Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices 9615

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

This proposed rule change will

remove a burden on competition in that

it provides a mechanism for ISE market

makers to announce indications of

interest where currently they only have

such capability on other options

exchanges. Restricting ISE market

makers’ ability to seek liquidity for

large-size trading interest when they are

able to do so on other options exchanges

is a substantial burden on competition

as it reduces the likelihood that such

orders will be executed on the

Exchange. It is not necessary or

appropriate in furtherance of the

purposes of the Act to competitively

disadvantage the ISE on the basis that

its members communicate electronically

rather than in person.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange has not solicited, and

does not intend to solicit, comments on

this proposed rule change. The

Exchange has not received any

unsolicited written comments from

members or other interested parties.

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 Exchange 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 the filing will also be

available for inspection and copying at

the principal offices of the ISE. All

submissions should refer to File No.

SR–ISE–01–03 and should be submitted

by March 1, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3267 Filed 2–7–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43914; File No. SR–NASD–

00–78]

Self Regulatory Organizations; Notice

of Filing of a Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Amending the Nasdaq ByLaws

January 31, 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 January

22, 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 (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by Nasdaq. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is proposing to amend its ByLaws regarding the balancing

requirements on the Nasdaq Board of

Directors (‘‘the Board’’) and the

composition and operation of certain

Nasdaq committees. Nasdaq also seeks

to make certain changes to conform to

the General Corporation Law of the

State of Delaware (‘‘Delaware law’’).

Proposed new language is in italics;

proposed deletions are in brackets.

By-Laws of the NASDAQ Stock Market,

Inc.

Article I

Definitions

* * * * *

(j) ‘‘Industry Director’’ or ‘‘Industry

member’’ means a Director (excluding

[the President or the Chief Executive

Officer] any two officers of Nasdaq,

selected at the sole discretion of the

Board, amongst those officers who may

be serving as Directors (the ‘‘Staff

Directors’’)) or Nasdaq Listing and

Hearing Review Council or committee

member who (1) is or has served in the

prior three years as an officer, director,

or employee of a broker or dealer,

excluding an outside director or a

director not engaged in the day-to-day

management of a broker or dealer; (2) is

an officer, director (excluding an

outside director), or employee of an

entity that owns more than ten percent

of the equity of a broker or dealer, and

the broker or dealer accounts for more

than five percent of the gross revenues

received by the consolidated entity; (3)

owns more than five percent of the

equity securities of any broker or dealer,

whose investments in brokers or dealers

exceed ten percent of his or her net

worth, or whose ownership interest

otherwise permits him or her to be

engaged in the day-to-day management

of a broker or dealer; (4) provides

professional services to brokers or

dealers, and such services constitute 20

percent or more of the professional

revenues received by the Director or 20

percent or more of the gross revenues

received by the Director’s or member’s

firm or partnership; (5) provides

professional services to a director,

officer, or employee of a broker, dealer,

or corporation that owns 50 percent or

more of the voting stock of a broker or

dealer, and such services relate to the

director’s officer’s, or employee’s

professional capacity and constitute 20

percent or more of the professional

revenues received by the Director or

member or 20 percent or more of the

gross revenues received by the

Director’s or member’s firm or

partnership; or (6) has a consulting or

employment relationship with or

provides professional services to the

NASD, NASD Regulation, Nasdaq, or

Amex (and any predecessor) or has had

any such relationship or provided any

such services at any time within the

prior three years;

* * * * *

(p) ‘‘[National] Nominating

Committee’’ means the [National]

Nominating Committee appointed

9616 Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices

pursuant to [Article VII, Section 9 of the

NASD] these By-Laws;

(q) ‘‘Non-Industry Director’’ or ‘‘NonIndustry member’’ means a Director

(excluding the [President or the Chief

Executive Officer] Staff Directors) or

Nasdaq Listing and Hearing Review

Council or committee member who is

(1) a Public Director or Public member;

(2) an officer or employee of an issuer

of securities listed on Nasdaq [or Amex],

or traded in the over-the-counter

market; or (3) any other individual who

would not be an Industry Director or

Industry member;

* * * * *

[(u) ‘‘Floor Governor’’ or ‘‘Amex Floor

Governor’’ means a Floor Governor of

Amex elected pursuant to Article II,

Section .01(a) of the Amex By-Laws;]

[(v) ‘‘Nasdaq-Amex’’ means NasdaqAmex Market Group, Inc.;]

[(w) (v) ‘‘Amex’’ means American

Stock Exchange LLC[; and].

[(x) ‘‘Amex Board’’ means the Board

of Governors of Amex.]

