Document ID: SEC-2008-0748-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2008-05-29T04:00Z

[Federal Register: May 29, 2008 (Volume 73, Number 104)]
[Notices]               
[Page 30990-30992]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29my08-134]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57842; File No. SR-NASDAQ-2008-031]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Amend Rule 4350 Related to 
the Direct Registration Programs

May 20, 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 April 1, 2008, The NASDAQ Stock Market LLC (``Nasdaq'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change described in Items I, II, and III below, which items have 
been prepared primarily by Nasdaq. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
parties.
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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 modify the requirement for a foreign private 
issuer to be eligible to rely on an exception to the requirement to 
participate in a Direct Registration Program and to clarify the 
applicability of the requirement to book-entry-only securities. Nasdaq 
will implement the proposed change related to book-entry-only 
securities immediately upon approval and the proposed change affecting 
foreign private issuers on March 31, 2009.
    The text of the proposed rule change is below. Proposed new 
language is in 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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Rule 4350. Qualitative Listing Requirements for Nasdaq Issuers Except 
for Limited Partnerships

(a) Applicability
    (1) Foreign Private Issuers. A foreign private issuer may follow 
its home country practice in lieu of the requirements of Rule 4350, 
provided, however, that such an issuer shall: Comply with Rules 
4350(b)(1)(B), 4350(j) and 4350(m), have an audit committee that 
satisfies Rule 4350(d)(3), and ensure that such audit committee's 
members meet the independence requirement in Rule 4350(d)(2)(A)(ii). In 
addition, a foreign private issuer must be eligible to participate in a 
Direct Registration Program, as required by Rule 4350(l), unless 
prohibited from complying by a law or regulation in its home country. A 
foreign private issuer that follows a home country practice in lieu of 
one or more provisions of Rule 4350 shall disclose in either its annual 
reports filed with the Commission or on its website each requirement of 
Rule 4350 that it does not follow and shall describe the home country 
practice followed by the issuer in lieu of such requirements. In 
addition, a foreign private issuer making its initial public offering 
or first U.S. listing on Nasdaq shall make the same disclosures in 
either its registration statement or on its website.
    (2)--(5) No change.
    (b)--(k) No change.
(l) Direct Registration Program
    (1) All securities initially listing on Nasdaq on or after January 
1, 2007, must be eligible for a Direct Registration Program operated by 
a clearing agency registered under Section 17A of the Exchange Act. 
This provision does not extend to: (i) Additional classes of securities 
of companies which already have securities listed on Nasdaq; (ii) 
companies which immediately prior to such listing had securities listed 
on another registered securities exchange in the U.S; or, (iii) [non-
equity] securities which are book-entry-only.
    (2)(A) Except as indicated in paragraph (2)(B) below, on [On] and 
after March 31, 2008, all securities listed on Nasdaq (except [non-
equity] securities which are book-entry-only) must be eligible for a 
Direct Registration Program operated by a clearing agency registered 
under Section 17A of the Exchange Act.
    (B) Until March 31, 2009, a foreign private issuer may follow its 
home country practice in lieu of the requirements of this Rule 4350(l), 
provided, however, that such an issuer must follow the requirements of 
Rule 4350(a) and IM-4350-6 for doing so. Thereafter, the listed 
securities of such issuers (except securities which are book-entry-
only) must be eligible for a Direct Registration Program operated by a 
clearing agency registered under Section 17A of the Exchange Act unless 
prohibited from complying by a law or regulation in its home country.
    (3) No change.
    (m)-(n) No change.

IM 4350-6 Applicability

    1. Foreign Private Issuer Exception and Disclosure. A foreign 
private issuer (as defined in Rule 3b-4 under the Exchange Act) listed 
on Nasdaq may follow the practice in such issuer's home country (as 
defined in General Instruction F of Form 20-F) in lieu of some of the 
provisions of Rule 4350, subject to several important exceptions. 
First, such an issuer shall comply with Rule 4350(b)(1)(B) (Disclosure 
of Going Concern Opinion), Rule 4350(j) (Listing Agreement) and Rule 
4350(m) (Notification of Material Noncompliance). Second, such an 
issuer shall have an audit committee that satisfies Rule 4350(d)(3). 
Third, members of such audit committee shall meet the criteria for 
independence referenced in Rule 4350(d)(2)(A)(ii) (the criteria set 
forth in Rule 10A-3(b)(1), subject to the exemptions provided in Rule 
10A-3(c) under the Exchange Act). Fourth, a foreign private issuer must 
comply with Rule 4350(l) (Direct Registration Program) unless 
prohibited from complying by a law or regulation in its home country. 
Finally, a foreign private issuer that elects to follow home

