Document ID: SEC-2011-0891-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2011-06-27T04:00Z

[Federal Register Volume 76, Number 123 (Monday, June 27, 2011)]
[Notices]
[Pages 37388-37390]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15964]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64713; File No. SR-NASDAQ-2011-082]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Align Certain Disclosure Requirements in Nasdaq's Corporate Governance 
Rules with Similar Disclosure Requirements in the Commission's Rules

 June 21, 2011.
    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 June 9, 2011, The NASDAQ Stock Market LLC (``Nasdaq'') filed with 
the Securities and Exchange Commission (``Commission'')

[[Page 37389]]

the proposed rule change as described in Items I and II below, which 
Items have been prepared by Nasdaq. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to align certain disclosure requirements in 
Nasdaq's corporate governance rules with similar disclosure 
requirements in the Commission's rules. Nasdaq will implement the 
proposed rule change thirty days after the date of the filing. The text 
of the proposed rule change is below. Proposed new language is in 
italics; proposed deletions are in brackets.\5\
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    \5\ 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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* * * * *

5605.  Boards of Directors and Committees.

    (a) No change.
    IM-5605. No change.
    (b) Independent Directors
    (1) Majority Independent Board
    A majority of the board of directors must be comprised of 
Independent Directors as defined in Rule 5605(a)(2). The Company, other 
than a Foreign Private Issuer, must [disclose in its annual proxy (or, 
if the Company does not file a proxy, in its Form 10-K or 20-F) those 
directors that the board of directors has determined to be independent 
under Rule 5605(a)(2).] comply with the disclosure requirements set 
forth in Item 407(a) of Regulation S-K. A Foreign Private Issuer must 
disclose in its next annual report (e.g., Form 20-F or 40-F) those 
directors that the board of directors has determined to be independent 
under Rule 5605(a)(2).
    (A) No change.
    IM-5605-1. No change.
    (2) No change.
    IM-5605-2. No change.
    (c)--(e) No change.
* * * * *

5615.  Exemptions from Certain Corporate Governance Requirements

    This rule provides the exemptions from the corporate governance 
rules afforded to certain types of Companies, and sets forth the phase-
in schedules for initial public offerings, Companies emerging from 
bankruptcy and Companies transferring from other markets. This rule 
also describes the applicability of the corporate governance rules to 
controlled companies and sets forth the phase-in schedule afforded to 
Companies ceasing to be controlled companies.
    (a)--(b) No change.
    (c) How the Rules Apply to a Controlled Company
    (1) No change.
    (2) Exemptions Afforded to a Controlled Company
    A Controlled Company is exempt from the requirements of Rules 
5605(b), (d) and (e), except for the requirements of subsection (b)(2) 
which pertain to executive sessions of Independent Directors. A 
Controlled Company, other than a Foreign Private Issuer, relying upon 
this exemption must [disclose in its annual meeting proxy statement 
(or, if the Company does not file a proxy, in its Form 10-K or 20-F) 
that it is a Controlled Company and the basis for that determination.] 
comply with the disclosure requirements set forth in Instruction 1 to 
Item 407(a) of Regulation S-K. A Foreign Private Issuer must disclose 
in its next annual report (e.g., Form 20-F or 40-F) that it is a 
Controlled Company and the basis for that determination.
    (3) 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 proposes to make changes to Rules 5605(b)(1) and 5615(c)(2) 
to align certain disclosure requirements with the applicable disclosure 
requirements of Item 407(a) of Regulation S-K \6\ and incorporate those 
requirements into Nasdaq rules.
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    \6\ 17 CFR 229.407(a).
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    Nasdaq currently requires a listed company to disclose in its 
annual proxy (or if the company does not file a proxy, in its Form 10-K 
or 20-F) those directors that the board of directors has determined to 
be independent.\7\ Nasdaq proposes to replace its current disclosure 
requirement in Listing Rule 5605(b)(1) with a reference to the 
disclosure requirement in Item 407(a) of Regulation S-K, which requires 
similar disclosure.\8\ As a result, a listed company, other than a 
foreign private issuer, that does not make the disclosure required 
under Item 407(a) of Regulation S-K will be out of compliance with 
Nasdaq's rules. A foreign private issuer, which is not subject to Item 
407(a) of Regulation S-K, will continue to be required to make the 
disclosure in its annual report.
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    \7\ Nasdaq Listing Rule 5605(b)(1).
    \8\ See 17 CFR 229.407(a) (requiring a company to, among other 
things, identify each director that is independent and explain the 
factors considered by the board in making its independence 
determination).
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    Nasdaq believes that the disclosure requirements in current Nasdaq 
Listing Rule 5605(b)(1) and Item 407(a) of Regulation S-K are 
substantially similar and, to the extent they differ, Item 407(a) 
requires more disclosure.\9\ As a result, incorporating these 
additional disclosure requirements from Item 407(a) of Regulation S-K 
into Nasdaq's rules will avoid duplication and confusion and enhance 
overall disclosures by its listed companies.
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    \9\ Id. Differences include where Item 407(a)(2) of Regulation 
S-K requires specific disclosures when a registrant uses its own 
definitions when determining whether directors and director nominees 
are independent and where Item 407(a)(3) of Regulation S-K requires 
specific disclosures of any transactions, relationships or 
arrangements not disclosed pursuant to Item 404 of Regulation S-K 
that were considered by the board in determining independence.
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    Nasdaq also currently requires a company to disclose that it is a 
controlled company, the basis for that determination, and that it is 
relying on the exemption for a controlled company from the requirements 
to have a majority independent board and independent director oversight 
of executive officer compensation and director nominations.\10\ Nasdaq 
proposes to replace this disclosure requirement with a reference to the 
disclosure requirement in Instruction 1 to Item 407(a) of Regulation S-
K, which requires similar disclosure.\11\ As a