* * * * *

Article III

Meeting of Stockholders

[Action by Consent of Stockholder]

Annual Meetings of Stockholders

Sec. 3.1 (a) Nominations of persons

for election to the Board and the

proposal of business to be considered by

the stockholders may be at an annual

meeting of stockholders only (i)

pursuant to Nasdaq’s notice of meeting

(or any supplement thereto), (ii) by or at

the direction of the Board or the

[National] Nominating Committee or

(iii) by an stockholder of Nasdaq who

was a stockholder of record of Nasdaq

at the time the notice provided for in

this Section 3.1 is delivered to the

Secretary of Nasdaq, who is entitled to

vote at the meeting and who complies

with the notice procedures set forth in

this Section 3.1.

(b) For nominations or other business

to be properly brought before an annual

meeting by a stockholder pursuant to

Section 3.1(a)(iii), the stockholder must

have given timely notice thereof in

writing to the Secretary of Nasdaq and

any such proposed business other than

the nominations of persons for election

to the Board must constitute a proper

matter for stockholder action. To be

timely, a stockholder’s notice shall be

delivered to the Secretary at the

principal executive offices of Nasdaq

not later than the close of business on

the ninetieth day nor earlier than the

close of business on the one hundred

twentieth day prior to the first

anniversary of the preceding year’s

annual meeting (provided, however,

that in the event that the date of the

annual meeting is more than thirty days

before or more than seventy days after

such anniversary date, notice by the

stockholder must be so delivered not

earlier than the close of business on the

one hundred twentieth day prior to such

annual meeting and not later than the

close of business on the later of the

ninetieth day prior to such annual

meeting or the tenth day following the

day on which public announcement of

the date of such meeting is first made by

Nasdaq). For purposes of the first

annual meeting of stockholders of

Nasdaq held after 2000, the first

anniversary of the 2000 annual meeting

of stockholders shall be deemed to be

May 15, 2001. In no event shall the

public announcement of an

adjournment or postponement of an

annual meeting commence a new time

period (or extend any time period) for

the giving of a stockholder’s notice as

described above. Such stockholder’s

notice shall set forth: (i) As to each

person whom the stockholder proposes

to nominate for election as a director all

information relating to such person that

is required to be disclosed in

solicitations of proxies of election of

directors in an election contest, or is

otherwise required, in each case

pursuant to Regulation 14A under the

Act and Rule 14a–11 thereunder (and

such person’s written consent to being

named in the proxy statement as a

nominee and to serving as a director if

elected); (ii) as to any other business

that the stockholder proposes to bring

before the meeting, a brief description of

the business desired to be brought

before the meeting, the text of the

proposal or business (including the text

of any resolutions proposed for

consideration and in the event that such

business includes a proposal to amend

the By-Laws of Nasdaq, the language of

the proposed amendment), the reasons

for conducting such business at the

meeting and any material interest in

such business of such stockholder and

the beneficial owner, if any, on whose

behalf the proposal is made; and (iii) as

to the stockholder giving the notice and

the beneficial owners, if any, on whose

behalf the nomination or proposal is

made (A) the name and address of such

stockholder, as they appear on Nasdaq’s

books, and of such beneficial owner, (B)

the class and number of shares of capital

stock of Nasdaq which are owned

beneficially and of record by such

stockholder and such beneficial owner,

(C) a representation that the stockholder

is a holder of record of stock of Nasdaq

entitled to vote at such meeting and

intends to appear in person or by proxy

at the meeting to propose such business

or nomination, and (D) a representation

whether the stockholder or the

beneficial owner, if any, intends or is

part of a group which intends (1) to

deliver a proxy statement and/or form of

proxy to holders of at least the

percentage of Nasdaq’s outstanding

capital stock required to approve or

adopt the proposal or elect the nominee

and/or (2) otherwise to solicit proxies

from stockholders in support of such

proposal or nomination. Nasdaq may

require any proposed nominee to

furnish such other information as it may

reasonably require to determine the

eligibility of such proposed nominee to

serve as a director of Nasdaq.

(c) No change.

