Document ID: SEC-2006-0271-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-03-02T05:00Z

[Federal Register: March 2, 2006 (Volume 71, Number 41)]
[Notices]               
[Page 10734-10736]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02mr06-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53362; File No. SR-NASD-2006-028]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change To Allow Nasdaq 
To Take Certain Actions on Behalf of Its Issuers in Connection With 
Nasdaq's Transition to a National Securities Exchange

February 24, 2006.
    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 February 23, 2006, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``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. 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

    Nasdaq proposes to adopt NASD Rule 4130 to allow Nasdaq to file an 
application with the Commission or another appropriate regulator on 
behalf of its issuers to register their listed securities under Section 
12(b) of the Act, or seek a temporary exemption from Section 12, in 
connection with Nasdaq's transition to one of its subsidiaries 
operating as a national securities exchange. Nasdaq will implement the 
proposed rule upon approval. The text of the proposed rule change is 
below. Proposed new language is in italics.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com. No pending rule 

filings would affect the text of this rule. Because of the nature of 
this rule, no conforming change will be made to the rules of The 
NASDAQ Stock Market LLC. See Securities Exchange Act Release No. 
53128 (January 13, 2006), 71 FR 3550 (January 23, 2006).
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4130. Permission to Act on Behalf of Issuer

    In connection with The NASDAQ Stock Market LLC (the ``Nasdaq 
Exchange'') commencing operations as a national securities exchange, 
each issuer authorizes Nasdaq and the Nasdaq Exchange to file an 
application to register under Section 12(b) of the Act any class of the 
issuer's securities that is listed on Nasdaq on the day immediately 
preceding the day the Nasdaq Exchange commences such operations; 
provided, however, that this provision shall not be applicable to any 
security that the issuer informs Nasdaq, pursuant to procedures set 
forth by Nasdaq, should not be so registered. The application to 
register under Section 12(b) of the Act will be filed with the 
Commission or, for those securities subject to Section 12(i) of the 
Act, with the appropriate banking regulator specified in Section 12(i). 
The authorization in this paragraph includes allowing Nasdaq and the 
Nasdaq Exchange to request any appropriate regulatory relief from the 
provisions of Section 12.
* * * * *

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 had 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
    On January 13, 2006, the Commission approved Nasdaq's application 
to register one of its subsidiaries, The Nasdaq Stock Market LLC 
(``Nasdaq Exchange''), as a national securities exchange.\4\ Once the 
Nasdaq Exchange begins operation, securities listed on Nasdaq will need 
to have been registered under Section 12(b) of the Act so that brokers 
and dealers may effect transactions in these securities on the Nasdaq 
Exchange consistent with Section 12(a) of the Act.\5\ Accordingly, 
absent relief from the Commission and other regulators, Nasdaq's 
transition to the Nasdaq Exchange beginning operations as a national 
securities exchange would require approximately 3,200 Nasdaq National 
Market and Capital Market issuers to register their Nasdaq-listed 
securities under Section 12(b) of the Act. This process would require 
each issuer to file a registration statement with the Commission or 
other appropriate regulator.\6\ The Nasdaq Exchange would then be 
required to certify to the Commission and the Banking Regulators that 
each issuer's securities are approved for listing and registration.
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    \4\ Securities Exchange Act Release No. 53128 (January 13, 
2006), 71 FR 3550 (January 23, 2006).
    \5\ Section 12(a) of the Act, 15 U.S.C. 78l(a). As discussed in 
footnote 10, Nasdaq anticipates that it will seek relief from the 
Section 12(b) registration requirement during a limited transition 
period for certain securities that are currently exempt from 
registration under Section 12(g).
    \6\ Section 12(i) of the Act requires filings relating to 
certain financial institutions to be made with the Comptroller of 
the Currency, the Board of Governors of the Federal Reserve System, 
the Federal Deposit Insurance Corporation, or the Office of Thrift 
Supervision (collectively, the ``Banking Regulators''). 15 U.S.C. 
78l(i).
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    Nasdaq believes that this registration process would be confusing 
and would place an unnecessary cost and administrative burden on 
issuers, on the Commission and Banking Regulators, and on Nasdaq, and 
would not be in the public interest. For the great majority of issuers 
whose securities are currently listed on Nasdaq, this additional 
registration process would not result in any significant benefit to the 
marketplace or investors because they would not receive any additional 
information regarding the security. Nasdaq issuers whose securities are 
registered under Sections 12(b) or 12(g) of the Act would have already 
filed a registration statement pursuant to the Act to register those 
securities. Similarly, issuers registered under the Investment Company 
Act of 1940 (the ``1940 Act'') will have filed detailed information 
with the Commission.\7\ There are also no material differences in

