[Federal Register Volume 64, Number 5 (Friday, January 8, 1999)]
[Notices]
[Pages 1258-1262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-417]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40874; File No. SR-NASD-98-88]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc. Relating
to Listing and Continued Listing Determinations
December 31, 1998.
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 November 27, 1998, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association''), through its wholly-owned
subsidiary, The Nasdaq Stock Market Inc. (``Nasdaq''), filed a proposed
rule change with the Securities and Exchange Commission
(``Commission'') relating to issuer listing and continued listing
determinations. The NASD amended this proposal on December 15, 1998.\3\
The proposed rule change, as amended, is described in Items I, II, and
III below, which Items have been 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.
\3\ See letter from Robert E. Aber, Senior Vice President and
General Counsel, Nasdaq, to Katherine A. England, Assistant
Director, Division of Market Regulation, Commission, dated December
15, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Association is filing with the Commission a proposed rule
change that would replace the existing Rule 4800 Series (Rules 4810
through 4890) with a new code of procedure for review of Nasdaq listing
determinations. The proposal also would temporarily relocate the
existing Rule 4800 Series, to the extent it relates to other grievances
concerning the Association's automated systems, to the Rule 9700
Series.\4\ Below is the text of the proposed rule change. New language
is italicized and deletions are [bracketed].
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\4\ The Association intends this latter change as a temporary
measure pending submission and approval of amendments to the Rule
9510 Series addressing these issues.
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4480. Termination Procedure.
(a) Failure to maintain compliance with the provisions of Rules
4450, 4460, or 4470 will result in the termination of an issue's
designation unless an exception is granted as provided in [this] the
Rule [4480] 4800 Series. Termination shall become effective in
accordance with the terms of the notice by Nasdaq.
(b) [An issuer that is subject to termination of its designation
may request a review by a Panel authorized to hear appeals. If a
review is requested, the issuer is entitled to submit materials and
arguments in connection with such review.
(c) The Panel may grant or deny continued designation on the
basis of the written submission by the issuer and whatever other
data it deems relevant.
(d) Determinations by the Panel may be appealed to the Nasdaq
Listing and Hearing Review Committee by any aggrieved person. An
appeal to the Nasdaq Listing and Hearing Review Committee shall not
operate as a stay of the decision of the Panel unless the Nasdaq
Listing and Hearing Review Committee in its discretion determines to
grant such a stay.
(e) The Rule 4800 series sets forth procedures applicable to the
review of the termination of an issuer's designation.
(f)] An issuer may voluntarily terminate its designation upon
written notice to Nasdaq.
* * * * *
4530. Issuer Hearing Fee
Removed
* * * * *
[4800] 9700. PROCEDURES ON GRIEVANCES CONCERNING THE AUTOMATED SYSTEMS
[4810] 9710. Purpose
The purpose of this Rule 9700 [4800] Series is to provide, where
justified, redress for persons aggrieved by the operations of any
automated quotation, execution, or communication system owned or
operated by the Association, or any subsidiary thereof, and approved
by the Commission, not otherwise provided for by the Code of
Procedure as set forth in the Rule 9000 Series [or], the Uniform
Practice Code as set forth in the Rule 11000 Series, [and to provide
procedures for the handling of qualification matters pursuant to The
Nasdaq Stock Market Rules, as set forth in the Rule 4000 Series] or
the Procedures for Review of Nasdaq Listing Determinations as set
forth in the Rule 4800 Series.
[4820] 9720. Form of Application
No change
[4830] 9730. Request for Hearing
No change
[4840] 9740. Consideration of Applications
No change
[4850] 9750. Decision
No change
[4860] 9760. Review by the Nasdaq Listing and Hearing Review Council
No change
[4870] 9770. Findings of the Nasdaq Listing and Hearing Review Council
on Review
No change
[4880] 9780. Discretionary Review by the Board
No change
[4890] 9790. Application to Commission for Review
Any decision not appealed under Rule 9760 [4860] or called for
review under Rule 9760 [4860] or Rule 9780 [4880] shall become the
final action of the Association upon expiration of the time allowed
for appeal or call for review. In any case where a person feels
aggrieved by any final action of the Association issued pursuant to
Rule 9770 [4870] or Rule 9780 [4880], the person may make
application for review to the Commission in accordance with the Act.
