Document ID: SEC-2011-0524-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-04-13T04:00Z

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20744-20747]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8914]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64263; File No. SR-NASDAQ-2011-050]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify an Initial Listing Standard for the Nasdaq Global Select Market

April 8, 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 April 1, 2011, The NASDAQ Stock Market LLC (``Nasdaq'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and III below, which Items have 
been prepared by Nasdaq. Nasdaq has designated the proposed rule change 
as effecting a change described under Rule 19b-4(f)(6) under the 
Act,\3\ which renders the proposal effective upon filing with the 
Commission. The Commission is publishing this notice to

[[Page 20745]]

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\ 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 modify an initial listing standard for the 
Nasdaq Global Select Market. Nasdaq will implement the proposed rule 
change immediately.
    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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    \4\ 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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5310. Definitions and Computations
    (a)-(i) No change.
    (j) In computing total assets and stockholders' equity for purposes 
of Rule 5315(f)(3)(D), Nasdaq will rely on a Company's most recent 
publicly reported financial statements subject to the adjustments 
described below:
    (1) Application of Use of Proceeds--If a company is in registration 
with the SEC and is in the process of an equity offering, adjustments 
should be made to reflect the net proceeds of that offering, and the 
specified intended application(s) of such proceeds to:
    (A) Pay off existing debt or other financial instruments: The 
adjustment will include elimination of the actual historical interest 
expense on debt or other financial instruments classified as 
liabilities under generally accepted accounting principles being 
retired with offering proceeds of all relevant periods or by conversion 
into common stock at the time of an initial public offering occurring 
in conjunction with the company's listing. If the event giving rise to 
the adjustment occurred during a time-period such that pro forma 
amounts are not set forth in the SEC registration statement (typically, 
the pro forma effect of repayment of debt will be provided in the 
current registration statement only with respect to the last fiscal 
year plus any interim period in accordance with SEC rules), the company 
must prepare the relevant adjusted financial data to reflect the 
adjustment to its historical financial data, and its outside audit firm 
must provide a report of having applied agreed-upon procedures with 
respect to such adjustments. Such report must be prepared in accordance 
with the standards established by the American Institute of Certified 
Public Accountants.
    (B) Fund an acquisition:
    (i) The adjustments will include those applicable with respect to 
acquisition(s) to be funded with the proceeds. Adjustments will be made 
that are disclosed as such in accordance with Rule 3-05 ``Financial 
Statements of Business Acquired or to be Acquired'' and Article 11 of 
Regulation S-X. Adjustments will be made for all the relevant periods 
for those acquisitions for which historical financial information of 
the acquiree is required to be disclosed in the SEC registration 
statement; and (ii) Adjustments applicable to any period for which pro 
forma numbers are not set forth in the registration statement shall be 
accompanied by the relevant adjusted financial data to combine the 
historical results of the acquiree (or relevant portion thereof) and 
acquiror, as disclosed in the company's SEC filing. Under SEC rules, 
the number of periods disclosed depends upon the significance level of 
the acquiree to the acquiror. The adjustments will include those 
necessary to reflect (a) the allocation of the purchase price, 
including adjusting assets and liabilities of the acquiree to fair 
value recognizing any intangibles (and associated amortization and 
depreciation), and (b) the effects of additional financing to complete 
the acquisition. The company must prepare the relevant adjusted 
financial data to reflect the adjustment to its historical financial 
data, and its outside audit firm must provide a report of having 
applied agreed-upon procedures with respect to such adjustments. Such 
report must be prepared in accordance with the standards established by 
the American Institute of Certified Public Accountants.
    (2) Acquisitions and Dispositions--In instances other than 
acquisitions (and related dispositions of part of the acquiree) funded 
with the use of proceeds, adjustments will be made for those 
acquisitions and dispositions that are disclosed as such in a company's 
financial statements in accordance with Rule 3-05 ``Financial 
Statements of Business Acquired or to be Acquired'' and Article 11 of 
Regulation S-X. If the disclosure does not specify pre-tax earnings 
from continuing operations, minority interest, and equity in the 
earnings or losses of investees, then such data must be prepared by the 
company's outside audit firm for the Exchange's consideration. In this 
regard, the audit firm would have to issue an independent accountant's 
report on applying agreed-upon procedures in accordance with the 
standards established by the American Institute of Certified Public 
Accountants.
5315. Initial Listing Requirements for Primary Equity Securities
    Rule 5310 provides guidance about computations made under this Rule 
5315.
    (a)--(e) No change.

