Federal Register / Vol. 65, No. 228 / Monday, November 27, 2000 / Notices 70751

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Nasdaq originally submitted the proposal on

October 19, 2000. On November 8, 2000, Nasdaq

submitted a letter from Sara Nelson Bloom,

Assistant General Counsel, Nasdaq, to Katherine

England, Assistant Director, Division of Market

Regulation (‘‘Division’’), Commission, amending the

filing (‘‘Amendment No. 1’’). In Amendment No. 1,

Nasdaq made several corrections to its rule text and

designated the proposed rule change as effective

pursuant to Section 19(b)(3)(A)(i) of the Act, and

Rule 19b–4(f)(3) thereunder. 15 U.S.C.

78s(b)(3)(A)(i), 17 CFR 240.19b–4(f)(3). Because of

the nature of the Amendment, the Commission

deems the filing date to be November 8, 2000, the

date of the final amendment.

withdraw their quotes or are SOESedout-of-the-Box is consistent with

Sections 15A(b)(6 and 11A of the

Exchange Act because the 10 day period

will continue to penalize market makers

that fail to keep quotes in the market.

Reducing the period to 10 days will not

diminish the deterrent effect of the

penalty because market makers will

continue to be penalized economically

through the lost trade revenue and will

continue to suffer harm to their

reputation. In addition, because of the

enormous increase in trading on Nasdaq

since the 20 day penalty was

established, the NASD believes that a 10

day penalty period today may be more

severe than the 20 day penalty was in

1988.

Based on the daily average share

volume in 1988, which was 122.5

million shares per day, the average

share volume on a single day on Nasdaq

is equal to approximately 13 days

average share volume in 1988. While the

daily average share volume is not a

direct measure of the amount of

business any one particular market

maker may lose during a penalty period,

the number does not demonstrate the

extraordinary increase in trading on

Nasdaq. Therefore, the NASD believes

that a 10 day penalty period will

continue to serve as a significant

deterrent. As such, the NASD believes

the proposed penalty will continue to

promote just and equitable principles of

trade, prevent fraudulent and

manipulative acts and practices, protect

investors and the public interest, and

promote the maintenance of fair and

orderly markets.

The NASD also believes that allowing

market makers until 7:00 p.m. Eastern

Time on the day in which they

accidentally withdrew their quotes or

were SOESed-out-of-the-Box to apply

for reinstatement is consistent with

Sections 15A(b)(6) and 11A of the

Exchange Act. As discussed earlier, the

volume of trading on Nasdaq has

increased significantly over the past few

years. This surge in volume requires

market makers to actively manage their

quotes and trading in many securities.

Due to these increased demands, it is

likely that a market maker cannot file a

request for reinstatement within one

hour from the time its quotes lapse,

especially when the quotes lapse in a

less actively traded security.

The direct benefit of extending the

deadline is that market makers would

have more of an opportunity to have

their requests considered on the

substantive merits. Furthermore, this

proposal does not diminish the

standards that an applicant must meet

to be reinstated. Applications that

comply with the new filing deadline

will continue to be reviewed in

accordance with the standards codified

in NASD Rules 4620 and 4730.

Another potential benefit would be to

maintain liquidity in some less actively

traded stocks by reducing the potential

that a market maker will be subject to

the penalty period for procedural

reasons only, and, thus, be prohibited

from making a market in a stock. For

these reasons, the NASD believes that

the proposal will promote just and

equitable principles of trade, prevent

fraudulent and manipulative acts and

practices, protect investors and the

public interest, and promote the

maintenance of fair and orderly markets.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq does not believe that the

proposed rule change will impose 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

Nasdaq neither solicited nor received

written comments.

III. Date of Effectiveness of the

Proposed Rule Change and timing for

Commission Act

Within 35 days of the 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 Nasdaq consents, the

Commission will:

(A) By order approve 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 proposal is

consistent with the Exchange Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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 at

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–00–61 and should be

submitted by December 18, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30135 Filed 11–24–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43583; File No. SR–NASD–

00–62]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendment No. 1 Thereto by the

National Association of Securities

Dealers, Inc., Relating to the Removal

of Duplicative Provisions

November 17, 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 October

19, 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.3 The

Commission is publishing this notice to

70752 Federal Register / Vol. 65, No. 228 / Monday, November 27, 2000 / Notices

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

revisions to the Nasdaq Marketplace

Rules to eliminate duplicative

provisions and make conforming

changes. Below is the text of the

proposed rule change. Additions are

italicized and deletions are in brackets.