[[Page 10735]]

the regulatory requirements for issuers whose securities are registered 
under Section 12(b) and those whose securities are registered under 
Section 12(g) or are exempted pursuant to Section 12(g)(2)(B) of the 
Act that would negatively impact investors or place additional burdens 
on the issuers.\8\
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    \7\ In particular, each registered investment company has filed 
a registration statement with the Commission under the 1940 Act and 
has made periodic filings under the 1940 Act identical in form to 
those required of investment companies that have registered their 
securities under Section 12(b) of the Act.
    \8\ Nasdaq believes that the only differences relate to how the 
issuer identifies itself on the cover of its periodic reports (e.g., 
as registered under Section 12(b) instead of Section 12(g)) and the 
process surrounding a decision to delist or deregister. Nasdaq also 
notes that an issuer registered under the 1940 Act will satisfy its 
obligation to file reports under the Act through the filing of 
reports that it is already required to make under the 1940 Act.
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    As a result, Nasdaq proposes to file a single application for 
registration on behalf of these issuers by means of a letter to the 
Commission and Banking Regulators. To provide notice of Nasdaq's plan 
to seek Section 12(b) registration on behalf of its issuers and to 
assure sufficient authority for Nasdaq to make this application, 
however, Nasdaq has proposed adopting a rule specifically permitting 
Nasdaq and the Nasdaq Exchange to take this action.
    Prior to filing this application, Nasdaq will provide notice to 
each issuer and will allow any issuer that does not wish to register 
under Section 12(b) the ability to opt-out of Nasdaq's request to the 
Commission and Banking Regulators.\9\ Nasdaq expects to provide 
companies 10 business days to request to opt-out of Nasdaq's 
application on their behalf under Section 12(b). The result of an 
issuer choosing to opt-out would be that the issuer's securities would 
be ineligible to be listed and traded on the Nasdaq Exchange as of the 
operational date; such issuers would instead trade on the pink sheets 
or OTC Bulletin Board unless the issuer filed a Section 12(b) 
registration statement with the Commission in connection with listing 
on the Nasdaq Exchange or on another national securities exchange. 
Following this opt-out period, Nasdaq will submit a letter to the 
Commission and Banking Regulators requesting that such letter serve as 
the application for registration under Section 12(b), as well as the 
Nasdaq Exchange's certification of such application, for all those 
issuers with securities registered under Section 12(b) or 12(g) or 
exempt from registration under Section 12(g)(2)(B) and listed on Nasdaq 
on the day immediately preceding Nasdaq Exchange's operation as a 
national securities exchange.\10\ Nasdaq will notify issuers when this 
relief is granted.\11\
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    \9\ Nasdaq will make this notification via e-mail to the 
issuer's e-mail address on file with Nasdaq, or, if no e-mail 
address is available, via facsimile. Nasdaq will also issue a press 
release describing this process and post information about this 
process to its Web site.
    \10\ Nasdaq also anticipates that this letter will seek relief 
from the registration requirement for securities currently exempt 
from registration under Section 12(g)(2)(G) of the Act and Rule 
12g3-2(b) thereunder to allow these securities to trade on the 
Nasdaq Exchange during a limited transition period. The proposed 
rule would specifically permit Nasdaq to request such regulatory 
relief. Nasdaq would follow the same notice and opt-out procedures 
for these companies.
    \11\ Nasdaq will make this notification in the same manner as 
the earlier notification, including the issuance of a press release. 
See footnote 9, supra.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\12\ in general, and furthers 
the objectives of section 15A(b)(6),\13\ in particular, in that it is 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market, and 
to protect investors and the public interest. The proposed rule change 
would allow Nasdaq's issuers to seamlessly transition to the Nasdaq 
Exchange, thus removing a potential impediment to the mechanism of a 
free and open market and protecting the public interest.
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    \12\ 15 U.S.C. 78o-3.
    \13\ 15 U.S.C. 78o-3(b)(6).
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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

    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 NASD 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-NASD-2006-028 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-NASD-2006-028. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the NASD. 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 publicly available. All submissions should refer to 
File Number SR-NASD-2006-028 and should be submitted on or before March 
23, 2006.

[[Page 10736]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-2960 Filed 3-1-06; 8:45 am]

BILLING CODE 8010-01-P