Document ID: SEC-2021-1775-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2021-12-21T05:00Z

[Federal Register Volume 86, Number 242 (Tuesday, December 21, 2021)]
[Notices]
[Pages 72293-72295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27544]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93789; File No. SR-NASDAQ-2021-099]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Amend Nasdaq Rule 5815 
Regarding the Use of a Panel Monitor Following a Compliance 
Determination by a Nasdaq Listings Qualification Hearings Panel

December 15, 2021.
    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 December 10, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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

    The Exchange proposes to amend Rule 5815 regarding the use of a 
Panel Monitor following a compliance determination by a Nasdaq Listings 
Qualification Hearings Panel.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 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
    Nasdaq administers a series of rules that govern the initial and 
continued listing qualifications required of companies listed on the 
Exchange.\3\ In the event that a company fails to maintain compliance 
with the Listing Rules, Nasdaq Listings Qualifications Staff 
(``Staff'') will issue a notification informing the company of the 
deficiency. Where allowed by Nasdaq's rules, Staff's notification may 
provide for a cure or compliance period or allow the company to submit 
a plan of compliance for Staff to review.
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    \3\ See Nasdaq Rules 5300, 5400, and 5500 Series, outlining 
requirements for companies seeking to conduct an initial listing on 
Nasdaq Global Select Market, Nasdaq Global Market and Nasdaq Capital 
Market, respectively, as well as requirements for continued listing 
once an initial listing has been completed.
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    However, where a company has previously been deficient with a 
listing requirement and regained compliance pursuant to an exception 
(``exception'') \4\ from a continued listing standard granted by an 
industry Hearings Panel (``Hearings Panel'') pursuant to Rule 
5815(c)(1)(A), under certain circumstances, Nasdaq rules do not allow 
that company a cure or compliance period or the opportunity to submit a 
plan to regain compliance in the event it incurs another deficiency 
within one year of regaining compliance with a previous deficiency. 
Instead, Exchange Rules 5815(d)(4)(A) or (B) apply. Both rules set out 
a process by which Staff will issue a Delisting Determination \5\ for a 
company that fails to maintain compliance with one or more listing 
requirements within one year of having regained compliance with one or 
more listing requirements pursuant to an exception granted by a 
Hearings Panel. Once a Delisting Determination letter has been issued 
to a company pursuant to Rules 5815(d)(4)(A) or 5815(d)(4)(B), the 
company may then request a hearing before a Hearings Panel to argue in 
favor of maintaining its Exchange listing. Unless specifically outlined 
in proposed Rule 5815(d)(4)(C), the process for conducting a review of 
a Staff Delisting Determination will continue to be governed by Rule 
5815.
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    \4\ See Rule 5815(c)(1): When the Hearings Panel review is of a 
deficiency related to continued listing standards, the Hearings 
Panel may, where it deems appropriate: (A) Grant an exception to the 
continued listing standards for a period not to exceed 180 days from 
the date of the Staff Delisting Determination with respect to the 
deficiency for which the exception is granted.
    \5\ See Rule 5805(h): ``Staff Delisting Determination'' or 
``Delisting Determination'' is a written determination by the 
Listing Qualifications Department to delist a listed Company's 
securities for failure to meet a continued listing standard.
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    Rule 5815(d)(4)(A), entitled ``Hearings Panel Monitor,'' provides a 
Hearings Panel with discretion to monitor a company for a period of up 
to one year after the date a company regains compliance with a listing 
standard if it concludes that there is a likelihood that a company will 
fail to maintain compliance with one or more listing standards during 
that period (including requirements with which the company was not 
previously deficient). During this one-year monitoring period, Staff 
will monitor the company, to confirm compliance with all listing 
requirements. While Staff monitors all listed companies for compliance 
with the Exchange's listing standards, if Staff identifies a deficiency 
with any listing requirement for companies that are being monitored 
under Rule 5815(d)(4)(A), staff may not provide the company with a cure 
or compliance period, nor the opportunity to submit a plan to regain 
compliance with the deficiency. Instead, Staff will issue a Delisting 
Determination for these companies.
    Rule 5815(d)(4)(B) provides that a company that received an 
exception from a Hearings Panel with respect to the stockholder's 
equity requirement, periodic filing requirement or a bid price 
requirement where the company was ineligible for a bid price compliance 
period under Listing Rule 5810(c)(3)(A)(iii) or (iv), and subsequently 
regained compliance with the listing requirement that was the subject 
of the exception, will not be allowed a cure or compliance period or 
the opportunity to submit a plan of compliance for Staff to review as 
allowed under Listing Rule 5810(c)(2) if, within one year of regaining 
compliance, the company subsequently