4310. Qualification Requirements for

Domestic and Canadian Securities

To qualify for inclusion in Nasdaq, a

security of a domestic or Canadian issuer

shall satisfy all applicable requirements

contained in paragraphs (a) or (b), and (c)

hereof.

(a) No change.

(b) No change.

(c) In addition to the requirements

contained in paragraph (a) or (b) above, and

unless otherwise indicated, a security shall

satisfy the following criteria for inclusion in

Nasdaq:

(1)–(20) No change.

(21) Deleted and reserved.

(22)–(24) No change.

(25)–(29) Deleted and reserved.

(d) No change.

IM–4310. Voting Rights Policy

Renumbered IM–4351 and moved to follow

Rule 4351.

4320. Qualification Requirements for NonCanadian Foreign Securities and American

Depositary Receipts

To qualify for inclusion in Nasdaq, a

security of a non-Canadian foreign issuer, an

American Depositary Receipt (ADR) or

similar security issued in respect of a

security of a foreign issuer shall satisfy the

requirements of paragraphs (a), (b) or (c), and

(d) and (e) of this Rule.

(a)–(d) No change.

(e) In addition to the requirements

contained in paragraphs (a), (b) or (c), and

(d), the security shall satisfy the following

criteria for inclusion in Nasdaq:

(1)–(18) No change.

(19) Deleted and reserved.

(20) No change.

(21)–(25) Deleted and reserved.

(f) No change.

Cross reference to IM–4310 is deleted.

4420. Quantitative Designation Criteria

(a)–(g) No change.

(h) Units

(1) Minimum Inclusion Period and Notice of

Withdrawal

In the case of units, the minimum period

for inclusion of the units shall be 30 days

from the first day of inclusion, except the

period may be shortened if the units are

suspended or withdrawn for regulatory

purposes. Issuers and underwriters seeking to

withdraw units from inclusion must provide

Nasdaq with notice of such intent at least 15

days prior to withdrawal.

(2) Disclosure Requirements for Units

Each Nasdaq National Market issuer of

units shall include in its prospectus or other

offering document used in connection with

any offering of securities that is required to

be filed with the Commission under the

federal securities laws and the rules and

regulations promulgated thereunder a

statement regarding any intention to delist

the units immediately after the minimum

inclusion period.

4460. Non-Quantitative Designation Criteria

for Issuers Excepting Limited Partnership

Cross reference to IM–4310 is deleted.

Renumbered as Rule 4350 and Amended as

follows:

4350. [Non-Quantitative Designation Criteria]

Qualitative Listing Requirements for Nasdaq

National Market and Nasdaq SmallCap Market

Issuers Except[ing] for Limited Partnerships

Traded on the Nasdaq National Market

(a) Applicability

No provisions of this Rule shall be

construed to require any foreign issuer to do

any act that is contrary to a law, rule or

regulation of any public authority exercising

jurisdiction over such issuer or that is

contrary to generally accepted business

practices in the issuer’s country of domicile.

Nasdaq shall have the ability to provide

exemptions from the applicability of these

provisions as may be necessary or

appropriate to carry out this intent.

Nasdaq shall review the issuer’s past

corporate governance activities. This review

may include activities taking place while the

issuer is listed on Nasdaq or an exchange

that imposes corporate governance

requirements, as well as activities taking

place after the issuer is no longer listed on

Nasdaq or an exchange that imposes

corporate governance requirements. Based on

such review, Nasdaq may take any

appropriate action, including placing of

restrictions on or additional requirements for

listing, or the denial of listing of a security

if Nasdaq determines that there have been

violations or evasions of such corporate

governance standards. Determinations under

this subparagraph shall be made on a caseby-case basis as necessary to protect

investors and the public interest.

(b) Distribution of Annual and Interim

Reports

(1) Each [Nasdaq National Market] issuer

shall distribute to shareholders copies of an

annual report containing audited financial

statements of the company and its

subsidiaries. The report shall be distributed

to shareholders a reasonable period of time

prior to the company’s annual meeting of

shareholders and shall be filed with Nasdaq

at the time it is distributed to shareholders.

(2) Each [NNM] issuer which is subject to

SEC Rule 13a–13 shall make available copies

of quarterly reports including statements of

operating results to shareholders either prior

to or as soon as practicable following the

company’s filing of its Form 10–Q with the

Commission. If the form of such quarterly

report differs from the Form 10–Q, the issuer

shall file one copy of the report with Nasdaq

in addition to filing its Form 10–Q pursuant

to Rule 4310(c)(14). The statement of

operations contained in quarterly reports

shall disclose, as a minimum, any substantial

items of an unusual or nonrecurrent nature

and net income before and after estimated

federal income taxes or net income and the

amount of estimated federal taxes.

