[Federal Register Volume 64, Number 241 (Thursday, December 16, 1999)]
[Notices]
[Pages 70309-70311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32557]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42214; File No. SR-NASD-99-61]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc.,
Amending Its Rules for the Listing of Additional Shares
December 9, 1999.
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 October 19, 1999, the National Association of Securities Dealers,
Inc. (``NASD''), through its wholly owned subsidiary the Nasdaq Stock
Market, Inc. (``Nasdaq''), filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the NASD.
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
The NASD is proposing to modify the notification requirements under
the Nasdaq's Listing of Additional Shares (``LAS'') Program and to make
conforming changes to procedures for calculating the related LAS fee.
Below is the text of the proposed rule change. Proposed new language
appears in italic; proposed deletions are bracketed.
* * * * *
4310. Qualification Requirements for Domestic and Canadian
Securities
To qualify for inclusion in Nasdaq, a security of a domestic or
Canadian issuer shall satisfy all applicable requirements contained in
paragraphs (a) or (b), and (c) hereof.
(a) No change.
(b) No change.
(c) In addition to the requirements contained in paragraph (a) or
(b) above, and unless otherwise indicated, a security shall satisfy the
following criteria for inclusion in Nasdaq:
(1)-(16) No change.
(17) The issuer shall be required to [file on a form designated by
Nasdaq notification of the creation of a stock option, employee stock
purchase or other stock remuneration plan or the issuance of additional
shares of any class of securities included in Nasdaq, except for the
issuance of additional shares under a stock option, employee stock
purchase or other stock remuneration plan, no later than 15 calendar
days prior to the creation of the plan or the issuance of additional
shares.] notify Nasdaq on the appropriate form no later than 15
calender days prior to:
(A) establishing a stock option plan, purchase plan or other
arrangement pursuant to which stock may be acquired by officers or
directors without shareholder approval; or
(B) issuing securities that may potentially result in a change of
control of the issuer; or
(C) issuing any common stock or security convertible into common
stock in connection with the acquisition of the stock or assets of
another company, if any officer or director or substantial shareholder
of the issuer has a 5% or greater interest (or if such persons
collectively have a 10% or greater interest) in the company to be
acquired or in the consideration to be paid; or
(D) entering into a transaction that may result in the potential
issuance of common stock (or securities convertible into common stock)
greater than 10% of either the total shares outstanding or the voting
power outstanding on a pre-transaction basis.
(18)-(28) No change.
(d) No change.
4320. Qualification Requirements for Non-Canadian Foreign
Securities and American Depositary Receipts
To qualify for inclusion in Nasdaq, a security of a non-Canadian
foreign issuer, an American Depositary Receipt (ADR) or similar
security issued in respect of a security of a foreign issuer shall
satisfy the requirements of paragraphs (a), (b) or (c), and (d) and (e)
of this Rule.
(a)-(d) No change.
(e) In addition to the requirements contained in paragraph (a), (b)
or (c), and (d), the security shall satisfy the following criteria for
inclusion in Nasdaq:
(1)-(14) No change.
(15) The issuer shall be required to [file on a form designated by
Nasdaq notification of creation of a stock option, employee stock
purchase or other stock remuneration plan or the issuance of additional
shares of any class of securities included in Nasdaq, except for the
issuance of additional shares under a stock option, employee stock
purchase or other stock remuneration plan, no later than 15 calendar
days prior to the creation of the plan or the issuance of additional
shares.] notify Nasdaq on the appropriate form no later than 15
calendar days prior to:
[[Page 70310]]
(A) establishing a stock option plan, purchase plan or other
arrangement pursuant to which stock may be acquired by officers or
directors without shareholder approval; or
(B) issuing securities that may potentially result in a change of
control of the issuer; or
(C) issuing any common stock or security convertible into common
stock in connection with the acquisition of the stock or assets of
another company, if any officer or director or substantial shareholder
of the issuer has a 5% or greater interest (or if such persons
collectively have a 10% or greater interest) in the company to be
acquired or in the consideration to be paid; or
(D) entering into a transaction that may result in the potential
issuance of common stock (or securities convertible into common stock)
greater than 10% of either the total shares outstanding or the voting
power outstanding on a pre-transaction basis.
(16)-(24) No change.
(f) No change.
4510. The Nasdaq National Market \3\
(a) Entry fee
No change.