[[Page 30991]]

country practice in lieu of a requirement of Rule 4350 shall submit to 
Nasdaq a written statement from an independent counsel in such issuer's 
home country certifying that the issuer's practices are not prohibited 
by the home country's laws and, in the case of a company prohibited 
from complying with Rule 4350(l), certifying that a law or regulation 
in the home country prohibits such compliance. In the case of new 
listings, this certification is required at the time of listing. For 
existing issuers, the certification is required at the time the company 
seeks to adopt its first non-compliant practice. In the interest of 
transparency, the rule requires a foreign private issuer to make 
appropriate disclosures in the issuer's annual filings with the 
Commission (typically Form20-F or 40-F), and at the time of the 
issuer's original listing in the United States, if that listing is on 
Nasdaq, in its registration statement (typically Form F-1, 20-F, or 40-
F); alternatively, the issuer may provide these disclosures in English 
on its website. The issuer shall disclose each requirement of Rule 4350 
that it does not follow and include a brief statement of the home 
country practice the issuer follows in lieu of the requirements of Rule 
4350. If the disclosure is only available on the website, the annual 
report and registration statement should so state and provide the web 
address at which the information may be obtained.
    2.-4. 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 these 
statements.\4\
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    \4\ The Commission has modified portions of the text of the 
summaries prepared by the Nasdaq.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    Nasdaq proposes to modify the requirements related to its Direct 
Registration Program rule to provide that the requirement to be 
eligible to participate in a Direct Registration Program applies to a 
foreign private issuer, unless the law or regulations in the company's 
home country prohibit compliance with the requirement, and to clarify 
the application of the requirement to securities held in book-entry-
only form.
    Nasdaq's rule permits a foreign private issuer to follow its home 
country practice in lieu of certain requirements of Rule 4350, 
including the requirement that securities be eligible to participate in 
a Direct Registration Program. Nasdaq proposes to modify this 
requirement so that a foreign private issuer could only follow its home 
country practice with respect to the requirement that securities be 
eligible to participate in a Direct Registration Program if the issuer 
is prohibited from complying with this requirement by the laws or 
regulations in the issuer's home country. In order to assure that 
foreign private issuers have adequate time to take necessary actions to 
come into compliance with the proposed rule, Nasdaq proposes that until 
March 31, 2009, such issuers can continue to rely on the prior version 
of the exception to this requirement.
    In addition, Nasdaq's rule excludes from the requirement to be 
eligible to participate in a Direct Registration Program ``non-equity 
securities which are book-entry-only.'' Nasdaq proposes to modify this 
requirement to exclude all book-entry-only securities because ownership 
of such securities is already recorded only on the books and records of 
the issuer and are not held in certificated form. As such, these 
securities would already avail themselves of the advantages that the 
Direct Registration Program is designed to promote. If a security 
ceases to be book-entry-only, that security would then be required to 
be eligible to participate in a Direct Registration Program.
(2) Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(5) of the Act, in particular, in that the proposal is designed to, 
among other things, 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 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public 
interest.\6\ The proposed rule change modifies Nasdaq's rules relating 
to the Direct Registration Programs to require a foreign private issuer 
to comply with the Nasdaq's rules unless the foreign private issuer is 
prohibited from doing so and to exclude from the proposed requirement 
securities that are book-entry-only and therefore already enjoy the 
same benefits of a Direct Registration System.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Nasdaq does not believe that the proposed rule change will 
impose 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 thirty-five 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 ninety 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 S-NASDAQ-2008-031 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary,

[[Page 30992]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NASDAQ-2008-031. 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 Section, 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 filings also will be available for 
inspection and copying at the principal office of Nasdaq and on 
Nasdaq's Web site, http://www.nasdaq.com. 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-2008-031 and should be submitted 
on or before June 19, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E8-11940 Filed 5-28-08; 8:45 am]

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