(3) Each [NNM] issuer which is not subject

to SEC Rule 13a–13 and which is required to

file with the Commission, or another federal

or state regulatory authority, interim reports

relating primarily to operations and financial

position, shall make available to shareholders

reports which reflect the information

contained in those interim reports. Such

reports shall be made available to

shareholders either before or as soon as

practicable following filing with the

appropriate regulatory authority. If the form

of the interim report provided to

shareholders differs from that filed with the

regulatory authority, the issuer shall file one

copy of the report to shareholders with

Nasdaq in addition to the report to the

regulatory authority that is filed with Nasdaq

pursuant to Rule 4310(c)(14).

(c) Independent Directors

Each [NNM] issuer shall maintain a

sufficient number of independent directors

on its board of directors to satisfy the audit

committee requirement set forth in Rule

[4460]4350(d)(2).

(d) Audit Committee

(1) Audit Committee Charter

Each Issuer must certify that it has adopted

a formal written audit committee charter and

that the [A]audit [C]committee has reviewed

and reassessed the adequacy of the formal

written charter on an annual basis. The

charter must specify the following:

(A) the scope of the audit committee’s

responsibilities, and how it carries out those

responsibilities, including structure,

processes, and membership requirements;

(B) the audit committee’s responsibility for

ensuring its receipt from the outside auditors

of a formal written statement delineating all

relationships between the auditor and the

company, consistent with Independence

Standards Board Standard 1, and the audit

committee’s responsibility for actively

engaging in a dialogue with the auditor with

respect to any disclosed relationships or

services that may impact the objectivity and

independence of the auditor and for taking,

or recommending that the full board take,

appropriate action to oversee the

independence of the outside auditor; and

(C) the outside auditor’s ultimate

accountability to the board of directors and

the audit committee, as representatives of

shareholders, and these shareholder

representatives’ ultimate authority and

responsibility to select, evaluate, and, where

appropriate, replace the outside auditor (or to

nominate the outside auditor to be proposed

for shareholder approval in any proxy

statement).

(2) Audit Committee Composition

(A) Each issuer must have, and certify that

it has and will continue to have, an audit

Federal Register / Vol. 65, No. 228 / Monday, November 27, 2000 / Notices 70753

committee of at least three members,

comprised solely of independent directors,

each of whom is able to read and understand

fundamental financial statements, including

a company’s balance sheet, income

statement, and cash flow statement or will

become able to do so within a reasonable

period of time after his or her appointment

to the audit committee. Additionally, each

issuer must certify that it has, and will

continue to have, at least one member of the

audit committee that has past employment

experience in finance or accounting, requisite

professional certification in accounting, or

any other comparable experience or

background which results in the individual’s

financial sophistication, including being or

having been a chief executive officer, chief

financial officer or other senior officer with

financial oversight responsibilities.

(B) Notwithstanding paragraph (A), one

director who is not independent as defined

in Rule 4200, and is not a current employee

or an immediate family member of such

employee, may be appointed to the audit

committee, if the board, under exceptional

and limited circumstances, determines that

membership on the committee by the

individual is required by the best interests of

the corporation and its shareholders, and the

board discloses, in the next annual proxy

statement subsequent to such determination,

the nature of the relationship and the reasons

for that determination.

(C) Exception for Small Business Filers—

Paragraphs (2)(A) and (2)(B) do not apply to

issuers that file reports under SEC Regulation

S–B. Such issuers must establish and

maintain an [A]audit [C]committee of at least

two members, a majority of the members of

which shall be independent directors.

(e) Shareholder Meetings

Each [NNM] issuer shall hold an annual

meeting of shareholders and shall provide

notice of such meeting to Nasdaq.

(f) Quorum

Each [NNM] issuer shall provide for a

quorum as specified in its by-laws for any

meeting of the holders of common stock;

provided, however, that is no case shall such

quorum be less than 331⁄3 [percent] % of the

outstanding shares of the company’s common

voting stock.

(g) Solicitation of Proxies

Each [NNM] issuer shall solicit proxies and

provide proxy statements for all meetings of

shareholders and shall provide copies of

such proxy solicitation to Nasdaq.

(h) Conflicts of Interest

Each [NNM] issuer shall conduct an

appropriate review of all related party

transactions on an ongoing basis and shall

utilize the company’s [A]audit [C]committee

or a comparable body of the [B]board of

[D]directors for the review of potential

conflict of interest situations where

appropriate.