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\3\ The NASD has filed a proposed rule change with the
Commission to revise the fees it charges issuers listing additional
shares on the Nasdaq National Market or Nasdaq SmallCap Market.
Under the proposed rule change, the NASD seeks to modify its Rules
4510 and 4520 as they relate to the calculation of LAS fees. The
language of Rules 4510 and 4520 as it appears here has been marked
to show changes to the language published for comment in SR-NASD-99-
40. See Commission File No. SR-NASD-99-40 and Securities Exchange
Act Release No. 42108 (Nov. 4, 1999), 64 FR 61678 (Nov. 12, 1999).
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(b) Additional Shares
(1) The issuer of each class of security that is a domestic issue
which is listed in the Nasdaq National Market shall pay to The Nasdaq
Stock Market, Inc. the fee set forth in subparagraph (2) below in
connection with the issuance of additional shares of each class of
listed security.
(2) The fee in connection with additional shares shall be $2,000 or
$.01 per additional share, whichever is higher, up to a maximum of
$17,500 per [notification] quarter and an annual maximum of $35,000 per
issuer.
(3) [Calculation of the fee will be] The fee will be calculated and
assessed quarterly based on the [issuer notification to Nasdaq of the
issuance of additional shares of securities as required under
provisions of Rule 4310(c)(17)] issuer's total shares outstanding as
reported on its periodic reports filed with the SEC.
(c)-(d) No change.
4520. The Nasdaq SmallCap Market
(a) Entry Fee
No change.
(b) Additional Shares
(1) The issuer of each class of security that is a domestic issue
which is listed in The Nasdaq SmallCap Market shall pay to The Nasdaq
Stock Market, Inc. the fee set forth in subparagraph (2) below in
connection with the issuance of additional shares of each class of
listed security.
(2) The fee in connection with additional shares shall be $2,000 or
$.01 per additional share, whichever is higher, up to a maximum of
$17,500 per [notification] quarter and an annual maximum of $35,000 per
issuer.
(3) [Calculation of the fee will be] The fee will be calculated and
assessed quarterly based on [issuer notification to the Association of
the issuance of additional shares of securities as required under
provisions of Rule 4310(c)(17).] the issuer's total shares outstanding
as reported on its periodic reports filed with the SEC.
(c)-(d) 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. The NASD 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 LAS Program has been employed by Nasdaq staff to monitor
compliance by issuers with Nasdaq listing rules governing shareholder
approval, public interest concerns, reverse mergers, and voting rights.
Since 1992, all Nasdaq issuers have been required to file a
notification upon the creation of a stock option, employee stock
purchase, or other stock remuneration plan, or upon the issuance of
additional shares of any class of securities included in Nasdaq.\4\ The
NASD has reviewed the current LAS Program and is filing this proposed
rule change to improve efficiency and to eliminate certain
administrative burdens for Nasdaq staff and issuers arising from the
requirements of the current LAS program.
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\4\ See NASD Rules 4310(c)(17) and 4320(e)(15). The Commission
issued an order granting permanent approval to the LAS Program in
1993. See Securities Exchange Act Release No. 31859 (February 16,
1993), 58 FR 9584 (Feb. 22, 1993), (SR-NASD-92-27).
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The NASD believes that the current LAS Program is difficult and
unduly time-consuming to administer. Specifically, the timing of the
notification required by the current LAS Program varies depending on
the nature of the specific action undertaken by an issuer and, as a
result, has proved confusing to issuers and their counsel. This in turn
has led to delays in filing or failures to comply with LAS Program
notification and fee requirements. Furthermore, the NASD believes that,
under the current LAS Program, it is difficult for an issuer to
calculate the number of shares to be reported for LAS purposes because
in order to do so an issuer must track the number of shares approved by
Nasdaq according to current LAS criteria (a number not otherwise
monitored by issuers and which has often proved difficult for Nasdaq
staff and issuers to reconcile) instead of the total number of shares
outstanding reported in periodic reports required to be filed with the
Commission.
