Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices 61011

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

2The American Stock Exchange, Inc. has filed a

similar proposed rule change SR-Amex-00–46. See

Securities Exchange Act Release No. 43419 (Oct. 6,

2000).

3Amendment No. 1 changes the section under

which the proposed rule change was filed from

Section 19(b)(3) to Section 19(b)(2) of the Act and

made other technical changes. See Letter from

Edward Knight, Executive Vice President and Chief

Legal Officer, Nasdaq, to Katherine A. England,

Assistant Director, SEC (Oct. 2, 2000).

4Nasdaq understands that the Commission

believes that this activity is not appropriate under

Section 5 of the Securities Act of 1933. See 15

U.S.C. 77e.

Institution and settlement of

administrative proceedings of an

enforcement nature

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact:

The Office of the Secretary at (202)

942–7070.

Dated: October 10, 2000.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26461 Filed 10–11–00; 11:29

am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43420; File No. SR–NASD–

00–50]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to the Definition

of ‘‘Public Offering’’ for Purposes of

Nasdaq’s Shareholder Approval Rules

October 6, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

August 11, 2000, The National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), through its

wholly owned subsidiary, The Nasdaq

Stock Market, Inc. (‘‘Nasdaq’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the NASD.2 On

October 4, 2000, the Nasdaq filed

Amendment No. 1 to the proposed rule

change.3 The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is filing with the Commission

a proposed rule change regarding the

adoption of interpretive material

defining ‘‘Public Offering’’ for purposes

of Nasdaq’s shareholder approval rules.

Below is the text of the proposed rule

change. All text is being added.

* * * * *

IM–4310–2. Definition of a Public Offering

Marketplace Rules 4310(c)(25)(G)(i)(d),

4320(e)(21)(G)(i)(d), and 4460(i)(1)(D)

provide that shareholder approval is required

for the issuance of common stock (or

securities convertible into or exercisable for

common stock) equal to 20 percent or more

of the common stock or 20 percent or more

of the voting power outstanding before the

issuance for less than the greater of book or

market value of the stock. Under these rules,

however, shareholder approval is not

required for a ‘‘public offering.’’

Issuers are encouraged to consult with

Nasdaq staff in order to determine if a

particular offering is a ‘‘public offering’’ for

purposes of the shareholder approval rules.

Generally, a firm commitment underwritten

securities offering registered with the

Commission will be considered a public

offering for these purposes. Likewise, any

other securities offering which is registered

with the Commission and which is publicly

disclosed and distributed in the same general

manner and extent as a firm commitment

underwritten securities offering will be

considered a public offering for purposes of

the shareholder approval rules. However,

Nasdaq staff will not treat an offering as a

‘‘public offering’’ for purposes of the

shareholder approval rules merely because

they are registered with the Commission

prior to the closing of the transaction.

When determining whether an offering is

a ‘‘public offering’’ for purposes of these

rules, Nasdaq staff will consider all relevant

factors, including but not limited to:

(i) the type of offering (including whether

the offering is conducted by an underwriter

on a firm commitment basis, or an

underwriter or placement agent on a bestefforts basis, or whether the offering is selfdirected by the issuer);

(ii) the manner in which the offering is

marketed (including the number of investors

offered securities, how those inventors were

chosen, and the breadth of the marketing

effort);

(iii) the extent of the offering’s distribution

(including the number and identity of the

investors who participate in the offering and

whether any prior relationship existed

between the issuer and those investors);

(iv) the offering price (including the extent

of any discount to the market price of the

securities offered); and

(v) the extent to which the issuer controls

the offering and its distribution.

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

NASD 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 statement

may be examined at the places specified

in Item IV below. The NASD 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

(a) Purpose

Nasdaq rules require shareholder

approval for stock issuances of 20

percent or more of an issuer’s total

shares outstanding, offered at less than

the greater of book or market value. The

applicable rules further provide,

however, that shareholder approval is

not required for a ‘‘public offering,’’

although that term is not defined in the

rules. Recently, a number of issuers

have inquired as to whether certain

large, below-market offerings were

‘‘public offerings’’ because the

transactions, which were initiated

pursuant to exceptions to the

registration requirements, were

registered with the Commission prior to

closing the transactions.4 Historically,

for purposes of assessing the

applicability of the shareholder

approval rules, Nasdaq staff has

interpreted ‘‘public offering’’ as a

broadly distributed, registered offering

based on a firm commitment

underwriting. Conversely, staff does not

consider a transaction to be a ‘‘public

offering’’ for these purposes when the

transaction is of limited distribution

and/or is not based on a firm

commitment underwriting, even if the

offering was registered. Because the

offerings described had limited

distributions and, in some cases, the

offerees were pre-determined by the

issuer, Nasdaq believed that these

transactions were not ‘‘public offerings’’

for purposes of the shareholder approval

rules.