(i) Shareholder Approval

(1) Each [NNM] issuer shall require

shareholder approval of a plan or

arrangement under subparagraph (A) below,

or prior to the issuance of designated

securities under subparagraph (B), (C), or (D)

below:

(A) When a stock option or purchase plan

is to be established or other arrangement

made pursuant to which stock may be

acquired by officers or directors, except for

warrants or rights issued generally to security

holders of the company or broadly based

plans or arrangements including other

employees (e.g.,2 ESOPs). In a case where the

shares are issued to a person not previously

employed by the company, as an inducement

essential to the individual’s entering into an

employment contract with the company,

shareholder approval will generally not be

required. The establishment of a plan or

arrangement under which the amount of

securities which may be issued does not

exceed the lesser of 1% of the number of

shares of common stock, 1% of the voting

power outstanding, or 25,000 shares will not

generally require shareholder approval;

(B) When the issuance or potential

issuance will result in a change of control of

the issuer;

(C) In connection with the acquisition of

the stock or assets of another company if:

(i) Any director, officer or substantial

shareholder of the issuer has a 5% or greater

interest (or such persons collectively have a

10% or greater interest), directly or

indirectly, in the company or assets to be

acquired or in the consideration to be paid

in the transaction or series of related

transactions and the present or potential

issuance of common stock, or securities

convertible into or exercisable for common

stock, could result in an increase in

outstanding common shares or voting power

of 5% or more; or

(ii) Where, due to the present or potential

issuance of common stock, or securities

convertible into or exercisable for common

stock, other than a public offering for cash:

a. The common stock has or will have

upon issuance voting power equal to or in

excess of 20% of the voting power

outstanding before the issuance of stock or

securities convertible into or exercisable for

common stock; or

b. The number of shares of common stock

to be issued is or will be equal to or in excess

of 20% of the number of shares of common

stock outstanding before the issuance of the

stock or securities; or

(D) In connection with a transaction other

than a public offering involving:

(i) The sale, issuance or potential issuance

by the issuer of common stock (or securities

convertible into or exercisable for common

stock) at a price less than the greater of book

or market value which together with sales by

officers, directors or substantial shareholders

of the company equals 20% or more of

common stock or 20% or more of the voting

power outstanding before the issuance; or

(ii) The sale, issuance or potential issuance

by the company of common stock (or

securities convertible into or exercisable

common stock) equal to 20% or more of the

common stock or 20% or more of the voting

power outstanding before the issuance for

less than the greater of book or market value

of the stock.

(2) Exceptions may be made upon

application to Nasdaq when:

(A) The delay in securing stockholder

approval would seriously jeopardize the

financial viability of the enterprise; and

(B) Reliance by the company on this

exception is expressly approved by the

[A]audit [C]committee or a comparable body

of the [B]board of [D]directors.

A company relying on this exception must

mail to all shareholders not later than ten

days before issuance of the securities a letter

alerting them to its omission to seek the

shareholder approval that would otherwise

be required and indicating that the [A]audit

[C]committee [of the Board] or a comparable

body of the board of directors has expressly

approved the exception.

(3) Only shares actually issued and

outstanding (excluding treasury shares or

shares held by a subsidiary) are to be used

in making any calculation provided for in

this paragraph (i). Unissued shares reserved

for issuance upon conversion of securities or

upon exercise of options or warrants will not

be regarded as outstanding.

(4) Voting power outstanding as used in

this rule refers to the aggregate number of

votes which may be cast by holders of those

securities outstanding which entitle the

holders thereof to vote generally on all

matters submitted to the company’s security

holders for a vote.

(5) An interest consisting of less than either

5% of the number of shares of common stock

or 5% of the voting power outstanding of an

issuer or party shall not be considered a

substantial interest or cause the holder of

such an interest to be regarded as a

substantial security holder.

(6) Where shareholder approval is

required, the minimum vote which will

constitute shareholder approval shall be a

majority of the total votes cast on the

proposal in person or by proxy.

Cross Reference IM–4300, Future Priced

Securities

(j) Voting Rights

(1) No rule, stated policy, practice, or

interpretation of Nadaq shall permit the

authorization for quotation and/or

transaction reporting through an automated

inter-dealer quotation system (authorization),

or the continuance of authorization, of any

common stock or other equity security of a

domestic issuer, if the issuer of such security

issues any class of security, or takes other

corporate action, with the effect of nullifying,

restricting, or disparately reducing the per

share voting rights of holders of an

outstanding class or classes of common stock

of such issuer registered pursuant to section

12 of the Act.

