Federal Register / Vol. 66, No. 121 / Friday, June 22, 2001 / Notices 33593

18See June 13 Conversation, supra note 12.

19 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Mary M. Dunbar, Vice President,

Nasdaq, to Katherine England, Assistant Director,

Division of Market Regulation, Commission, dated

June 12, 2001 (‘‘Amendment No. 1’’). In

Amendment No. 1, Nasdaq changed the term

‘‘debenture’’ to ‘‘note’’ throughout the proposed

rule text and filing, and clarified the circumstances

under which Hellman and Friedman would be

entitled to an exemption from the restriction

contained in the Restated Certificate of

Incorporation that prohibits any beneficial owner of

more than five percent of common stocks or notes

from voting those excess shares or notes.

of calculating position exercise limits.18

The different symbols for the old and

revised indexes also should help to

avoid confusion.

For all of the reasons set forth above,

the Commission finds that it is

consistent with the protection of

investors and the public interest for the

proposal to become operative on June

15, 2001. 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

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether it 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.,

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

Section, 450 Fifth Street, NW,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

CBOE. All submissions should refer to

File No. SR–CBOE–2001–34 and should

be submitted by July 13, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.19

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15680 Filed 6–21–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44423; File No. SR–NASD–

2001–34]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to Amendments

to the Restated Certificate of

Incorporation of The Nasdaq Stock

Market, Inc.

June 13, 2001.

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 May 8,

2001, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its 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 Nasdaq. On June 4, 2001

the NASD filed Amendment No. 1 to the

Proposal.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 proposing to amend its

Restated Certification of Incorporation

(‘‘Certificate’’). Additions are italicized;

deletions are bracketed.

* * * * *

Restated Certificate of Incorporation of the

NASDAQ Stock Market, Inc.

* * * * *

Article Fourth

A. No change.

B. No change.

C. 1. (a) Except as may otherwise be

provided in this Restated Certificate of

Incorporation (including any Preferred Stock

Designation) or by applicable law, each

holder of Common Stock, as such, shall be

entitled to one vote for each shore of

Common Stock held of record by such holder

on all matters on which stockholders

generally are entitled to vote, and no holder

of any series of Preferred Stock, as such, shall

be entitled to any voting powers in respect

thereof.

(b) Except as may otherwise be provided in

this Restated Certificate of Incorporation or

by applicable law, the holders of the 4.0%

Convertible Subordinate Notes due 2006 (the

‘‘Notes’’) which may be issued from time to

time by Nasdaq shall be entitled to vote on

all matters submitted to a vote of the

stockholders of Nasdaq, voting together with

the holders of the Common Stock (and of any

other shares of capital stock of Nasdaq

entitled to vote at a meeting of stockholders)

as one class. Each principal amount of Notes

shall be entitled to a number of votes equal

to the number of votes represented by the

Common Stock of Nasdaq that could then be

acquired upon conversion of such principal

amount of Notes into Common Stock, subject

to adjustments as provided in the Notes.

Holders of the Notes shall be deemed to be

stockholders of Nasdaq, and the Notes shall

be deemed to be shares of stock, solely for the

purpose of any provision of the General

Corporation Law of the State of Delaware or

this Restated Certificate of Incorporation that

requires the vote of stockholders as a

prerequisite to any corporate action.

2. Notwithstanding any other provision of

this Restated Certificate of Incorporation, but

subject to subparagraph 6 of this paragraph

C. of this Article Fourth, in no event shall (i)

any record owner of any outstanding

Common Stock which is beneficially owned,

directly or indirectly, as of any record date

for the determination of stockholders and/or

holders of Notes entitled to vote on any

matter, or (ii) any holder of any Notes which

are beneficially owned, directly or indirectly,

as of any record date for the determination

of stockholders and/or holders of Notes

entitled to vote on any matter, by a person

(other than an Exempt Person) who

beneficially owns shares of Common Stock

and/or Notes (‘‘Excess Shares and/or Notes’’)

in excess of five percent (5%) of the thenoutstanding shares of Common Stock, be

entitled or permitted to vote any Excess

Shares and/or Notes. For all purposes hereof,

any calculation of the number of shares of

Common Stock outstanding at any particular

time, including for purposes of determining

the particular percentage of such outstanding

shares of Common Stock of which any person

is the beneficial owner, shall be made in

accordance with the last sentence of Rule

13d–3(d)(1)(i) of the General Rules and

Regulations under the Securities Exchange

Act of 1934, as amended (the ‘‘Exchange

Act’’), as in effect on the date of filing this

Restated Certificate of Incorporation.