In order to ensure that all issuers

understand how Nasdaq will determine

whether a transaction is a ‘‘public

offering’’ for purposes of the

shareholder approval rules, Nasdaq has

prepared the proposed Interpretative

Material. Determinations as to whether

a transaction is a ‘‘public offering’’ for

purposes of these rules will be made

based on the facts and circumstances

surrounding each particular transaction.

61012 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

5 15 U.S.C. 78o–3(b)(6). 6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The NASD filed its proposed rule change on

March 31, 2000. On April 4, 2000, the NASD filed

Amendment No. 1 that entirely replaced the

original rule filing. 4See Letter from Rober E. Aber, General Counsel

and Senior Vice President, Nasdaq, to Katherine A.

England, Assistant Director, Division of Market

Regulation (‘‘Division’’), Commission (May 16,

2000). Amendment No. 2 corrected a typographical

error that appeared in the proposed rule language

and clarified that the Mutual Fund Quotation

Service includes only 73.8% of the total open-end

and closed-end fund population. 5Securities Exchange Act Release No. 42831 (May

25, 2000), 65 FR 35693. 6See Letter from Edward S. Knight, General

Counsel and Senior Vice President, Nasdaq, to

Katherine A. England, Assistant Director, Division,

Commission (September 29, 2000). Amendment No.

3 amended the language of proposed NASD Rule

6800(d)(3) to replace the phrase ‘‘investment

management firm managing the fund’’ with

‘‘investment adviser’’ and make other technical

corrections.

The proposed Interpretative Material

identifies a number of factors that will

be considered when determining

whether an offering is a ‘‘public

offering,’’ including: the type of offering;

the marketing of the offering; the extent

of the offering’s distribution; the

offering price; and the extent to which

the issuer controls the offering and its

distribution.

(b) Statutory Basis

The NASD believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(6) 5 of the

Act, which requires, among other

things, that the Association’s rules 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. The

Interpretative Material is designed to

educate issuers and other interested

parties as to how Nasdaq defines a

‘‘public offering’’ in order to ensure that

issuers are aware as to which

transactions require shareholder

approval under the NASD’s rules, thus

promoting just and equitable principles

of trade and protecting investors and the

public interest.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will result in any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

(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 35 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 NASD consents, the

Commission will:

A. by order approve 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington DC 20549–0609. 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 inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–00–50 and should be

submitted by November 3, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26381 Filed 10–12–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43417; File No. SR–NASD–

00–16]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 3 to Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to Amendments

to Minimum Listing Requirements for

the Inclusion and Maintenance of Open

and Closed-End Funds in Nasdaq’s

Mutual Fund Quotation Service

October 5, 2000.

I. Introduction

On April 4, 2000, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’) through its wholly owned

subsidiary The Nasdaq Stock Market,

Inc. (‘‘Nasdaq’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘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

relating to amendments to the minimum

listing requirements for the inclusion

and maintenance of open and closedend funds in Nasdaq’s Mutual Fund

Quotation Service (‘‘MFQS’’ or

‘‘Service’’).3 On May 16, 2000, the

Nasdaq submitted Amendment No. 2 to

the proposed rule change.4 The

proposed rule change was published in

the Federal Register on June 5, 2000.5

On September 29, 2000, the Nasdaq

submitted Amendment No. 3 to the

proposed rule change.6 No comments

were received on the proposal. This

order approves the proposed rule

change, as amended. Also, Amendment

No. 3 is approved on an accelerated

basis.

II. Description of the Proposal

Nasdaq proposes to amend NASD

Rule 6800 regarding the minimum

listing requirements for the inclusion

and maintenance of open and closedend funds in Nasdaq’s Mutual Fund

Quotation Service (‘‘MFQS’’). Proposed

new language is in italics; proposed

deletions are in brackets.

* * * * *

6800. MUTUAL FUND QUOTATION

SERVICE

(a)–(b) No Change.

(c) News Media Lists.

(1)(A) An eligible open end fund shall be

authorized for inclusion in the News Media

List released by the Association if it has at

least 1,000 shareholders or $25 million in net

assets.

(B) An eligible closed-end fund shall be

authorized for inclusion in the News Media

List released by the Association if it has at

least $60 [100] million in net assets.

(C) Compliance with subparagraphs (1)(A)

and (B) shall be certified by the fund to the

Association at the time of initial application

for inclusion in the List.