Document ID: SEC-2018-1807-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2018-11-26T05:00Z

[Federal Register Volume 83, Number 227 (Monday, November 26, 2018)]
[Notices]
[Pages 60545-60547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25731]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84629; File No. SR-NASDAQ-2018-095]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Nasdaq Rule 5615(b)(4) To Change the Threshold for Qualifying as a 
Smaller Reporting Company To Qualify for Certain Exemptions From the 
Compensation Committee Requirements

November 20, 2018.
    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 November 14, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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 Nasdaq Rule 5615(b)(4) to change the 
threshold for listed companies that are eligible to benefit from the 
exemptions from the Exchange's compensation committee requirements 
applicable to smaller reporting companies so that all companies that 
qualify for smaller reporting company status under the revised SEC 
definition will qualify for the Exchange's exemptions.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.com, 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
    The purpose of the proposed rule change is to amend Rule 5615(b)(4) 
to change the threshold for listed companies that are eligible to 
benefit from the exemptions from the Exchange's compensation committee 
requirements applicable to smaller reporting companies so that all 
companies that qualify for smaller reporting company status under the 
revised SEC definition will qualify for the Exchange's exemptions.
    The SEC recently adopted \3\ amendments to the definition of 
``smaller reporting company'' set forth in Item 10(f)(1) of Regulation 
S-K,\4\ Rule 12b-2 under the Act \5\ and Rule 405 under the Securities 
Act of 1933.\6\ The amendments raise the smaller reporting company cap 
from less than $75 million in public float to less than $250 million 
and also include as smaller reporting companies issuers with less than 
$100 million in annual revenues if they also have either no public 
float or a public float that is less than $700 million. The amendments 
became effective on September 10, 2018. As a result of the SEC rule 
changes, an expanded number of registrants, and hence, of listed 
companies, will qualify for smaller reporting company status than was 
previously the case.\7\
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    \3\ See Release Nos. 33-10513 and 34-83550 (June 28, 2018); 83 
FR 31992 (July 10, 2018) (the ``Adopting Release'').
    \4\ 17 CFR 229.10(f)(1).
    \5\ 17 CFR 240.12b-2.
    \6\ 17 CFR 230.405.
    \7\ See the Adopting Release.
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    Smaller reporting companies are entitled to avail themselves of 
certain exemptions from Nasdaq's compensation committee 
requirements.\8\

[[Page 60546]]

Rule 5615(b)(4) includes a provision describing the period within which 
a company must comply with all applicable compensation committee 
requirements after it ceases to be a smaller reporting company.\9\ This 
provision currently states explicitly that a smaller reporting company 
must have less than $75 million in public float. In light of the recent 
changes to the SEC's rules with respect to smaller reporting companies, 
the Exchange proposes to delete this reference to the $75 million 
public float cap and revise the provision to state simply that a 
smaller reporting company that fails to meet the requirements for 
smaller reporting company status as of the last business day of its 
second fiscal quarter (the Determination Date) will cease to be a 
smaller reporting company as of the beginning of the following fiscal 
year. The effect of the proposed rule change is to change the threshold 
for listed companies that are eligible to benefit from the exemptions 
from the Exchange's compensation committee requirements applicable to 
smaller reporting companies so that all companies that qualify for 
smaller reporting company status under the revised SEC definition will 
qualify for the Exchange's exemptions.
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    \8\ Specifically, pursuant to Rule 5605(d)(5), a listed company 
that satisfies the definition of smaller reporting company is not 
required to comply with: (i) The additional requirements with 
respect to the independence of compensation committee members set 
forth in Rule 5605(d)(2)(A); (ii) the requirements with respect to 
the specific compensation committee responsibilities and authority 
set forth in Rule 5605(d)(3) and the requirement to include such 
responsibilities and authority in its compensation committee charter 
as set forth in Rule 5605(d)(1)(D); or (iii) the requirement with 
respect to the compensation committee's responsibility to review and 
reassess the adequacy of its compensation committee charter on an 
annual basis. A listed smaller reporting company must comply with 
all other applicable Exchange corporate governance requirements, 
including all other applicable compensation committee requirements, 
unless it qualifies for another exemption from those requirements.
    \9\ Under the SEC rules set forth above with respect to smaller 
reporting companies, a company tests its status as a smaller 
reporting company on an annual basis at the end of its most recently 
completed second fiscal quarter (``Determination Date''). A smaller 
reporting company ceases to be a smaller reporting company as of the 
beginning of the fiscal year following the Determination Date 
(``Start Date''). By six months from the Start Date, a company must 
comply with Rule 5605(d)(3) and certify to Nasdaq that: (i) It has 
complied with the requirement in Rule 5605(d)(1) to adopt a formal 
written compensation committee charter including the content 
specified in Rule 5605(d)(1)(A)- (D); and (ii) it has complied, or 
within the applicable phase-in schedule will comply, with the 
additional requirements in Rule 5605(d)(2)(A) regarding compensation 
committee composition. A company shall be permitted to phase in its 
compliance with the additional compensation committee eligibility 
requirements of Rule 5605(d)(2)(A) relating to compensatory fees and 
affiliation as follows: (i) One member must satisfy the requirements 
by six months from the Start Date; (ii) a majority of members must 
satisfy the requirements by nine months from the Start Date; and 
(iii) all members must satisfy the requirements by one year from the 
Start Date.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\10\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\11\ in particular, in that it 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    As noted above, the effect of the proposed rule change is to change 
the threshold for listed companies that are eligible to benefit from 
the exemptions from the Exchange's compensation committee requirements 
applicable to smaller reporting companies so that all companies that 
qualify for smaller reporting company status under the revised SEC 
definition will qualify for the Exchange's exemptions. A listed smaller 
reporting company must comply with all other applicable Exchange 
corporate governance requirements, including all other applicable 
compensation committee requirements, unless it qualifies for some other 
exemption from those requirements. The Commission has already 
determined through its own rulemaking that the revised thresholds for 
smaller reporting company status proposed in this rule proposal are 
consistent with the goal of the Act to further the protection of 
investors and the public interest \12\ and the Exchange believes that 
its own proposal is consistent with Section 6(b)(5) of the Act for the 
same reasons. The Exchange also believes that the proposed rule change 
fosters cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities because it conforms Rule 
5615(b)(4) to a rule change made by the Commission.
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    \12\ See supra note 3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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 will not impose 
any burden on competition as its sole purpose is to change the 
threshold for listed companies that are eligible to benefit from the 
exemptions from the Exchange's compensation committee requirements 
applicable to smaller reporting companies so that all companies that 
qualify for smaller reporting company status under the revised SEC 
definition will qualify for the Exchange's exemptions.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the proposed rule change 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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder. \15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file 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. The Exchange has 
satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6)\16\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. In its filing with the 
Commission, Nasdaq has asked the Commission to waive the 30-day 
operative delay to make Nasdaq Rule 5615(b)(4) consistent with the 
Commission's revised definition of smaller reporting company that 
became effective on September 10, 2018. As such, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest and designates the 
proposed rule change operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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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

[[Page 60547]]

public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings under Section 
19(b)(2)(B) \19\ of the Act to determine whether the proposed rule 
change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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-2018-095 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-2018-095. 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 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. 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-2018-095, and should be submitted 
on or before December 17, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25731 Filed 11-23-18; 8:45 am]
 BILLING CODE 8011-01-P