to protect 

investors and the public interest. 

Further, to address concerns about the 

potential manipulation of lower priced 

stocks to meet the initial listing 

requirements, Nasdaq has amended its 

proposal to require a company to 

maintain a $2 or $3 closing price for five 

consecutive business days prior to 

approval for listing, rather than on a 

single day, as proposed.37 The 

Commission believes that requiring the 

minimum $2 or $3 closing price to be 

maintained for a longer period should 

reduce the risk that some might attempt 

to manipulate or otherwise artificially 

inflate the closing price in order to 

allow a security to qualify for listing. In 

addition, Nasdaq has noted that it 

would exercise its discretionary 

authority to deny initial listing if there 

were particular concerns about an 

issuer, such as its ability to maintain 

compliance with continued listing 

standards or if there were other public 

interest concerns. The Commission 

believes these additional measures, in 

conjunction with Nasdaq’s surveillance 

procedures and pre-listing qualification 

review, should help reduce the potential 

for price manipulation to meet the new 

initial listing standards, and in this 

respect are designed to prevent 

fraudulent and manipulative acts and 

practices consistent with Section 6(b)(5) 

of the Act. 

Additionally, under Nasdaq’s 

proposal, if securities listed under the 

alternative price listing standard 

subsequently achieve a $4 closing price 

over at least five consecutive business 

days, and the issuer and the securities 

satisfy all other relevant initial listing 

criteria, then such securities would no 

longer be considered as having listed 

under the alternative price requirement. 

As with the initial $2 and $3 closing 

price requirements, the Commission has 

considered whether this provision could 

provide an incentive for market 

participants to manipulate the price of 

the security in order to achieve the $4 

closing price and no longer be 

considered as having listed under the 

alternative price requirement. The 

Commission notes that Nasdaq has 

taken several steps to address these 

concerns. First, Nasdaq has represented 

that it would conduct a robust, 

wholesale review of the issuer’s 

compliance with all applicable initial 

listing criteria, including qualitative and 

quantitative standards, at the time the 

$4 closing price is achieved, and would 

have a reasonable basis to believe that 

that price was legitimately, and not 

manipulatively, achieved. Secondly, 

Nasdaq has further represented that it is 

developing enhanced surveillance 

procedures to monitor securities listed 

under the alternative price requirement 

as they approach $4 to identify 

anomalous trading that would be 

indicative of potential price 

manipulation. Finally, the amended 

proposal requires the $4 closing price to 

be met over at least a five consecutive 

business day period in order to reduce 

the potential for price manipulation. 

The Commission believes that these 

measures should help reduce the 

potential for price manipulation to 

achieve the $4 closing price, and in this 

respect are designed to prevent 

fraudulent and manipulative acts and 

practices consistent with Section 6(b)(5) 

of the Act.38

In sum, the Commission believes that 

the Nasdaq proposal, as amended, 

reasonably addresses the concerns 

discussed above. We also note that 

Nasdaq’s proposal is more rigorous than 

existing NYSE Amex listing standards 

in that it additionally requires the net 

tangible assets or average revenue test 

set forth in Rule 3a51–1(g) to be met. 

For the reasons set forth above, the 

Commission finds that the proposed 

rule change is consistent withthe Act, 

including the provisions of Section 

6(b)(5) thereunder. 

V. Solicitation of Comments of 

Amendment No. 1 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including 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 rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2012–002 on the 

subject line. 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24553 

39 15 U.S.C. 78s(b)(2). 

40 15 U.S.C. 78s(b)(2). 

41 17 CFR 200.30–3(a)(12). 

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–2012–002. 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 a.m. and 3 p.m. Copies of the 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–2012–002 and 

should be submitted on or before May 

15, 2012. 

VI. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 1 

Amendment No. 1 revises the 

proposal to, among other things, change 

the minimum bid price requirement to 

a closing price, require that a security 

must have a $4 closing price for at least 

five consecutive business days, rather 

than one day as originally proposed, 

before it will be reevaluated under both 

the qualitative and quantitative initial 

listing standards, and require daily 

publication of the list of securities that 

become subject to the penny stock rules. 

The Commission believes that the 

changes in Amendment No. 1 

strengthen the proposal and, as 

discussed above, address concerns 

about the potential for manipulation. 

Accordingly, 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. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,40 that the 

proposed rule change (SR–NASDAQ– 

2012–002), as modified by Amendment 

No. 1, is approved on an accelerated 

basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.41

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9795 Filed 4–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #13050 and #13051] 

Kentucky Disaster Number KY–00045 

AGENCY: Small Business Administration. 

ACTION: Amendment 2. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 

disaster for Public Assistance Only for 

the Commonwealth of Kentucky 

(FEMA–4057–DR), dated 03/16/2012. 

Incident: Severe Storms, Tornadoes, 

Straight-line Winds, and Flooding. 

Incident Period: 02/29/2012 through 

03/03/2012. 

DATES: Effective Date: 04/12/2012. 

Physical Loan Application Deadline 

Date: 05/15/2012. 

Economic Injury (EIDL) Loan 

Application Deadline Date: 12/17/2012. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street SW., Suite 6050, 

Washington, DC 20416. 

SUPPLEMENTARY INFORMATION: The notice 

of the President’s major disaster 

declaration for Private Non-Profit 

organizations in the Commonwealth of 

KENTUCKY, dated 03/16/2012, is 

hereby amended to include the 

following areas as adversely affected by 

the disaster. 

Primary Counties: 

Adair, Bath. 

All other information in the original 

declaration remains unchanged. 

(Catalog of Federal Domestic Assistance 

Numbers 59002 and 59008) 

James E. Rivera, 

Associate Administrator for Disaster 

Assistance. 

[FR Doc. 2012–9757 Filed 4–23–12; 8:45 am] 

BILLING CODE 8025–01–P 

SMALL BUSINESS ADMINISTRATION 

Announcement of National Small 

Business Week Video Contest Under 

the America Competes Reauthorization 

Act of 2011 

AGENCY: Small Business Administration 

(SBA). 

ACTION: Notice. 

SUMMARY: In celebration of National 

Small Business Week 2012, the U.S. 

Small Business Administration (SBA) 

announces a video contest (the 

‘‘Contest’’) for small businesses to show 

how they have been assisted by an SBA 

program or service. This Federal 

Register notice is required under the 

Section 105 of the America COMPETES 

Reauthorization Act of 2011. 

DATES: The submission period for 

entries begins 12 p.m. EDT, April 16, 

2012, and ends 5 p.m. EDT, May 11, 

2012. Winners will be announced 

during National Small Business Week 

2012, unless the term of the Contest is 

extended by SBA. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Morris, Office of 

Communications & Public Liaison, U.S. 

Small Business Administration, 409 

Third Street SW., Washington, DC 

20416; Telephone (202) 205–7422; 

stephen.morris@sba.gov. 

SUPPLEMENTARY INFORMATION: 

Competition Details 

1. Subject of the Competition: In 

celebration of National Small Business 

Week 2012, the U.S. Small Business 

Administration is looking for creative 

videos from small businesses that show 

how they have been assisted by an SBA 

program or service, including, but not 

limited to, counseling, training, 

guaranteed loans, government contracts, 

and disaster recovery. The video contest 

will provide recognition to small 

businesses across the country that are 

utilizing SBA’s programs and services to 

create jobs, serve as pillars in their 

communities, and to create the next big 

products that will help keep America 

competitive. 

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