[Federal Register: July 21, 2008 (Volume 73, Number 140)]
[Notices]
[Page 42389-42390]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21jy08-100]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58125; File No. SR-NASDAQ-2008-031]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval of a Proposed Rule Change To Amend Rule 4350 Related
to the Direct Registration Program
July 9, 2008.
I. Introduction
On April 1, 2008, The NASDAQ Stock Market LLC (``NASDAQ'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change pursuant to Section 19(b)(1) of the Securities Exchange Act
of 1934 (``Act'').\1\ Notice of the proposal was published in the
Federal Register on May 29, 2008.\2\ No comment letters were received.
For the reasons discussed below, the Commission is granting approval of
the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 57842 (May 20, 2008), 73
FR 30990 (May 29, 2008) [File No. SR-NASDAQ-2008-031].
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II. Description
Pursuant to NASDAQ Rule 4350(l), Nasdaq requires that all listed
securities be eligible to participate in a Direct Registration Program
(generally referred to as the Direct Registration System or
``DRS'').\3\ However, Rule 4350(a) allowed foreign private issuers to
follow its home country practice in lieu of complying with certain
provisions of Rule 4350, including those pertaining to DRS under
Section (l) of the rule.
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\3\ For more information on NASDAQ's DRS listing requirement and
DRS generally, see Securities Exchange Act Release Nos. 54288
(August 8, 2006), 71 FR 47276 (August 16, 2006) [File No. SR-NASDAQ-
2006-008] and 57062 (December 28, 2007), 73 FR 900 (January 4, 2008)
[File No. SR-NASDAQ-2007-101].
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NASDAQ is amending its rules to modify the requirement for a
foreign private issuer to be eligible to rely on an exception to the
requirement to participate in DRS and to clarify the applicability of
the DRS-eligibility requirement to book-entry-only securities. NASDAQ
will implement the proposed change related to book-entry-only
securities immediately upon approval and the proposed change affecting
foreign private issuers on March 31, 2009.
The text of the new rule change is below. New rule language is in
italics; 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://nasdaq.complinet.com.
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Rule 4350. Qualitative Listing Requirements for NASDAQ Issuers Except
for Limited Partnerships
(a) Applicability
(1) Foreign Private Issuers. A foreign private issuer may follow
its home country practice in lieu of the requirements of Rule 4350,
provided, however, that such an issuer shall: Comply with Rules
4350(b)(1)(B), 4350(j) and 4350(m), have an audit committee that
satisfies Rule 4350(d)(3), and ensure that such audit committee's
members meet the independence requirement in Rule 4350(d)(2)(A)(ii). In
addition, a foreign private issuer must be eligible to participate in a
Direct Registration Program, as required by Rule 4350(l), unless
prohibited from complying by a law or regulation in its home country. A
foreign private issuer that follows a home country practice in lieu of
one or more provisions of Rule 4350 shall disclose in either its annual
reports filed with the Commission or on its Web site each requirement
of Rule 4350 that it does not follow and shall describe the home
country practice followed by the issuer in lieu of such requirements.
In addition, a foreign private issuer making its initial public
offering or first U.S. listing on NASDAQ shall make the same
disclosures in either its registration statement or on its Web site.
(2)-(5) No change.
(b)-(k) No change.
(l) Direct Registration Program
(1) All securities initially listing on NASDAQ on or after January
1, 2007, must be eligible for a Direct Registration Program operated by
a clearing agency registered under Section 17A of the Exchange Act.
This provision does not extend to: (i) Additional classes of securities
of companies which already have securities listed on NASDAQ; (ii)
companies which immediately prior to such listing had securities listed
on another registered securities exchange in the U.S; or, (iii) [non-
equity] securities which are book-entry-only.
(2)(A) Except as indicated in paragraph (2)(B) below, on [On] and
after March 31, 2008, all securities listed on NASDAQ (except [non-
equity] securities which are book-entry-only) must be eligible for a
Direct Registration Program operated by a clearing agency registered
under Section 17A of the Exchange Act.
