Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change Relating to Certain Amendments to the Restated Certificate of Incorporation and the By-Laws of The Nasdaq Stock Market, Inc., 23286-23288 [E5-2166]
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23286
Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51626; File No. SR–NASD–
2005–054]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change Relating to
Certain Amendments to the Restated
Certificate of Incorporation and the ByLaws of The Nasdaq Stock Market, Inc.
April 28, 2005.
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 April 19,
2005, the National Association of
Securities Dealers, Inc. (‘‘NASD’’),
through its subsidiary, the Nasdaq Stock
Market Inc. (‘‘Nasdaq’’), filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq filed this proposed rule
change to make certain amendments to
the Nasdaq Restated Certificate of
Incorporation (the ‘‘Certificate’’) and the
Nasdaq By-Laws (the ‘‘By-Laws’’) to
phase out the current classified board
structure and provide for the annual
election of all members of the Nasdaq
Board of Directors (the ‘‘Nasdaq
Board’’). Under the General Corporation
Law of the State of Delaware (‘‘Delaware
law’’), the proposed amendments to the
Certificate must be approved by
Nasdaq’s stockholders. Nasdaq has
submitted the text of the proposed
amendments to the Certificate to its
stockholders for approval at the 2005
annual meeting of stockholders (the
‘‘Annual Meeting’’), which will be held
on May 25, 2005. After Nasdaq’s
stockholders approve the proposed
amendments to the Certificate, Nasdaq
will immediately amend this rule filing
to indicate such approval. In order to
allow the amendment to take effect as
approved by the stockholders, Nasdaq
requests that, if the Commission finds
that the proposed rule change is
consistent with the Act, immediately
after Nasdaq’s stockholders approve of
the proposed amendments to the
Certificate, then the proposed rule
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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21:08 May 03, 2005
Jkt 205001
change will be approved on May 25,
2005.3 Below is the text of the revised
rule change. Proposed new language is
in italics; proposed deletions are in
[brackets].
Commencing with the 2007 annual
meeting of stockholders, the foregoing
classification of the Board shall cease,
and the directors, other than the
Preferred Stock Directors, shall be
elected by the holders of the Voting
RESTATED CERTIFICATE OF
Stock (as hereinafter defined) and shall
INCORPORATION OF THE NASDAQ
hold office until the next annual
STOCK MARKET, INC.
meeting of stockholders and until their
*
*
*
*
*
respective successors shall have been
duly elected and qualified, subject,
ARTICLE FIFTH
however, to prior death, resignation,
A. No change.
retirement, disqualification or removal
B. [The] Subject to the provisions of
from office.
this paragraph B, the Board (other than
C. Subject to the rights of the holders
those directors elected by the holders of
of any one or more series of Preferred
any series of Preferred Stock provided
Stock then outstanding, newly created
for or fixed pursuant to the provisions
of Article Fourth hereof, (the ‘‘Preferred directorships resulting from any
increase in the authorized number of
Stock Directors’’)) shall be divided into
three classes, as nearly equal in number directors or any vacancies in the Board
resulting from death, resignation,
as possible, designated Class I, Class II
retirement, disqualification, removal
and Class III. [Class I directors shall
from office or other cause shall only be
initially serve until the first] Each
filled by the Board. [Any director so
director elected or appointed prior to
chosen shall hold office until the next
the effectiveness of this Certificate of
election of the class for which such
Amendment under the General
directors shall have been chosen and
Corporation Law of the State of
until his successor shall be elected and
Delaware shall serve for his or her full
qualified.] No decrease in the number of
term, such that the term of each Class
I director shall expire at the 2007 annual directors shall shorten the term of any
incumbent director.
meeting of stockholders [following the
D. Except for Preferred Stock
effectiveness of this Restated Certificate
Directors, any director, or the entire
of Incorporation; Class II directors shall
Board, may be removed from office at
initially serve until]; the term of each
any time, but only [for cause and only]
Class II director shall expire at the
[second] 2005 annual meeting of
by the affirmative vote of at least 662⁄3%
stockholders [following the
of the total voting power of the
effectiveness of this Restated Certificate outstanding shares of capital stock of
of Incorporation]; and the term of each
Nasdaq entitled to vote generally in the
Class III [directors shall initially serve
election of directors (‘‘Voting Stock’’),
until the third] director shall expire at
voting together as a single class.
the 2006 annual meeting of stockholders
E. No change.
[following the effectiveness of this
*
*
*
*
*
Restated Certificate of Incorporation.
