Document ID: SEC-2009-1273-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify the Procedures Followed When a Listed Company Falls Below Certain Listing Requirements
Posted Date: 2009-09-08T04:00Z

[Federal Register: September 8, 2009 (Volume 74, Number 172)]
[Notices]               
[Page 46267-46270]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08se09-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60611; File No. SR-NASDAQ-2009-077]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify the Procedures 
Followed When a Listed Company Falls Below Certain Listing Requirements

September 2, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 1919b-4 thereunder,\2\ notice is hereby given 
that on August 17, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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 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 240.1919b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to modify the procedures followed when a listed 
company falls below certain listing requirements. Nasdaq will implement 
the proposed rule upon approval.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://
nasdaqomx.cchwallstreet.com.
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5810. Notification of Deficiency by the Listing Qualifications 
Department
    When the Listing Qualifications Department determines that a 
Company does not meet a listing standard set forth in the Rule 5000 
Series, it will immediately notify the Company of the deficiency. As 
explained in more detail below, deficiency notifications are of four 
types:
    (1)-(4) No change.
    Notifications of deficiencies that allow for submission of a 
compliance plan or an automatic cure or compliance period may result, 
after review of the compliance plan or expiration of the cure or 
compliance period, in issuance of a Staff Delisting Determination or a 
Public Reprimand Letter.
    (a)-(b) No change.
    IM-5810-1. No change.
    (c) Types of Deficiencies and Notifications.
    The type of deficiency at issue determines whether the Company will 
be immediately suspended and delisted, or whether it may submit a 
compliance plan for review or is entitled to an automatic cure or 
compliance period before a Staff Delisting Determination is issued. In 
the case of a deficiency not specified below, Staff will issue the 
Company a Staff Delisting Determination or a Public Reprimand Letter.
    (1) No change.
    (2) Deficiencies for which a Company may Submit a Plan of 
Compliance for Staff Review.
    (A) Unless the Company is currently under review by an Adjudicatory 
Body for a Staff Delisting Determination, the Listing Qualifications 
Department may accept and review a plan to regain compliance when a 
Company is deficient with respect to one of the standards listed in 
subsections (i) through (iv) below. In accordance with Rule 
5810(c)(2)(C), plans provided pursuant to subsections (i) through (iii) 
below must be provided generally within [15] 45 calendar days, and in 
accordance with Rule 5810(c)(2)(F), plans provided pursuant to 
subsection (iv) must be provided generally within 60 calendar days.
    (i)-(iv) No change.
    IM-5810-2. No change.

[[Page 46268]]

    (B) Staff Alternatives Upon Review of Plan Staff may request such 
additional information from the Company as is necessary to make a 
determination, as described below. In cases other than filing 
delinquencies, which are governed by Rule 5810(c)(2)(F) below, upon 
review of a plan of compliance, Staff may either:
    (i) Grant an extension of time to regain compliance not greater 
than [105] 180 calendar days from the date of Staff's initial 
notification, unless the Company is currently under review by an 
Adjudicatory Body for a Staff Delisting Determination. If Staff grants 
an extension, it will inform the Company in writing of the basis for 
granting the extension and the terms of the extension;
    (ii)-(iii) No change.
    (C) Timeline for Submission of Compliance Plans
    Except for deficiencies from the standards of Rule 5250(c)(1) or 
(2), Staff's notification of deficiencies that allow for compliance 
plan review will inform the Company that it has [15] 45 calendar days 
to submit a plan to regain compliance with Nasdaq's listing 
standard(s). [Within the restrictions of paragraph (B),] Staff may 
extend this deadline for up to an additional 5 calendar days upon good 
cause shown and may request such additional information from the 
Company as is necessary to make a determination regarding whether to 
grant such an extension.[, and upon receipt of the Company's plan, may 
request additional information from the Company to help it determine 
the Company's ability to regain compliance.]
    (D)-(F) No change.
    (3) Deficiencies for which the Rules Provide a Specified Cure or 
Compliance Period
    With respect to deficiencies related to the standards listed in 
(A)-(E) below, Staff's notification will inform the Company of the 
applicable cure or compliance period provided by these Rules and 
discussed below. If the Company does not regain compliance within the 
specified cure or compliance period, the Listing Qualifications 
Department will immediately issue a Staff Delisting Determination 
letter.
    (A)-(B) No change.
    (C) Market Value of Listed Securities [(MVLS)]
    A failure to meet the continued listing requirements for [MVLS] 
Market Value of Listed Securities shall be determined to exist only if 
the deficiency continues for a period of [10] 30 consecutive business 
days. Upon such failure, the Company shall be notified promptly and 
shall have a period of [90] 180 calendar days from such notification to 
achieve compliance [with the applicable continued listing standard]. 
Compliance can be achieved by meeting the applicable standard for a 
minimum of 10 consecutive business days during the [90] 180 day 
compliance period.
    (D) Market Value of Publicly Held Shares [(MVPHS)]
    A failure to meet the continued listing requirement for Market 
Value of Publicly Held Shares shall be determined to exist only if the 
deficiency continues for a period of 30 consecutive business days. Upon 
such failure, the Company shall be notified promptly and shall have a 
period of [90] 180 calendar days from such notification to achieve 
compliance. [
    ]Compliance can be achieved by meeting the applicable standard for 
a minimum of 10 consecutive business days during the [90] 180 day 
compliance period.
    (E)-(F) No change.
    (4) No change.
    (d) No change.
* * * * *
5840. Adjudicatory Process: General Information
    (a)-(d) No change.
    (e) Computation and Adjustment of Time
    (1) No change.
    (2) When Staff determines whether a deficiency has occurred with 
respect to [bid price, market value of listed securities] the Bid 
Price, Market Value of Listed Securities or [market value of publicly 
held shares] Market Value of Publicly Held Shares requirements, the 
first trading day that the [bid price or market value] Bid Price or 
Market Value is below required standards is included in computing the 
total number of consecutive trading days of default. Similarly, when 
Staff determines whether a Company has regained compliance with the 
[bid price, MVLS or MVPHS] Bid Price, Market Value of Listed 
Securities, or Market Value of Publicly Held Shares requirements, the 
first trading day that the [bid price or market value] Bid Price or 
Market Value is at or above required standards is included in computing 
the total number of consecutive trading days.
    (3)-(4) No change.
    (f)-(k) No change.
* * * * *

