[Federal Register: May 27, 2004 (Volume 69, Number 103)]
[Notices]
[Page 30356-30358]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27my04-117]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49746; File No. SR-NASD-2004-081]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to Unit Listing Standards
May 20, 2004.
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 May 17, 2004, the National Association of Securities Dealers, Inc.
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc.
(``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 filed the
proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective
upon filing.\5\ 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\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ Nasdaq asked the Commission to waive the 30-day operative
delay. See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to amend the listing standards for units. Below is
the text of the proposed rule change. Proposed new language is
underlined; proposed deletions are in brackets.\6\
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\6\ The proposal is marked against the rule text of the current
NASD manual, which is available on http://www.nasdaq.com. There are no
other pending rule filings that would affect the text of this rule.
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* * * * *
Rule 4420. Quantitative Designation Criteria
(a)-(g) no change.
(h) Units
(1) Initial and Continued Inclusion Requirements
(a) All units shall have at least one equity component. All
components of such units shall satisfy the requirements for initial and
continued listing under Rules 4420 and 4450, as applicable, or, in the
case of debt components, satisfy the requirements of 4420(h)(1)(b).
(b) All debt components of a unit, if any, shall meet the following
requirements:
(i) the debt issue must have an aggregate market value or principal
amount of at least $5 million;
(ii) the issuer of the debt security must have equity securities
listed on the Nasdaq National Market; and
(iii) in the case of convertible debt, the equity into which the
debt is convertible must itself be subject to real-time last sale
reporting in the United States, and the convertible debt must not
contain a provision which gives the company the right, at its
discretion, to reduce the conversion price for periods of time or from
time to time unless the company establishes a minimum period of ten
business days within which such price reduction will be in effect.
(c) All components of the unit shall be issued by the same issuer.
All units and issuers of such units shall comply with the initial and
continued inclusion requirements under Rules 4420 and 4450, as
applicable.
(2) Minimum Inclusion Period and Notice of Withdrawal
In the case of units, the minimum period for inclusion of the units
shall be 30 days from the first day of inclusion, except the period may
be shortened if the units are suspended or withdrawn for regulatory
purposes. Issuers and underwriters seeking to withdraw units from
inclusion must provide Nasdaq with notice of such intent at least 15
days prior to withdrawal.
([2]3) Disclosure Requirements for Units
Each Nasdaq National Market issuer of units shall include in its
prospectus or other offering document used in connection with any
offering of securities that is required to be filed with the Commission
under the federal securities laws and the rules and regulations
promulgated thereunder a statement regarding any intention to delist
the units immediately after the minimum inclusion period. The issuer of
a unit shall further provide information regarding the terms and
conditions of the components of the unit (including information with
respect to any original issue discount or other significant tax
attributes of any component) and the ratio of the components comprising
the unit. An issuer shall also disclose when a component of the unit is
separately listed on Nasdaq. These disclosures shall be made on the
issuer's website, or if it does not maintain a website, in its annual
report provided to unit holders. An issuer shall also immediately
publicize through, at a minimum, a public announcement through the news
media, any change in the terms of the unit, such as changes to the
terms and conditions of any of the components (including changes with
respect to any original issue discount or other significant tax
attributes of any component), or to the ratio of the components within
the unit. Such public notification shall be made as soon as practicable
in relation to the effective date of the 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 has recently received inquiries about listing of units
comprised of common stock and subordinated notes, sometimes referred to
as Income Deposit Securities or IDS's.
[[Page 30357]]
Listing standards for these securities have been approved for the
American Stock Exchange LLC (``Amex'') and the New York Stock Exchange,
Inc. (``NYSE''). Nasdaq now proposes listing standards for such units
that are substantially similar to the standards of these other markets.
In particular, Nasdaq proposes to require that all units shall have at
least one equity component, and that all components must meet the
Nasdaq National Market initial and continued inclusion requirements
under Nasdaq Rules 4420 and 4450, or in the case of debt components,
meet certain specified standards including: an aggregate market value
or principal amount of at least $5 million; a requirement that the debt
issuer have equity listed on Nasdaq; and in the case of convertible
debt, limitations on changes to conversion prices and a last sale
reporting requirement for the equity into which the debt is
convertible. In that regard, real time last sale reporting must be
available for the underlying equity security, and it will not be
sufficient that a unit containing the equity security is subject to
last sale reporting. In addition, all components of the unit shall be
issued by the same issuer, and all units and the issuer of such units
shall be required to comply with the initial and continued inclusion
requirements under Nasdaq Rules 4420 and 4450, as applicable.
An issuer would be required to provide information regarding the
terms and conditions of the components of the unit on a Web site, or if
it does not maintain a Web site, in its annual report provided to unit
holders. In addition, an issuer would be required to disclose when a
component of the unit is separately listed on Nasdaq. The proposal
would also require an issuer to immediately publicize through, at a
minimum, a public announcement through the news media, any change in
the terms of a listed unit, such as changes to the terms and conditions
of any of the components or to the ratio of components within the unit.
Nasdaq believes that this heightened disclosure requirement is
appropriate to ensure that sufficient information regarding the
attributes of these securities is publicly available on a timely basis.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 15A of the Act,\7\ in general and with
section 15A(b)(6) of the Act,\8\ in particular, in that it will promote
just and equitable principles of trade, facilitate transactions in
securities, remove impediments to and perfect the mechanism of a free
and open market and a national securities system, and protect investors
and the public interest. Specifically, the proposed rule change will
permit the listing of units comprised of equity and debt components on
Nasdaq.
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\7\ 15 U.S.C. 78o-3.
\8\ 15 U.S.C. 78o-3(6).
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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 on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become effective upon filing
on May 17, 2004 pursuant to section 19(b)(3)(A) of the Act \9\ and Rule
19b-4(f)(6) thereunder \10\ because the proposal: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not 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;
provided that the self-regulatory organization has given the Commission
written notice of its intent to file the proposed rule change at least
five business days prior to the filing date of the proposed rule
change.\11\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ As required under Rule 19b-4(f)(6)(iii), Nasdaq provided
the Commission with written notice of its intent to file the
proposed rule change at least five business days prior to the filing
date.
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Nasdaq has asked the Commission to waive the 30-day operative
delay. The Commission believes waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that it recently approved similar proposals by the
Amex and NYSE, which Nasdaq's proposal is based upon.\12\ The Amex and
NYSE proposals were published for comment and the Commission received
no comments on them.\13\ Finally, the Commission does not believe
Nasdaq's proposal raises any new regulatory issues. For these reasons,
the Commission designates the proposal to be effective and operative
upon filing of the proposal on May 17, 2004 with the Commission.\14\
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\12\ See Securities Exchange Act Release No. 48666 (October 21,
2003); 68 FR 61239 (October 27, 2003) (SR-Amex-2003-83); Securities
Exchange Act Release No. 49515 (April 1, 2004); 69 FR 19592 (April
13, 2004) (SR-NYSE-2004-17).
\13\ See id.
\14\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the amended 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 proposed rule change. 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-NASD-2004-081 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-NASD-2004-081. 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
[[Page 30358]]
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Section, 450 Fifth Street,
NW., Washington, DC 20549. 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-NASD-2004-081 and should be
submitted on or before June 17, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12029 Filed 5-26-04; 8:45 am]
BILLING CODE 8010-01-P