    (f)

(1)-(2) No change
(3) Valuation Requirement

    A Company, other than a closed end management investment company, 
shall meet the requirements of sub-paragraph (A), (B), (C), or (D) 
below:
    (A)-(C) No change.
    (D) (i) Market capitalization of at least $160 million, (ii) total 
assets of at least $80 million [for the most recently completed fiscal 
year], and (iii) stockholders' equity of at least $55 million.
* * * * *

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 recently adopted an initial listing standard for the Nasdaq 
Global Select Market that permits listing if the company has: (i) $80 
million in total assets; (ii) $55 million in stockholders' equity; and 
(iii) $160 million of market capitalization.\5\ Companies qualifying 
under this standard also have to meet all other requirements of Rule 
5315, including the ownership and market value requirements contained 
in Rule 5315(f) and, upon listing, are subject to the Global Market 
continued listing standards.
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    \5\ Securities Exchange Act Release No. 61904 (April 14, 2010), 
75 FR 20651 (April 20, 2010) (SR-NASDAQ-2010-047).
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    Nasdaq based this listing standard on a listing standard adopted by 
the New York Stock Exchange (``NYSE''), though the numeric requirements 
of the Nasdaq standard are higher than those of the

[[Page 20746]]

NYSE.\6\ However, unlike the NYSE requirement upon which the standard 
is based, Nasdaq required that the total assets portion of the 
requirement be met at the end of the prior fiscal year. As a result, 
companies are only able to demonstrate compliance with the total assets 
portion of this standard based on a single point in time each year--the 
year-end financials. To conform with NYSE's treatment under their 
comparable standard, Nasdaq proposes to delete the requirement in Rule 
5315(f)(3)(D)(ii) that total assets be demonstrated as of the close of 
the most recent fiscal year. Nasdaq also proposes to add a definition 
in Rule 5310 explaining what adjustments will be made to total assets 
and stockholders' equity to reflect the use of proceeds and 
acquisitions and dispositions. These adjustments are identical to the 
adjustments specified in the NYSE Listed Company Manual.\7\
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    \6\ Securities Exchange Act Release No. 58934 (November 12, 
2008), 73 FR 69708 (November 19, 2008) (SR-NYSE-2008-098, modifying 
Section 102.01C of the Listed Company Manual). The NYSE listing 
standard allows a company to list if it has total assets of at least 
$75 million, stockholders' equity of at least $50 million, and a 
global market capitalization of at least $150 million.
    \7\ See Section 102.01C(IV)(ii) of the Listed Company Manual 
noting that total assets and stockholders' equity are adjusted 
pursuant to Sections 102.01C(I)(3)(a) and (b).
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    Nasdaq believes that the proposed amendment to Rule 5315(f)(3)(D) 
does not affect the status of Global Select Market-listed securities 
under Securities Exchange Act Rule 3a51-1(a) (the ``Penny Stock 
Rule''),\8\ as the amended standards satisfy the requirements of 
Exchange Act Rule 3a51-1(a)(2).\9\ Rule 5315(f)(3)(D) requires 
stockholders' equity of at least $55 million, which exceeds the 
requirement in SEC Rule 3a51-1(a)(2)(i)(A)(1) of $5 million. Rule 
5315(f)(3)(D) also requires a minimum market capitalization of $160 
million. Nasdaq believes that this meets or exceeds the requirement of 
SEC Rule 3a51-1(a)(2)(i)(B) that a company have a market value of 
listed securities of at least $50 million, although these are not 
identical standards. Nasdaq believes that its Global Select Market's 
rules will also exceed the Penny Stock Rules remaining stock price and 
distribution requirements. Rule 5315(e)(1) requires companies initially 
listing on Nasdaq to have a minimum bid price of $4 per share, thereby 
satisfying the $4 requirement of SEC Rule 3a51-1(a)(2)(i)(C). Rule 
5315(f)(1) requires a company's securities to have either 450 round lot 
holders or at least 2,200 total holders, although if a company is 
publicly traded and has an average monthly trading volume over the 