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 is proposing to modify certain of the listing rules that 
provide the compliance periods associated with Nasdaq's continued 
listing rules to make them more consistent and, in some cases, to 
provide additional time to companies to regain compliance. In addition, 
Nasdaq is proposing to modify the time available to a company to 
provide a plan to regain compliance with certain listing requirements 
and the length of the extension that Nasdaq staff can allow a company 
to regain compliance.\4\
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    \4\ Nasdaq is also proposing to eliminate certain abbreviations 
that are used inconsistently and utilize defined terms, as 
appropriate, in Rules 5810 and 5840, and to remove authority in Rule 
5810(c)(2)(C) that is duplicated in Rule 5810(c)(2)(B).
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Price Related Criteria
    Under Nasdaq rules, if a company's security has a closing bid price 
below $1 for 30 consecutive trading days, it no longer meets the bid 
price requirement and is automatically provided 180 calendar days to 
regain compliance.\5\ However, under other requirements that are 
derived, in part, from the company's price, the company may be found 
non-compliant based on fewer days below the applicable threshold or 
have less time to regain compliance. Specifically, under the current 
rules related to market value of listed securities, a company is non-
compliant after being below the standard for 10 consecutive trading 
days and, thereafter, is provided only 90 calendar days to regain 
compliance.\6\ Similarly, while the rules for market value of publicly 
held shares provide that a company is not deficient until it is below 
the standard for 30 consecutive trading days, the company is only 
provided with 90 calendar days to regain compliance.\7\ Because

[[Page 46269]]

