Document ID: SEC-2023-0227-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2023-02-28T05:00Z

[Federal Register Volume 88, Number 39 (Tuesday, February 28, 2023)]
[Notices]
[Pages 12710-12713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04033]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96966; File No. SR-NASDAQ-2023-004]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Fees the Exchange Charges Companies Seeking Review of a 
Delisting Determination, Public Reprimand Letter, or Written Denial of 
an Initial Listing Application

February 22, 2023.
    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 February 10, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, which Items have been prepared by the Exchange. 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

    The Exchange proposes to modify the fees the Exchange charges 
companies seeking review of a delisting determination, public reprimand 
letter, or written denial of an initial listing application.
* * * * *

The Nasdaq Stock Market LLC Rules

* * * * *

5815. Review of Staff Determinations by Hearings Panel

    When a Company receives a Staff Delisting Determination or a Public 
Reprimand Letter issued by the Listing Qualifications Department, or 
when its application for initial listing is denied, it may request in 
writing that the Hearings Panel review the matter in a written or an 
oral hearing. This section sets forth the procedures for requesting a 
hearing before a Hearings Panel, describes the Hearings Panel and the 
possible outcomes of a hearing, and sets forth Hearings Panel 
procedures.
    (a) Procedures for Requesting and Preparing for a Hearing.
    (1)-(2) No changes.
    (3) Fees.
    Within 15 calendar days of the date of the Staff Delisting 
Determination, Public Reprimand Letter, or written denial of an initial 
listing application, the Company must submit a hearing fee of [$10,000] 
$20,000. However, if the hearing request relates to a Staff Delisting 
Determination dated on or before February 10, 2023, the Company must 
submit a hearing fee of $10,000.
    (4)-(6) No changes.
    (b)-(d) No changes.

5820. Appeal to the Nasdaq Listing and Hearing Review Council

    A Company may appeal a Panel Decision to the Listing Council. The 
Listing Council may also call for review a Panel Decision on its own 
initiative. This Rule 5820 describes the procedures applicable to 
appeals and calls for review.
    (a) Procedure for Requesting Appeal.
    A Company may appeal any Panel Decision to the Listing Council by 
submitting a written request for appeal and a fee of [$10,000] $15,000 
to the Nasdaq Office of Appeals and Review within 15 calendar days of 
the date of the Panel Decision. However, if the appeal relates to a 
Panel Decision dated

[[Page 12711]]

on or before February 10, 2023, the applicable fee is $10,000. An 
appeal will not operate as a stay of the Panel Decision. Upon receipt 
of the appeal request and the applicable fee, the Nasdaq Office of 
Appeals and Review will acknowledge the Company's request and provide 
deadlines for the Company to provide written submissions.
    (b)-(e) No changes.
* * * * *