(2) For the purposes of paragraph (j)(1), the

following shall be presumed to have the

effect of nullifying, restricting, or disparately

reducing the per share voting rights of an

outstanding class or classes of common stock:

(A) Corporate action to impose any

restriction on the voting power of shares of

the common stock of the issuer held by a

beneficial or record holder based on the

number of shares held by such beneficial or

record holder;

(B) Corporate action to impose any

restriction on the voting power of shares of

the common stock of the issuer held by a

70754 Federal Register / Vol. 65, No. 228 / Monday, November 27, 2000 / Notices

beneficial or record holder based on the

length of time such shares have been held by

such beneficial or record holder;

(C) Any issuance of securities through an

exchange offer by the issuer for shares of an

outstanding class of the common stock of the

issuer, in which the securities issued have

voting rights greater than or less than the per

share voting rights of any outstanding class

of the common stock of the issuer; or

(D) Any issuance of securities pursuant to

a stock dividend, or any other type of

distribution of stock, in which the securities

issued have voting rights greater than the per

share voting rights of any outstanding class

of the common stock of the issuer.

(3) For the purposes of paragraph (j)(1), the

following, standing alone, shall be presumed

not to have the effect of nullifying,

restricting, or disparately reducing the per

share voting rights of holders of an

outstanding class or classes of common stock:

(A) The issuance of securities pursuant to

an initial registered public offering;

(B) The issuance of any class of securities,

through a registered public offering, with

voting rights not greater than the per share

voting rights of any outstanding class of the

common stock of the issuer;

(C) The issuance of any class of securities

to effect a bona fide merger or acquisition,

with voting rights not greater than the per

share voting rights of any outstanding class

of the common stock of the issuer; or

(D) Corporate action taken pursuant to state

law requiring a state’s domestic corporation

to condition the voting rights of a beneficial

or record holder of a specified threshold

percentage of the corporation’s voting stock

on the approval of the corporation’s

independent shareholders.

(4) The following terms shall have the

following meanings for purposes of this Rule:

(A) The term ‘‘common stock’’ shall

include any security of an issuer designated

as common stock and any security of an

issuer, however designate,d which, by statute

or by its terms, is a common stock (e.g., a

security which entitles the holders thereof to

vote generally on matters submitted to the

issuer’s security holders for a vote).

(B) The term ‘‘equity security’’ shall

include any equity security defined as such

pursuant to SEC Rule 3a11–1 under the Act.

(C) The term ‘‘domestic issuer’’ shall mean

an issuer that is not a ‘‘foreign private issuer’’

as defined in SEC Rule 3b–4 under the Act.

(D) The term ‘‘security’’ shall include any

security defined as such pursuant to Section

3(a)(10) of the Act, but shall exclude any

class of security having a preference or

priority over the issuer’s common stock as to

dividends, interest payments, redemption or

payments in liquidation, if the voting rights

of such securities only become effective as a

result of specified events, not relating to an

acquisition of the common stock of the

issuer, which reasonably can be expected to

jeopardize the issuer’s financial ability to

meet is payment obligations to the holders of

that class of securities.

Cross Reference—IM–4310, Voting Rights

Policy

(k)] Listing Agreement

Each [NNM] issuer shall execute a Listing

Agreement in the form designated by Nasdaq.

[(I) Units

(1) Minimum Inclusion Period and Notice of

Withdrawal

In the case of units, the minimum period

for inclusion of the units shall be 30 days

from the first day of inclusion, except the

period may be shortened if the units are

suspended or withdrawn for regulatory

purposes. Issuers and underwriters seeking to

withdraw units from inclusion must provide

Nasdaq with notice of such intent at least 15

days prior to withdrawal.

(2) Disclosure Requirements for Units

Each Nasdaq National Market issuer of

units shall include in its prospectus or other

offering document used in connection with

any offering of securities that is required to

be filed with the Commission under the

federal securities laws and the rules and

regulations promulgated thereunder a

statement regarding any intention to delist

the units immediately after the minimum

inclusion period.

(m)] (k) Peer Review

(1) Each issuer must be audited by an

independent public accountant that:

(A) Has received an external quality

control review by an independent public

accountant (‘‘peer review’’) that determines

whether the auditor’s system of quality

control is in place and operating effectively

and whether established policies and

procedures and applicable auditing standards

are being followed; or

(B) Is enrolled in a peer review program

and within 18 months receives a peer review

that meets acceptable guidelines.

(2) The following guidelines are acceptable

for purposes of this paragraph [(m)]:

(A) The peer review should be comparable

to AICPA standards included in Standards

for Performing on Peer Reviews, codified in

the AICPA’s SEC Practice Section Reference

Manual;

(B) The peer review program should be

subject to oversight by an independent body

comparable to the organizational structure of

the Public Oversight Board as codified in the

AICPA’s SEC Practice Section Reference

Manual; and

(C) The administering entity and the

independent oversight body of the peer

review program must, as part of their rules

of procedure, require the retention of the peer

review working papers for 90 days after

acceptance of the peer review report and

allow Nasdaq access to those working papers.