compliance with each of these rules is directly related to the price of 
an issuer's security, Nasdaq believes that the length of time to 
trigger non-compliance, and the amount of time afforded as a compliance 
period, should be consistent with each other and with the periods 
applicable under the bid price rules. Therefore Nasdaq proposes to 
extend the period that a company would need to be below the minimum 
market value of listed securities requirement before being considered 
non-compliant from 10 to 30 consecutive trading days. In addition to 
providing consistency among the price-related tests, Nasdaq believes 
that this longer period will prevent a short-term market-wide decline 
from causing a company to become non-compliant. Nasdaq also proposes to 
extend from 90 to 180 days the compliance period in which companies 
that are non-compliant with the market value of listed securities and 
market value of publicly held shares requirements can regain 
compliance.\8\ Nasdaq believes that the existing 90-day time frames do 
not provide sufficient time for a company to regain compliance. For 
example, if a company chooses to issue additional shares to evidence 
compliance, 90 calendar days is often an insufficient time to allow a 
company to obtain any necessary shareholder approval, register the 
shares, and demonstrate compliance for 10 business days.
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    \5\ Rule 5810(b)(3)(A).
    \6\ Rule 5810(b)(3)(C). NASDAQ recently changed the period to 
regain compliance with the market value of listed securities 
requirement from 30 to 90 days. Securities Exchange Act Release No. 
59291 (January 23, 2009), 74 FR 5197 (January 29, 2009) (SR-NASDAQ-
2009-002).
    \7\ Rule 5810(b)(3)(D).
    \8\ Nasdaq could apply its authority described in Rule 5100 to 
delist a security during a compliance period if the market value of 
listed securities or market value of publicly held shares was so low 
that delisting is necessary to maintain the quality of and public 
confidence in the market, to prevent fraudulent and manipulative 
acts and practices, and to protect investors and the public 
interest.
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    As revised, the maximum amount of time that could be afforded to a 
company that failed to meet the market value of listed securities or 
market value of publicly held shares requirements would be 18 months. A 
company could only receive an extension up to this 18-month maximum 
length if: (i) It failed to comply during the automatic 180-day 
compliance period; \9\ (ii) the company appealed to a Hearings Panel; 
\10\ and (iii) the Nasdaq Listing and Hearing Review Council determined 
to call the matter for review, stay the company's delisting,\11\ and, 
after reviewing the company's compliance plan,\12\ provide the company 
with the maximum 360-day period from the date of the Staff Delisting 
Determination to regain compliance.\13\
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    \9\ Proposed Rules 5810(c)(3)(C) and 5810(c)(3)(D).
    \10\ An appeal to the Hearings Panel stays the securities 
delisting. Rule 5815(a)(1). The company can submit a plan to regain 
compliance and request that the Hearings Panel grant an exception to 
the listing standards for a limited time period. Rule 5815(a)(5). 
Based on its review of that plan, the Hearings Panel can grant the 
company a maximum of 180 days from the date of the staff's delisting 
determination to regain compliance. Rule 5815(c)(1)(A).
    \11\ Rule 5820(a) provides that an appeal to the Nasdaq Listing 
and Hearings Review Council does not operate to stay a Hearings 
Panel's decision to delist a company. In order for a Panel decision 
to be stayed, the Listing Council must call the matter for review 
pursuant to Rule 5820(b) and affirmatively determine to stay the 
Panel's decision.
    \12\ When the Listing Council calls a matter for review it 
provides the company with a deadline to submit a written submission. 
Rule 5820(b). The Listing Council's review is based on the written 
record, including that submission. Rule 5820(e)(1).
    \13\ Rule 5820(d)(1).
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Requirements with Respect to Compliance Plans
    Nasdaq also proposes to modify the periods applicable in cases 
where a company can provide staff with a plan to regain compliance, 
such as when a company fails to meet the minimum requirements for 
stockholders' equity, the number of publicly held shares, or the number 
of shareholders.\14\ Currently, companies are provided 15 calendar days 
to submit a plan to regain compliance and, following a review of the 
plan, staff can grant the company a period of up to 105 calendar days 
from the initial notification of non-compliance for the company to 
regain compliance. Nasdaq's experience has been that 15 days is often 
insufficient for a company to formulate a meaningful plan, especially 
given current market and economic conditions, and accordingly proposes 
to increase from 15 to 45 the number of calendar days a company has to 
present its plan. Staff would be permitted to grant up to a 5-day 
extension of this period upon good cause shown.\15\ Further, Nasdaq 
proposes to increase from 105 to 180 the number of calendar days for 
which staff can grant an extension of time from its initial 
notification of non-compliance.\16\ Nasdaq believes that this 
additional time will better allow companies to implement a plan to 
regain compliance.
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    \14\ Rule 5810(c)(2) and IM-5810-2 provide the procedures 
governing deficiencies for which a company may submit a plan of 
compliance to Nasdaq staff. Nasdaq has posted frequently asked 
questions at http://www.nasdaq.com/about/faqs-listing-information-
questions.stm#continued, which discuss the information a company 
should consider in preparing its plan of compliance.
    \15\ It is anticipated that this authority would be used to 
address cases where the company could not timely submit its plan due 
to events outside the control of the company, such as when severe 
weather interferes with the company's ability to provide the 
necessary information before the deadline.
    \16\ Nasdaq staff will determine whether to allow the company 
additional time, and if so how much time to allow, based on a review 
of the company's plan of compliance.
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    As revised, the maximum amount of time that could be afforded to a 
company that failed to meet a listing requirement that allows the 
submission of a plan to regain compliance would be 18 months. A company 
could only receive an extension up to this 18-month maximum length if: 
(i) After reviewing the company's compliance plan, Nasdaq staff granted 
the company the maximum 180-day period to regain compliance; \17\ (ii) 
the company failed to comply within the time allowed by staff and 
appealed to a Hearings Panel;\18\ and (iii) the Nasdaq Listing and 
Hearing Review Council determined to call the matter for review, stay 
the company's delisting, and, after reviewing the company's compliance 
plan, provide the company with the maximum 360-day period from the date 
of the Staff Delisting Determination to regain compliance.\19\
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    \17\ Proposed Rule 5810(c)(2)(B)(i).
    \18\ See footnote 10, supra.
    \19\ See footnotes 11-13, supra.
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Implementation
    Any company that had not yet been notified that is was non-
compliant with the market value of listed securities requirement upon 
Commission approval of the proposed rule change would not be notified 
until they were below the requirement for 30 consecutive trading 
days.\20\ Any company that had already been notified that it was non-
compliant with either the market value of listed securities requirement 
or the market value of publicly held shares requirement and that was 
still in the 90 calendar day compliance period for such failure would 
have their compliance period extended until 180 calendar days from the 
date they were originally notified of the deficiency.\21\ No additional 
time would be provided to a company that has received a Staff Delisting 
Determination for failure to

