[Federal Register Volume 66, Number 111 (Friday, June 8, 2001)]
[Notices]
[Page 30972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-14430]



[[Page 30972]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44374; File No. SR-NASD-2001-17]


Self-Regulatory Organizations; Order Approving a Proposed Rule 
Change by the National Association of Securities Dealers, Inc. To 
Revise the Fees Associated With Appeals of Nasdaq Listing 
Determinations

May 31, 2001.
    On March 13, 2001, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, the Nasdaq Stock Market, Inc. 
(``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 
proposed rule change to revise the fees associated with appeals of 
Nasdaq Listing Determinations. The proposed rule change was noticed in 
the Federal Register on April 11, 2001.\3\ No comments were received 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\ Securities Exchange Act Release No. 44153 (April 5, 2001), 
66 FR 44153 (April 11, 2001) (SR-NASD-01-17).
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I. Description of the Proposal

    Determinations by the Listing Qualifications Department or the 
Listing Investigations Department to limit or prohibit the initial or 
continued listing of an issuer's securities may be appealed by the 
issuer to the Listing Qualifications Panel (the ``Panel'') and 
thereafter to the Nasdaq Listing and Hearing Review Council (the 
``Listing Council''). Nasdaq has proposed to revise the current fee 
schedules for issuer requests for the review of listing determinations 
to both the Panel and the Listing Council to cover the costs associated 
with the review.
    Currently, the fee for an appeal to the Panel based on a written 
submission from the issuer is $1,400, and the fee for an oral hearing 
before the Panel is $2,300. In addition, the fee for an appeal to the 
Listing Council is $1,400.\4\ Nasdaq has proposed to change the fee for 
an appeal to the Panel based on a written submission from the issuer to 
$4,000, and the fee for an oral hearing before the Panel to $5,000. In 
addition, Nasdaq has proposed to change the fee for an appeal to the 
Listing Council to $4,000.
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    \4\ Pursuant to Marketplace Rule 4840(d), appeals to the Listing 
Council are based only on the written record unless the Listing 
Council exercises its discretion to hold an oral hearing. There is 
no additional fee for an oral hearing before the Listing Council.
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    The fees associated with appeals to the Panel were last revised in 
1996.\5\ Nasdaq asserts that since that time, there has been an 
increase in the various costs associated with the review process. 
Nasdaq asserts in particular that, in 1999, it expanded the review 
process in part in response to the Commission's findings, which 
required changes in the process of reviews and an increase in the 
amount of time spent by Nasdaq staff members dedicated to the review 
process.\6\ Further, Nasdaq has identified other expenses related to 
the review process that are not covered by the current hearing fees.\7\
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    \5\ See Securities Exchange Act Release No. 37088 (April 9, 
1996), 61 FR 16662 (April 16, 1996). In 1999, a $1,400 fee for 
appeals to the Listing Council was established, which matched the 
fee for appeals to the Panel based only on the written record. See 
Securities Exchange Act Release No. 41367 (May 4, 1999), 64 FR 25942 
(May 13, 1999).
    \6\ See Securities Exchange Act Release No. 41367 (May 4, 1999), 
64 FR 25942 (May 13, 1999).
    \7\ Nasdaq has represented that the other expenses relating to 
the review process that are not covered by the current hearing fees 
include the following: overhead, including telephones, supplies, 
depreciation and occupancy, computer system support, listing 
qualifications retention analyst and manager review, and a stipend 
for Panel and Listing Council members. Telephone conversation 
between John D. Nachmann, Senior Attorney, Office of General 
Counsel, Nasdaq, and Lisa Jones, Attorney, Division of Market 
Regulation, Commission (March 30, 2001).
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    The proposed fee for an appeal to the Panel includes all costs of 
the Office of Listing Qualifications Hearings attributable to the 
processing of hearing requests and the associated expenses of the 
Panel.\8\ In addition, the proposed fee for an appeal to the panel 
includes a large portion of the expenses associated with the Office of 
Appeals and Review,\9\ and the Listing Council. The proposed fee for an 
appeal to the Listing Council under Marketplace Rule 4840(b) will cover 
the remainder of the expenses of the Office of Appeals and Review and 
the Listing Council, as well as the Office of General Counsel's time 
directly related to the appeals process.\10\
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    \8\ The additional variable fee allocated to issuers who request 
oral hearings before the panel is designed to recover the additional 
costs associated with such hearings; specifically, travel expenses 
for members of the Panel and court reporter time to maintain a 
transcript of these hearings.
    \9\ On March 22, 2001, Nasdaq filed a proposed rule change, SR-
NASD-2001-02, with the Commission pursuant to Section 19(b)(3)(A) of 
the Act, and subparagraph (f) of Rule 19b-4 thereunder, that 
transfers certain responsibilities from the Nasdaq Office of General 
Counsel regarding the review process to the Office of Appeals and 
Review, a new unit in the Nasdaq's Listing Qualifications 
Department. The Office of Appeals and Review will receive requests 
for review from issuers and will keep records of proceedings.
    \10\ The fees proposed in this proposed rule change are designed 
to recover only the direct costs associated with the review process 
and do not include various indirect overhead costs that have been 
identified by Nasdaq as Senior Management, Finance, Human Resources, 
Administrative Services, Legal (excluding unrelated litigation and 
international expenses), Economic Research, Nas Tech and Strategic 
Development.
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II. Discussion

    The Commission finds that the proposed rule change is consistent 
with the provisions of Section 15A(b)(5) \11\ and Section 15A(b)(6) 
\12\ of the Act. The Commission believes that the proposed rule change 
is consistent with Section 15A(b)(5) because it helps to provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among issuers using Nasdaq, by proposing fees for the review process 
that are revenue neutral and reflect the costs incurred by Nasdaq to 
process issuer requests. The Commission also believes that the proposed 
rule change is consistent with Section 15A(b)(6), which requires that 
the rules of the Exchange be designed to prevent fraudulent and 
manipulative acts and practices as well as to protect investors and the 
public interest. In particular, the Commission believes that the 
proposed fees will help Nasdaq to ensure that only qualified issuers 
are allowed to list or remain listed on Nasdaq.
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    \11\ 15 U.S.C. 78o-3(b)(5).
    \12\ 15 U.S.C. 78o-3(b)(6).
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III. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-NASD-2001-17) is approved.

    \13\ 15 U.S.C. 78s(b)(2).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-14430 Filed 6-7-01; 8:45 am]
BILLING CODE 8010-01-M