4800. PROCEDURES FOR REVIEW OF NASDAQ LISTING DETERMINATIONS
4810. Purpose and General Provisions
(a) The purpose of this Rule 4800 Series is to provide
procedures for the independent review of determinations of the
Association that prohibit or limit the listing of an issuer's
securities on the Nasdaq Stock Market based upon the Nasdaq Stock
Market Rules, as set forth in the Rule 4000 Series. Securities of
issuers that do not meet the quantitative or qualitative listing
standards set forth in the Rule 4000 Series are subject to delisting
from, or denial of initial inclusion on, The Nasdaq Stock Market.
(b) An issuer may file a written request for an extension of
time to comply with any of the standards set forth in the Rule 4000
Series or an exception to those standards at any time during the
pendency of a proceeding under the Rule 4800 Series. The Association
may grant extensions or exceptions where it deems appropriate.
(c) At each level of a proceeding under the Rule 4800 Series,
the Listing Qualifications Panel (as defined in Rule 4830). Nasdaq
Listing and Hearing Review Council (the ``Listing Council''), or the
NASD Board of
[[Page 1259]]
Governors (the ``NASD Board''), as part of its respective review,
may request additional information from the issuer. The issuer will
be afforded an opportunity to address the significance of the
information requested.
(d) At each level of a proceeding under the Rule 4800 Series,
the Listing Qualifications Panel, Listing Council, or NASD Board, as
part of its respective review, may consider the issuer's bid price,
market makers or any information that the issuer releases to the
public, including any additional quantitative deficiencies reflected
in the released information.
(e) At each level of a proceeding under the Rule 4800 Series,
the Listing Qualifications Panel, Listing Council, or NASD Board, as
part of its respective review, may consider any failure to meet any
quantitative standard or qualitative consideration set forth in the
Rule 4000 Series, including failures previously not considered in
the proceeding. The issuer will be afforded notice of such
consideration and an opportunity to respond. In this regard, the
issuer may be subject to additional or more stringent criteria for
the initial or continued inclusion of particular securities based on
any event, condition, or circumstance that exists or occurs that
makes initial or continued inclusion of the securities inadvisable
or unwarranted in the opinion of the Association, even though the
securities meet all enumerated criteria for initial or continued
inclusion in The Nasdaq Stock Market.
4815. Written Notice of Staff Determination
If the Listing Qualification Department or the Listing
Investigations Department reaches a determination (the ``Staff
Determination'') to limit or prohibit the initial or continued
listing of an issuer's securities, it will notify the issuer,
describe the specific grounds for the determination, identify the
quantitative standard or qualitative consideration set forth in the
Rule 4000 Series that the issuer has failed to satisfy, and provide
notice that upon request the issuer will be provided an opportunity
for a hearing under this Rule 4800 Series.
4820. Request for Hearing
(a) An issuer may, within seven calendar days of the date of the
Staff Determination, request either a written or oral hearing to
review the Staff Determination. Requests for hearings should be
filed with The Nasdaq Office of Listing Qualifications Hearings (the
``Hearings Department''). A request for a hearing will stay the
delisting action pending the issuance of a written determination by
a Listing Qualifications Panel. If no hearing is requested within
the seven calendar day period, the Staff Determination will take
immediate effect. All hearings will be held before a Listing
Qualifications Panel as described in Rule 4830. All hearings will be
scheduled, to the extent practicable, within 45 days of the date
that the request for hearing is field, at a location determined by
the Hearings Department. The Hearings Department will make an
acknowledgment of the issuer's hearing request stating the date,
time, and location of the hearing, and the deadline for written
submissions to the Listing Qualifications Panel. The issuer will be
provided at least 10 calendar days notice of the hearing unless the
issuer waives such notice.
(b) The issuer may file a written submission with the Hearings
Department stating the specific grounds for the issuer's contention
that the Staff Determination was in error or requesting an extension
of time to comply with the listing requirements or an exception to
those requirements, as permitted by Rule 4810. The issuer may also
submit any documents or other written material in support of its
request for review, including any information not available at the
time of the Staff Determination.