3. The following definitions shall apply to

this paragraph C. of this Article Fourth:

(a) ‘‘Affiliate’’ shall have the meaning

ascribed to that term in Rule 12b–2 of the

General Rules and Regulations under the

Exchange Act, as in effect on the date of

filing this Restated Certificate of

Incorporation.

(b) A person shall be deemed the

‘‘beneficial owner’’ of, shall be deemed to

have ‘‘beneficial ownership’’ of and shall be

deemed to ‘‘beneficially own’’ any securities:

33594 Federal Register / Vol. 66, No. 121 / Friday, June 22, 2001 / Notices

(i) which such person or any of such

person’s Affiliates is deemed to beneficially

own, directly or indirectly, within the

meaning of Rule 13d–3 of the General Rules

and Regulations under the Exchange Act as

in effect on the date of the filing of this

Restated Certificate of Incorporation;

(ii) which such person or any of such

person’s Affiliates has (A) the right to acquire

(whether such right is exercisable

immediately or only after the passage of time)

pursuant to any agreement, arrangement or

understanding (other than customary

agreements with and between underwriters

and selling group members with respect to a

bona fide public offering of securities), or

upon the exercise of conversion rights,

exchange rights, rights, warrants or options,

or otherwise; provided, however, that a

person shall not be deemed the beneficial

owner of, or to beneficially own, securities

tendered pursuant to a tender or exchange

offer made by or on behalf of such person or

any of such person’s Affiliates until such

tendered securities are accepted for purchase;

or (B) the right to vote pursuant to any

agreement, arrangement or understanding;

provided, however, that a person shall not be

deemed the beneficial owner of, or to

beneficially own, any security by reason of

such agreement, arrangement or

understanding if the agreement, arrangement

or understanding to vote such security (1)

arises solely from a revocable proxy or

consent given to such person in response to

a public proxy or consent solicitation made

pursuant to, and in accordance with, the

applicable rules and regulations promulgated

under the Exchange Act and (2) is not also

then reportable on Schedule 13D under the

Exchange Act (or any comparable or

successor report); or

(iii) which are beneficially owned, directly

or indirectly, by any other person and with

respect to which such person or any of such

person’s Affiliates has any agreement,

arrangement or understanding (other than

customary agreements with and between

underwriters and selling group members

with respect to a bona fide public offering of

securities) for the purpose of acquiring,

holding, voting (except to the extent

contemplated by the proviso to (b)(ii)(B)

above) or disposing of such securities;

provided, however, that (A) no person who

is an officer, director or employee of an

Exempt Person shall be deemed, solely by

reason of such person’s status or authority as

such, to be the ‘‘beneficial owner’’ of, to have

‘‘beneficial ownership’’ of or to ‘‘beneficially

own’’ any securities that are ‘‘beneficially

owned’’ (as defined herein), including,

without limitation, in a fiduciary capacity, by

an Exempt Person or by any other such

officer, director or employee of an Exempt

Person, and (B) the Voting Trustee, as

defined in the Voting Trust Agreement by

among Nasdaq, the National Association of

Securities Dealers, Inc., a Delaware

corporation (the ‘‘NASD’’), and The Bank of

New York, a New York banking corporation,

as such may be amended from time to time

(the ‘‘Voting Trust Agreement’’), shall not be

deemed, solely by reason of such person’s

status or authority as such, to be the

‘‘beneficial owner’’ of, to have ‘‘beneficial

ownership’’ of or to ‘‘beneficially own’’ any

securities that are governed by and held in

accordance with the Voting Trust Agreement.