Special Meetings of Stockholders

Sec. 3.2 Only such business shall be

conducted at a special meeting of

stockholders as shall have been brought

before the meeting pursuant to Nasdaq’s

notice of meeting. Nominations of

persons for election to the Board may be

made at a special meeting of

stockholders at which directors are to be

elected pursuant to Nasdaq’s notice of

meeting (a) by or at the direction of the

Board or the [National] Nominating

Committee or (b) provided that the

Board has determined that directors

shall be elected at such meeting, by any

stockholder of Nasdaq who is a

stockholder of record at the time the

notice provided for in this Section 3.2

is delivered to the Secretary of Nasdaq,

who is entitled to vote at the meeting

and upon such election and who

complies with the notice procedures set

forth in this Section 3.2. In the event

Nasdaq calls a special meeting of

stockholders for the purpose of electing

one or more directors to the Board, any

such stockholder entitled to vote in

such election may nominate a person or

persons (as the case may be) for election

to such position(s) as specified in

Nasdaq’s notice of meeting, if the

stockholder’s notice required by Section

3.1(b) shall be delivered to the Secretary

at the principal executive offices of

Nasdaq not earlier than the close of

business on the one hundred twentieth

day prior to such special meeting and

not later than the close of business on

the later of the ninetieth day prior to

such special meeting or the tenth day

following the day on which the public

announcement is first made of the date

of the special meeting and of the

nominees proposed by the Board to be

elected at such meeting. In no event

shall the public announcement of an

adjournment or postponement of a

special meeting commence a new time

Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices 9617

period (or extend any time period) for

the giving of a stockholder’s notice as

described above.

General

Sec. 3.3 (a) Only such persons who

are nominated in accordance with the

procedures set forth in this Article III

shall be eligible to be elected at an

annual or special meeting of

stockholders of Nasdaq to serve as

directors and only such business shall

be conducted at a meeting of

stockholders as shall have been brought

before the meeting in accordance with

the procedures set forth in this Article

III. Except as otherwise provided by

law, the chairman of the meeting shall

have the power and duty [(a)] (i) to

determine whether a nomination or any

business proposed to be brought before

the meeting was made or proposed, as

the case may be, in accordance with the

procedures set forth in this Article III

(including whether the stockholder or

beneficial owner, if any, on whose

behalf the nomination or proposal is

made solicited (or is part of a group

which solicited) or did not so solicit, as

the case may be, proxies in support of

such stockholder’s nominee or proposal

in compliance with such stockholder’s

representation as required by Section

3.1(b)(iii)(D)) and (ii) if any proposed

nomination or business was not made or

proposed in compliance with this

Article III, to declare that such

nomination shall be disregarded or that

such proposed business shall not be

transacted. Notwithstanding the

foregoing provisions of this Article III, if

the stockholder (or a qualified

representative of the stockholder) does

not appear at the annual or special

meeting of stockholders of Nasdaq to

present a nomination or business, such

nomination shall be disregarded and

such proposed business shall not be

transacted, notwithstanding that proxies

in respect of such vote may have been

received by Nasdaq.

* * * * *

Article IV

Board of Directors

* * * * *

Qualifications

Sec. 4.3 Directors need not be

stockholders of Nasdaq. The number of

Non-Industry Directors, including at

least one Public Director and at least

one issuer representative, shall equal or

exceed the number of Industry

Directors, [plus the President and the

Chief Executive Officer (if they are

elected Directors),] unless the Board

consists of ten or more Directors. In

such case at least two Directors shall be

issuer representatives. [At least two

Industry Directors and two NonIndustry Directors shall be drawn from

candidates proposed to the National

Nominating Committee by a majority of

the non-NASD stockholders of Nasdaq.]

Election

Sec. 4.4 No change.

Resignation

Sec. 4.5 Any Director may resign at

any time either upon [written] notice of

resignation to the Chair of the Board, the

Chief Executive Officer, the President,

or the Secretary. Any such resignation

shall take effect at the time specified

therein or, if the time is not specified,

upon receipt thereof, and the acceptance

of such resignation, unless required by

the terms thereof, shall not be necessary

to make such resignation effective.

* * * * *

Filling of Vacancies

Sec. 4.8 If a Director position

becomes vacant, whether because of

death, disability, disqualification,

removal, or resignation, the [National]

Nominating Committee shall nominate,

and the Board shall elect by majority

vote, a person satisfying the

classification (Industry, Non-Industry,

or Public Director), if applicable, for the

directorship as provided in Section 4.3

to fill such vacancy, except that if the

remaining term of office for the vacant

Director position is not more than six

months, no replacement shall be

required.

* * * * *

Sec. 4.11 (a)–(c) No change.

(d) Directors or members of any

committee appointed by the Board may

participate in a meeting of the Board or

of such committee through the use of a

conference telephone or [similar] other

communications equipment by means of

which all persons participating in the

meeting may hear one another, and such

participation in a meeting shall

constitute presence in person at such

meeting for all purposes.

Notice of Meetings; Waiver of Notice

Sec. 4.12 (a) No change.

(b) Notice of any meeting of the Board

need not be given to any Director if

waived by that Director in writing or by

electronic transmission (or by telegram,

telefax, cable, radio, or wireless and

subsequently confirmed in writing or by

electronic transmission) whether before

or after the holding of such meeting, or

if such Director is present at such

meeting, subject to Article X, Section

10.3(b).

(c) No change.

