Document ID: SEC-2010-0196-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-02-08T05:00Z

[Federal Register: February 8, 2010 (Volume 75, Number 25)]
[Notices]               
[Page 6241-6243]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe10-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61461; File No. SR-NASDAQ-2010-006]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify the Press Release 
Requirements for Listed Companies

February 1, 2010.
    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 January 13, 2010, 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 the 
Substance of the Proposed Rule Change

    Nasdaq proposes to modify certain of the press release requirements 
for listed companies. Nasdaq will implement the proposed rule upon 
approval. The text of the proposed rule change is available from 
Nasdaq's Web site at http://nasdaq.cchwallstreet.com, at Nasdaq's 
principal office, and at the Commission's Public Reference Room.

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
    There are a number of Nasdaq rules related to the issuer compliance 
process that require a company to disclose information in a press 
release or through the news media.\3\ These rules generally were 
adopted to address inconsistent issuer disclosure practices and 
reflected the view, prevalent at that time, that issuing a press 
release was the only way to assure wide dissemination of an important 
event. However, in 2002, after the Commission adopted Regulation FD,\4\ 
Nasdaq amended its rules to allow listed companies to provide 
disclosure of material news via any Regulation FD compliant means.\5\ 
Since that time Nasdaq has had the opportunity to observe market 
reaction to news disclosed in ways other than via a press release. 
Nasdaq's experience since adopting this rule indicates that there is 
broad acceptance of Regulation FD compliant methods of disclosure, such 
as through the use of a Form 8-K.
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    \3\ Nasdaq interprets the requirement to disclose information 
through the news media to be satisfied by the issuance of a press 
release.
    \4\ 17 CFR 243.100-103. Regulation FD permits a company to 
disclose material information using a method (or combination of 
methods) of disclosure that is reasonably designed to provide broad, 
non-exclusionary distribution of the information to the public.
    \5\ Exchange Act Release No. 46901 (November 25, 2002), 67 FR 
72011 (December 3, 2002).
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    In addition, the Commission has substantially modified its rules 
regarding the disclosure of information on a Form 8-K.\6\ As a result 
Nasdaq's requirements in some instances are duplicative of the Form 8-K 
requirements and Nasdaq sees companies forced to make multiple 
disclosures regarding the same event. Nasdaq believes that investors 
have come to rely upon Form 8-K disclosure and notes that Form 8-K 
disclosures are readily available to investors and the information 
reported on them is widely reported on by the news media. As such, to 
the extent information is reported on a Form 8-K, Nasdaq believes that 
duplicate disclosure through a press release is unnecessary and an 
extra burden on listed companies.
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    \6\ Exchange Act Release No. 49424 (March 16, 2004), 69 FR 15594 
(March 25, 2004).
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    Given the foregoing, Nasdaq believes it is appropriate to modify 
the following rules to permit disclosure either through a press release 
or by filing a Form 8-K where required by Commission rules:

[[Page 6242]]

