[Federal Register Volume 65, Number 223 (Friday, November 17, 2000)]
[Notices]
[Pages 69594-69595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29445]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43536; File No. SR-NASD-00-48]


Self-Regulatory Organizations; Order Granting Approval of 
Proposed Rule Change by the National Association of Securities Dealers, 
Inc. Requiring Public Disclosure of Receipt of a Delisting Notice

November 9, 2000.

I. Introduction

    On August 10, 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 (``Commission'' or ``SEC''), 
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 that 
would require an issuer to publicly disclose the receipt of a delisting 
notice for failure to comply with Nasdaq's continued listing 
requirements. Notice of the proposed rule change appeared in the 
Federal Register on October 5, 2000.\3\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 43383 (September 28, 
2000), 65 FR 59480.
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II. Description of the Proposal

    Nasdaq proposes to amend Rule 4815(b) and IM 4120-2, ``Disclosure 
of Written Notice of Staff Determination,'' to require an issuer to 
make a public announcement through the news media disclosing the 
receipt of a written staff determination to prohibit continued listing 
requirements (``Staff Determination'') and the rule(s) upon which the 
Staff Determination was based. The proposal also requires the public 
announcement to be make as promptly as possible, but not more than 
seven calendar days following the receipt of the Staff Determination. 
Additionally, the proposal provides that if the public announcement is 
not made by the issuer within the time allotted, trading of its 
securities shall be halted, even if the issuer appeals the Staff 
Determination as set forth in Rule 4820. If the issuer fails to made 
the public announcement by the time that the Listings Qualification 
Panel issues its decision, that decision will also determine whether to 
delist the issuer's securities for failure to make the public 
announcement.
    According to Nasdaq, the proposed rule change is designed to 
require a Nasdaq issuer to publicly disclose the receipt of a written 
delisting notice for failure to comply with the continued listing 
requirements. Since Nasdaq does not currently have such a requirement, 
some Nasdaq issuers publicly disclose the receipt of a Staff 
Determination while other issuers do not make the disclosure. In this 
regard, Nasdaq proposes that the public announcement shall not only 
disclose the receipt of a Staff Determination, but shall also indicate 
the Marketplace Rule(s) upon which it was based.
    Furthermore, Nasdaq proposes that an issuer be required to make the 
public announcement as promptly as possible, but not more than seven 
calendar days following the receipt of the Staff

[[Page 69595]]

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.
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    \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.
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    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 non-compliance 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.
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    \7\ Id.
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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.
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    \8\ Id.
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    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.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-29445 Filed 11-16-00; 8:45 am]
BILLING CODE 8010-01-M