(c) A ‘‘person’’ shall mean any individual,

firm, corporation, partnership, limited

liability company or other entity.

(d) ‘‘Exempt Person’’ shall mean Nasdaq or

any Subsidiary of Nasdaq, in each case

including, without limitation, in its fiduciary

capacity, or any employee benefit plan of

Nasdaq or of any Subsidiary of Nasdaq, or

any entity or trustee holding Common Stock

for or pursuant to the terms of any such plan

or for the purpose of funding any such plan

or funding other employee benefits for

employees of Nasdaq or of any Subsidiary of

Nasdaq.

(e) ‘‘Subsidiary’’ of any person shall mean

any corporation or other entity of which

securities or other ownership interests having

ordinary voting power sufficient to elect a

majority of the board of directors or other

persons performing similar functions are

beneficially owned, directly or indirectly, by

such person, and any corporation or other

entity that is otherwise controlled by such

person.

(f) The Board shall have the power to

construe and apply the provisions of this

paragraph C. of this Article Fourth and to

make all determination necessary or

desirable to implement such provisions,

including, but not limited to, matters with

respect to (1) the number of shares of

Common Stock beneficially owned by any

person, (2) the number of Notes beneficially

owned by any person, (3) whether a person

is an Affiliate of another, ([3]4) whether a

person has an agreement, arrangement or

understanding with another as to the matters

referred to in the definition of beneficial

ownership, ([4]5) the application of any other

definition or operative provision hereof to

the given facts, or ([5]6) any other matter

relating to the applicability or effect of this

paragraph C. of this Article Fourth.

(4) The Board shall have the right to

demand that any person who is reasonably

believed to hold of record or beneficially own

Excess Shares and/or Notes supply Nasdaq

with complete information as to (a) the

record owner(s) of all shares and/or Notes

beneficially owned by such person who is

reasonably believed to own Excess Shares

and/or Notes, and (b) any other factual matter

relating to the applicability or effect of this

paragraph C. of this Article Fourth as may

reasonably be requested of such person.

5. Any constructions, applications, or

determinations made by the Board, pursuant

to this paragraph C. of this Article Fourth, in

good faith and on the basis of such

information and assistance as was then

reasonably available for such purpose, shall

be conclusive and binding upon Nasdaq

[and], its stockholders and the holders of the

Notes.

6. Notwithstanding anything herein to the

contrary, subparagraph 2 of this paragraph C.

of this Article Fourth shall not be applicable

to any Excess Shares and/or Notes

beneficially owned by (a) the NASD or its

Affiliates until such time as the NASD

beneficially owns five percent (5%) or less of

the outstanding shares of Common stock [or]

and/or Notes, (b) any other person as may be

approved for such exemption by the Board

prior to the time such person beneficially

owns more than five percent (5%) of the

outstanding shares of Common Stock and/or

Notes or (c) Hellman & Friedman Capital

Partners IV, L.P., H&F International Partners

IV–A, L.P., Hellman & Friedman

International Partners IV–B, L.P., and H&F

Executive Fund, L.P. if the Board has

approved an exemption for any other person

pursuant to Section 6(b) of this paragraph C.

of this Article Fourth (other than an

exemption granted in connection with the

establishment of a strategic alliance with

another exchange or similar market). The

Board, however, may not approve an

exemption under [this] Section 6(b): (i) for a

registered broker or dealer or an Affiliate

thereof (provided that, for these purposes, an

Affiliate shall not be deemed to include an

entity that either owns ten percent or less of

the equity of a broker or dealer, or the broker

or dealer accounts for one percent or less of

the gross revenues received by the

consolidated entity); or (ii) an individual or

entity that is subject to a statutory

disqualification under Section 3(a)(39) of the

Exchange Act. The Board, may approve an

exemption for any other stockholder or

holder of Notes if the Board determines that

granting such exemption would (A) not

reasonably be expected to diminish the

quality of, or public confidence in, The

Nasdaq Stock Market or the other operations

of Nasdaq, on the ability to prevent

fraudulent and manipulative acts and

practices and on investors and the public,

and (B) 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

or assist in the removal of impediments to or

perfection of the mechanisms for a free and

open market and a national market system.

