Document ID: SEC-2008-0550-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-04-10T04:00Z

[Federal Register: April 10, 2008 (Volume 73, Number 70)]
[Notices]               
[Page 19540-19542]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10ap08-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57616; File No. SR-NASDAQ-2008-017]

 
Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Clarify the Listing of 
Additional Shares Notification Process

April 3, 2008.
    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 March 6, 2008, 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 substantially 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 proposes to clarify the process concerning notifications of 
the listing of additional shares.\3\ The text of the proposed rule 
change is below. Proposed new language is in italics; proposed 
deletions are in brackets.\4\
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    \3\ The Commission notes that as part of the proposed rule 
filing, the Exchange submitted a revised Listing of Additional 
Shares Notification Form conforming the instructions on the Form to 
the proposed rule changes herein.
    \4\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://www.complinet.com/
nasdaq.
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* * * * *
4310. Listing Requirements for Domestic and Canadian Securities
    To qualify for listing in Nasdaq, a security of a domestic or 
Canadian issuer shall satisfy all applicable requirements contained in 
paragraphs (a), (b), and (c) hereof. Issuers that meet these 
requirements, but that are not listed on the Nasdaq Global Market, are 
listed on the Nasdaq Capital Market.
    (a)-(b) No change.
    (c) In addition to the requirements contained in paragraph (a) and 
(b) above, and unless otherwise indicated, a security shall satisfy the 
following criteria for listing on Nasdaq:
    (1)-(16) No change.
    (17) [The issuer shall be] A listed company is required to notify 
Nasdaq [on the appropriate form no later than] at least 15 calendar 
days prior to:

[[Page 19541]]

    (A)(i) establishing or materially amending a stock option plan, 
purchase plan or other equity compensation arrangement pursuant to 
which stock may be acquired by officers, directors, employees, or 
consultants without shareholder approval.
    (ii) Nasdaq recognizes that when an issuer makes an equity grant to 
induce an individual to accept employment, as permitted by the 
exception contained in Rule 4350(i)(1)(A)(iv), it may not be practical 
to provide the advance notice otherwise required by this Rule. 
Therefore, when an issuer relies on that exception to make such an 
inducement grant without shareholder approval, it is sufficient to 
notify Nasdaq about the grant and the use of the exception no later 
than five calendar days after entering into the agreement to issue the 
securities; or
    (B)-(C) No change.
    (D) [entering into] issuing any common stock, or any security 
convertible into common stock in a transaction that may result in the 
potential issuance of common stock, [(or securities convertible into 
common stock)] greater than 10% of either the total shares outstanding 
or the voting power outstanding on a pre-transaction basis.
    The notifications required by this paragraph must be made on the 
Notification Form: Listing of Additional Shares and Nasdaq encourages 
companies to file this form as soon as practicable, even if all of the 
relevant terms are not yet known. Nasdaq reviews these forms to 
determine compliance with applicable Nasdaq rules, including the 
shareholder approval requirements. Therefore, if a company fails to 
file timely the form required by this paragraph, Nasdaq may issue a 
Staff Determination (pursuant to the Rule 4800 Series) that is either a 
public reprimand letter or a delisting determination.
    (18)-(30) No change.
    (d) No change.
4320. Listing Requirements for Non-Canadian Foreign Securities and 
American Depositary Receipts
    To qualify for listing on Nasdaq, a security of a non-Canadian 
foreign issuer, an American Depositary Receipt (ADR) or similar 
security issued in respect of a security of a foreign issuer shall 
satisfy the requirements of paragraphs (a), (b), and (e) of this Rule. 
Issuers that meet these requirements, but that are not listed on the 
Nasdaq Global Market, are listed on the Nasdaq Capital Market.
    (a)-(d) No change.
    (e) In addition to the requirements contained in paragraphs (a) and 
(b), the security shall satisfy the criteria set out in this subsection 
for listing on Nasdaq. In the case of ADRs, the underlying security 
will be considered when determining the ADR's qualification for initial 
or continued listing on Nasdaq.
    (1)-(14) No change.
    (15) The issuer of any class of securities listed on Nasdaq, except 
for American Depositary Receipts, [shall be] is required to notify 
Nasdaq [on the appropriate form no later than] at least 15 calendar 
days prior to:
    (A)(i) establishing or materially amending a stock option plan, 
purchase plan or other equity compensation arrangement pursuant to 
which stock may be acquired by officers, directors, employees, or 
consultants without shareholder approval.
    (ii) Nasdaq recognizes that when an issuer makes an equity grant to 
induce an individual to accept employment, as permitted by the 
exception contained in Rule 4350(i)(1)(A)(iv), it may not be practical 
to provide the advance notice otherwise required by this Rule. 
Therefore, when an issuer relies on that exception to make such an 
inducement grant without shareholder approval, it is sufficient to 
notify Nasdaq about the grant and the use of the exception no later 
than five calendar days after entering into the agreement to issue the 
securities; or
    (B)-(C) No change.
    (D) [entering into] issuing any common stock, or any security 
convertible into common stock in a transaction that may result in the 
potential issuance of common stock, [(or securities convertible into 
common stock)] greater than 10% of either the total shares outstanding 
or the voting power outstanding on a pre-transaction basis.
    The notifications required by this paragraph must be made on the 
Notification Form: Listing of Additional Shares and Nasdaq encourages 
companies to file this form as soon as practicable, even if all of the 
relevant terms are not yet known. Nasdaq reviews these forms to 
determine compliance with applicable Nasdaq rules, including the 
shareholder approval requirements. Therefore, if a company fails to 
file timely the form required by this paragraph, Nasdaq may issue a 
Staff Determination (pursuant to the Rule 4800 Series) that is either a 
public reprimand letter or a delisting determination.
    (16)-(26) No change.
    (f) 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 Rules 4310(c)(17) and 4320(e)(15) require a company to 
provide 15 days notice prior to issuing securities in certain specified 
situations. These notifications allow Nasdaq to make compliance 
determinations regarding stock issuances that are potentially subject 
to the shareholder approval rules.
    Nasdaq proposes to clarify the timing requirement contained in 
Rules 4310(c)(17)(D) and 4320(e)(15)(D).\5\ At present, the rules 
provide that notifications under these subparagraphs are required prior 
to ``entering into'' a described transaction. However, while Nasdaq has 
treated this requirement as being satisfied if the company files the 
required notification 15 days before issuing the securities, that 
interpretation is not transparent from the rule. As such, Nasdaq 
proposes to revise these provisions such that notice will instead be 
required prior to ``issuing'' the securities, consistent with the 
requirements in paragraphs (B) and (C) of those rules.\6\
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    \5\ See supra note 3.
    \6\ Nasdaq believes that this is also consistent with the 
requirements of other marketplaces. See, e.g., New York Stock 
Exchange LLC (``NYSE'') Listed Company Manual Section 703.01(B) 
(requiring subsequent listing applications to be filed at least two 
weeks before the company wishes the NYSE to take action upon the 
application) and American Stock Exchange LLC (``Amex'') Company 
Guide Sections 303(b) and 331 (requiring a company to submit an 
additional listing application at least one to two weeks in advance 
of the date on which Amex's approval is needed).
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    In addition, Nasdaq proposes to modify the timing requirement 
contained in Rules 4310(c)(17)(A) and 4320(e)(15)(A) as it relates to 
companies relying on the exception to shareholder approval for 
inducement grants to new employees contained in Rule