(c) Within 15 calendar days of the date of the Staff
Determination, but in no event after the time of the hearing, the
issuer must submit a hearing fee to The Nasdaq Stock Market, Inc.,
to cover the cost of holding the hearing, as follows:
(1) where consideration is on the basis of written submission
from the issuer, $1,400; or
(2) where consideration is on the basis of an oral hearing,
whether in person or by telephone, $2,300.
4830. The Listing Qualification Panel
(a) All hearings will be conducted before an independent panel
(the ``Listing Qualifications Panel'') composed of at least two
persons, not employees of the NASD or its subsidiaries, designated
by the Nasdaq Board of Directors. No person shall serve as a Listing
Qualifications Panel member for a matter if his or her interest or
the interests of any person in whom he or she is directly or
indirectly interested will be substantially affected by the outcome
of the matter.
(b) Prior to the hearing, the Listing Qualifications Panel will
review the written record, as defined in Rule 4870. At the hearing,
the issuer may make such presentation as it deems appropriate,
including the appearance by its officers, directors, accountants,
counsel, investment bankers, or other persons. Hearings are
generally scheduled to last one hour, but may be extended at the
discretion of the Listing Qualifications Panel. The Listing
Qualifications Panel may question any representative of the issuer
appearing at the hearing. A transcript of oral hearings will be
kept. The record of proceedings before a Listing Qualifications
Panel will be kept by the Hearings Department.
(c) After the hearing, the Listing Qualifications Panel will
issue a written decision (the ``Panel Decision'') describing the
specific grounds for the determination and identifying the
quantitative standard or qualitative consideration set forth in the
Rule 4000 Series that the issuer has failed to satisfy. The Panel
Decision will be promptly provided to the issuer and is effective
immediately unless it specifies to the contrary. The Panel Decision
will provide notice that the issuer may request review of the Panel
Decision by the Nasdaq Listing and Hearing Review Council within 15
calendar days of the date of the Panel Decision and that the Panel
Decision may be called for review by the Nasdaq Listing and Hearing
Review Council within 45 calendar days from the date of the Panel
Decision pursuant to Rule 4840.
4840. Review by the Nasdaq Listing and Hearing Review Council
(a) The Nasdaq Listing and Hearing Review Council (the ``Listing
Council'') is a committee appointed by the Nasdaq Board of Directors
pursuant to Article V of the Nasdaq By-laws whose responsibilities
include the consideration of determinations to limit or prohibit the
listing of an issuer's securities.
(b) The issuer may initiate the Listing Council's review of any
Panel Decision by making a written request within 15 calendar days
of the date of the decision. Requests for review should be addressed
to the Listing Council in care of the Nasdaq Office of General
Counsel. The request will not operate as a stay of the Panel
Decision. Also within 15 calendar days of the date of the Panel
Decision, the issuer must submit a fee of $1,400 to The Nasdaq Stock
Market, Inc. to cover the cost of the review. Upon receipt of the
request for review and the applicable fee, the Nasdaq Office of
General Counsel will make an acknowledgment of the issuer's request
stating the deadline for the issuer to provide any written
submissions.
(c) The Listing Council may also consider any Panel Decision
upon the request of one or more members of the Listing Council
within 45 calendar days of the date of the Panel Decision. The
issuer will be promptly informed of the reasons for the review and
will be provided a deadline to provide a written submission if the
issuer wishes. The institution of discretionary review by the
Listing Council will not operate as a stay of the Panel Decision,
unless the call for review specifies to the contrary. At the sole
discretion of the Listing Council, the call for review of a Panel
Decision may be withdrawn at any time prior to the issuance of a
decision.
(d) The Listing Council will consider the written record and, at
its discretion, hold additional hearings. Any hearing will be
scheduled, to the extent practicable, within 45 days of the date
that a request for review initiated by either the issuer or one or
more members of the Listings Council, is made. The Listing Council
may also recommend that the NASD Board of Governors (``NASD Board'')
consider the matter. The record of proceedings before the Listing
Council will be kept by the Nasdaq Office of General Counsel.
(e) The Listing Council will issue a written decision (the
``Listing Council Decision'') that affirms, modifies, or reverses
the Panel Decision or that refers the matter to Nasdaq staff or to
the Listing Qualifications Panel for further consideration. The
Listing Council Decision will describe the specific grounds for the
decision, identify the quantitative standard or qualitative
consideration set forth in the Rule 4000 Series that the issuer has
failed to satisfy, and provide notice that the NASD Board may call
the Listing Council Decision for review at any time before its next
meeting which is at least 15 calendar days following the issuance of
the Listing Council Decision. The Listing Council Decision will be
promptly provided to the issuer and will take immediate effect
unless it specifies to the contrary.