The NASD proposes to make the following changes to the current LAS
Program:
1. The billing aspect of the LAS Program would be separated from
required compliance reviews. Under the proposal, issuers will be billed
each quarter for any increase in their total shares outstanding
(``TSO'') as reported in publicly available periodic reports required
to be filed with the Commission.\5\ This modification would ensure that
the LAS Program is administered based on a publicly disclosed TSO
number rather than on the number of approved shares currently
calculated by Nasdaq according to existing LAS criteria. This
modification would thereby eliminate the current procedure of
establishing a baseline number of shares upon an issuer's initial
listing as well as the
[[Page 70311]]
resultant confusion surrounding when transactions resulting in new
shares being issued must be reported to Nasdaq. This modification would
also permit Nasdaq staff to rely on the publicly reported TSO when
performing reconciliations.
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\5\ Billing for all issuers would be conducted on a calendar
year basis and LAS fees would then be assessed on any increase in
the TSO number set forth in an issuer's most recent periodic report
filed with the Commission pursuant to Section 13 or 15(d) of the
Act. Telephone conversation between Arnold Golub, Senior Attorney,
Office of the General Counsel, Nasdaq, and Matthew Boesch,
Paralegal, Division of Market Regulation Commission, on December 6,
1999.
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2. The process of reporting to Nasdaq would be streamlined by
confining issuers' notification requirements to those transactions
implicated by the Nasdaq's corporate governance compliance
requirements.\6\ Consequently, notification would not be required,
unless:
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\6\ See NASD Rules 4310(c)(25) and 4320(e)(21).
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(a) a stock option plan, purchase plan or other arrangement is
established without shareholder approval; or
(b) the issuer enters into a transaction that may result in a
change of control; or
(c) the issuer issues common stock or a security convertible into
common stock in connection with the acquisition of the stock or assets
of another company, if any officer or director or substantial
shareholder of the issuer has an interest of 5% or more (or if a group
of such persons collectively holds an interest of 10% or more) in the
company to be acquired or in the consideration to be paid; or
(d) the issuer enters into a transaction that may result in the
potential issuance of common stock (or securities convertible into
common stock) representing more than 10% of either the total shares
outstanding or voting power outstanding on a pre-transaction basis.
Under the proposed rule change, all LAS notifications would be
required to be filed 15 calendar days prior to issuance (except for
stock splits and dividends which are required to be filed 10 calendar
days prior to the record date pursuant to SEC Rule 10b-17 \7\). This
requirement would eliminate the numerous timing requirements under the
current LAS Program and enable Nasdaq staff to consider the most
current information when evaluating such transactions.
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\7\ 17 CFR 240.10b-17.
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The NASD believes that these proposed changes to the LAS Program,
if approved, will improve Nasdaq's administration of the LAS Program by
focusing on the TSO reported publicly in periodic reports required to
be filed with the Commission instead of relying on a calculated number
of approved shares. In addition, the NASD believes that the proposed
changes will streamline the filing requirements imposed on issuers by
reducing the filing burden to the extent that no filings will be
required for issuances that do not raise corporate governance concerns,
while simultaneously streamlining the notification filing time frame.
Finally, the NASD believes that the proposed changes will allow Nasdaq
staff to focus on larger and more complex transactions in its review of
issuers' compliance with corporate governance rules and other continued
listing standards by eliminating the current requirement that issuers
file information about even those issuances that do not generally raise
these concerns in these respects.
2. Statutory Basis
The NASD believes that the proposed rule change is consistent with
the provisions of Sections 15A(b)(5) and (6) \8\ of the Act. The
proposed rule change is consistent with Section 15A(b)(5) as it
provides for the equitable allocation of reasonable dues, fees, and
other charges among members and issuers using the Nasdaq system. The
proposed rule change will alter the frequency with which Nasdaq
collects LAS fees from issuers by billing these quarterly rather than
per transaction; the change will also simplify the computation of fees
owed by issuers by basing such fees on changes in the TSO rather than
the number of shares approved for issuance according to existing Nasdaq
procedures. The proposed rule change is consistent with Section
15A(b)(6) as it is designed to promote just and equitable principles of
trade and does not permit unfair discrimination between customers,
issuers, brokers or dealers. As noted above, the proposed rule change
is designed to reduce the number of LAS filings required of issuers and
to thereby allow Nasdaq staff more time to review those share issuances
that may be in contravention of Nasdaq corporate governance rules or
listing standards.
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\8\ 15 U.S.C. 78o-3(b)(5) and (6).
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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, 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 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 proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
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 Pubic 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 number SR-NASD-99-61 and
should be submitted by January 6, 2000.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-32557 Filed 12-15-99; 8:45 am]
BILLING CODE 8010-01-M