[[Page 72294]]

becomes deficient in the same requirement that was the subject of the 
exception. While limiting the grounds for an immediate Delisting 
Determination to a recurrence of the initial deficiency in one or more 
of the three enumerated areas in the rule that gave rise to the 
previous hearing before the Hearings Panel (i.e., the stockholder's 
equity requirement, periodic filing requirement or a bid price 
requirement where the company was ineligible for a bid price compliance 
period under Listing Rule 5810(c)(3)(A)(iii) or (iv)), Rule 
5815(d)(4)(B) also requires Staff to issue a Delisting Determination to 
the company without providing an opportunity for a cure or compliance 
period or the opportunity to submit a plan of compliance for Staff to 
review. While entitled ``No Hearings Panel Monitor,'' the rule amounts 
to what is in effect a mandatory Hearings Panel Monitor.
    The Exchange proposes to amend Rule 5815(d)(4) to clarify the 
instances under which a Hearings Panel may impose a Panel Monitor and 
when the implementation of a Panel Monitor is mandatory. In particular, 
the Exchange proposes to modify, among other changes, the headings to 
Rules 5815(d)(4)(A) and (B) to ``Discretionary'' and ``Mandatory,'' 
respectively, to accurately describe the scope of the Panel's authority 
to implement the Panel Monitor.\6\ The Exchange also proposes adding a 
reference to Rule 5810(c)(3) to clarify that Listings Qualifications 
Staff will not be permitted to provide a company under a Hearings Panel 
Monitor with a cure or compliance period after it has receive a 
Delisting Determination. While the original language in both 
5815(d)(4)(A) and (B) included language regarding Staff's inability to 
afford a company under a Hearings Panel Monitor a cure or compliance 
period, the current rules do not specifically include a reference to 
Rule 5810(c)(3) itself. The addition of a specific reference to Rule 
5810(c)(3) will remove any potential confusion regarding this point.
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    \6\ Staff is not aware of the reason for the original language 
in Rule 5815(d)(4)(B) stating that that rule would not call for a 
Panel Monitor.
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    Rules 5815(d)(4)(A) and (B) each describe the specific procedures 
for use of a Panel Monitor. Rule 5815(d)(4)(A) states that in the event 
a company under a Panel Monitor fails to maintain compliance with a 
listing requirement, the Hearings Department will schedule a new 
hearing, with the original Hearings Panel or a new panel if the 
original panel is unavailable. The rule text also notes that the 
hearing may be oral or written, at the company's election. The text 
finally notes that the Hearings Panel will consider the company's 
compliance history when rendering a decision. The Exchange proposes to 
amend Rule 5815(d)(4)(A) to remove each of these provisions and add 
them in proposed Rule 5815(d)(4)(C) which will apply to both 
5815(d)(4)(A) and (B).
    Under the proposed language, in the event a company under a Panel 
Monitor fails to maintain compliance with any listing standard, Staff 
will issue a Delisting Determination. The company must then determine 
if it wishes to seek an appeal from this determination. The proposed 
rule change will correct the erroneous inclusion of language in the 
rule requiring the Hearings Department to promptly schedule a hearing 
without first receiving a request for appeal from the company.\7\ The 
Exchange proposes removing the language regarding whether the hearing 
will be oral or written and the language noting that the Hearings Panel 
may consider the company's compliance history when rendering a decision 
in order to add that language to proposed Rule 5815(d)(4)(C), a new 
sub-paragraph that will outline procedures applicable to both instances 
in which a Panel Monitor has been employed. The Exchange also proposes 
adding a reference to Rule 5810(c)(3) to remove any confusion that may 
be created by the current Rule 5815(d)(4)(A) and (B) which both 
reference the Listings Qualifications Department's inability to grant 
additional time for the Company to regain compliance despite the 
specified cure or compliance period allowed for under Rule 5810(c)(3).
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    \7\ Historically the Hearings Department has not immediately 
scheduled a new hearing for a company under a Panel Monitor that has 
received a Delisting Determination from Staff. A new hearing would 
not be scheduled until the company in question had requested an 
appeal from the Delisting Determination. The proposed rule change 
will simply codify the existing practice of the Hearings Department.
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    The Exchange proposes amending Rule 5815(d)(4)(B) to change the 
heading from ``No Hearings Panel Monitor'' to ``Mandatory Hearings 
Panel Monitor.'' Despite the fact that the title is ``No Hearings Panel 
Monitor'', the rule itself actually outlines a process that calls for 
the mandatory use of a Hearings Panel Monitor. The proposed new title 
will remove any confusion brought about by this language. The proposed 
rule changes also include adding language to the body of the rule 
specifically calling for the Hearings Panel to impose a Hearings Panel 
Monitor for a period of one year from the date the company regained 
compliance with the stockholders' equity, periodic filing or certain 
bid price listing standards. The Exchange also proposes adding language 
that will align the language in both Rules 5815(d)(4)(A) and (B) 
regarding the inability of Staff to grant the company a cure or 
compliance period or submit a plan to regain compliance. Again, the 
Exchange proposes adding a specific reference to Rule 5810(c)(3) to 
clarify that Listings Qualifications Staff will not have the ability to 
provide a Company under a Hearings Panel Monitor subject to a Delisting 
Determination additional time to regain compliance with respect to any 
deficiency. While the current rule prohibits such an extension of time, 
the Exchange thought it prudent to specifically reference Rule 
5810(c)(3) to avoid any possible confusion.
    The Exchange also proposes removing language currently found in 
Rules 5815(d)(4)(A) and (B) which outlines the process that will apply 
to either situation in which a Panel Monitor has been implemented and 
add this language in Proposed Rule 5815(d)(4)(C).\8\ Specifically, the 
proposed language will outline how a company may seek an appeal of a 
Staff Delisting Determination, that the Hearings Department will 
schedule a hearing with the original Hearings Panel or a new Hearings 
Panel if the original Hearings Panel is unavailable, that the hearing 
may be written or oral, and that the Hearings Panel will consider the 
company's compliance history when rendering its decision. Unless 
specifically addressed in proposed Rule 5815(d)(4)(C), the procedures 
for requesting and preparing for a review by a Hearings Panel will 
continue to be governed by Rule 5815.
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    \8\ Rule 5815(c)(4)(B) in its present form includes language 
regarding a company's ability to request a review by a Hearings 
Panel and the fact that a company's compliance history will be 
considered by the Hearings Panel when it renders a decision. Rule 
5815(c)(4)(B) does not contain language found in 5815(c)(4)(A) 
regarding Staff issuing a Delisting Determination and the Hearings 
Department promptly scheduling a hearing upon a company's failure to 
maintain compliance with a relevant listing standard during the one-
year monitoring period, nor the use of the original or new Hearings 
Panel nor the ability of the hearing to be in written or oral form, 
at the company's election. Each of the provisions just outlined will 
apply to both 5815(c)(4)(A) and (B) through the implementation of 
proposed Rule 5815(c)(4)(C).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the