[[Page 1260]]
4850. Discretionary Review by NASD Board
(a) A Listing Council Decision may be called for review by the
NASD Board solely upon the request of one or more Governors not
later than the next NASD Board meeting that is 15 calendar days or
more following the date of the Listing Council Decision. Such review
will be undertaken solely at the discretion of the NASD Board. The
institution of discretionary review by the NASD Board will not
operate as a stay of the decision, unless the call for review
specifies to the contrary.
(b) If the NASD Board conducts a discretionary review, the
review generally will be based on the written record considered by
the Listing Council. However, the NASD Board may, at its discretion,
request and consider additional information from the issuer and/or
from Nasdaq staff. Should the Board consider additional information,
the record of proceedings before the NASD Board will be kept by the
Nasdaq Office of General Counsel.
(c) If the NASD Board conducts a discretionary review, the
issuer will be provided with a written decision describing the
specific grounds for its decision, and identifying the quantitative
standard or qualitative consideration set forth in the Rule 4000
Series that the issuer has failed to satisfy. The NASD Board may
affirm, modify or revise the Listing Council Decision and may remand
the matter to the Listing Council, Listing Qualifications Panel, or
Nasdaq staff with appropriate instructions. This decision represents
the final action of the Association and will take immediate effect
unless it specifies to the contrary.
(d) If the NASD Board declines to conduct a discretionary review
or withdraws its call for review, the issuer will be promptly
provided with written notice that the Listing Council Decision
represents the final action of the Association.
4860. Application to the Commission for Review
Any issuer aggrieved by a final action of the Association may
make application for review to the Commission in accordance with
Section 19 of the Act.
4870. Record on Review
(a) Documents in the written record may consist of the following
items, as applicable: correspondence between Nasdaq and the issuer,
the issuer's public filings, information released to the public by
the issuer, and any written submissions or exhibits submitted by
either the issuer or the Listing Qualifications Department or the
Listing Investigations Department, including any written request for
an extension or exception as permitted in Rule 4810(b) and any
response thereto. Any additional information requested from the
issuer by the Listing Qualifications Panel, Listing Council, or NASD
Board as part of the review process will be included in the written
record. The written record will be supplemented by the transcript of
any hearings held during the review process and each decision
issued. At each level of review under this Rule 4800 Series, the
issuer will be provided with a list of documents in the written
record, and a copy of any documents included in the record that are
not in the issuer's possession or control, at least three calendar
days in advance of the deadline for issuer submissions, unless the
issuer waives such production.
(b) In addition to the documents described in paragraph (a)
above, if the issuer's bid price, market makers, or any information
that the issuer releases to the public, is considered as permitted
in Rule 4810, that information, and any written submission
addressing the significance of that information, will be made part
of the record.
(c) If additional issues arising under the Rule 4000 Series are
considered, as permitted in Rule 4810, the notice of such
consideration and any response to such notice will be made a part of
the record.
4875. Document Retention Procedures
Any document submitted to the Association in connection with a
Rule 4800 proceeding that is not made part of the record will be
retained by the Association until the date upon which the Rule 4800
Series proceeding decision becomes final including, if applicable,
upon conclusion of any review by the Commission or a federal court.
4880. Delivery of Documents
Delivery of any document under this Rule 4800 Series by an
issuer or by the Association may be made by hand delivery to the
designated address, or by facsimile to the designated facsimile
number and overnight courier to the designated address. Delivery
will be considered timely if hand delivered prior to the relevant
deadline or upon being faxed and/or sent by overnight courier
service prior to the relevant deadline. If an issuer has not
specified a facsimile number or address, delivery will be made to
the last known facsimile number and address. If an issuer is
represented by counsel or a representative, delivery will be made to
the counsel or representative.
4885. Computation of Time
In computing any period of time under the Rule 4800 Series, the
day of the act, event, or default from which the period of time
begins to run is not to be included. The last day of the period so
computed is included, unless it is a Saturday, Sunday, federal
holiday, or NASD holiday in which event the period runs until the
end of the next day that is not a Saturday, Sunday, federal holiday
or NASD holiday.
