Document ID: SEC-2010-0497-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-04-02T04:00Z

[Federal Register: April 2, 2010 (Volume 75, Number 63)]
[Notices]               
[Page 16877-16878]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap10-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61789; File No. SR-NASDAQ-2010-037]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Nasdaq's Rules To Eliminate an Outdated Reference

March 26, 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 March 15, 2010, The NASDAQ Stock Market LLC (``Nasdaq'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by Nasdaq. Nasdaq has designated the proposed rule change as 
effecting a change described under Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
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.
    \3\ 17 CFR 240.19b-4(f)(6).
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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 Rule 5605(c), which contains the audit 
committee charter requirements, to eliminate an outdated reference to 
Independence Standards Board Standard 1.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.\4\
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    \4\ 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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* * * * *

5605. Board of Directors and Committees

    (a)-(b) No change.

(c) Audit Committee Requirements

(1) Audit Committee Charter

    Each Company must certify that it has adopted a formal written 
audit committee charter and that the audit committee has reviewed 
and reassessed the adequacy of the formal written charter on an 
annual basis. The charter must specify:
    (A) No change.
    (B) The audit committee's responsibility for ensuring its 
receipt from the outside auditors of a formal written statement 
delineating all relationships between the auditor and the Company, 
[consistent with Independence Standards Board Standard 1, and the 
audit committee's responsibility for] actively engaging in a 
dialogue with the auditor with respect to any disclosed 
relationships or services that may impact the objectivity and 
independence of the auditor and for taking, or recommending that the 
full board take, appropriate action to oversee the independence of 
the outside auditor; and
    (C)-(D) No change.
    IM-5605-3. No change.
    (2)-(5) No change.
    (d)-(e) 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 such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq Rule 5605(c)(1) describes the provisions that are required 
to be included in the audit committee charter of each Nasdaq-listed 
company. Among those provisions, Rule 5605(c)(1)(B) requires that the 
charter specify the audit committee's responsibility for ``ensuring its 
receipt from the outside auditors of a formal written statement 
delineating all relationships between the auditor and the Company, 
consistent with Independence Standards Board Standard 1. * * * ''
    The Independence Standards Board (``ISB''), which was created in 
1997 through an agreement between the SEC and the AICPA ceased 
operations in 2001.\5\ In 2002, Congress adopted Section 103(b) of the 
Sarbanes-Oxley Act,\6\ directing the Public Company Accounting 
Oversight Board (the ``PCAOB'') to establish rules on auditor 
independence for public companies. Pursuant to that authority, the 
PCAOB adopted Rule 3526, Communication with Audit Committees Concerning 
Independence.\7\ This rule was designed

[[Page 16878]]

to build on ISB Standard 1, and superseded that standard and two 
related interpretations.
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    \5\ SEC Press Release 2001-72, available at http://www.sec.gov/
news/press/2001-72.txt.
    \6\ 15 U.S.C. 7213.
    \7\ Exchange Act Release No. 58415 (August 22, 2008), 73 FR 
50843 (August 28, 2008) (File No. PCAOB-2008-003). This rule 
requires auditor's [sic] to deliver certain information concerning 
their independence to the audit committee and to discuss that 
information with the committee.
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    Nasdaq proposes to remove the reference in its rules to the 
superseded ISB Standard. This proposed change will not change the 
substantive requirements that must be contained in the audit committee 
charter.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\8\ in general, and Section 
6(b)(5) of the Act,\9\ in particular, because 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The proposed rule change is 
designed to update Nasdaq's requirements concerning auditor 
independence by eliminating an outdated, redundant reference.
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    \8\ 15 U.S.C. 78f.
    \9\ 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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Commission notes that Nasdaq satisfied the five-
day pre-filing notice requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-NASDAQ-2010-037 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2010-037. 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 Web site 
viewing and printing 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-2010-037 and should be submitted on or before 
April 23, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7430 Filed 4-1-10; 8:45 am]
BILLING CODE 8011-01-P