Summary

This report follows up on whether the Securities and Exchange Commission (SEC) and the Nasdaq Stock Market have implemented GAO's earlier recommendations for improving the oversight and operations of Nasdaq's Listing Qualifications Department. (See GAO/GGD-98-45, Feb. 1998.) GAO also includes information on the status of Nasdaq's response to recommendations SEC made as part of its oversight of the Listing Qualifications Department and information on the status of Nasdaq's new automated Risk Scoring Compliance System.

GAO noted that: (1) SEC and Nasdaq have implemented the GAO report's 2 recommendations; (2) SEC's Office of Compliance Inspections and Examinations (OCIE) developed and issued its first report to SEC Commissioners on significant, open recommendations resulting from OCIE inspections; (3) OCIE's report included not only recommendations involving listing programs, but also those from OCIE inspections of various other self-regulatory organization (SRO) regulatory programs; (4) bringing open, significant inspection recommendations to the attention of SEC Commissioners, and letting the SROs know that this is being done, provides additional incentive for SROs to comply with OCIE recommendations; (5) NLQ has started preparing quarterly reports to Nasdaq's management that provide statistical measures of the listing program's results; (6) the report contains information pertaining to three primary NLQ activities, including: (a) exception granting and administration; (b) application review; and (c) compliance monitoring; (7) routinely reporting these overall program statistics to Nasdaq management should help to keep officials informed about whether the listings program is achieving results appropriate to program goals; (8) Nasdaq and SEC officials said that Nasdaq has addressed all 27 of the recommendations resulting from OCIE's 1997 inspection of NLQ; (9) SEC officials told GAO that they would follow up on three of these recommendations during the next OCIE inspection of Nasdaq to ensure that the actions taken have been effective; (10) Nasdaq officials told GAO that they have made substantial progress in their development of RSCS; (11) they expect RSCS to be implemented into Nasdaq's compliance monitoring program sometime during mid-1999; and (12) officials said that RSCS is to help NLQ analysts more quickly detect problem companies that are falling out of compliance with Nasdaq listing requirements.