4890. Prohibited Communications
(a) Unless on notice and opportunity for the appropriate Nasdaq
staff and the issuer to participate, a representative of the
Association involved in reaching a Staff Determination, an issuer,
or counsel to or representative of an issuer, shall not make or
knowingly cause to be made a communication relevant to the merits of
a proceeding under this Rule 4800 Series (a ``Prohibited
Communication'') to any Listing Qualifications Panel member, Listing
Council member, Governor of the NASD Board, or Association employee
who is participating in or advising in the decision in that
proceeding.
(b) Listing Qualifications Panel members, Listing Council
members, Governors of the NASD Board and Association employees who
are participating in or advising in the decision in a proceeding
under this Rule 4800 Series, shall not make or knowingly cause to be
made a Prohibited Communication to an issuer, counsel to or
representative of an issuer, or a representative of the Association
involved in reaching a Staff Determination.
(c) If a Prohibited Communication is made, received, or caused
to be made, the Association will place a copy of it, or its
substance if it is an oral communication, in the record of the
proceeding. The Association will permit Nasdaq staff or the issuer,
as applicable, to respond to the Prohibited Communication, and will
place any response in the record of the proceeding.
(d) If the issuer submits a proposal to resolve matters at issue
in a Rule 4800 Series proceeding, that submission will constitute a
waiver of any claim that Association communications relating to the
proposal were Prohibited Communications.
4330. Suspension or Termination of Inclusion of a Security and
Exceptions to Inclusion Criteria
(a) No change.
(b) [Should Nasdaq] If the Association determines to suspend or
terminate [that] a security's inclusion [shall be suspended or
terminated] because of [its] noncompliance with the provisions of
this Rule 4000 Series [4310 or Rule 4320 or by the operation of
paragraph (a)(1), (2) or (3) of this Rule, Nasdaq], the Association
will [shall so] notify the issuer prior to suspension or termination
or as soon as practicable thereafter. This notification constitutes
a Staff Determination for purposes of Rule 4815 and the issuer may
request review of the decision under the Rule 4800 Series.
(c)-(f) No 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, the NASD 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 NASD is proposing to replace its existing rules relating to
listing matters.\5\
[[Page 1261]]
These changes follow changes made by the NASD in 1997 to the Rules of
the Association relating to other grievances concerning the automated
systems. Many of the procedures set forth in the proposed code of
listings procedures (``Proposed Listings Code'') are already used by
Nasdaq in practice, and issuers are informed of these procedures in
correspondence. The Proposed Listings Code codifies these procedures.
In addition, it provides issuers with much greater detail about the
review process and adds a number of procedures, including those for the
maintenance of the record on review, procedures for the delivery of
documents, and prohibitions on communications outside of the official
proceeding.
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\5\ The Association's proposal temporarily relocates the
existing Rule 4800 Series relating to other grievances concerning
the Association's automated systems to the Rule 9700 Series. The
NASD and NASD Regulation, Inc. plan to file changes to the Rule 9500
Series in the near term and, upon approval of those changes, the
Rule 9700 Series will be deleted and non-listing related grievances
and denials of access involving Nasdaq's automated systems will be
reviewed through Rule 9500 Series procedures.
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Section 4810 of the Proposed Listings Code describes the purpose of
the new Rule 4800 Series and certain general provisions. The proposed
Rule 4800 Series applies only to decisions to prohibit or limit the
listing of an issuer's securities on the Nasdaq.
The Proposed Listings Code provides that an issuer may request an
extension of time to comply with any of the standards contained in the
Rule 4000 Series or an exception to such standards. The granting of
such an extension or exception is within the discretion of the NASD.
During the review of a request for an extension or exception, the
reviewing body will consider the original issue cited, but may also
consider any additional issues, regardless of whether they were
considered earlier in the proceeding. The Proposed Listings Code
provides that the issuer will be notified of such consideration and
given an opportunity to respond.
Proposed Rules 4815-4860 provide the general procedures that the
Association and an issuer must follow with respect to any determination
by the NASD to deny initial or continued listing to an issuer. Under
proposed Rule 4815, Nasdaq staff in the Listing Qualifications
Department or Listing Investigation Department will notify the issuer
in writing of any decision to limit or prohibit the initial or
continued listing of an issuer's securities. This notification will
describe the specific grounds for the determination.