BY-LAWS OF THE NASDAQ STOCK
Commencing with the first annual
MARKET, INC.
meeting of stockholders following the
effectiveness of this Restated Certificate *
*
*
*
*
of Incorporation, directors of each class
ARTICLE IV
the term of which shall then expire shall
be elected to hold office for a three-year BOARD OF DIRECTORS
term and until the election and
Sec. 4.1–Sec. 4.3 No change.
qualification of their respective
successors in office]. In case of any
Election
increase or decrease, from time to time,
Sec. 4.4 Except as otherwise provided
in the number of directors (other than
by law, these By-Laws, or the Delegation
Preferred Stock Directors), the number
Plan, after the first meeting of Nasdaq at
of directors in each class shall be
apportioned as nearly equal as possible. which Directors are elected, [a class of]
Directors of Nasdaq shall be elected
The term of each director elected at the
2005 annual meeting of stockholders
each year at the annual meeting of the
and at each subsequent annual meeting stockholders, or at a special meeting
of stockholders shall expire at the first
called for such purpose in lieu of the
annual meeting of stockholders
annual meeting. If the annual election of
following his or her election.
Directors is not held on the date
designated therefore, the Directors shall
3 Telephone conversation between John Yetter,
cause such election to be held as soon
Associate General Counsel, Nasdaq, and Mia Zur,
thereafter as convenient.
Attorney, Division of Market Regulation
(‘‘Division’’), Commission (April 28, 2005).
Sec. 4.5 No change.
PO 00000
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Fmt 4703
Sfmt 4703
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Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Notices
Removal
Sec. 4.6 Any or all of the Directors
may be removed from office at any
time[, but only for cause,] by the
affirmative vote of at least 662⁄3 percent
of the total voting power of the
outstanding shares of capital stock of
Nasdaq entitled to vote generally in the
election of directors, voting together as
a single class.
Sec. 4.7–Sec. 4.16 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,
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 seeks to phase out its current
classified board structure and provide
for the annual election of the entire
Nasdaq Board. The Certificate provides
in Article Fifth, paragraph B that the
Nasdaq Board be divided into three
classes, with one class elected at each
annual meeting and members of each
class serving three-year terms. The
Certificate and Nasdaq’s By-Laws
provide, in accordance with Delaware
law applicable to classified boards of
directors, that directors may be removed
only for cause. This system for electing
directors was established in June 2000
while Nasdaq was still a wholly-owned
subsidiary of NASD in anticipation of
NASD’s sale of a portion of its interest
in Nasdaq in 2000 and 2001 that led to
Nasdaq becoming a publicly traded
corporation.
Nasdaq believes that the
determination of whether a classified
board of directors serves the interests of
stockholders of a corporation requires
an examination of all relevant factors by
the directors and stockholders of the
corporation. In light of Nasdaq’s
particular situation, including its
unique role as regulator and operator of
a securities market, Nasdaq believes that
the annual election of directors may
better serve its investors by enhancing
accountability through more frequent
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21:08 May 03, 2005
Jkt 205001
elections. Nasdaq also believes that the
size and diversified experience of the
Nasdaq Board are likely to assist Nasdaq
in retaining seasoned directors despite
more frequent election. While a
classified board generally may
discourage takeover attempts because
the extended terms of directors can
delay a change in control of the board
of directors, Nasdaq does not believe
that there is a clear consensus on
whether this is a positive or negative
result for stockholders.
