Document ID: SEC-2015-0295-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2015-02-20T05:00Z

[Federal Register Volume 80, Number 34 (Friday, February 20, 2015)]
[Notices]
[Pages 9285-9286]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-03518]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74279; File No. SR-NASDAQ-2014-102]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change To Require That a Company 
Publicly Disclose the Denial of a Listing Application

February 13, 2015.

I. Introduction

    On December 11, 2014, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to require companies to disclose the denial of an 
initial listing application. The proposed rule change was published for 
comment in the Federal Register on December 30, 2014.\3\ The Commission 
received no comments on the proposed rule change. This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 73912 (December 22, 
2014), 79 FR 78540 (December 30, 2014) (``Notice'').
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II. Description of Proposed Rule Change

    In its filing, Nasdaq stated that it processes between 200 and 300 
applications each year from companies seeking to list securities on 
Nasdaq. According to the Exchange, while most applicants meet the 
listing requirements (or are prepared to take action to meet those 
requirements before listing) in some cases a company does not meet the 
requirements and is not willing, or able, to comply. Nasdaq may also 
deny a listing application based on public interest concerns even 
though the company meets all quantitative listing requirements.\4\ In 
either case, Nasdaq will inform the company of the outcome, and the 
company may withdraw its application before the application is formally 
denied. If the company does not withdraw its application, then the 
Nasdaq Listing Qualifications Department will issue a written denial to 
the company.\5\ A company denied listing on Nasdaq may appeal the 
denial to a Listing Qualifications Hearings Panel (``Hearings 
Panel'').\6\
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    \4\ See Nasdaq Rule 5101 and 5101-1.
    \5\ See Nasdaq Rule 5810.
    \6\ See Nasdaq Rule 5815.
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    According to Nasdaq, investors view a company's decision to seek 
initial listing on the Exchange as a positive development, and 
companies often publicize their intention to apply for listing.\7\ 
Nasdaq believes that the public is therefore interested in the outcome 
of an application for initial listing. Nasdaq proposes to require that 
a company that receives a written determination denying its application 
for listing must, within four business days, make a public announcement 
in a press release or other Regulation FD compliant manner about the 
receipt of the determination and the Nasdaq Rule(s) upon which the 
determination is based. The company must describe each specific basis 
and concern identified by Nasdaq in reaching the determination. If the 
public announcement is not made by the company within the time allotted 
or does not include all of the required information, Nasdaq will make a 
public announcement with the required information and, if the company 
appeals the determination as set forth in Nasdaq Rule 5815, the 
Hearings Panel will consider the company's failure to make the public 
announcement in considering whether to list the company. Nasdaq also 
proposes to clarify in Rule 5205 that a company may withdraw its 
application for initial listing at any time.
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    \7\ See Notice, supra note 3.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\9\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to prevent fraudulent and manipulative acts and practices, 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

[[Page 9286]]

investors and the public interest and are not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that full and fair disclosure of information 
by companies is of critical importance to financial markets and the 
investing public. According to the Exchange, investors view a company's 
decision to seek initial listing on the Exchange as a positive 
development, and companies often publicize their intention to apply for 
listing. The listing of a company on a national securities exchange 
such as Nasdaq provides benefits including, among others, potential for 
increased stock liquidity and capital raising benefits.\10\ However, 
there appears to be no Exchange requirement for the company to 
publicize when its listing application has been denied and therefore 
that the company will not be receiving the benefits of an exchange 
listing.
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    \10\ Section 18 of the Securities Act of 1933 (``Securities 
Act'') provides federal preemption of state blue sky laws for 
securities listed on certain national securities exchanges. 15 
U.S.C. 77r. See also 17 CFR 230.146.
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    The Commission believes that the public, including potential future 
investors, would find a denial of a company's listing application, just 
as important as the decision to seek an exchange listing which, as 
noted by Nasdaq, is often publicized. The significance of a denial of 
listing is also underscored by the existence of both the right to 
appeal the denial on Nasdaq and the right to obtain Commission review 
of such appeals. Nasdaq rules provide, as noted above, for due process 
to appeal a denial of listing.\11\ Denial of listings have also been 
subject to Commission review under section 19(d) of the Exchange 
Act.\12\
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    \11\ These appeal provisions have been adopted in accordance 
with section 6(b)(7) of the Act. 15 U.S.C. 78f(b)(7).
    \12\ Section 19(d) of the Act provides, among other things, for 
Commission review of any action self-regulatory organization that, 
among other things, prohibits or limits any person in respect to 
access to service offered by such organization. See U.S.C. 78s(d).
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    The Commission therefore believes that the proposed rule change 
will help provide transparency to future, as well as existing, 
investors about the status of a company's listing application. The 
Commission also believes that Nasdaq's proposal to require that such 
disclosure be made by press release, or other Regulation FD compliant 
manner, will permit companies to disseminate this important information 
to the public in a broad and inclusive manner and should help to ensure 
for broad public access to the denial of listing determination and the 
reasons for the denial.
    As described above, the proposal will also clarify in Nasdaq's 
rules that a company may withdraw its application for initial listing 
at any time during the review process.\13\ The decision to seek listing 
and submit a listing application is generally a voluntary decision by a 
company. Consistent with this, it is our understanding that companies 
seeking listing on Nasdaq are allowed to withdraw their voluntary 
application at any time during the process. The clarification in 
Nasdaq's proposal codifies this concept in Nasdaq's rules. The 
Commission also believes that for, the same reasons noted above, 
companies should consider any applicable disclosure requirements under 
the federal securities laws if a company withdraws its listing 
application with Nasdaq for any reason.
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    \13\ See Notice, supra note 3.
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IV. Conclusion

    It is therefore ordered pursuant to section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NASDAQ-2014-102) be, and it 
hereby is, approved.
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-03518 Filed 2-19-15; 8:45 am]
BILLING CODE 8011-01-P