Proposed Rule 4820 provides that within 7 calendar days of receipt
of this notification, the issuer may request a hearing for review of
the determination.\6\ If an issuer requests a review, the staff
determination will generally be stayed pending the outcome of the
review.\7\ If no request for review is made, the determination will
take effect after the time to request review has expired.
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\6\ The fee for such a review remains at its existing level of
$1,400 for a review based on written submission and $2,300 for a
review based on an oral presentation. The fee provisions have been
relocated from Rule 4530 to Rule 4820(c).
\7\ The Association is permitted, however, to suspend a
security's inclusion in Nasdaq if the securities are not in
compliance with the qualification requirements of NASD Rule 4310, or
Rule 4320, or those requirements imposed by the NASD under NASD Rule
4330(a). In such exent, Nasdaq will notify the issuer prior to the
suspension or as soon as practicable thereafter. See NASD Rule
4330(b). Furthermore, Nasdaq may halt trading in a security pending
the dissemination of material news or when Nasdaq requests
information from an issuer relating to material news, qualification
matters, or other information necessary to protect the public
interest. See NASD Rule 4120(a)(5).
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Proposed NASD Rule 4830 provides that all requests for review will
be considered by an independent panel (``the Panel'') composed of at
least two persons, not employees of the NASD or its subsidiaries. The
Nasdaq Board of Directors will designate potential panelists. Panelists
may include both securities and non-securities professionals, such as
NASD members, issuers, attorneys or accountants. The Panel hearing
will, to the extent practicable, be scheduled within 45 days of the
date that the request for hearing is filed. After the Panel hearing,
the Panel will issue a written decision that is effective immediately
(unless the decision itself provdes otherwise).
Under proposed NASD Rule 4840, an issuer may request review of the
Panel's decision within 15 days of the date the decision is issued.
Such review is conducted by the Nasdaq Listing and Hearing Review
Council (``Listing Council''). In addition, any member of the Listing
Council may call a decision of the Panel for review within 45 days of
the date of the issuance of that decision. Listing Council review of a
matter generally does not stay the Panel decision (unless the call for
review specifies otherwise). Given the heightened complexity of the
procedure under the Proposed Listings Code and the additional resources
that will be required as a result thereof, a fee of $1,400 for review
by the Listing Council is included in the Proposed Listings Code. This
fee is designed to recoup the costs of processing the request for
review, including preparing and copying the record on review for the
Review Council, staff resources within the Nasdaq Office of General
Counsel for reviewing the record, advising the Review council,
preparing the decision, and a proportionate part of the expense of
Review Council meetings. The fee is designed to be revenue neutral and
to directly offset the costs associated with the Review Council's
review. The Association believes that the fee is consistent with the
fee currently charged for Panel review of a written record.\8\
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\8\ This fee was approved by the Commission in Exchange Act
Release No. 37088 (April 9, 1996), 61 FR 16662 (April 16, 1996).
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The Listing Council will review matters based on the written record
and will issue a decision to affirm, modify, or reverse the decision,
or remand the matter to Nasdaq staff or to the Panel.\9\ This decision
will be effective immediately, unless it specifies to the contrary.
While these decisions remain subject to a call for review by the NASD
Board of Governors, the ability to immediately issue a decision will
allow the Council to act swiftly to delist a non-complaint issuer that
is still trading on the Nasdaq Stock Market, or to permit an issuer who
was wrongly delisted to return to the Nasdaq Stock Market more quickly.
The Association believes that this ability will help it fulfill its
directive to protect prospective investors.
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\9\ The Listing Council may, at its sole discretion, also hold
additional hearings.
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Any member of the NASD Board may call a Listing Council decision
for review at its next meeting that is 15 calendar days or more
following the date of the Council decision. An issuer may not request
that the NASD Board review the Council decision. If the NASD Board does
not call a Council decision for review, the issuer will be notified
that the Council decision represents the final action of the NASD. If
the NASD Board does call a Council decision for review, the NASD Board
will generally review the matter based on the record before the Listing
Council. Ordinarily, the issuer will not be permitted to supplement the
record on review.\10\ The NASD Board may affirm, modify, or reverse the
Listing Council decision and may remand the matter to the Council, the
Panel, or Nasdaq staff.