Committees

Sec. 4.13 (a) The Board may, by

resolution or resolutions adopted by [a

majority of] the [whole] Board, appoint

one or more committees. Except as

herein provided, vacancies in

membership of any committee shall be

filled by the [vote of a majority of the

whole] Board. The Board may designate

one or more Directors as alternate

members of any committee, who may

replace any absent or disqualified

member at any meeting of the

committee. In the absence or

disqualification of any member of a

committee, the member or members

thereof present at any meeting and not

disqualified from voting, whether or not

such member or members constitute a

quorum, may unanimously appoint

another Director to act at the meeting in

the place of any such absent or

disqualified member. Members of a

committee shall hold office for such

period as may be fixed by a resolution

adopted by [a majority of] the [whole]

Board. Any member of a committee may

be removed from such committee only

[after a majority vote] by [of] the [whole]

Board, after appropriate notice.

(b) The Board may, be resolution or

resolutions adopted by a majority of the

whole Board, delegate to one or more

committees the power and authority to

act on behalf of the Board in carrying

out the functions and authority

delegated to Nasdaq by the NASD under

the Delegation Plan. Such delegations

shall be in conformance with applicable

law, the Restated Certificate of

Incorporation, these By-Laws, and the

Delegation Plan. Action taken by a

committee pursuant to such delegated

authority shall be subject to review,

ratification, or rejection by the Board. In

all other matters, the Board may, by

resolution or resolutions adopted by [a

majority of] the [whole] Board, delegate

to one or more committees that consist

solely of one or more Directors the

power and authority to act on behalf of

the Board in the management of the

business and affairs of Nasdaq to the

extent permitted by law and not

inconsistent with the Delegation Plan. A

committee, to the extent permitted by

law and provided in the resolution or

resolutions creating such committee

may authorize the seal of Nasdaq to be

affixed to all papers that may require it.

(c) No change.

(d) The Board may appoint an

Executive Committee, which shall, to

the fullest extent permitted by Delaware

law and other applicable law, have and

be permitted to exercise all the powers

and authority of the Board in the

management of the business and affairs

9618 Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices

of Nasdaq between meetings of the

Board, and which may authorize the

seal of Nasdaq to be affixed to all papers

that may require it. [The Executive

Committee shall consist of three or four

Directors, including at least one Public

Director. The Chief Executive Officer of

Nasdaq shall be a member of the

Executive Committee.] The number of

Non-Industry [committee members]

Directors on the Executive Committee

shall equal or exceed the number of

Industry [committee members] Directors

on the Executive Committee [plus the

Chief Executive Officer]. The percentage

of Public Directors on the Executive

Committee shall be at least as great as

the percentage of Public Directors on the

whole Board. An Executive Committee

member shall hold office for a term of

one year. [At all meetings of the

Executive Committee, a quorum for the

transaction of business shall consist of

a majority of the Executive Committee.

In the absence of a quorum, a majority

of the committee members present may

adjourn the meeting until a quorum is

present].

(e) The Board may appoint a Finance

Committee. The Finance Committee

shall advise the Board with respect to

the oversight of the financial operations

and conditions of Nasdaq, including

recommendations for Nasdaq’s annual

operating and capital budgets and

proposed changes to the rates and fees

charged by Nasdaq. [The Finance

Committee shall consist of three or four

Directors. The Chief Executive Officer of

Nasdaq shall serve as a member of the

Committee]. A Finance Committee

member shall hold office for a term of

one year.

(f) The Board shall appoint a

Management Compensation Committee.

The Management Compensation

Committee shall consider and

recommend compensation policies,

programs, and practices for employees

of Nasdaq. A majority of Management

Compensation Committee members

shall be Non-Industry Directors. The

Chief Executive Officer shall be an exofficio, non-voting member of the

Management Compensation Committee.

A Management Compensation

Committee member shall hold office for

a term of one year.

(g) The Board shall appoint an Audit

Committee.

(i) The Audit Committee shall consist

of four or five Directors, none of whom

shall be officers or employees of

Nasdaq. A majority of the Audit

Committee members shall be NonIndustry Directors. The Audit

Committee shall include two Public

Directors. A Public Director shall serve

as Chair of the Committee. An Audit

Committee member shall hold office for

a term of one year.

(ii) No member of the Audit

Committee shall participate in the

consideration or decision of any matter

relating to a particular Nasdaq member,

company, or individual if such Audit

Committee member has a material

interest in, or a professional, business,

or personal relationship with, that

member, company, or individual, or if

such participation shall create an

appearance of impropriety. An Audit

Committee member shall consult with

the General Counsel of Nasdaq to

determine if recusal is necessary. If a

member of the Audit Committee is

recused from consideration of a matter,

any decision on the matter shall be by

a vote of a majority of the remaining

members of the Audit Committee.