(I[n]) Direct Registration Program

If an issuer establishes or maintains a

Direct Registration Program for its

shareholders, the issuer shall, directly or

through its transfer agent, participate in an

electronic link with a securities depository

registered under Section 17A of the Exchange

Act to facilitate the electronic transfer of

securities held pursuant to such program.

4351. Voting Rights

Voting rights of existing shareholders of

publicly traded common stock registered

under Section 12 of the Act cannot be

disparately reduced or restricted through any

corporate action or issuance. Examples of

such corporate action or issuance include,

but are not limited to, the adoption of timephased voting plans, the adoption of capped

voting rights plans, the issuance of supervoting stock, or the issuance of stock with

voting rights less than the per share voting

rights of the existing common stock through

an exchange offer.

Cross Reference IM–4300, Future Priced

Securities

IM–4351, Voting Rights Policy

Text of existing IM–4310 relocated here.

4470. [Non-Quantitative Designation Critical

Qualitative Listing Requirements for Nasdaq

National Market Issuers That Are Limited

Partnerships

(a) Applicability

No change.

(b) Distribution of Annual and Interim

Reports

No change.

(c) Corporate General Partner/Independent

Directors

Each issuer that is a limited partnership

shall maintain a corporate general partner or

co-general partner, which shall have the

authority to manage the day-to-day affairs of

the partnership. Such corporate general or

co-partner shall maintain a sufficient number

of independent directors on its board of

directors to satisfy the audit committee

requirement set forth in Rule

[4460]4350(d)(2).

(d) Audit Committee

The corporate general partner or co-general

partner of each issuer that is a limited

partnership must satisfy the audit committee

requirements set forth in Rule [4460]4350(d).

(e)–(i) No change.

4480. Termination Procedure

(a) Failure to maintain compliance with the

provisions of Rules 4350, 4450, [4460,] or

4470 will result in the termination of an

issue’s designation unless an exception is

granted as provided in the Rule 4800 Series.

Termination shall become effective in

accordance with the terms of notice by

Nasdaq.

(b) No change.

IM–4300. Interpretive Material Regarding

Future Priced Securities Summary

No change.

How the Rules Apply

Shareholder Approval

NASD Rule 4350(i)(1)(D)[4310(c)(25)(H)(i)

relating to Nasdaq SmallCap issuers and Rule

4460(i)(1) relating to Nasdaq National Market

issuers] provides, in part:

Each issuer shall require shareholder

approval * * * prior to the issuance of

designated securities * * * in connection

Federal Register / Vol. 65, No. 228 / Monday, November 27, 2000 / Notices 70755

4Nasdaq may make exceptions to this

requirement when the delay in securing stockholder

approval would seriously jeopardize the financial

viability of the enterprise and reliance by the

company on this exception is expressly approved

by the Audit Committee or a comparable body of

the Board of Directors.

5 In order to obviate the need for shareholder

approval through such an arrangement, those shares

already issued in connection with the Future Priced

Security must not be entitled to vote on the

proposal to approve the issuance of additional

shares upon conversion of the Future Priced

Security.

6The Rule 4300 Series applies to all Nasdaq

issuers. Nasdaq National Market issuers must also

comply with the Rule 4400 Series.

7 In addition to the primary corporate governance

sections, those sections relating to voting rights,

audit committees, listing agreements, auditor peer

review, and direct registration programs would also

be combined in the new rules applicable to all

issuers.

8Nasdaq represents that one provision of Rule

4460 is not being moved to Rule 4350. The Units

provision (existing Rule 4460(l)) will be moved to

existing Rule 4420 because it contains a provision,

Disclosure Requirements for Units, that solely

applies to Nasdaq National Market issuers.

Telephone conversation between Arnold Golub,

Senior Attorney, Office of General Counsel, Nasdaq,

and Lisa Jones, Attorney, Division, Commission,

November 17, 2000.

9See Securities Exchange Act Release No. 34518

(August 11, 1994), 59 FR 42614 (August 18, 1994)

(‘‘Voting Rights Release’’).