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\10\ The NASD Board may, at its sole discretion, request
additional information from the issuer and/or from Nasdaq staff and
may, at its sole discretion, hold additional hearings.
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Proposed NASD Rule 4870 defines what is included in the record on
review at each level of a Rule 4800 proceeding. At each level of
review, the issuer will be provided a list of documents included in the
record on
[[Page 1262]]
review. In addition, any subsequent public filings made by the issuer
and any subsequent information released to the public by the issuer may
be added to the record on review, as well as any subsequent
correspondence between the Association and the issuer. Furthermore, at
any level of review, the deciding body may take note of the issuer's
bid price and market makers at the time of consideration. The written
record, as well as any documents excluded from the written record, will
be maintained until the date upon which the decision becomes final
including, if applicable, upon conclusion of any review by the
Commission or a federal court.
Time is computed within the Proposed Listings Code based on
calendar days. In computing any period of time, the day of the act,
event, or default from which the period of time begins is not included.
The last day of the period is included, unless it is a Saturday,
Sunday, federal holiday, or NASD holiday. An NASD holiday is any day on
which the Nasdaq or the executive offices of the NASD are closed for
the entire day.
The Proposed Listings Code prohibits any communication relevant to
the merits of a proceeding with anyone who is participating in or
advising in the consideration of a matter (including members of the
Listing Qualifications Panel, Listing Council, or Board of Governors
and NASD employees), unless the issuer and the appropriate Nasdaq staff
have been provided notice and an opportunity to participate in the
communication. The purpose of this limitation is to prevent non-record
information from being considered in rendering a decision in a matter.
It is currently expected that Nasdaq staff generally will waive their
rights under this provision, giving effect to Nasdaq's current general
approach where listing decisions are considered in a non-adversarial
business forum. The Proposed Listing Code also specifies that if an
issuer submits a proposal to resolve matters at issue in a Rule 4800
Series proceeding, communications about that submission will be
excluded from the prohibitions discussed above.
Conforming changes are being made to Rules 4330 and 4480, and Rule
4530 is being removed because the substance of that Rule has been
relocated to Rule 4820(c).
Effective Date: The renumbering of the existing Rule 4800 Series to
the Rule 9700 Series and the changes being made to the Rule 9700 Series
will be made effective immediately upon approval of this proposed rule
change. The Rule 9700 Series, as hereby proposed, will be removed upon
approval of revisions to the Rule 9500 Series that will be separately
proposed.
The revised Rule 4800 Series will be made effective immediately
upon approval for matters where the issuer has not yet received a Staff
Determination, as defined in Rule 4815 of the Proposed Code. For
issuers that have received notification from the staff that they will
be delisted or denied initial inclusion prior to the date of approval,
or that otherwise have matters pending before the Panel or the Listing
Council prior to the date of approval, the existing Rule 4800 Series
will continue to apply for 180 days. This period will permit Nasdaq to
make an orderly transition from the existing rules to the Proposed
Listings Code.
2. Statutory Basis
The NASD believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(6) of the Act,\11\ which requires,
among other things, that the NASD's rules must be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest. The proposed rule change balances the rights
of issuers on the Nasdaq Stock Market with Nasdaq's obligation to
protect investors and the public interest. The NASD also believes that
the proposed rule change is consistent with the provisions of Section
19(d) of the Act \12\ and Rule 19d-1 thereunder,\13\ which govern a
self-regulatory organization's obligations upon denying access to the
services offered by the self-regulatory organization. The proposed rule
change describes all administrative remedies that are available to an
issuer prior to final action by the Association, as well as the
availability of review by the Commission.
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\11\ 15 U.S.C. 78o-3(b)(6).
\12\ 15 U.S.C. 78s-3(d).
\13\ 17 CFR 240.19d-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The NASD did not solicit or receive written comments on the
Proposed Listings Code.
III. Date of Effectiveness of 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 the self-regulatory organization 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 proposal is
consistent with the Act. Persons making written submissions should file
six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 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. Copies of such filing will also be available for
inspection and copying at the principal office of the NASD. All
submissions should refer to File No. SR-NASD-98-88 and should be
submitted by January 29, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 100.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-417 Filed 1-7-99; 8:45 am]
BILLING CODE 8010-01-M