(h) The Board may appoint a

Nominating Committee. The

Nominating Committee shall nominate

Directors for each vacant or new

Director position on the Board and

members for each vacant or new

position on the Nasdaq Listing and

Hearing Review Council for

appointment by the Board.

(i) The Nominating Committee shall

consist of no fewer than six and no more

than nine members. The number of

Non-Industry members on the

Nominating Committee shall equal or

exceed the number of Industry members

on the Nominating Committee. If the

Nominating Committee consists of six

members, at least two shall be Public

committee members. If the Nominating

Committee consists of seven or more

members, at least three shall be Public

committee members. No officer or

employee of Nasdaq shall serve as a

member of the Nominating Committee

in any voting or non-voting capacity. No

more than three of the Nominating

Committee members and no more than

two of the Industry committee members

shall be current members of the Nasdaq

Board.

(ii) A Nominating Committee member

may not simultaneously serve on the

Nominating Committee and the Board,

unless such member is in his or her final

year of service on the Board, and

following that year, that member may

not stand for election to the Board until

such time as he or she is no longer a

member of the Nominating Committee.

(iii) Members of the Nominating

Committee shall be appointed annually

by the Board and may be removed by

majority vote of the Board.

(iv) The Secretary shall collect from

each nominee for Director such

information as is reasonably necessary

to serve as the basis for a determination

of the nominee’s classification as an

Industry, Non-Industry, or Public

Director, if applicable, and the Secretary

shall certify to the Nominating

Committee each nominee’s

classification, if applicable. Directors

shall update the information submitted

under this subsection at least annually

and upon request of the Secretary, and

shall report immediately to the

Secretary and change in such

information.

[(f)] (i) Each committee may adopt its

own rules of procedure and may meet

at stated times or on such notice as such

committee may determine. Each

committee shall keep regular minutes of

its proceedings and report the same to

the Board when required.

[(g)] (j) Unless otherwise provided by

these By-Laws, a majority of a

committee shall constitute a quorum for

the transaction of business, and the vote

of a majority of the members of such

committee present at a meeting at which

a quorum is present shall be an act of

such committee.

[(h)] (k) Upon request of the Secretary

of Nasdaq, each prospective committee

member who is not a Director shall

provide to the Secretary such

information as is reasonably necessary

to serve as the basis for a determination

of the prospective committee member’s

classification as an Industry, NonIndustry, or Public committee member.

The Secretary of Nasdaq shall certify to

the Board each prospective committee

member’s classification. Such

committee members shall update the

information submitted under this

[Section] subsection at least annually

and upon request of the Secretary of

Nasdaq, and shall report immediately to

the Secretary any change in such

information.

* * * * *

Sec. 4.16 Any action required or

permitted to be taken at a meeting of the

Board or of a committee may be taken

without a meeting if all Directors or all

members of such committee, as the case

may be, consent thereto in [writing, and

the writing or writings are filed with the

minutes of proceedings of the Board or

the committee] accordance with

applicable law.

Article V

NASDAQ Listing and Hearing Review

Council

* * * * *

Nomination Process

Sec. 5.3 The Secretary of Nasdaq

shall collect from each nominee for the

office of member of the Nasdaq Listing

and Hearing Review Council such

information as is reasonably necessary

Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices 9619

to serve as the basis for a determination

of the nominee’s qualifications and

classification as an Industry or NonIndustry member, and the Secretary

shall certify to the [National]

Nominating Committee each nominee’s

qualifications and classification. After

appointment to the Nasdaq Listing and

Hearing Review Council, each member

shall update such information at least

annually and upon request of the

Secretary, and shall report immediately

to the Secretary any change in such

information.

* * * * *

Filling of Vacancies

Sec. 5.8 If a position on the Nasdaq

Listing and Hearing Review Council

becomes vacant, whether because of

death, disability, disqualification,

removal, or resignation, the [National]

Nominating Committee shall nominate,

and the Board shall appoint a person

satisfying the qualifications for the

position as provided in Section 5.2(a) to

fill such vacancy, except that if the

remaining term of office for the vacant

position is not more than six months, no

replacement shall be required.

Quorum and Voting

Sec. 5.9 No change.

Meetings

Sec. 5.10 The members of the

Nasdaq Listing and Hearing Review

Council may participate in a meeting

through the use of a conference

telephone or [similar] other

communications equipment by means of

which all persons participating in the

meeting may hear one another, and such

participation in a meeting shall

constitute presence in person at such

meeting for all purposes.