7. In the event any provision (or portion

thereof) of this paragraph C. of this Article

Fourth shall be found to be invalid,

prohibited or unenforceable for any reason,

the remaining provisions (or portions thereof)

of this paragraph C. of this Article Fourth

shall remain in full force and effect, and shall

be construed as if such invalid, prohibited or

unenforceable provision (or portion hereof)

had been stricken herefrom or otherwise

rendered inapplicable, it being the intent of

Nasdaq [and], its stockholders and the

holders of the Notes that each such

remaining provision (or portion thereof) of

this paragraph C. of this Article Fourth

remains, to the fullest extent permitted by

law, applicable and enforceable as to all

stockholders and all holders of Notes,

including stockholders and holders of Notes

that beneficially own Excess Shares and/or

Notes, notwithstanding any such finding.

* * * * *

Article Ninth

Nasdaq reserves the right to amend, alter,

change, or repeal any provisions contained in

this Restated Certificate of Incorporation, in

the manner now or hereafter prescribed by

statute, and all rights conferred herein are

granted subject to this reservation; provided,

however, that the affirmative vote of the

Federal Register / Vol. 66, No. 121 / Friday, June 22, 2001 / Notices 33595

4Certain exhibits to Nasdaq’s application were

incomplete, and therefore on March 15, 2001,

Nasdaq submitted to the Commission revised

exhibits to address the deficiencies. As a result,

Nasdaq’s Form 1 was completed and officially filed

with the Commission on March 15, 2001. 5 17 CFR 240.13d–3(d)(1)(i).

holders of at least 662⁄3% of the voting power

of the outstanding Voting Stock, voting

together as a single class, shall be required

to amend, repeal or adopt any provision

inconsistent with paragraph C. of Article

Fourth, Article Fifth, Article Seventh, Article

Eighth or this Article Ninth; provided further,

however, the affirmative vote of at least

662⁄3% of the voting power of the holders of

the outstanding Notes shall also be required

to (i) amend paragraph C. of Article Fourth

in a manner that would adversely affect the

rights of the holders of the Notes thereunder

without similarly affecting the rights of the

holders of the Common Stock thereunder or

(ii) amend this clause.

* * * * *

Article Eleventh

In light of the unique nature of Nasdaq and

its operations and in light of Nasdaq’s status

as a self-regulatory organization, the Board of

Directors, when evaluating (A) any tender or

exchange offer or invitation for tenders of

exchanges, or proposal to make a tender or

exchange offer or request or invitation for

tenders or exchanges, by another party, for

any equity security of Nasdaq, (B) any

proposal or offer by another party to (1)

merge or consolidate Nasdaq or any

subsidiary with another corporation or other

entity, (2) purchase or otherwise acquire all

or a substantial portion of the properties or

assets of Nasdaq or any subsidiary, or sell or

otherwise dispose of to Nasdaq or any

subsidiary all or a substantial portion of the

properties or assets of such other party, or (3)

liquidate, dissolve, reclassify the securities

of, declare an extraordinary dividend of,

recapitalize or reorganize Nasdaq, (C) any

action, or any failure to act, with respect to

any holder or potential holder of Excess

Shares and/or Notes subject to the limitations

set forth in subparagraph 2 of paragraph C.

of Article Fourth, (D) any demand or

proposal, precatory or otherwise, on behalf of

or by a holder or potential holder of Excess

Shares and/or Notes subject to the limitations

set forth in subparagraph 2 of paragraph C.

of Article Fourth or (E) any other issue, shall,

to the fullest extent permitted by applicable

law, take into account all factors that the

Board of Directors deems relevant, including,

without limitation, to the extent deemed

relevant, (i) the potential impact thereof on

the integrity, continuity and stability of The

Nasdaq Stock Market and the other

operations of Nasdaq, on the ability to

prevent fraudulent and manipulative acts

and practices and on investors and the

public, and (ii) whether such would 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 or assist

in the removal of impediments to or

perfection of the mechanisms for a free and

open market and a national market system.