[[Page 37390]]

result, a controlled company, other than a foreign private issuer, that 
does not make the disclosure required under Instruction 1 to Item 
407(a) of Regulation S-K will be out of compliance with Nasdaq's rules. 
A foreign private issuer, which is not subject to Item 407(a) of 
Regulation S-K, will continue to be required to make the disclosure in 
its annual report. Nasdaq believes that the disclosure requirements in 
current Nasdaq Listing Rule 5615(c)(2) and Instruction 1 to Item 407(a) 
of Regulation S-K are substantially similar.\12\
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    \10\ Nasdaq Listing Rule 5615(c)(2).
    \11\ See 17 CFR 229.407(a) (in instruction 1, requiring a 
company that is relying on an exemption to disclose the exemption 
relied upon and explain the basis for concluding that such exemption 
is applicable).
    \12\ Id.
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    Nasdaq believes that the proposed changes will avoid duplication 
and confusion, given that the current Nasdaq disclosure requirements 
are duplicative of the disclosure required by Item 407(a), and will 
facilitate compliance for listed companies while continuing to provide 
transparency to investors. As a result of the changes, Nasdaq rules 
will be harmonized with the applicable disclosure requirements of Item 
407(a) of Regulation S-K without substantively lessening any of 
Nasdaq's regulatory requirements for listed companies.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\13\ in general and with Section 
6(b)(5) of the Act,\14\ in particular. The proposed rule change would 
remove disclosure requirements in Nasdaq's rules that are similar to 
Commission disclosure requirements and provide cross references to 
Commission requirements. Nasdaq believes the proposed amendments are 
consistent with the protection of investors and the public interest, as 
they simply harmonize Nasdaq's disclosure requirements with those of 
the Commission and, therefore, do not substantively lessen Nasdaq's 
regulatory requirements for listed companies. As such, the proposed 
rule change is 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 investors and the 
public interest.
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    \13\ 15 U.S.C. 78f.
    \14\ 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

    Because the foregoing proposed rule does not (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file the proposed rule change, along with a brief description and text 
of the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change or such shorter time as 
designated by the Commission,\15\ the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \15\ The Exchange has satisfied this requirement.
    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2011-082 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-2011-082. 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-2011-082 and 
should be submitted on or before July 18, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15964 Filed 6-24-11; 8:45 am]
BILLING CODE 8011-01-P