In order to ensure a smooth transition
to the system of annual election of the
entire Nasdaq Board, the proposed rule
change would not shorten the terms of
directors elected prior to the Annual
Meeting. As a result, the terms of Class
2 directors, who are up for election at
the Annual Meeting, would be for one
year and would expire at the 2006
annual meeting if the amendment is
approved by stockholders and the
Commission. Class 1 and Class 3
directors would continue to serve until
their current terms expire in 2007 and
2006, respectively, and annual election
would apply to these directors
thereafter. Directors elected by the
Nasdaq Board to fill vacancies that may
arise will serve for the remainder of the
term of the class to which the director
was elected. Beginning in 2007, the
classification of the Nasdaq Board
would end and all directors would be
subject to annual election.
The proposed amendments to the
Certificate also would delete the
existing requirement which provides, in
accordance with the provisions of
Delaware law applicable to classified
boards of directors, that directors may
be removed only for cause. Under
Delaware law, directors of companies
that do not have classified boards may
be removed by stockholders with or
without cause. The Nasdaq Board has
approved conforming amendments to
the By-Laws that would be effective
only in the event the proposed
amendment is approved by the
stockholders at the Annual Meeting and
by the Commission. The conforming
amendments are also included as
proposed rule changes in this filing.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the Act,
including section 15A(b)(2) and (6) of
the Act,4 which require, among other
things, that Nasdaq be so organized and
have the capacity to be able to carry out
the purposes of the Act and to comply
with and enforce compliance with the
provisions of the Act, and that Nasdaq’s
PO 00000
4 15
U.S.C. 78o–3(b)(2) and (6).
Frm 00200
Fmt 4703
Sfmt 4703
23287
rules are 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.
Nasdaq believes that the changes
proposed to the Certificate and By-Laws
will serve the public interest by
enhancing the accountability of board
members through more frequent
elections. Nasdaq also believes that
enhancing the accountability of its
board members will also help Nasdaq
fulfill its obligations arising under the
Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq 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
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 NASD 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.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2005–054 on the
subject line.
Paper comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
E:\FR\FM\04MYN1.SGM
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23288
Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Notices
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–NASD–2005–054. 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 (https://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
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 also will be
available for inspection and copying at
the principal office of the 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–2005–054 and
should be submitted on or before May
25, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.5
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2166 Filed 5–3–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51628; File No. SR–NYSE–
2005–28]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by the New
York Stock Exchange, Inc. Relating to
Its Original Financial Listing Standards
Pilot Program
April 28, 2005.
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 April 25,
5 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate jul<14>2003
21:08 May 03, 2005
Jkt 205001
2005, the New York Stock Exchange,
Inc. (‘‘NYSE’’ or ‘‘Exchange’’) 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 the Exchange. The
proposed rule change has been filed by
the NYSE as a ‘‘non-controversial’’ rule
change pursuant to Rule 19b–4(f)(6)
under the Act.3 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange seeks to extend its
original financial listing standards pilot
program (the ‘‘Pilot Program’’) 4 until
the earlier of July 31, 2005, or such date
as the Commission may approve File
Number SR–NYSE–2004–20,5 which
seeks permanent approval of the Pilot
Program. The Pilot Program established
revised financial standards applicable to
the listing of equity securities on the
Exchange. The Pilot Program is
currently in effect on an extended basis
until the earlier of April 30, 2005, or
such date as the Commission may
approve File Number SR–NYSE–2004–
20.6
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
Exchange 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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant parts of such
statements.
CFR 240.19b–4(f)(6).
Securities Exchange Act Release Nos. 51104
(January 28, 2005), 70 FR 6482 (February 7, 2005)
(File No. SR–NYSE–2005–08); 50615 (October 29,
2004), 69 FR 64799 (November 8, 2004) (File No.
SR–2004–58); 50123 (July 29, 2004), 69 FR 57474
(August 5, 2004) (File No. SR–NYSE–2004–40); and
49154 (January 29, 2004), 69 FR 5633 (February 5,
2004) (approving File No. SR–NYSE–2003–43).
5 See Securities Exchange Act Release No. 51332
(March 8, 2005), 70 FR 15392 (March 25, 2005).