prior 12 months of at least 1.1 million shares per month, it can list 
with 550 total holders. Nasdaq believes that these requirements are 
comparable to, or more stringent than, the requirement of SEC Rule 
3a51-1(a)(2)(i)(D) that a security have at least 300 round lot holders, 
and satisfy the same objective by assuring adequate liquidity in the 
security. Last, SEC Rule 3a51-1(a)(2)(i)(E) requires at least 1 million 
publicly held shares with a market value of at least $5 million. Rule 
5315(e)(2) requires all securities listing on the Nasdaq Global Select 
Market to have at least 1.25 million publicly held shares and Rule 
5215(f)(2) requires a minimum $45 million market value of publicly held 
shares. As such, Nasdaq believes its initial listing standards for the 
Global Select Market continue to meet or exceed the requirements of the 
Penny Stock Rules.\10\
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    \8\ 17 CFR 240.a51-1(a).
    \9\ 17 CFR 240.a51-1(a)(2).
    \10\ Nasdaq notes that each of these requirements exceed the 
comparable requirements of the NYSE. See Securities Exchange Act 
Release No. 58934, supra, note 6.
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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,\11\ in general and with 
Sections 6(b)(5) of the Act,\12\ 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. The proposed rule change is 
consistent with the investor protection objectives of the Act in that 
the proposed requirements modify and provide transparency to the 
calculation of total assets, but maintain the requirement at a level 
high enough so that only companies that are suitable for listing on the 
Global Select Market will qualify to list.
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    \11\ 15 U.S.C. 78f.
    \12\ 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 proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and 
Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give 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. 
The Commission notes that the Exchange has satisfied this 
requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that companies may immediately take advantage of the proposed rule 
change. In support of the waiver, Nasdaq believes that its proposal is 
consistent with NYSE's rules, which were previously published for 
public comment, and raise no new issues.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the operative delay is 
consistent with the protection of investors and the public interest. In 
making this determination, the Commission notes that Nasdaq's proposed 
rule change is consistent with the NYSE's comparable listing standard 
in Section 102.01C(IV) of the NYSE's Listed Company Manual (``Assets 
and Equity Test'') and applicable adjustments as set forth in Section 
102.01C(I) of the NYSE's Listed Company Manual.\17\ The Commission 
believes that Nasdaq's proposed rule

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change does not raise any issues that were not previously considered by 
the Commission in its approval of the NYSE's Assets and Equities Test 
and does not otherwise raise any new regulatory issues. The Commission 
also notes that the NYSE's proposal to adopt the Assets and Equity Test 
listing standard, with the applicable adjustments noted above, was 
subject to full notice and comment, and the Commission received no 
comments on the NYSE's rule proposal. For these reasons, the Commission 
designates, consistent with the protection of investors and the public 
interest, that the proposed rule change become operative immediately 
upon filing.\18\
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    \17\ See supra notes 6 and 7.
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the 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 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 No. SR-NASDAQ-2011-050 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 No. SR-NASDAQ-2011-050. 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 Web site 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 
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 No. SR-NASDAQ-2011-050 and should be 
submitted on or before May 4, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8914 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P