Document ID: SEC-2008-0885-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-07-02T04:00Z

[Federal Register: July 2, 2008 (Volume 73, Number 128)]
[Notices]               
[Page 38016-38017]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jy08-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58029; File No. SR-NASDAQ-2008-053]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify the Definition of 
``Independent Director''

June 26, 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 June 6, 2008, The NASDAQ Stock Market LLC (``Nasdaq''), filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been substantially 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 amend Rule 4200(a)(15)(B) and IM-4200 to modify 
Nasdaq's definition of ``independent director.'' Nasdaq will implement 
the proposed rule upon approval.
    The text of the proposed rule change is available at Nasdaq, at the 
Commission's Public Reference Room, and on Nasdaq's Web site at http://
nasdaq.complinet.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
    The purpose of this rule filing is to modify Nasdaq's definition of 
an ``independent director.''
    Nasdaq's rules generally preclude a director from being considered 
independent if the director has received more than $100,000 in 
compensation from the issuer.\3\ When Nasdaq first adopted this rule in 
1999, the threshold was $60,000, which was chosen to be consistent with 
the $60,000 disclosure threshold set by the Commission in Regulation S-
K, Item 404.\4\ In August 2006, the Commission adopted final rules 
raising the threshold in Regulation S-K, Item 404 from $60,000 to 
$120,000.\5\ Following this change to the SEC's rules, Nasdaq, as an 
intermediate step, increased the threshold in its independence 
definition from $60,000 to $100,000,\6\ which was consistent with the 
threshold in the comparable rule of the New York Stock Exchange, Inc. 
(``NYSE'').\7\
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    \3\ Nasdaq Rule 4200(a)(15)(B).
    \4\ The rule filing stated that ``* * * Nasdaq believes that a 
compensation threshold of $60,000 is appropriate as it corresponds 
to the de minimis threshold for disclosure of relationships that may 
affect the independent judgment of directors set forth in SEC 
Regulation S-K, Item 404.'' See Securities Exchange Act Release No. 
41982 (October 6, 1999), 64 FR 55510 (October 13, 1999).
    \5\ See Securities Exchange Act Release No. 54302A (August 29, 
2006), 71 FR 53158 (September 8, 2006).
    \6\ See Securities Exchange Act Release No. 55463 (March 13, 
2007), 72 FR 13327 (March 21, 2007).
    \7\ See Section 303A.02(b)(ii) of the NYSE Listed Company 
Manual.
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    On June 8, 2007, NYSE amended a prior rule proposal filed with the 
Commission regarding changes to certain of its corporate governance 
requirements.\8\ In the amendment, NYSE proposed increasing the 
threshold in its independence definition from $100,000 to $120,000. In 
its statement of the purpose of its proposal, NYSE explained that 
``[t]his change reflects the SEC's recent amendment to the dollar 
threshold applicable to related party transactions that must be 
disclosed under Item 404 of Regulation S-K.'' \9\
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    \8\ See Amendment No. 1 to File No. SR-NYSE-2005-81.
    \9\ Id., citing Securities Act Release No. 8732A (August 29, 
2006), 71 FR 53158 (September 8, 2006).
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    Nasdaq believes that the monetary threshold in its independence 
definition should be consistent with the amount in Regulation S-K, Item 
404. Using a consistent standard would enhance Nasdaq's ability to 
assess compliance with the independent director requirements because 
companies are required to disclose compensation in excess of $120,000, 
but are not necessarily required to disclose compensation between 
$100,000 and $120,000. Finally, Nasdaq believes that its rules and the 
NYSE rules should be consistent with regard to the definition

[[Page 38017]]

of an independent director. As such, and given that Nasdaq's objective 
has always been to make its independence threshold consistent with the 
SEC's disclosure threshold in Regulation S-K, Item 404, Nasdaq is 
proposing to increase its independence threshold from $100,000 to 
$120,000.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\10\ in general, and with 
Section 6(b)(5) of the Act,\11\ in particular. Section 6(b)(5) of the 
Act requires, among other things, that Nasdaq's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, 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 change is consistent with these requirements in that it will 
conform Nasdaq's requirement to SEC disclosure requirements and 
proposed NYSE rule changes, and provide a standard that is clear, 
straightforward, and easy for issuers to understand and apply.
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    \10\ 15 U.S.C. 78f.
    \11\ 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 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 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-2008-053 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-2008-053. 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, 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 Number SR-NASDAQ-2008-053 and should 
be submitted on or before July 23, 2008.

    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,
Acting Secretary.
 [FR Doc. E8-14983 Filed 7-1-08; 8:45 am]

BILLING CODE 8010-01-P