[[Page 19542]]

4350(i)(1)(A)(iv).\7\ Because these grants can be made at the time the 
employment offer is accepted, companies may not be able to provide 15 
days advance notice. Instead, the proposed rule would require 
notification no later than five calendar days after entering into the 
agreement to issue the securities.
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    \7\ Rule 4350(i)(1)(A)(iv) allows an exception to the 
requirement to obtain shareholder approval for equity compensation 
for certain ``issuances to a person not previously an employee or 
director of the company, or following a bona fide period of non-
employment, as an inducement material to the individual's entering 
into employment with the company.''
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    Nasdaq also proposes to amend Rules 4310(c)(17) and 4320(e)(15) to 
clarify that the notifications required by these rules must be made on 
a Listing of Additional Shares (``LAS'') Notification Form and to 
provide transparency to the consequences of failing to timely file LAS 
notifications. Specifically, depending on the circumstances, Nasdaq may 
issue a Staff Determination (pursuant to the Rule 4800 Series) that is 
a public reprimand letter or a delisting determination. In determining 
whether to issue a Staff Determination, and whether such a Staff 
Determination would be a delisting determination or a public reprimand 
letter, Nasdaq would consider whether the issuer has demonstrated a 
pattern of late filings, the length of such filing delays, the reason 
for the delays, whether the issuer has been contacted concerning 
previous violations, whether the underlying transactions were 
themselves non-compliant, and whether the issuer has taken steps to 
assure that future violations will not occur.
    Finally, in connection with this change, Nasdaq notes that it also 
intends to adopt a process whereby it will notify companies when the 
LAS review process has been completed. At present, Nasdaq does not 
routinely inform a company when it has completed its review.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\8\ in general, and with Section 
6(b)(5) of the Act,\9\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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. The proposed rule change is 
designed to simplify and provide transparency to the operation of 
Nasdaq's notification requirements.
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    \8\ 15 U.S.C. 78f.
    \9\ 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.

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 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. 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-2008-017 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2008-017. 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 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 Nasdaq. 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-2008-017 and should be submitted on or before May 
1, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7508 Filed 4-9-08; 8:45 am]

BILLING CODE 8011-01-P