Document ID: SEC-2013-1815-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62726-62728]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24636]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70627; File No. SR-NASDAQ-2013-130]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Adopt New Regulatory Fees Payable by Certain Listed Companies and 
Applicants

October 8, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on October 2, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is proposing to adopt new regulatory fees payable by certain 
listed companies and applicants.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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. 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
    NASDAQ proposes to adopt new regulatory fees applicable to certain 
listed companies and applicants. Specifically, NASDAQ proposes to 
require that an acquisition company that completes a business 
combination pay a $15,000 substitution listing fee in connection with 
the acquisition transaction. In addition, NASDAQ proposes to require 
that an applicant that does not list within 12 months of submitting its 
application pay a $5,000 additional application fee each subsequent 12 
month period that the application remains pending. NASDAQ also proposes 
to impose a $5,000 application fee on companies that transfer from the 
NASDAQ Global or Global Select Market to the NASDAQ Capital Market. 
Finally, NASDAQ proposes to impose a $5,000 review fee on companies 
that submit a plan to regain compliance with certain listing 
requirements.
Acquisition Companies
    NASDAQ Rule IM-5101-2 provides rules for the listing of a company 
whose business plan is to complete one or more acquisitions. These 
companies are required to maintain most of the proceeds of their 
initial public offering in a deposit account until the company 
completes one or more acquisitions representing at least 80% of the 
value of the deposit account. In connection with each acquisition made 
during this period, the acquisition company must notify NASDAQ about 
the acquisition and NASDAQ staff must determine whether the combined 
company will meet the requirements for initial listing. In conducting 
this review, NASDAQ staff considers the quantitative requirements for 
listing and also reviews for any public interest concerns the new 
officers, directors and shareholders that will become associated with 
the listed company as a result of the transaction.
    When NASDAQ initially adopted rules concerning the listing of 
acquisition companies it determined not to charge an entry fee when the 
company completes a business combination.\3\ As a result, because the 
application review fee is a component of the entry fee, NASDAQ also 
does not collect an application fee in connection with its review of 
whether the acquisition company satisfies the initial listing 
standards.\4\ However, while the acquisition company is already a 
listed company, there are significant changes in its business, 
management and ownership structure at the time of the acquisition, 
necessitating a review that is substantially similar to the review 
conducted for newly listing companies. NASDAQ staff spends considerable 
time on such reviews.
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    \3\ See Securities Exchange Act Release No. 57685 (April 18, 
2008), 73 FR 22191 (April 24, 2008) (Notice of Filing for SR-NASDAQ-
2008-013, proposing additional initial listing standards for Special 
Purpose Acquisition Vehicles) at footnote 9 (noting that companies 
would not be required to pay a new listing fee at the time of an 
acquisition transaction).
    \4\ See Rules 5910(a) and 5920(a).
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    Accordingly, NASDAQ now proposes to include a business combination 
described in IM-5101-2 in the definition of ``Substitution Listing 
Events,'' and thus subject these transactions to the $15,000 fee 
imposed on a Subsitution [sic] Listing Event in Rules 5910(f) and 
5920(e). NASDAQ believes that this is appropriate, as the business 
combination by an acquisition company is similar to other Substitution 
Listing Events for which a fee is charged, such as a technical change 
whereby the shareholders of the original company receive a share-for-
share interest in a new company.
    NASDAQ will implement this fee immediately. However, NASDAQ will 
not charge this fee in connection with its review of any transaction 
that was publicly announced in a press release or Form 8-K prior to 
October 15, 2013.
Additional Application Fee
    NASDAQ Rules 5910(a) and 5920(a) impose application fees on 
companies listing on NASDAQ. These fees are designed to recoup a 
portion of the costs associated with NASDAQ's review of the company.
    NASDAQ has observed that when a company lists a substantial period 
of time after it first submitted its applications, NASDAQ must complete 
additional reviews of the application prior to the listing. These 
additional reviews are substantially equivalent to the review for a 
newly applying company and include, for example, additional reviews of 
individuals associated with the company, staff monitoring of 
disclosures and public filings by the applicant while its application 
is pending, and often extensive discussions with the applicant. To 
offset the costs associated with the ongoing monitoring and additional 
reviews for companies whose application remains open for an extended 
period, NASDAQ proposes to

[[Page 62727]]