[[Page 72295]]

objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest, by removing any ambiguity as to when 
a Hearings Panel has the discretion to implement a Hearings Panel 
Monitor and when the use of a Hearings Panel Monitor is mandatory. The 
proposed rule will not change the operation of the Hearings Panel 
Monitor, but will provide clarification as to when a Hearings Panel may 
impose a Hearings Panel Monitor and when the use of a Hearings Panel 
Monitor is mandatory under Rule 5815(d)(4)(A) or 5815(d)(4)(B), which 
are designed to protect investors and the public interest. Under the 
proposed change to Rule 5815(d)(4)(A), the ability of a Panel to 
continue to monitor a company's continued compliance for up to one year 
after the compliance date will remain unchanged during which time the 
company will not be permitted to provide the Listing Qualifications 
Department with a plan of compliance with respect to any deficiency 
that arises during the monitor period, and the Listing Qualifications 
Department will not be permitted to grant additional time for the 
Company to regain compliance with respect to any deficiency. Similarly, 
under the proposed change to Rule 5815(d)(4)(B), companies that regain 
compliance with the shareholder equity, periodic filing or certain bid 
price requirements will continue to be prohibited from submitting a 
plan of compliance or be afforded a compliance period to cure the 
deficiency under Listing Rule 5810(c)(2) or (3) within one year of 
regaining compliance with the listing requirement in question. The rule 
change will simply clarify that Rule 5815(d)(4)(B) calls for the 
mandatory use of a Hearings Panel Monitor.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    Nasdaq believes that the prosed rule change's clarification of the 
mandatory nature of the Hearings Panel Monitor when a company has 
regained compliance with the shareholders' equity, periodic filing or 
certain bid price rules will promote fair and orderly markets by 
eliminating confusion. Nasdaq also believes that the alignment of 
language used in Rules 5815(d)(4)(A) and (B), including creating a new 
Rule 5815(d)(4)(C), will also eliminate confusion that could arise due 
to previous differences in the wording between the similar sections and 
will ensure that all companies that are subject to a Hearings Panel 
Monitor, whether required by rule or imposed at the discretion of the 
Hearings Panel, will be treated in the same manner.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
expected to have any impact on competition among listed companies nor 
on competition between exchanges. The proposed rule change will apply 
equally to all companies that are subject to Panel Monitors.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the 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 [email protected]. Please include 
File Number SR-NASDAQ-2021-099 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2021-099. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2021-099, and should be submitted 
on or before January 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27544 Filed 12-20-21; 8:45 am]
BILLING CODE 8011-01-P