Document ID: SEC-2008-1634-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-12-02T05:00Z

[Federal Register: December 2, 2008 (Volume 73, Number 232)]
[Notices]               
[Page 73358-73360]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02de08-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59014; File No. SR-NASDAQ-2008-084]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of a Proposed Rule Change To Require Limited 
Partnerships To Obtain Shareholder Approval for the Use of Equity 
Compensation and Make Other Clarifying Changes to the Listing 
Requirements for Limited Partnerships

November 25, 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 18, 2008, 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. 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 require limited partnerships to obtain 
shareholder approval for the use of equity compensation and make other 
clarifying changes to the listing requirements for limited 
partnerships. Nasdaq will implement the proposed rule change upon 
approval. The text of the proposed rule change is below. Proposed new

[[Page 73359]]

language is in italics; there are no proposed deletions.\3\
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    \3\ 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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4360. Qualitative Listing Requirements for Nasdaq Issuers That Are 
Limited Partnerships

    (a)-(j) No change.
    (k) Shareholder Approval. Each issuer that is a limited partnership 
must obtain shareholder approval when a stock option or purchase plan 
is to be established or materially amended or other equity compensation 
arrangement made or materially amended, pursuant to which stock may be 
acquired by officers, directors, employees, or consultants, as would be 
required under Rule 4350(i)(1)(A) and IM-4350-5.
    (l) Auditor Registration. Each issuer that is a limited partnership 
must be audited by an independent public accountant that is registered 
as a public accounting firm with the Public Company Accounting 
Oversight Board, as provided for in Section 102 of the Sarbanes-Oxley 
Act of 2002 [15 U.S.C. 7212].
    (m) Notification of Material Noncompliance. Each issuer that is a 
limited partnership must provide Nasdaq with prompt notification after 
an executive officer of the issuer, or a person performing an 
equivalent role, becomes aware of any material noncompliance by the 
issuer with the requirements of this Rule 4360.
* * * * *

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
    Currently, NASDAQ rules require that issuers, except Limited 
Partnerships (``LPs''), obtain shareholder approval for a variety of 
corporate actions, including the issuance of equity compensation. 
NASDAQ's shareholder approval requirements have not historically been 
applied to LPs because their structure requires that public investors 
have limited rights and that the general partners make all significant 
decisions about the operation of the company. As such, limited partners 
do not expect to have a voice in the operations of the partnership.
    Nonetheless, the Commission recently noted that the ``rationale for 
treating an LP differently than, for example, a traditional corporation 
with respect to shareholder input on equity compensation is less 
compelling'' and that it is ``beneficial from a corporate governance 
perspective'' to require shareholder approval for equity 
compensation.\4\ As such, and in response to these findings by the 
Commission, Nasdaq now proposes to expand the requirement to obtain 
shareholder approval for equity compensation to entities that are LPs.
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    \4\ Securities Exchange Act Release No. 55796 (May 22, 2007) 
(approving SR-NYSE-2007-28).
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    In addition, Nasdaq proposes to modify the rules applicable to LPs 
to require that the auditor of a listed LP must be registered with the 
Public Company Accounting Oversight Board (``PCAOB'') and that an LP 
must notify Nasdaq of any material non-compliance with the corporate 
governance rules. When Nasdaq adopted these requirements for other 
companies in 2003 in response to requirements imposed by the Sarbanes-
Oxley Act of 2002, Nasdaq inadvertently excluded LPs from these 
requirements. Nonetheless, these requirements are already applicable to 
LPs. Specifically, with respect to the proposed auditor registration 
requirement, it is unlawful for an auditor to participate in the 
preparation or issuance of an audit report with respect to any listed 
company, including an LP, unless it is registered with the PCAOB.\5\ 
With respect to the proposed notification requirement, LPs have agreed 
in Nasdaq's listing agreement, which each listed company must sign 
prior to listing, to promptly notify Nasdaq in writing of any corporate 
action or other event which will cause the company to cease to be in 
compliance with NASDAQ listing requirements.\6\ As such, including 
these changes in Nasdaq's rules are simply clarifying changes designed 
to highlight the requirements and facilitate understanding and 
compliance of the rules by LPs.
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    \5\ Section 102 of the Sarbanes-Oxley Act, 15 U.S.C. 7212.
    \6\ See http://www.nasdaq.com/about/Listing_Agreement.pdf.
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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,\7\ in general and with sections 
6(b)(5) of the Act,\8\ 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 
designed to help protect investors in LP securities against insider 
self-dealing and the potential dilutive effect of equity compensation 
plans and enhance the transparency surrounding the application of 
NASDAQ's requirements.
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    \7\ 15 U.S.C. 78f.
    \8\ 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

    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.

[[Page 73360]]

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-2008-084 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street, NE., Washington, 
DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2008-084. 
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 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-2008-084 and should be submitted on or before 
December 23, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E8-28495 Filed 12-1-08; 8:45 am]

BILLING CODE 8011-01-P