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Nasdaq 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. Nasdaq has prepared

summaries, set fort 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

1. Purpose

The purpose of the proposed rule

change is to amend the Certificate to

afford the holders of 4.0% Convertible

Subordinated Notes due 2006 (the

‘‘Notes’’) the right to vote with Nasdaq

stockholders. Nasdaq has sold $240

million of the Notes to Hellman &

Friedman Capital Partners IV. L.P., H&F

International Partners IV–A, L.P., H&F

International Partners IV–B, L.P., and

H&F Executive Fund IV. L.P.

(collectively the ‘‘HFCP IV LPs’’). The

Notes are convertible at any time during

a five-year period into shares of Nasdaq

common stock at a conversion price of

$20 per share; thus, the Notes purchased

by the HFCP IV LPs would be

convertible into 12,000,000 shares of

Nasdaq common stock.

Nasdaq and the NASD have entered

into an agreement pursuant to which

Nasdaq has used substantially all of the

cash raised from the sale of the Notes to

repurchase outstanding shares of

Nasdaq common stock owned by the

NASD. The purchase of shares from the

NASD allows the NASD and Nasdaq to

reduce the NASD’s ownership interest

in Nasdaq without diluting other

existing equity holders in Nasdaq. The

NASD will, however, retain voting

control of Nasdaq until Nasdaq obtains

approval of its application to register as

a securities exchange, which it

submitted to the Commission on

November 9, 2000.4 Prior to exchange

registration, Nasdaq’s activities that

involve functions or responsibilities of a

registered securities association will be

subject to the NASD’s oversight under

the Plan of Allocation and Delegation by

NASD to Subsidiaries, as approved by

the Commission, as well as the NASD’s

voting control.

Article Fourth

Paragraph C.1. Nasdaq proposes to

amend this paragraph of the Certificate

to provide that holders of the Notes

have the right to vote with Nasdaq

stockholders, with each holder of Notes

entitled to a number of votes equal to

the number of shares of common stock

such holder would obtain upon

conversion of the principal among of

Notes held by such person. The

amendment will also provide that

holders of Notes shall be deemed to be

stockholders and the Notes shall be

deemed to be shares of stock solely for

the purposes of provisions of the

Delaware General Corporation Law and

the Certificate that require the vote of

stockholders as a prerequisite to

corporate action.

Paragraph C.2. Nasdaq proposes to

amend the provision of the Certificate

that imposes restrictions on

stockholders voting shares in excess of

5% of outstanding stock. The

amendment would make the same

restriction applicable to holders of the

Notes. Any person who beneficially

owns shares of common stock and/or

Notes in excess of 5% of then thenoutstanding shares of common stock

would not be permitted to vote such

excess shares and/or Notes. As is true

under the current Certificate, the

calculation of the number of shares of

common stock outstanding at any

particular time is to be made in

accordance with the last sentence of

SEC Rule 13d–3(d)(1)(i).5 As a result,

shares of common stock that may be

acquired by a holder of Notes through

conversion would be deemed to be

outstanding for purposes of calculating

the voting power owned by such holder.

Paragraph C.3.(f), C.4., and C.5.

Currently, these paragraphs (1)

authorize the Nasdaq Board of Directors

to make determinations necessary to

implement Paragraph C of Article

Fourth of the Certificate, including

determinations about stockholders’

beneficial ownership of shares, (2)

empower the Nasdaq Board of Directors

to demand that any person who is

reasonably believed to be the beneficial

owner of shares in excess of the 5%

voting limitation provide information

about such person’s ownership

interests, and (3) provide that

determinations made by the Nasdaq

Board of Directors to implement

Paragraph C of Article Fourth of the

Certificate are conclusive and binding

33596 Federal Register / Vol. 66, No. 121 / Friday, June 22, 2001 / Notices

6A small number of the limited partners of the

HFCP IV LPs are registered broker/dealers or

affiliates of registered broker/dealers (the ‘‘Broker/

Dealer Investors’’). The Certificate provides that

Nasdaq may not exempt a registered broker/dealer

or an affiliate thereof from the 5% voting limitation.