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

    In its filing with the Commission, the Exchange 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. The Exchange 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 Listing Rule 5815, companies may seek review of 
a determination by the Nasdaq's Listing Qualifications Department (``LQ 
Staff'') to deny initial listing or delist a company's securities or to 
issue a Public Reprimand Letter, by requesting a hearing before an 
independent Hearings Panel (the ``Hearings Panel''). Listing Rule 
5815(a)(3) provides that to request a hearing, the company must, within 
15 calendar days of the date of the LQ Staff delisting determination, 
public reprimand letter, or written denial of an initial listing 
application, submit a hearing fee in the amount of $10,000. Companies 
may also appeal a Hearings Panel decision to the Nasdaq Listing and 
Hearing Review Council (the ``NLHRC''). Listing Rule 5820(a) requires a 
company seeking such an appeal to submit a fee of $10,000. Nasdaq last 
changed these fees in 2013.\3\ Nasdaq now proposes to increase the fee 
for review by a Hearings Panel to $20,000 and the fee to appeal a 
Hearings Panel decision to the NLHRC to $15,000. Nasdaq is increasing 
the fees because the costs incurred in preparing for and conducting 
hearings and appeals have increased since the fees were last changed.
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    \3\ Securities Exchange Act Release No. 68676 (January 16, 2013) 
78 FR 4914 (January 23, 2013) (approving [sic] SR-NASDAQ-2013-004).
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    The costs of the review process include significant time and 
resources to maintain the infrastructure for the processes and to 
prepare for and conduct individual hearings and appeals. For example, 
with respect to review by the Hearings Panels, Nasdaq incurs expenses 
related to the Nasdaq staff that facilitates the hearings and provides 
legal counsel and support to the independent Hearings Panel members, 
the honorarium paid to the Hearings Panel members, and the cost of 
maintaining a transcript of the hearing. LQ Staff reviews each 
company's submissions to the Hearings Panel and provides the Hearings 
Panel with its analysis of the company's plans; LQ Staff also provides 
written submissions in support of the delisting, listing denial, or 
Public Reprimand determination. In addition, in some matters LQ Staff 
attends hearings to respond to presentations by the company and answer 
questions from the Hearings Panel members. Where hearings are held in 
person, Nasdaq also incurs expenses related to securing and maintaining 
a location for the hearings and travel expenses for Hearings Panel 
members. Staff also must manage and coordinate the Hearings Panel 
dockets, maintain the systems that track hearing matters, draft initial 
decisions for review by the Hearings Panel members, and monitor post-
hearing compliance efforts in matters where the Hearings Panel has 
granted the company a period of time to cure a deficiency.
    There are also additional costs associated with the NLHRC review of 
every Hearings Panel decision, in determining whether to call that 
decision for review as described in Rule 5820(b). In that regard, 
Nasdaq incurs expenses related to the Nasdaq staff that facilitates the 
call for review process and that provides legal counsel and support to 
the NLHRC members, as well as the honorarium paid to the NLHRC members. 
When a matter is called for review, Nasdaq also incurs costs related to 
the staff in the Listing Qualifications Department, which reviews the 
company's submissions to the NLHRC and provides the NLHRC with LQ 
Staff's analysis of the company's plans and any issues identified by 
the NLHRC in its call for review. Nasdaq staff also must manage and 
coordinate the NLHRC docket, maintain the systems that track call for 
review matters, and draft initial decisions for review by NLHRC 
members. Nasdaq believes that these additional costs for the call for 
review process are appropriately considered as part of the cost of the 
Hearings Panel review, since every Hearings Panel decision is subject 
to review by the NLHRC and the decision as to whether to call a matter 
for review rests with the NLHRC.
    Where a company appeals a matter to the NLHRC, there are similar 
additional costs as well, which Nasdaq believes should be borne by the 
company through the appeal fee. Specifically, like where a decision is 
called for review, when a company appeals a decision Nasdaq incurs 
expenses related to the Nasdaq staff that facilitates the process and 
that provides legal counsel and support to the NLHRC members, the 
honorarium paid to the NLHRC members, LQ Staff review and analysis of 
the company's submissions to the NLHRC, management of the docket, 
maintaining the systems that track NLHRC appellate matters and drafting 
the initial decisions for review by NLHRC members.
    Throughout the hearing and NLHRC process, the Exchange incurs costs 
to maintain and upgrade its electronic systems for tracking companies 
and maintaining a clear record, as required by Nasdaq and SEC rules.\4\ 
It also maintains lists on its website, updated every business day, 
that reflect the status of all companies in the deficiency process \5\ 
and frequently asked questions providing transparency to companies and 
investors about the delisting and deficiency process, as well as the 
initial listing process.\6\
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    \4\ See Nasdaq Rule 5840(a). See also Rule 420(e) of the SEC 
Rules of Practice, 17 CFR 201.420(e) which requires Nasdaq to 
certify and file a copy of the record upon which a delisting or 
denial was based where the company requests Commission review of 
Nasdaq's action.
    \5\ See https://listingcenter.nasdaq.com/IssuersPendingSuspensionDelisting.aspx and https://listingcenter.nasdaq.com/NonCompliantCompanyList.aspx.
    \6\  See https://listingcenter.nasdaq.com/Material_Search.aspx?mcd=LQ. Users can view more than 30 Frequently 
Asked Questions about the hearings and appeals processes and 
hundreds more about the processes associated with specific listing 
rule deficiencies. In addition, there are summaries of over 100 
prior NLHRC decisions.
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    All of these expenses have increased in the ten years since the 
fees were last changed in 2013. In addition, due to changes in 
procedures over time, Nasdaq devotes more staff time and resources to 
certain matters.\7\

[[Page 12712]]