require that an applicant that does not list within 12 months of 
submitting its application pay an additional $5,000 application fee 
each subsequent 12 month period. NASDAQ believes that the proposed 
additional application fee may result in companies closing unrealistic 
applications rather than maintaining such applications indefinitely.
    Like the current application fee, the proposed additional 
application fee would be credited towards the entry fee payable upon 
listing if the application remains open until such listing. Thus, for a 
company that ultimately lists on NASDAQ, there would be no change in 
the overall fee paid. If a company does not timely pay the additional 
application fee, its application will be closed and it will be required 
to submit a new application, and pay a new application fee, if it 
subsequently reapplies.
    NASDAQ will implement this fee immediately, but will not charge any 
company until October 15, 2014. This will assure that any company with 
an application pending at the time of this filing will have at least 
one year to list before they are charged the fee.
Capital Market Transfer Fee
    NASDAQ does not impose an entry fee on a company that transfers 
from the NASDAQ Global Market to the NASDAQ Capital Market.\5\ As a 
result, because the application fee is a component of the entry fee, 
similar to the case noted above involving acquisition companies, NASDAQ 
also has not collected an application fee for companies that transfer 
from the Global to the Capital Market. However, the review of such 
applications is often complicated and companies transferring from the 
Global Market to the Capital Market are often experiencing business 
challenges.\6\ As a result, to help offset a portion of the costs 
associated with such reviews, NASDAQ now proposes to impose a $5,000 
application fee for a company that submits an application to transfer 
from the Global to the Capital Market.
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    \5\ Rule 5920(a)(7)(i). The NASDAQ Global Market also includes 
the Global Select tier.
    \6\ In fact, many companies making such transfers do so in 
connection with their failure to meet a Global Market continued 
listing standard. Such companies would not also be subject to the 
proposed compliance plan review fee discussed below.
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    NASDAQ will implement this fee for transfer applications submitted 
after October 15, 2013. This period before implementation will allow 
companies with an application in progress to finalize and submit that 
application before the new fee is applicable.
    NASDAQ will implement this fee for transfer applications submitted 
after October 15, 2013. This period before implementation will allow 
companies with an application in progress to finalize and submit that 
application before the new fee is applicable. [sic]
Compliance Plan Review Fee
    NASDAQ proposes to impose a $5,000 review fee on non-compliant 
companies that submit a plan to regain compliance with certain of the 
listing requirements. Rule 5810(c)(2) allows a listed company to submit 
a plan to regain compliance when it fails to meet certain listing 
requirements. NASDAQ dedicates considerable staff resources to 
reviewing these plans of compliance. At present, the cost of that time 
is allocated across all companies as part of the listing fee. In order 
to allocate this cost more equitably to the individual companies who 
directly benefit, NASDAQ proposes to adopt a $5,000 review fee for the 
review of certain compliance plans.
    NASDAQ believes that the proposed compliance plan review fee is 
appropriate because companies often have the ability to foresee non-
compliance with these listing requirements and take appropriate action 
before becoming non-compliant. In addition, companies have a period of 
time, generally either 45 or 60 days, before they must submit a plan to 
regain compliance \7\ and, if a company achieves compliance during this 
time, it would not be required to submit a plan or pay the proposed 
compliance plan review fee. When a company does become non-compliant 
and cannot cure the deficiency before the plan is due, NASDAQ's 
experience is that the company's plan often requires detailed analysis 
by staff to determine whether the plan can enable the company to regain 
compliance in the near term.\8\ Depending on the underlying listing 
requirement, NASDAQ staff may also need to expend time discussing the 
viability of the plan with the company's outside auditor and advisors 
and/or reviewing transactional documents.
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    \7\ Rule 5810(c)(2)(A).
    \8\ A company's plan with respect to a quantitative deficiency 
may be for it to transfer from the Global Market to the Capital 
Market, which has lower quantitative listing requirements. In this 
case, the company must submit the application transfer fee in 
proposed Rule 5920(a)(11), described above, but would not also pay a 
compliance plan review fee.
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    NASDAQ does not propose to impose the compliance plan review fee on 
plans to regain compliance with deficiencies from board of director and 
board committee requirements where the company is not eligible for a 
cure period, as described in Rule 5810(c)(2)(A)(iii) [sic]. NASDAQ's 
experience is that these types of deficiencies often arise unexpectedly 
from events outside the control of the company, such as the death or 
resignation of a director. Further, NASDAQ has observed that the plans 
to regain compliance with these deficiencies are typically straight 
forward and do not require significant staff analysis. For example, a 
typical plan might describe the hiring of a director search firm or 
providing the resume of a director candidate who is concluding his or 
her own due diligence on the company before agreeing to join the board. 
As such, NASDAQ does not believe it is necessary to impose a plan 
review fee in these situations.
    NASDAQ will implement this fee for plans submitted in response to 
deficiency notifications sent after October 15, 2013.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\9\ in general and with Sections 
6(b)(4) and (5) of the Act,\10\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members, issuers and other persons using its facilities, and 
does not unfairly discriminate between customers, issuers, brokers or 
dealers.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the proposed fees are reasonable because they 
will better reflect NASDAQ's costs in reviewing applications and 
compliance plans and help ensure adequate resources for NASDAQ's 
listing compliance program. In addition, NASDAQ believes that such fees 
are reasonable and that none of the proposed fees are unduly burdensome 
or would discourage any company from pursuing an application or 
submitting a plan of compliance, as applicable.
    The proposed changes are equitable and not unfairly discriminatory 
because they would apply equally to all similarly situated companies. 
In addition, aligning NASDAQ's fees with the costs incurred for 
specific actions will help minimize the extent that companies that do 
not utilize the application process, or which are compliant with all 
listing standards, may subsidize the costs of review for other 
companies. NASDAQ believes that excluding companies that submit a plan 
for a board or committee deficiency

[[Page 62728]]

from the compliance plan review fee is not unfairly discriminatory 
because these plans are generally simpler and require fewer resources 
and less time to review.
    NASDAQ also believes that the proposed fees are consistent with the 
investor protection objectives of Section 6(b)(5) of the Act \11\ in 
that they are designed to promote just and equitable principles of 
trade, to remove impediments to a free and open market and national 
market systems, and in general to protect investors and the public 
interest. Specifically, the fees are designed to ensure that there are 
adequate resources for NASDAQ's listing compliance program, which helps 
to assure that listing standards are properly enforced and investors 
are protected.
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    \11\ 15 U.S.C. 78f(b)(5).
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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, as amended. The market for 
listing services is extremely competitive and listed companies may 
freely choose alternative venues based on the aggregate fees assessed, 
and the value provided by each listing. This rule proposal does not 
burden competition with other listing venues, which are similarly free 
to align their fees on the costs incurred by the process they offer. 
For these reasons, NASDAQ does not believe that the proposed rule 
change will result in any burden on competition for listings.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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) of the Act \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-130 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-NASDAQ-2013-130. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2013-130 and should 
be submitted on or before November 12, 2013

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24636 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P