[[Page 46270]]

meet either of those requirements before the proposed rule change is 
approved.\22\
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    \20\ For example, if a security is below the market value of 
listed securities requirement for 7 consecutive trading days when 
the proposed rule is approved, the company would not be notified 
that it is deficient unless and until the security remains below the 
requirement for another 23 consecutive trading days, such that it 
remained below for a total of 30 consecutive trading days.
    \21\ For example, if a company had been notified that its 
security was below either the market value of listed securities or 
market value of publicly held shares requirement 30 days before the 
proposed rule is approved, such that it had 60 days remaining in its 
compliance period, that compliance period would be extended by 90 
days so that the company would have 150 days remaining in the 
compliance period.
    \22\ For example, if a company had been notified that its 
security was below either the market value of listed securities or 
market value of publicly held shares requirement 95 days before the 
proposed rule is approved, the company would not receive any 
additional time as a result of the proposed rule change. Such 
companies would continue through the Hearings and Appeals process, 
however, and could receive additional time as provided for in Rules 
5815(c)(1)(A) and 5820(d)(1).
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    With respect to the proposed changes to the compliance plan 
process, if a company has not yet submitted its plan of compliance when 
the proposed rule change is approved, the deadline to submit that plan 
would be extended until 45 days from the date of staff's notification 
of the deficiency. If the company had submitted its plan of compliance 
when the proposed rule change is approved, but staff has not yet made a 
determination with respect to whether to grant additional time, staff 
would be permitted to grant the company up to 180 days from staff's 
notification of the deficiency to regain compliance. If the company has 
already received an extension of time to regain compliance from staff 
when the proposed rule change is approved,\23\ at the end of that 
exception staff could, based on a review of the company at the time, 
grant additional time for the company to regain compliance, up to 180 
days from staff's original notification of the deficiency.\24\ No 
additional time would be provided to a company that had already 
received a Staff Delisting Determination at the time the proposed rule 
change is approved.\25\
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    \23\ Rule 5810(c)(2)(B)(i).
    \24\ The proposal to allow a company additional time at the end 
of its extension based on staff's further review of the company is 
consistent with Nasdaq's current practice of potentially allowing a 
company additional time if it was not initially granted the full 105 
days allowed by current Rule 5810(c)(2)(B)(i).
    \25\ Such companies would continue through the Hearings and 
Appeals process, however, and could receive additional time as 
provided for in Rules 5815(c)(1)(A) and 5820(d)(1).
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\26\ in general and with 
Sections 6(b)(5) of the Act,\27\ in particular, which requires, among 
other things, that a national securities exchange's rules must 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 
proposed rule change is consistent with these requirements in that it 
would enhance consistency within Nasdaq's rules and between Nasdaq and 
other markets, thereby reducing investor confusion and facilitating 
capital formation, while permitting reasonable periods of time for 
companies to address instances of non-compliance with Nasdaq rules.
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    \26\ 15 U.S.C. 78f.
    \27\ 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.

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

    Written comments were neither solicited nor received.

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. 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2009-077 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 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2009-077. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such 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 publicly available. All 
submissions should refer to File Number SR-NASDAQ-2009-077 and should 
be submitted on or before September 29, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21644 Filed 9-4-09; 8:45 am]

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