(B) Until March 31, 2009, a foreign private issuer may follow its
home country practice in lieu of the requirements of this Rule 4350(l),
provided, however, that such an issuer must follow the requirements of
Rule 4350(a) and IM-4350-6 for doing so. Thereafter, the listed
securities of such issuers (except securities which are book-entry-
only) must be eligible for a Direct Registration Program operated by a
clearing agency registered under Section 17A of the Exchange Act unless
prohibited from complying by a law or regulation in its home country.
(3) No change.
(m)-(n) No change.
IM 4350-6 Applicability
1. Foreign Private Issuer Exception and Disclosure. A foreign
private issuer (as defined in Rule 3b-4 under the Exchange Act) listed
on Nasdaq may follow the practice in such issuer's home country (as
defined in General Instruction F of Form 20-F) in lieu of some of the
provisions of Rule 4350, subject to several important exceptions.
First, such an issuer shall comply with Rule 4350(b)(1)(B) (Disclosure
of Going Concern Opinion), Rule 4350(j) (Listing Agreement) and Rule
4350(m) (Notification of Material Noncompliance). Second, such an
issuer shall have an audit committee that satisfies Rule 4350(d)(3).
Third, members of such audit committee shall meet the criteria for
independence referenced in Rule 4350(d)(2)(A)(ii) (the criteria set
forth in Rule 10A-3(b)(1), subject to the exemptions provided in Rule
10A-3(c) under the Exchange Act). Fourth, a foreign private issuer must
comply with Rule 4350(l) (Direct Registration Program) unless
prohibited from complying by a law or regulation in its home country.
Finally, a foreign private issuer that elects to follow home country
practice in lieu of a requirement of Rule 4350 shall submit to Nasdaq a
written statement from an independent counsel in such issuer's home
country certifying that the issuer's practices are not prohibited by
the home country's laws and, in the case of a company prohibited from
complying with Rule 4350(l), certifying that a law or regulation in the
home country prohibits such compliance. In the case of new listings,
this certification is required at the time of listing. For existing
issuers, the certification is required at the time
[[Page 42390]]
the company seeks to adopt its first non-compliant practice. In the
interest of transparency, the rule requires a foreign private issuer to
make appropriate disclosures in the issuer's annual filings with the
Commission (typically Form 20-F or 40-F), and at the time of the
issuer's original listing in the United States, if that listing is on
Nasdaq, in its registration statement (typically Form F-1, 20-F, or 40-
F); alternatively, the issuer may provide these disclosures in English
on its Web site. The issuer shall disclose each requirement of Rule
4350 that it does not follow and include a brief statement of the home
country practice the issuer follows in lieu of the requirements of Rule
4350. If the disclosure is only available on the Web site, the annual
report and registration statement should so state and provide the web
address at which the information may be obtained.
2.-4. No change.
* * * * *
III. Discussion
Section 6(b)(5) of the Act requires, among other things, that the
rules of an exchange be 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 respect to,
and facilitating transactions in securities, to remove impediments to
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public
interest.\5\ After careful consideration, the Commission finds that the
proposed rule change is consistent with the provisions of the Act
because it requires foreign private issuers to comply with the same
DRS-eligibility rules required of other equity issuers unless the
foreign private issuer is prohibited from doing so under its home
country laws. The rule change relating to clarification that the DRS-
eligibility requirement excludes all book-entry-only securities is
consistent with the Act because it allows issuers, broker-dealers, and
investors to better determine which securities are required to be
facilitated in DRS and which securities are not.
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\5\ 15 U.S.C. 78f(b)(5).
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Accordingly, for the reasons stated above the Commission finds that
the rule change is consistent with Nasdaq's obligation under Section
6(b) of the Act to foster cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with
respect to, and facilitating transactions in securities, to remove
impediments to perfect the mechanism of a free and open market and a
national market system, and, in general, to protect investors and the
public interest.\6\
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\6\ In approving the proposed rule change, the Commission notes
that it has considered the impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular with the requirements of Section 6(b)(5) of the Act and
the rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-NASDAQ-2008-031) be and
hereby is approved.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 7 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16504 Filed 7-18-08; 8:45 am]
BILLING CODE 8010-01-P