The Certificate defines ‘‘affiliate’’ with reference to

SEC Rule 12b–2, 17 CFR 240.12b–2, which in turn

defines an ‘‘affiliate’’ of a specified person as ‘‘a

person that directly, or indirectly through one or

more intermediaries, controls, or is controlled by,

or is under common control with, the person

specified.’’ The interests of the Broker/Dealer

Investors in the HFCP IV LPs are minimal.

Moreover, the limited partnership agreements that

govern the HFCP IV LPs provide that the limited

partners shall take no part in the control or

management of the business or affairs of the limited

partnership, nor shall they have any authority to act

for or on behalf of the limited partnership.

Accordingly, the HFCP IV LPs are not affiliates of

the Broker/Dealer Investors. Similarly, the

investment by the HFCP IV LPs in Nasdaq will not

raise issues under proposed Rule 2130, as proposed

in Nasdaq’s application for registration as a national

securities exchange, if the Broker/Dealer Investors

or any of their affiliates become members of Nasdaq

following its registration as a national securities

exchange. Proposed Rule 2130 provides that no

Nasdaq member or person associated with a

member may be the beneficial owner of more than

5% of the outstanding shares of Nasdaq’s common

stock, and further provides that the term ‘‘beneficial

owner’’ shall have the meaning set forth in Article

Fourth, Paragraph C of the Certificate. Because the

Broker/Dealer Investors do not meet the definition

of ‘‘beneficial owner’’ in Article Fourth, Pargraph C

of the Certificate, beneficial ownership of the Notes

(and the common stock underlying the Notes)

would not be attributable to them for purposes of

proposed Rule 2130.

7 15 U.S.C. 78c(a)(39).

8See Securities Exchange Act Release No. 42983

(June 26, 2000), 65 FR 41116 (July 3, 2000) (File No.

SR–NASD–00–27).

upon Nasdaq and its stockholders.

Nasdaq proposes to amend these

paragraphs to include conforming

references to the Notes.

Paragraph C.6. Currently, this

paragraph provides that the 5% voting

limitation does not apply to (1) the

NASD or its affiliates until such time as

the NASD beneficially owns 5% or less

of Nasdaq’s outstanding common stock,

or (2) any other person that the Nasdaq

Board of Director may exempt prior to

the time that such person beneficially

owns more than 5% of the outstanding

shares of common stock. The paragraph

also provides that the Board may not

approve an exemption from the 5%

limit for a registered broker or dealer or

an affiliate thereof 6 or a person that is

subject to a statutory disqualification

under Section 3(a)(39) of the Act.7 In

addition, before granting an exemption,

the Nasdaq Board must make certain

findings with respect to the effect of an

exemption on enumerated aspects of

Nasdaq’s regulatory obligations.

The proposed rule amendment would

add conforming references to the Notes

and would also provide that the HFCP

IV LPs will be exempted from the 5%

voting limitation if the Nasdaq Board of

Directors approves an exemption from

the 5% voting limitation for any other

person (other than an exemption

granted in connection with the

establishment of a strategic alliance

with another exchange or similar

market). This exemption would not

apply to any other person to whom the

HFCP IV LPs might transfer Notes and/

or common stock.

Paragraph C.7. This paragraph is a

savings clause that provides that if any

portion of Paragraph C. of Article Fourth

of the Certificate is found to be invalid,

the validity of remaining provisions

shall not be affected. Nasdaq proposes

to amend the paragraph to include

conforming references to the Notes.

Article Ninth

Nasdaq proposes to amend this article

to provide that a two-third vote of the

holders of outstanding Notes is required

(1) to amend Paragraph C. of Article

Fourth of the Certificate in a manner

that would adversely affect the rights of

the holders of the Notes without

similarly affecting the rights of

stockholders or (2) to amend such twothirds voting requirement.