10See Id.

with a transaction other than a public

offering involving * * * the sale, issuance or

potential issuance by the issuer of common

stock (or securities convertible into or

exercisable for common stock) at a price less

than the greater of book or market value

which together with sales by officers,

directors or substantial shareholders of the

company equals [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].4

* * * * *

Some Future Priced Securities may contain

features to obviate the need for shareholder

approval by: (1) placing a cap on the number

of shares that can be issued upon conversion,

such that the holders of the Future Priced

Security cannot, without prior shareholder

approval, convert the security into 20

[percent] % or more of the common stock or

voting power outstanding before the issuance

of the Future Priced Security; 5 or (2) placing

a floor on the conversion price, such that the

conversion price will always be at least as

high as the greater of book or market value

of the common stock prior to the issuance

[emphasis added] of the Future Priced

Securities. Even when a Future Priced

Security contains these features, however,

shareholder approval is still required under

Rule[s 4310(c)(25)(H)(i)(b) and 4460]

4350(i)(1)(B) if the issuance will result in a

change of control.

Voting Rights

NASD Rule ø4310(c)(21)¿ 4351 provides:

Voting rights of existing shareholders of

publicly traded common stock registered

under Section 12 of the Act cannot be

disparately reduced or restricted through any

corporate action or issuance.

[Rule 4460(j) and] IM–ø4310¿ 4351 also

provides rules relating to voting rights of

Nasdaq issuers.

* * * * *

The Bid Price Requirement

No change.

Listing of Additional Shares

NASD Rule 4310(c)(17) provides:

øThe issuer shall be required to file on a

form designated by Nasdaq notification of

* * * the issuance of additional shares of

any class of securities included in Nasdaq

* * * no later than 15 calendar days prior to

* * * the issuance of additional shares.¿

The issuer shall be required to notify

Nasdaq on the appropriate form no later than

15 calendar days prior to: * * * issuing

securities that may potentially result in a

change of control of the issuer, or * * *

entering into a transaction that may result in

the potential issuance of common stock (or

securities convertible into common stock)

greater than 10% of either the total shares

outstanding or the voting power outstanding

on a pre-transaction basis.

Issuers should be cognizant that under this

rule notification is required at least 15 days

PRIOR [emphasis added] to issuing any

security (including a Future Priced Security)

convertible into shares of a class of securities

already listed on Nasdaq. Failure to provide

such notice can result in an issuer’s removal

from Nasdaq.

Public Interest Concerns

No change.

Change of Control and Change in Financial

Structure

No change.

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 statements

may be examined at the places specified

in Item IV below. The NASD has

prepared summaries, set forth in Section

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

1. Purpose

Currently, Nasdaq issuers and their

counsel must navigate through three

sets of Corporate Governance

requirements depending on whether the

issuer is a Nasdaq SmallCap Market

issuer or a Nasdaq National Market

issuer and whether the issuer is

domestic or foreign. These three sets of

rules, however, are largely identical.

Furthermore, the layout of and citation

to some of these rules is extremely

cumbersome. For example, a SmallCap

issuer seeking information about

shareholder approval in connection

with an acquisition of another company

would have to look at Rule

4310(c)(25)(G)(i)(c)(2)(A). Accordingly,

in an effort to simplify the Marketplace

Rules and make them more user

friendly, Nasdaq proposes to eliminate

the duplication of these rules and have

the Corporate Governance rules appear

in a single location applicable to all

issuers, 6 other than Limited

Partnerships traded on the Nasdaq

National Market. The comparable rules

relating to Limited Partnerships would

not be combined with those of other

issuers because of the unique structure

of Limited Partnerships, the fact that

different corporate governance rules

apply to such issuers, and the fact that

the existing Limited Partnership rules

only apply to Nasdaq National Market

issuers.

To give effect to this change, the

Nasdaq proposes to have the corporate

governance sections of current Rule

4310 (relating to domestic SmallCap

issuers) and Rule 4320 (relating to

foreign SmallCap issuers) deleted. 7

Nasdaq proposes to have existing Rule

4460 (which now relates only to

National Market issuers other than

Limited Partnerships) be renumbered to

Rule 4350 and amended to apply to all

Nasdaq issuers. 8

The language of the voting rights rules

presently differ between the SmallCap

Market and National Market. Nasdaq,

however, has applied these rules

consistently across the two markets. In

fact, when the voting rights rules were

first adopted for the Small Cap Market,

Nasdaq stated that it would interpret the

rules of both market segments

uniformly.9 Nasdaq does not believe

that the disparity in language between

the two markets serves any useful

purpose and proposes adopting a single

voting rights rule applicable to both

markets. Further, Nasdaq believes that

this change will give effect to the SEC’s

goal that Nasdaq, the American Stock

Exchange (‘‘Amex’’), and the New York

Stock Exchange (‘‘NYSE’’) all adopt a

uniform policy with respect to the

voting rights of common stock

shareholders.10 Accordingly, Nasdaq

proposes eliminating the existing Rule

4460(j) and incorporating existing Rule

70756 Federal Register / Vol. 65, No. 228 / Monday, November 27, 2000 / Notices

11Existing Rule 4310(c)(21) is identical to the

voting rights rules on the NYSE and Amex. See

NYSE Listed Company Manual Section 313 and

Amex Company Guide Section 122.

