Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Notices 69595

4 In approving this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition and capital formation. 15

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

5 15 U.S.C. 78o–3(b)(6).

6 Id.

7 Id.

8 Id.

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12).

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

2The American Stock Exchange, Inc. filed a

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

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

2000), 65 FR 61206 (Oct. 16, 2000).

3Amendment No. 1 changed 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, Division of Market Regulation

(‘‘Division’’), SEC (Oct. 2, 2000).

4Securities Exchange Act Release No. 43420 (Oct.

6, 2000), 65 FR 61011 (Oct. 13, 2000).

5Amendment No. 2 made a minor technical

change to the interpretation. See Letter from Arnold

P. Golub, Senior Attorney, Nasdaq, to Katherine A.

England, Assistant Director, Division, SEC (Oct. 11,

2000). Because the amendment is technical, it does

not need to be published for comment.

Determination. Nasdaq believes this

time frame will provide an issuer with

a sufficient opportunity to prepare a

public announcement while also

ensuring that investors receive

information in a timely manner. If an

issuer fails to disclose the receipt of a

Staff Determination, trading of its

securities will be halted until the

disclosure is made, even if the issuer

appeals to the Listings Qualifications

Panel, as provided for under

Marketplace Rule 4820. If an issuer fails

to make the public announcement by

the time the Listing Qualification Panel

issues its decision, that decision will

also determine whether to delist an

issuer’s securities for failure to make the

public announcement.

III. Discussion

The Commission finds the proposed

rule change is consistent with the Act

and the rules and regulations

promulgated thereunder.4 Specifically,

the Commission finds that approval of

the proposed rule change is consistent

with Section 15A(b)(6) 5 of the Act.

Section 15A(b)(6) 6 requires that the

rules of a registered national securities

association be designed to prevent

fraudulent and manipulative acts and

practices, promote just and equitable

principles of trade, foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in

securities, remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and in general, protect investors

and the public interest.

Specifically, the Commission finds

that the proposal to amend NASD Rule

4815 to require that an issuer make a

public announcement through the news

media to disclose the receipt of a Staff

Determination to prohibit continued

listing of the issuer’s securities as a

result of the issuer’s failure to comply

with the continued listing requirements

is consistent with Section 15A(b)(6) 7

because it will provide notice to

investors that Nasdaq has determined to

delist an issuer’s securities for noncompliance with Nasdaq’s continued

listing requirements, and the Rules

upon which the Staff Determination was

based. Such information should serve to

protect present and future investors in

an issuer’s securities by providing them

with this information as promptly as

possible, and not more than seven

calendar days following the receipt of a

Staff Determination for failure to

comply with continued listing

requirements. Nasdaq believes, and the

Commission agrees, that requiring

public announcement of this

information as promptly as possible, but

not more than seven calendar days from

receipt of the Staff Determination,

allows a reasonable timeframe for the

issuer to prepare an announcement,

while ensuring that investors receive the

information in a timely manner. The

Commission believes that investors

should have the benefit of knowing that

an issuer has failed to meet Nasdaq’s

continued listing requirements and the

Rules upon which the Staff

Determination is based, and therefore

finds the provision that trading of an

issuer’s securities, if an issuer fails to

disclose receipt of a Staff Determination,

will be halted until the disclosure is

made, even if the issuer appeals to the

Listing Qualifications Panel, to be

reasonable and consistent with the Act.

Finally, the Commission believes that

the proposal should benefit investors

because it will ensure that all Nasdaq

issuers publicly disclose the receipt of

a Staff Determination in both a timely

and uniform manner, as opposed to the

current situation whereby some issuers

voluntarily make the disclosure while

others do not.

IV. Conclusion

For the above reasons, the

Commission finds that the proposed

rule change is consistent with the

provisions of the Act, in general, and

with Section 15A(b)(6),8 in particular.

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,9 that the

proposed rule change (SR–NASD–00–

48), be and hereby is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29445 Filed 11–16–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43549; File No. SR–NASD–

00–50]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the Definition

of ‘‘Public Offering’’ for Purposes of

Nasdaq’s Shareholder Approval Rules

November 13, 2000.