     Rules 5250(b)(3), 5810(b), 5840(k) and IM-5810-1, which 
require disclosure of notifications from Nasdaq staff or an 
Adjudicatory Body \7\ regarding a company's compliance with the listing 
standards. Rules 5250(b)(3) and 5810(b) require a company to ``make a 
public announcement through the news media'' disclosing the receipt of 
a notice that the company does not meet a listing standard, that staff 
has determined to delist the company, or that is a Public Reprimand 
Letter.\8\ IM-5810-1 provides the time frame for companies to make 
these disclosures and describes the consequences of failing to do so. 
Rule 5840(k) requires that a company that receives a Public Reprimand 
Letter from an Adjudicatory Body must make ``a public announcement 
through the news media'' disclosing receipt of that letter. Nasdaq 
proposes to modify these rules to allow the company, in each case, to 
make a public announcement by ``filing a Form 8-K, where required by 
SEC rules, or by issuing a press release.'' \9\ However, a company that 
is late in filing a required periodic report with the Securities and 
Exchange Commission would still be required to issue a press release 
announcing that it has received notice that it does not meet that 
requirement. Nasdaq also proposes to clarify in each of these rules 
that notification of these disclosures should be made to the 
MarketWatch Department through Nasdaq's electronic disclosure 
submission system at least ten minutes prior to the notification to the 
public.\10\
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    \7\ Rule 5805(a) defines an ``Adjudicatory Body'' as the 
Hearings Panel, the Nasdaq Listing and Hearing Review Council, or 
the Nasdaq Board, or a member thereof.
    \8\ Current Rule 5250(b)(3) is also renumbered by this filing as 
Rule 5250(b)(2).
    \9\ Item 3.01 of Form 8-K requires a company to file a Form 8-K 
when it receives notice from Nasdaq that the company does not 
satisfy a listing standard or when Nasdaq issues a Public Reprimand 
Letter to the company. As such, Nasdaq's requirements are, in some 
cases, duplicative of the Form 8-K disclosure requirement and a 
company could be required to issue a press release under Nasdaq's 
rules and a Form 8-K under the Commission's rules containing the 
same information. A company could satisfy the revised requirement by 
filing the required Form 8-K, thereby eliminating this dual 
disclosure and any confusion it creates, while ensuring that the 
information remains publicly disclosed.
    \10\ The Commission notes that Nasdaq recently filed a proposed 
rule change that provides that if the public release of material 
information is made outside of Nasdaq market hours, companies must 
notify MarketWatch of the material information prior to 6:50 a.m. 
ET. See NASDAQ-2010-008.
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     Rule 5635(f), which requires a company to ``make a public 
announcement through the news media'' when it receives an exception to 
the shareholder approval requirements because compliance would 
jeopardize the company's financial viability. Nasdaq proposes instead 
to allow companies to make this announcement ``by filing a Form 8-K, 
where required by SEC rules, or by issuing a press release.'' Nasdaq 
notes that companies that receive an exemption are also required to 
mail this notice to all shareholders at least ten days before issuing 
securities in reliance on the exception.
     Rule 5225(a)(3), which requires a company to ``publicize 
through, at a minimum, a public announcement through the news media'' 
any change in the terms of a listed unit. Nasdaq proposes to modify 
this rule to allow the company to ``make a public announcement by 
filing a Form 8-K, where required by SEC rules, or by issuing a press 
release'' of any change in the terms of the unit.
    Similarly, Rule 5250(c)(2) requires a company that is a foreign 
private issuer to disclose interim financial results ``in a press 
release and on a Form 6-K.'' Nasdaq proposes to eliminate the 
requirement that this information be published in a press release, 
while maintaining the requirement that it be on a Form 6-K. A foreign 
private issuer would still be free to disclose this information in a 
press release if it chooses.
    Nasdaq proposes to eliminate the requirement contained in Rule 
5250(b)(2) that a company issue a press release announcing the receipt 
of an audit opinion that expresses doubt about the ability of the 
company to continue as a going concern. This requirement, which was 
adopted in 2003,\11\ is duplicative of disclosure already provided in 
the Company's annual filing with the Commission, which must be made 
available to all shareholders under Nasdaq rules, and which must be 
distributed to shareholders under the Commission's Proxy Rules.\12\ 
Under these rules, a company must include the audit opinion in its 
annual report, without regard to whether it expresses doubt about the 
ability of the company to continue as a going concern.\13\ Given that 
the audit opinion is already required to be publicly disclosed, Nasdaq 
has found that the separate press release announcing the receipt of the 
opinion is duplicative and therefore can be confusing to investors. Of 
course if a company fails to include the audit opinion in its annual 
filing, Nasdaq would consider the filing deficient and would move to 
delist the company on that basis.\14\
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    \11\ Exchange Act Release No. 48745 (November 4, 2003), 68 FR 
64154 (November 12, 2003).
    \12\ 17 CFR 240.14a-1. See Item 13 of Schedule 14A, 17 CFR 
240.14a-101.
    \13\ Rule 2-01 of Regulation S-X, 17 CFR 210.2-01.
    \14\ Nasdaq is also proposing to make a conforming change to 
Rule 5615(a)(3) to eliminate the reference to the going concern 
requirement because it will no longer apply. In addition, Nasdaq is 
proposing to remove the reference in Rule 5615(a)(3) to the 
requirement for a foreign private issuer to enter into a listing 
agreement because there is no need to single out this requirement 
from all the others of the requirements of the Rule 5000 Series to 
which a foreign private issuer is subject.
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    Nasdaq is not proposing any change to Rule 5840(j), regarding the 
voluntary delisting of a company, because the press release requirement 
in that rule is required by Exchange Act Rule 12d2-2(c).\15\ Nasdaq is 
also maintaining the requirement in Rule 5635(c)(4) and IM-5365-1, 
which require that a company relying on the inducement exception to the 
requirement to obtain shareholder approval for equity compensation 
awards must ``disclose in a press release'' specific information about 
the equity award.
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    \15\ 17 CFR 240.12d2-2(c).
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    Finally, Rules 5810(b) and 5840(k) require companies to notify 
multiple Nasdaq departments before they issue certain disclosures.\16\ 
These duplicative notice requirements are burdensome to listed 
companies and provide no regulatory benefit to Nasdaq. As a result, 
Nasdaq proposes to modify these rules to require companies to provide 
these disclosures to the MarketWatch Department using the electronic 
disclosure submission system accessible at http://www.nasdaq.net.\17\ 
MarketWatch will notify other Nasdaq departments when necessary.\18\
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    \16\ Under these rules, a company must notify the MarketWatch, 
Listing Qualifications, and Hearings Departments.
    \17\ Companies are already required to use the electronic 
disclosure submission service to notify MarketWatch prior to the 
distribution of material news. See Rule 5250(b)(1) and IM-5250-1. 
See also Exchange Act Release No. 55856 (June 4, 2007), 72 FR 32383 
(June 12, 2007) (approving SR-NASDAQ-2007-029).
    \18\ Nasdaq is also proposing: (i) to add a title to Rule 
5250(b)(1) to clarify the text; and (ii) to use capitalization for a 
defined term in Rule 5615. These are non-substantive changes.
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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,\19\ in general and with 
Sections 6(b)(5) of the Act,\20\ 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

[[Page 6243]]

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 facilitate 
companies' compliance with Nasdaq rules by aligning Nasdaq's disclosure 
requirements with those of the Commission. Nasdaq notes that the 
proposed changes to permit disclosure by a Form 8-K will not eliminate 
or reduce information now available to investors, but will minimize 
duplicative disclosures.
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    \19\ 15 U.S.C. 78f.
    \20\ 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. 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-2010-006 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-2010-006. 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,\21\ 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 No. SR-NASDAQ-2010-006 and should be 
submitted on or before March 1, 2010.
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    \21\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2633 Filed 2-5-10; 8:45 am]
BILLING CODE 8011-01-P