12 15 U.S.C. 78o–3(b)(6).

13 15 U.S.C. 78s(b)(3)(A)(i).

14 17 CFR 240.19b–4(f)(3). 15 17 CFR 200.30–30–2(a)(12).

4310(c)(21) 11 into new Rule 4351. The

Voting Rights Policy presently located at

IM–4310 would be relocated as IM–

4351.

2. Statutory Basis

The NASD believes that the proposed

rule change is consistent with the

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

Act,12 which requires, among other

things, that the Association’s rules must

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

changes proposed are designed to

simplify the use of Nasdaq’s rules by

issuers and investors.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will impose any

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The NASD has neither solicited nor

received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(i) of the Act 13 and Rule 19b–

4(f)(3) thereunder because it is

concerned solely with the

administration of the NASD.14 At any

time within 60 days of the filing of such

proposed rule change, the Commission

may summarily abrogate such rule

change if it appears to the Commission

that such action is necessary or

appropriate in the public interest, for

the protection of investors, or otherwise

in furtherance of the purpose of the Act.

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.

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 at the principal

office of the NASD.

All submissions should refer to File

No. SR–NASD–00–62 and should be

submitted by December 18, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Jonathan G. Katz,

Secretary.

[FR Doc. 00–30136 Filed 11–24–00; 8:45 am]

BILLING CODE 8010–01–M

SOCIAL SECURITY ADMINISTRATION

Agency Information Collection

Activities: Emergency Consideration

Request

In compliance with Public Law 104–

13, the Paperwork Reduction Act of

1995, the Social Security

Administration (SSA) is providing

notice of its information collections that

require submission to the Office of

Management and Budget (OMB). SSA is

requesting emergency consideration

from OMB by 12/06/2000 of the

information collections listed below.

1. Beneficiary Interview and Auditor’s

Observations Form–0960–NEW.

The information collected through the

Beneficiary Interview and Auditor’s

Observations form, SSA–322, will be

used by SSA’s Office of the Inspector

General (OIG) to interview beneficiaries

and/or their caregivers to determine

whether representative payees are

complying with their duties and

responsibilities. Respondents to this

collection will be randomly selected

Supplemental Security Income

recipients and Social Security

beneficiaries that have representative

payees.

Number of Respondents: 150.

Frequency of Response: 1.

Average Burden Per Response: 15

minutes.

Estimated Annual Burden: 38 hours.

Background Information

In May of this year Congress held

hearings on SSA’s representative payee

program. These hearings were the result

of an investigation conducted by SSA’s

OIG involving a representative payee

who embezzled over $300,000 of Social

Security payments, and recent media

attention. Following these hearings SSA

began a number of initiatives to improve

oversight of representative payees. One

of the initiatives requested by Congress

was for OIG to perform audits of

representative payees. Specifically,

Congress requested an independent OIG

review and assessment of SSA’s

representative payee program. In

conjunction with this oversight,

Congress has further advised SSA that

briefings on the representative payee

program are expected and additional

congressional hearings are planned in

early spring. This information collection

is therefore necessary to comply with

the congressional reporting

requirements in a timely manner and to

augment other data needed for

determining whether representative

payees are complying with their duties.

You can obtain a copy of the

collection instruments and/or OMB

clearance packages by calling the SSA

Reports Clearance Officer on (410) 965–

4145, or by writing to him.

SSA Address

Social Security Administration,

DCFAM, Attn: Frederick W.

Brickenkamp, 6401 Security Blvd., 1–

A–21 Operations Bldg., Baltimore,

MD 21235

Dated: November 20, 2000.

Frederick W. Brickenkamp,

Reports Clearance Officer.

[FR Doc. 00–30082 Filed 11–24–00; 8:45 am]

BILLING CODE 4120–29–U

DEPARTMENT OF STATE

[Public Notice No. 3464]

Advisory Committee on Historical

Diplomatic Documentation; Notice of

Meeting

The Advisory Committee on

Historical Diplomatic Documentation

will meet in the Department of State,

2201 ‘‘C’’ Street NW, Washington, D.C.,

December 11–12, 2000 in Conference

Room 1105. Prior notification and a

valid photo are mandatory for entrance

into the building. One week before the

meeting, members of the public

planning to attend must notify Gloria

Walker, Office of Historian (202–663–

1124) providing relevant dates of birth,