* * * * *

Article VII

Officers, Agents, and Employees

Principal Officers

Sec. 7.1 The principal officers of

Nasdaq shall be elected by the Board

and shall include a Chair, a Chief

Executive Officer, a President, a

Secretary, a Treasurer, and such other

officers as may be designated by the

Board. One person may hold the offices

and perform the duties of any two or

more of said principal offices, except

the offices and duties of President and

Vice President or of President and

Secretary. None of the principal officers,

except the Chair of the Board [and the

Chief Executive Officer], need be

Directors of Nasdaq.

* * * * *

Resignation and Removal of Officers

Sec. 7.5 (a) Any officer may resign at

any time upon [written] notice of

resignation to the Board, the Chief

Executive Officer, the President, or the

Secretary. Any such resignation shall

take effect upon receipt of such notice

or at any later time specified therein.

The acceptance of a resignation shall

not be necessary to make the resignation

effective.

* * * * *

Article X

Miscellaneous Provisions

* * * * *

Waiver of Notice

Sec. 10.3 (a) Whenever notice is

required to be given by law, the Restated

Certificate of Incorporation, or these ByLaws, a [written] waiver thereof

[,signed] by the person or persons

entitled to such notice, whether before

or after the time stated therein, shall be

deemed equivalent to notice. Neither

the business to be transacted at, nor the

purpose of, any regular or special

meeting of the stockholders, Directors,

or members of a committee of Directors

need be specified in any [written]

waiver of notice.

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 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

Nasdaq proposes to amend its ByLaws regarding the balancing

requirements on the Nasdaq Board of

Directors and the composition and

operation of certain Nasdaq committees

and to make certain changes to conform

Nasdaq’s By-Laws to Delaware law.

NASD members approved a

restructuring plan on April 14, 2000,

with 3,423 members voting in favor and

652 against. The plan involves

broadening the ownership in Nasdaq

through a two-phase private placement

of common stock and warrants to NASD

members, Nasdaq issuers, and certain

others. Before Phase 1 of the private

placement closed on June 28, 2000, the

NASD owned 100 percent of Nasdaq.

Now, after the closing of Phase 2 of the

private placement, Nasdaq has

numerous shareholders, but the NASD

will retain voting control of Nasdaq

until Nasdaq obtains approval of its

exchange registration application. On

November 9, 2000, Nasdaq filed a Form

1 with the Commission, which, if

granted, would change Nasdaq’s status

to an exchange and a separate selfregulatory organization from the NASD.

Until the SEC approves the Form 1,

Nasdaq’s activities, including the

activities of committees described below

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 of Functions by NASD to

Subsidiaries (‘‘Delegation Plan’’), as

approved by the Commission.

Nasdaq proposes to amend its ByLaws to make certain changes to its

corporate governance while it is

operating under the Delegation Plan.

Nasdaq believes that these changes will

allow it to operate consistent with the

requirements of its Restated Certificate

of Incorporation and Delaware law and

operate with more flexibility insofar as

the balancing requirements are

concerned.

Article I

Nasdaq proposes that up to two

officers of Nasdaq who may be elected

to the Board be treated as neutral for

purposes of calculating the balance

between Industry and Non-Industry

Directors. Article IV, Section 4.3 of the

Nasdaq By-Laws requires that the

number of Non-Industry Directory equal

or exceed the number of Industry

Directors. Currently, Nasdaq officers

who serve on the Board are treated as

Industry Directors for purposes of

calculating the compositional balance of

the Nasdaq Board.

To effectuate this change, Nasdaq

proposes to exclude from the definitions

of Industry Director and Non-Industry

Director up to two Nasdaq officers who

are elected to the Board (hereinafter

referred to as ‘‘Staff Directors’’). Thus, if

the stockholders elected one or two

officers to the Board, they would be

deemed neutral Staff Directors and

would not be included in calculating

the balance between Industry and NonIndustry Directors on the Nasdaq Board

pursuant to Article IV, Section 4.3. If the

stockholders elected three or more

officers to the Board, then the Board, in

its discretion, would designate two as

9620 Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices

3 8 Del. C. Section 141(b).

4 8 Del. C. Section 141(c)(2).

5 Id.

6Nasdaq By-Laws Article IV, Section 4.13(h).

7Special NASD Notice to Members 00–90.

8Nasdaq By-Laws Article I(p); Article III, Sections

3.1, 3.2; Article IV, Sections 4.8; and Article V,

Sections 5.3, 5.8.

9 8 Del. C. Section 141(f).

10 8 Del. C. Section 229.

11 15 U.S.C. 78o–3(b)(6).

neutral Staff Directors and the others

would be considered Industry Directors.

Definitions for ‘‘Amex Floor

Governors,’’ ‘‘Nasdaq-Amex,’’ and

‘‘Amex Board’’ are deleted because the

terms are no longer used in the Nasdaq

By-Laws.

