Document ID: SEC-2007-0620-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-05-02T04:00Z

[Federal Register: May 2, 2007 (Volume 72, Number 84)]
[Notices]               
[Page 24349-24350]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02my07-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55672; File No. SR-NASDAQ-2007-029]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To 
Require That Companies Submit Material News to Nasdaq Using Nasdaq's 
Electronic Disclosure System, Except in Emergency Situations

April 26, 2007.

    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 March 27, 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 substantially by Nasdaq. Nasdaq filed Amendment No. 
1 to the proposed rule change on April 25, 2007. 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 amend Nasdaq Rule 4120, ``Trading Halts,'' and 
IM-4120-1, ``Disclosure of Material Information,'' to require Nasdaq-
listed companies to submit material news to Nasdaq using Nasdaq's 
electronic disclosure submission system, except in emergency 
situations. To allow Nasdaq sufficient time to communicate with listed 
companies about the new requirement, Nasdaq will not implement the 
proposed rule change until approximately 90 days after the proposal is 
approved. Nasdaq's communication with companies regarding this proposed 
change will provide notice of the implementation date. The text of the 
proposed rule change is available at Nasdaq, in the Commission's Public 
Reference Room, and at http://www.nasdaq.com.

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
    Pursuant to Nasdaq Rules 4310(c)(16) and 4320(e)(14), a Nasdaq-
listed company is required, except in unusual circumstances, to make 
prompt disclosure to the public through any Regulation FD compliant 
method (or combination of methods) of disclosure of any material 
information that would reasonably be expected to affect the value of 
its securities or influence investors' decisions. These rules also 
require that the company provide prior notice of certain disclosures to 
Nasdaq's MarketWatch Department (``MarketWatch'').
    Current methods to provide prior notification to MarketWatch 
include electronic submission using Nasdaq's Electronic Disclosure 
submission service, fax, and phone. While the Electronic Disclosure 
submission service was introduced to companies in 2004, the majority of 
companies still rely primarily on fax submission to MarketWatch.\3\ The 
material information from fax-delivered documents and telephonic 
notifications must be manually retyped into MarketWatch's database 
systems. Nasdaq notes that this uses staff time with no added 
regulatory benefit, introduces error risk, and results in a less robust 
audit trail. To reduce this administrative burden, Nasdaq has recently 
taken steps to make the Electronic Disclosure submission system more 
accessible to listed companies \4\ and is now proposing to require that 
companies submit material news to Nasdaq using the Electronic 
Disclosure submission system, except in emergency situations.
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    \3\ Nasdaq notes, for example, that of approximately 4,200 
material news notifications submitted to MarketWatch in January 
2007, over 70% were submitted by fax.
    \4\ According to Nasdaq, although the system was previously on a 
portion of the Nasdaq Online issuer Web site that offered limited 
access, it now resides on an area of Nasdaq Online that can be more 
easily and directly accessed by companies and their representatives.
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    Using the Electronic Disclosure submission system, company 
employees and representatives can transmit disclosures to Nasdaq using 
a secure, encrypted connection. Upon receipt, Nasdaq reviews these 
disclosures to determine if a trading halt is appropriate. If Nasdaq 
believes that a halt may be appropriate, Nasdaq will confirm all 
disclosures with a company source before taking any action. Nasdaq does 
not disseminate any information received over the Electronic Disclosure 
submission system.
    Companies would still be required to notify Nasdaq before 
disseminating material news, even if an emergency situation prevented 
them from accessing the Electronic Disclosure submission system. Nasdaq 
would accept notification by phone or fax in these situations. Examples 
of the types of situations where Nasdaq believes this could occur 
include: Lack of computer or internet access; a technical problem on 
either the issuer or Nasdaq system, or an incompatibility between those 
systems; and a material development such that no draft disclosure 
document exists, but immediate notification to MarketWatch is important 
based on the event.
    Nasdaq believes that companies should be familiar with electronic 
submission of documents, given that most reports to the Commission must 
be

[[Page 24350]]

submitted electronically over the Commission's EDGAR system. 
Furthermore, the Electronic Disclosure submission system has been 
designed to be simple to operate. As such, Nasdaq does not believe that 
the required use of the Electronic Disclosure submission system will be 
a burden on companies.
    If a company repeatedly fails to either notify Nasdaq prior to the 
distribution of material news, or to use the electronic disclosure 
submission system when Nasdaq finds no emergency situation existed, 
Nasdaq may issue a Staff Determination, pursuant to the Nasdaq Rule 
4800 Series,\5\ that is a public reprimand letter or, in extreme 
situations, a Staff Determination to delist the company's securities. 
In determining whether to issue a public reprimand letter, Nasdaq will 
consider whether the issuer has demonstrated a pattern of failures, 
whether the issuer has been contacted concerning previous violations, 
and whether the issuer has taken steps to assure that future violations 
will not occur.
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    \5\ See Amendment No. 1.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\6\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\7\ in particular. Nasdaq believes that the 
proposed rule change would enhance its ability to timely review issuer 
disclosures, thereby facilitating the operation of a free and open 
market and protecting investors and the public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 impose 
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 Nasdaq 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, as amended, 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-2007-029 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE, 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NASDAQ-2007-029. 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 at 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 the 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-
2007-029 and should be submitted on or before May 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-8313 Filed 5-1-07; 8:45 am]

BILLING CODE 8010-01-P