On August 11, 2000, The National

Association of Securities Dealers, Inc.

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

wholly owned subsidiary, The Nasdaq

Stock Marker, 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 a proposed rule change

regarding the adoption of interpretive

material defining ‘‘Public Offering’’ for

purposes of Nasdaq’s shareholder

approval rules.2 On October 4, 2000, the

Nasdaq filed Amendment No. 1 to the

proposed rule change.3 The proposed

rule change was noticed in the Federal

Register.4 On October 13, 2000, the

NASD filed Amendment No. 2 to the

proposed rule change.5 No comments

were submitted on the proposed rule

change. This order approves the

proposed rule change, as amended.

I. Background

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

69596 Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Notices

6The Commission believes that this activity is not

appropriate under Section 5 of the Securities Act

of 1933. See 15 U.S.C. 77e.

7 15 U.S.C. 78o–3(b)(6).

8 In approving the proposal, the Commission has

considered the rule’s impact on efficiency,

competition, and capital formation. 15 U.S.C. 78c(f).

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

‘‘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.6 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, Nasdaq 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.

To help 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.

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.

II. Discussion

The Commission finds that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) 7 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.8 The

Commission believes 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.

It Is Therefore ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposal, SR–NASD–00–50, as

amended, be and hereby is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29466 Filed 11–16–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43538; File No. SR–NYSE–

00–39]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc. To

Amend Arbitration Rules Regarding

Pilot Program for Mediation and

Administration Conferences

November 9, 2000.

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

September 29, 2000, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) 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 NYSE. The commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organizations’s

Statement of the Terms and Substance

of the Proposed Rule Change

The purpose of extending and

amending the pilot program for

mediation is to continue to offer

mediation as a way for parties to settle

cases earlier with fewer costs. The

administrative conference pilot, as

extended and amended, will allow the

arbitrators(s) to intervene early in the

case to set deadlines and resolve

preliminary issues. Below is the text of

the proposed rule change. Additions are

italicized; deletions are in brackets.

* * * * *

Rule 638 Mediation

(a) Mediation Pending Arbitration

(1) [(a)] A single mediation session of

up to four hours will be conducted in

all cases [not involving public

customers] submitted for arbitration

where the amount of the claim is

[$500,000] $250,000 or more.

(2) [(b)] The New York Stock

Exchange will provide the parties with

a mediator. The mediator’s fee for the

single mediation session shall be $500

and shall be paid by the New York

Stock Exchange. If the parties select a

mediator of their own choosing, from

outside the list of proposed mediators,

they shall be responsible for any

difference in the mediator’s fee. If the

parties desire they can extend the

mediation beyond the first session at

their own expense.

(3) [(c)] Unless the parties agree on a

mediator, the Director of Arbitration

will send the parties a list of five

proposed mediators together with the

mediators’s biographical information

described in Rule 608. The parties shall

have ten days to agree on a mediator

from the list or chose their own

mediator. If no agreement is reached,

the Director of Arbitration will select a

mediator from the list unless all the

names on the list are objected to by the

parties. In that instance, the Director of

Arbitration will appoint a mediator from

outside the list.

(4) [(d)] Unless otherwise agreed to by

the parties, mediation shall not delay

the arbitration.

(5) [(e)] The mediation shall be

confidential and no record kept of the

proceeding. The mediator will not be

permitted to act as an arbitrator in the

same case and the mediator shall not be

called to testify in any proceeding

regarding the mediation.

[(f) Mediation under this rule shall be

available in all matters submitted to

arbitration involving public customers

where the amount of the claim is

$500,000 or more, upon the consent of

the parties. The mediator will be

compensated under paragraph (b) of this

rule.]

(6) [g] In all other matters submitted

to arbitration, mediation shall be

available upon the consent of the

parties, at their own expense.

(b) Mediation Prior to Arbitration

(1) If the parties agree, any matter

eligible for arbitration under the

Constitution and Rules of the New York

Stock Exchange may be mediated at the

Exchange. To begin mediation under