Article IV

Nasdaq proposes to modify its By-Law

provision establishing the balancing

requirements between Industry and

Non-Industry Directors, by removing

references to Nasdaq officers who may

be elected to the Board. Nasdaq

represents that the effect of this

amendment, in conjunction with the

amendments to the definitions of

Industry and Non-Industry Directors

described above, will ensure that the

two neutral Staff Directors are not

counted when calculating the Industry/

Non-Industry balance of the Board.

Nasdaq proposes to delete the

provision of Section 4.3 that requires

that certain Directors be drawn from

candidates proposed to the National

Nominating Committee by a majority of

the non-NASD stockholders of Nasdaq.

This provision is no longer operative as

Nasdaq has solicited the

recommendations of the non-NASD

stockholders and has mailed a ballot to

non-NASD stockholders asking them to

vote on such candidates. Nasdaq

anticipates that the four new directors

will be selected and begin serving on

the Board by the end of January 2001.

Delaware law does not require

director and officer resignations to be in

writing.3 Conforming changes are made

in Article IV, Section 4.5 and Article

VII, Section 7.5 of the By-Laws.

Certain Nasdaq By-Laws relating to

committees currently requires

resolutions to be adopted by a majority

vote of the whole Board (e.g., to appoint

a committee, delegate authority to a

committee, remove a committee

member). Nasdaq proposes to remove

this high vote requirement since it is no

longer required for Nasdaq under

applicable Delaware law.4

Nasdaq proposes several amendments

to Section 4.13 relating to committees.

With respect to the Executive and

Finance Committees, Nasdaq proposes

to remove limitations on the size of the

Committees. As currently provided in

the By-Laws, the Executive Committee

would continue to have balancing

requirements for Industry, NonIndustry, and Public Directors, but no

such requirements would apply to the

Finance Committee.

Under Delaware law, the Board of a

stockholder-owned corporation must

appoint the Directors who serve on

Board committees. Moreover, Board

committees must be comprised solely of

directors to be validly constituted as

such under Delaware law.5 Therefore,

Nasdaq proposes to remove the By-Law

provision that requires the Nasdaq Chief

Executive Officer to serve on the

Executive and Finance Committees

because it is inconsistent with the

Board’s exclusive authority in this

respect and inconsistent with the

requirement that such committees be

comprised solely of directors if the

Chief Executive Officer is not a director.

In the future, any Nasdaq officer elected

to the Board may be appointed to these

Committees.

New provisions for an Audit

Committee and a Management

Compensation Committee are added to

Section 4.13. These provisions are

modeled on the provisions for the

counterpart NASD committees and

comply with the balancing requirements

of the NASD’s August 8, 1996

settlement order with the Commission

(‘‘1996 Order’’).

Nasdaq proposes new provision for a

Nominating Committee. Currently the

NASD Nominating Committee

nominates candidates for the Nasdaq

Board and Listing and Review Council.6

In light of the broadening of the

ownership of Nasdaq, Nasdaq proposes

that a committee of its Board, rather

than a committee of the board of one of

its stockholders, would be the

appropriate nomination body for the

organization. The NASD has proposed

conforming changes.7 The Nasdaq

Nominating Committee compositional

requirements would mirror the

compositional requirements for the

NASD Nominating Committee and

comply with the requirements of the

1996 Order. Throughout the By-Laws,

references to the NASD’s National

Nominating Committee would be

replaced with references to Nasdaq’s

Nominating Committee.8 Nasdaq

believes that, in general, establishment

of these committee will help Nasdaq

conduct its Board meetings in a more

streamlined and efficient manner.

Nasdaq proposes to amend Section

4.16 to conform it with amendments to

Delaware law affording greater use of

technology. Specifically, under

Delaware law, directors are now

permitted to take action without a

meeting if all directors consent in

writing or by electronic transmission.9

Article VII

Section 7.1 currently provides that

none of the principal officers of Nasdaq,

except the Chair and Chief Executive

Officer, need be Directors. Nasdaq

proposes to remove the reference to the

Chief Executive Officer to provide the

flexibility to have a Chief Executive

Officer who is not a Director.

Article X

Delaware law no longer requires a

waiver of certain notices to be in

writing.10 Nasdaq proposes a

conforming change in Section 10.3.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with the

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

Act,11 which requires, among other

things, that the rules of the association

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.

Nasdaq believes that the changes

proposed to its corporate governance

will improve the efficiency of the Board

and make it practices and procedures

consistent with the Delaware law

requirements for shareholder

corporations.

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 did not solicit or receive

written 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

Federal Register / Vol. 66, No. 27 / Thursday, February 8, 2001 / Notices 9621

12 17 CFR 200.30–3(a)(12).

(ii) as to which the NASD 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 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–78 and should be submitted

by March 1, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3238 Filed 2–7–01; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Advisory Circular 120–73, Damage

Tolerance Assessment of Repairs to

Pressurized Fuselages

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of issuance of advisory

circular.

