Document ID: SEC-2008-0235-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations: The NASDAQ Stock Market LLC
Posted Date: 2008-02-12T05:00Z

[Federal Register: February 12, 2008 (Volume 73, Number 29)]
[Notices]               
[Page 8084-8086]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12fe08-70]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57290; File No. SR-NASDAQ-2007-090]

 
Self-Regulatory Organizations; the NASDAQ Stock Market, LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to 
Accept Financial Statements Prepared in Accordance with International 
Financial Reporting Standards, as Issued by the International 
Accounting Standards Board, for Certain Foreign Private Issuers

February 7, 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 November 16, 2007, 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 prepared by Nasdaq. Nasdaq filed Amendment No. 1 to the 
proposed rule

[[Page 8085]]

change on February 6, 2008. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, 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 determine compliance with its listing standards 
based on financial statements prepared in accordance with International 
Financial Reporting Standards, as issued by the International 
Accounting Standards Board, for companies that are permitted to file 
financial statements using those standards with the Commission.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://nasdaq.complinet.com.

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* * * * *

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) No change.
    (2) (A)-(B) No change.
    (C) An issuer's qualifications will be determined on the basis of 
financial statements that are either: (i) Prepared in accordance with 
U.S. generally accepted accounting principles; or (ii) [those 
accompanied by detailed schedules quantifying the differences between] 
reconciled to U.S. generally accepted accounting principles as required 
by the Commission's rules [and those of the issuer's country of 
domicile]; or (iii) prepared in accordance with International Financial 
Reporting Standards, as issued by the International Accounting 
Standards Board, for companies that are permitted to file financial 
statements using those standards consistent with the Commission's 
rules.
    (D)-(E) No change.
    (3)-(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. 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
    Under current Commission rules, a foreign private issuer \4\ that 
files financial statements with the Commission that are prepared on a 
basis other than U.S. generally accepted accounting principals (``U.S. 
GAAP'') is required to include a reconciliation to U.S. GAAP. 
Similarly, Nasdaq's rules require a foreign private issuer to evidence 
compliance with the listing standards based on financial measures 
prepared in accordance with U.S. GAAP or reconciled to U.S. GAAP.\5\
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    \4\ A ``foreign private issuer'' is an issuer, other than a 
foreign government, that is incorporated in a foreign country and 
either: (i) Has a majority of its voting securities held other than 
by United States residents, or (ii) a majority of its executives are 
not United States citizens/residents, a majority of its assets are 
located outside of the United States and its business is principally 
administered outside the United States. See Securities Exchange Act 
Rule 3b-4(c), 17 CFR 240.3b-4(c).
    \5\ Nasdaq Rule 4320(e)(2)(C).
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    The Commission has recently approved a rule change to eliminate the 
requirement for a U.S. GAAP reconciliation for foreign private issuers 
that file financial statements prepared in accordance with 
International Financial Reporting Standards (``IFRS''), as issued by 
the International Accounting Standards Board (``IASB'').\6\ These 
changes apply only to foreign private issuers that file on Form 20-F, 
regardless of whether the issuer complies with IFRS as issued by the 
IASB voluntarily or in accordance with the requirements of the issuer's 
home country regulator or the exchange on which its securities are 
listed.\7\ A foreign private issuer will continue to be required to 
provide a reconciliation to U.S. GAAP if its financial statements 
include deviations from IFRS as issued by the IASB, if it does not 
state unreservedly and explicitly that its financial statements are in 
compliance with IFRS as issued by the IASB, if the auditor does not 
opine on compliance with IFRS as issued by the IASB, or if the 
auditor's report contains any qualification relating to compliance with 
IFRS as issued by the IASB.\8\ The Commission's rules are applicable to 
annual financial statements for financial years ending after November 
15, 2007, and to interim periods within those years, that are contained 
in filings made after March 4, 2008.\9\
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    \6\ See Securities Exchange Act Release No. 57026 (December 21, 
2007), 73 FR 986 (January 4, 2008) (the ``IFRS/IASB Adopting 
Release''). See also Securities Exchange Act Release No. 55998 (July 
2, 2007), 72 FR 37962 (July 11, 2007) (the ``IFRS/IASB Proposing 
Release''). The Commission is also considering whether to allow U.S. 
issuers to satisfy their reporting requirements through the 
provision of financial statements prepared in accordance with IFRS 
instead of U.S. GAAP. See Securities Exchange Act Release No. 56217 
(August 7, 2007), 72 FR 45600 (August 14, 2007). This proposed 
Nasdaq rule change would be applicable only to foreign private 
issuers and would not apply to domestic U.S. companies.
    \7\ IFRS/IASB Adopting Release at 992.
    \8\ Id. at 993. A foreign private issuer using a jurisdictional 
or other variation of IFRS will be able to rely on the amendments if 
that issuer also is able to state compliance with both IFRS as 
issued by the IASB and a jurisdictional variation of IFRS (and does 
so state), and its auditor opines that the financial statements 
comply with both IFRS as issued by the IASB and the jurisdictional 
variation, as long as the statement relating to the former is 
unreserved and explicit. Id.
    \9\ Id. at 994.
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    To allow foreign private issuers to take full advantage of this 
development, Nasdaq proposes changes to allow such issuers to evidence 
compliance with Nasdaq's listing requirements on the same basis as 
permitted by the Commission.
    Nasdaq believes that requiring companies to provide a U.S. GAAP 
reconciliation in order to obtain and maintain a listing on Nasdaq when 
they are no longer required to do so under Commission rules may result 
in issuers choosing not to list in the U.S. and so deny U.S. investors 
the ability to easily invest in such issuers. The proposed rule change 
would be compatible with the Commission's stated goal ``to facilitate 
cross-border capital formation while ensuring adequate disclosure for 
the protection of investors and the

[[Page 8086]]

promotion of fair, orderly and efficient markets.'' \10\
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    \10\ See the IFRS/IASB Proposing Release at 37965. See also 
IFRS/IASB Adopting Release at 1006 (noting that moving towards a 
single set of globally accepted accounting standards will have 
positive effects on investors).
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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 
section 6(b)(5) of the Act,\12\ in particular. Section 6(b)(5) requires 
that an exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. Nasdaq believes that the proposed rule change is 
consistent with these requirements in that modifying the U.S. GAAP 
reconciliation requirements will ease the burden of compliance on 
foreign private issuers, in a manner consistent with proposed changes 
to the federal securities laws, and will not adversely affect 
investors.
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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.

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 self-regulatory organization 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-2007-090 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-2007-090. 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, 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 Number SR-NASDAQ-2007-090 and should 
be submitted on or before March 4, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\

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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2567 Filed 2-11-08; 8:45 am]

BILLING CODE 8011-01-P