Article Eleventh

This article authorizes the Nasdaq

Board of Directors to consider the effect

of proposed corporate action on

enumerated aspects of Nasdaq’s

regulatory obligations. Nasdaq proposes

to amend the provision to include

conforming references to the Notes.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with the

provisions of section 15A(b)(2) and (6)

of the Act, which require, among other

things, that the Association be so

organized and have the capacity to be

able to carry out the purposes of the Act

and to comply with and enforce

compliance with the provisions of the

Act, and that the Association’s rules are

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.

Nasdaq believes that the changes

proposed to its Certificate are consistent

with maintaining the 5% voting

limitation that is currently contained in

the Certificate, which serves the public

interest by ensuring that certain

individuals and entities cannot gain

undue influence over the operations of

Nasdaq. In its order approving the

Certificate, the Commission found that

this 5% voting limitation and other

limitations affecting the control of

Nasdaq fulfill the obligations arising

under Section 15A(b)(2) and (6).8

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq 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

Nasdaq neither solicited nor received

comments on the proposed rule change.

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 self-regulatory

organization 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,

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 and copying at

the principal office of the NASD. All

submissions should refer to File No.

Federal Register / Vol. 66, No. 121 / Friday, June 22, 2001 / Notices 33597

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See PCX Rule 1.7(a)—Denial of and Conditions

to Membership.

4 15 U.S.C. 78f(b).

5 15 U.S.C. 78f(b)(4).

6The proposed fee will be applied to the

expenses of Exchange staff review, investigation

and evaluation of Applications for Approved Status

Despite Grounds for Statutory Disqualification.

Telephone discussion between Cindy L. Sink,

Senior Staff Attorney, Regulatory Policy, PCX, Karl

Varner, Senior Counsel, Division of Market

Regulation (‘‘Division’’), Commission, and Frank N.

Genco, Attorney Advisor, Division, Commission

(June 11, 2001).

7 15 U.S.C. 78s(b)(3)(A).

8 17 U.S.C. 240.19b–4.

9See 15 U.S.C. 78(b)(3)(C).

SR–NASD–2001–34 and should be

submitted by July 13, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15677 Filed 6–21–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44432; File No. SR–PCX–

2001–22]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to Fees

for Application for Approved Status

Despite Grounds for Statutory

Disqualification Fee

June 15, 2001.

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 June 1,

2001, the Pacific Exchange, Inc. (‘‘PCX’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II and III

below, which items have been prepared

by the Exchange. 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

The PCX proposes to change its

schedule of Fees and Charges for

Exchange Services by adding a fee for an

Application for Approved Status

Despite Grounds for Statutory

Disqualification.3 The text of the

proposed rule change is below. New text

is in italics.

Text of the Proposed Rule Change

SCHEDULE OF FEES AND CHARGES

FOR EXCHANGE SERVICES

* * * * *

PCX GENERAL MEMBERSHIP FEES

Application for Approved Status Despite Ground for

Statutory Disqualification.

$250.00 per application.

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

Exchange 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

Exchange 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

1. Purpose

The purpose of the proposed new fee

is to cover the expenses of handling the

Application for Approved Status

Despite Grounds for Statutory

Disqualification.

This fee is payable whenever a person

or entity is subject to a statutory

disqualification under the Act and (1) is

an applicant for Exchange membership,

(2) is seeking to be an associated person

of an Exchange Member (except where

the Exchange is merely asked to concur

in an SEC Rule 19h–1 filing by another

self-regulatory organization), or (3) is an

existing Exchange member or associated

person who submits an Application for

Approved Status Despite Grounds for

Statutory Disqualification. This fee is in

addition to any other membership fees

that might be applicable.

2. Statutory Basis

The Exchange believes that the

proposal is consistent with Section 6(b)

of the Act,4 in general, and Section

6(b)(4) of the Act,5 in particular, in that

it provides for the equitable allocation

of reasonable dues, fees and other

charges among its members.6

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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

Written comments on the proposed

rule change were neither solicited nor

received.

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) 7 of the Act and

subparagraph (f)(2) of Rule 19b–4 8

thereunder, because it establishes or

changes a due, fee, or other charge. 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

purposes of the Act.9

IV. Solicitation of Comments

Interested persons are invited to

submit written data, view 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 and copying at

the principal office of the PCX. All

submissions should refer to File No.