SUMMARY: This notice announces the

issuance of Advisory Circular (AC) 120–

73, ‘‘Damage Tolerance Assessment of

Repairs to Pressurized Fuselages.’’ The

AC provides guidance on acceptable

means of incorporating FAA-approved

repair assessment guidelines in air

carrier maintenance or inspection

programs.

DATES: Advisory Circular 120–73 was

issued on December 14, 2000, by the

Director of the Aircraft Certification

Service, Federal Aviation

Administration.

How to Obtain Copies: You can get a

paper copy of AC 120–73 by writing to

U.S. Department of Transportation,

Subsequent Distribution Center, SVC–

121.23, Ardmore East Business Center,

3341 Q 75th Avenue, Landover,

Maryland 20785. The AC also will be

available on the Internet at http://

www.faa.gov/avr/air/airhome.htm, at

the link titled ‘‘Advisory Circulars’’

under the ‘‘Available Information’’

drop-down menu.

FOR FURTHER INFORMATION CONTACT: For

technical issues contact Brent Bandley,

FAA, Transport Airplane Directorate,

Los Angeles Aircraft Certification

Office, Airframe Branch, ANM–120L,

3960 Paramount Boulevard, Lakewood,

California 90712–4137; telephone (562)

627–5237; fax (562) 627–5210.

For other information contact: Jill

DeMarco, FAA, Transport Airplane

Directorate, Program Management

Branch, ANM–114, 1601 Lind Avenue

SW., Renton, Washington 98055–4056;

telephone (425) 227–1313; fax (425)

227–1320.

SUPPLEMENTARY INFORMATION:

Discussion of Comments

On December 22, 1997, the FAA

issued a notice of the availability of

proposed Advisory Circular (AC) 120–

XX, ‘‘Repair Assessment of Pressurized

Fuselages.’’ That notice was published

in the Federal Register on January 2,

1998 (63 FR 137), and we requested

comments from the public on the

proposed AC document. Three

commenters sent comments asking for

changes to various sections of the

proposed AC. We have addressed those

comments in the final AC as described

below.

Changes in General Terminology

One commenter requests that the FAA

clarify the terminology used in the

proposed AC to indicate that the area of

inspection termed the ‘‘fuselage

pressure boundary.’’ The commenter

states that this area includes not only

the fuselage skin and bulkhead web, but

the door skin as well.

The FAA concurs. The intent of the

repair assessment is to include the

entire fuselage pressure boundary,

which does include, among other

things, the fuselage, bulkhead webs, and

the door skin. We have changed the

terminology accordingly throughout the

final AC. [We made this same change in

terminology in the final rule associated

with this AC: Repair Assessment for

Pressurized Fuselages, amendments 91–

264, 121–275, 125–33, and 129–8 (65 FR

24108, April 25, 2000).]

Stage 1: Data Collection

One commenter suggests changes to

the guidance that concerns the list of

structure for which repair assessments

are required. The proposed guidance

states that some manufacturers have

reduced this list by determining the

inspection requirements for critical

details. If the requirements are equal to

normal maintenance checks, such as the

Baseline Zonal Inspection (BZI), those

details were excluded from this list. The

commenter points out that some

manufacturers also have excluded items

from the list if, through any other

inspection program, the repaired

structure was previously found to be

damage-tolerant. The commenter

requests that this be noted in the

proposed AC.

The FAA concurs. We have revised

paragraph 5.a.(1) of the final AC

accordingly.

Stage 2: Repair Classification

One commenter notes the guidance

states that, during ‘‘Stage 2: Repair

Classification,’’ applicants would use

information collected from ‘‘a survey

form’’ to classify repairs (into one of

three categories). The commenter states

that, while filling in a survey form may

be helpful when it is time to classify

repairs, such a form is not necessary.

Based on the knowledge of those doing

the assessment, the classification could

be done without filling in a survey form.

Therefore, the commenter requests that

the FAA revise the language in the

proposed AC to state more generally

that the applicant may use the

information gathered during Stage 1 to

classify repairs.

The FAA concurs. We have revised

the wording in paragraph 5.a.(2) of the

final AC accordingly.

Category C Repairs

One commenter requests that the term

‘‘temporary’’ be further defined to mean

‘‘time-limited’’ when defining Category

C repairs. The commenter points to an

FAA letter (ANM–120S:SCF, dated

February 12, 1990) that it previously

received that provided three definitions

of repairs. The definition contained in

the letter that was most closely

correlated to the definition of Category

C repairs contained in the proposed AC,

used the term ‘‘time-limited’’ to describe

the repair, not ‘‘temporary.’’