Accordingly, Nasdaq proposes to increase the fee to request review by a 
Hearings Panel to $20,000 and the fee for an appeal to the NLRHC to 
$15,000. Nasdaq believes that this is an equitable allocation based on 
the expenses incurred in connection with each portion of the overall 
appellate process.
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    \7\ For example, in October 2020 the Commission approved changes 
to the procedures governing the introduction of information during 
the hearing process. As a result, whereas previously companies 
typically provided a single submission to the Hearings Panel, 
companies now typically submit both a Written Submission and a 
Written Update to the Hearings Panel, and LQ Staff must review and 
react to each. See Rule 5815(a)(5) and Securities Exchange Act 
Release No. 90201 (October 15, 2020) 85 FR 67024 (October 21, 2020) 
(approving SR-NASDAQ-2020-002).
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    The revised fees for a hearing will be applicable to issuers that 
are sent a delisting determination, public reprimand letter, or written 
denial of an initial listing application after February 10, 2023, the 
date of filing of this proposed rule change. Similarly, the revised 
fees for an appeal of a Hearings Panel decision to the NLHRC will be 
applicable to issuers that receive a Hearings Panel decision after 
February 10, 2023. The current fees will remain in effect for any 
company that received a Staff delisting determination, denial of a 
listing application, or public reprimand letter, or a Hearings Panel 
decision on or before February 10, 2023.\8\
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    \8\ Companies are notified about their ability to request a 
hearing, and the fees associated with such a hearing, in the Staff 
determination letter. They are notified of the fees associated with 
an appeal in the Hearings Panel decision, which also includes a 
notice of the right to appeal. As proposed, Nasdaq would only charge 
the new fee to companies that were not already advised of the prior 
fee in the applicable decision letter.
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    The revised fees will allow Nasdaq to recoup a portion of the 
expenses it incurs in the review and appeal processes that will more 
closely approximate its actual costs associated with those processes. 
The Exchange has reviewed all costs associated with delisting appeals 
and does not expect or intend that the fees will exceed the costs.\9\
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    \9\ A precise cost-per-hearing analysis is not possible given 
the need to maintain an infrastructure for which the Exchange incurs 
expenses irrespective of the number of hearings or appeals requested 
in a given year.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    Specifically, the proposed fee increase is reasonable because it 
will better reflect Nasdaq's costs related to hearings and appeals. 
Nasdaq has not increased these fees since 2013,\12\ but its costs have 
increased since that time. The fees will help offset the costs of 
conducting hearings and appeals, which serve to ensure that Nasdaq's 
listing standards are properly enforced for the protection of 
investors. The proposed changes are equitable and not unfairly 
discriminatory because they would apply equally to all companies that 
choose to request a hearing for review of a delisting determination, 
public reprimand letter or denial of initial listing, or to appeal a 
Hearings Panel decision. In addition, aligning the fees for hearings 
with the underlying costs of the review process is equitable because 
doing so will help minimize the extent that companies that are 
compliant with all listing standards may subsidize the costs of review 
for companies that are non-compliant.
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    \12\ Securities Exchange Act Release No. 68676, supra.
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    Nasdaq also believes that the proposed fees are consistent with the 
investor protection objectives of Section 6(b)(5) of the Act \13\ in 
that they are designed to promote just and equitable principles of 
trade, to remove impediments to a free and open market and national 
market systems, and in general to protect investors and the public 
interest. Specifically, the fees are designed to provide adequate 
resources for appropriate preparation to conduct reviews of Nasdaq 
Listing Qualifications' staff determinations and appeals of Hearings 
Panel decisions, which help to assure that the Exchanges' listing 
standards are properly enforced and investors are protected.
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    \13\ 15 U.S.C. 78f(b)(5).
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    Nasdaq also believes that the proposed changes are consistent with 
Section 6(b)(7) of the Act,\14\ in that the proposed fees are 
consistent with the provision by the Exchange of a fair procedures for 
the prohibition or limitation by the Exchange of any person with 
respect to access to services offered by the Exchange. In particular, 
the Exchange believes that the proposed amended fees should not deter 
listed issuers from availing themselves of the right to appeal because 
the fees will still be set at a level that will be affordable for 
listed companies. Nasdaq does not believe that the proposed fee is 
unduly burdensome or would discourage any company from seeking a 
hearing or appeal.
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    \14\ 15. U.S.C. 78f(b)(7).
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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. As discussed above, 
this proposed fee is based on the increase in costs to the Exchange to 
provide a delisting review process, which is in turn necessary to 
ensure investor protection as well as a transparent process for 
issuers. Moreover, the market for listing services is extremely 
competitive and listed companies may freely choose alternative venues 
based on the aggregate fees assessed, and the value provided by each 
listing. This rule proposal does not burden competition with other 
listing venues, which are similarly free to align their fees on the 
costs incurred by the process they offer. For this reason, and the 
reasons discussed in connection with the statutory basis for the 
proposed rule change, Nasdaq does not believe that the proposed rule 
change will result in any burden on competition for listings.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \15\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\16\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is: 
(i) necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
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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

[[Page 12713]]

     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2023-004 on the subject line.

Paper Comments:

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

All submissions should refer to File Number SR-NASDAQ-2023-004. This 
file number should be included on the subject line if email 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2023-004, and should be submitted 
on or before March 21, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04033 Filed 2-27-23; 8:45 am]
BILLING CODE 8011-01-P