6 See Securities Exchange Act Release No. 51104,
supra note 4.
PO 00000
3 17
4 See
Frm 00201
Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On January 29, 2004, the Commission
granted accelerated approval to the Pilot
Program on a six-month pilot basis
through July 30, 2004.7 Two comments
were received in response to File
Number SR–NYSE–2003–43.8 The
NYSE thereafter filed File Number SR–
NYSE–2004–15 on March 16, 2004 for
immediate effectiveness,9 which
suspended portions of the original Pilot
Program regarding minimum numerical
continued listing set forth in section
802.01B of the NYSE’s Listed Company
Manual. In File Number SR–NYSE–
2004–15, the Exchange noted its
intention to publish the requirements of
the original Pilot Program regarding
minimum numerical continued listing
standards set forth Section 802.01B for
public comment on a non-accelerated
timeframe. File Number SR–NYSE–
2004–15 did not, however, affect the
Pilot Program with respect to original
listing standards set forth in sections
102.01C and 103.01B of the NYSE’s
Listed Company Manual or the Pilot
Program’s non-substantive change to the
language of section 802.01C.
On April 4, 2004, the Exchange filed
File Number SR–NYSE–2004–20, which
seeks permanent approval for the Pilot
Program currently in effect with respect
to the Exchange’s original minimum
listing standards and approval of the
continued minimum listing standards as
originally proposed in File Number SR–
NYSE–2003–43. File Number SR–
NYSE–2004–20 was published in the
Federal Register on July 2, 2004.10
Three comment letters were received in
response to File Number SR–NYSE–
2004–20.11 Following consideration of
these comment letters, the Exchange
filed Amendment No. 2 to File Number
SR–NYSE–2004–20 on August 31,
7 See Securities Exchange Act Release No. 49154,
supra note 4.
8 See letters to Jonathan G. Katz, Secretary,
Commission, from W. Randy Eaddy, Kilpatrick
Stockton LLP, dated March 11, 2004, and Kenneth
A. Hoogstra, von Briesen & Roper, s.c., dated
February 25, 2004.
9 See Securities Exchange Act Release No. 49443
(March 18, 2004), 69 FR 13929 (March 24, 2004)
(File No. SR–NYSE–2004–15).
10 See supra note 5.
11 See letters to Jonathan G. Katz, Secretary,
Commission, from Richard F. Latour, President &
CEO, MicroFinancial Incorporated, July 15, 2004,
Kenneth A. Hoogstra, von Briesen & Roper, s.c.,
dated July 20, 2004, and John L. Patenaude, Vice
President Finance and Chief Financial Officer,
Nashua Corporation, dated July 22, 2004.
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]]>Agencies
[Federal Register Volume 70, Number 85 (Wednesday, May 4, 2005)]
[Notices]
[Pages 23286-23288]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2166]
[[Page 23286]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51626; File No. SR-NASD-2005-054]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing of Proposed Rule Change Relating to
Certain Amendments to the Restated Certificate of Incorporation and the
By-Laws of The Nasdaq Stock Market, Inc.
April 28, 2005.
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 April 19, 2005, the National Association of Securities Dealers, Inc.
(``NASD''), through its subsidiary, the Nasdaq Stock Market Inc.
(``Nasdaq''), filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq filed this proposed rule change to make certain amendments
to the Nasdaq Restated Certificate of Incorporation (the
``Certificate'') and the Nasdaq By-Laws (the ``By-Laws'') to phase out
the current classified board structure and provide for the annual
election of all members of the Nasdaq Board of Directors (the ``Nasdaq
Board''). Under the General Corporation Law of the State of Delaware
(``Delaware law''), the proposed amendments to the Certificate must be
approved by Nasdaq's stockholders. Nasdaq has submitted the text of the
proposed amendments to the Certificate to its stockholders for approval
at the 2005 annual meeting of stockholders (the ``Annual Meeting''),
which will be held on May 25, 2005. After Nasdaq's stockholders approve
the proposed amendments to the Certificate, Nasdaq will immediately
amend this rule filing to indicate such approval. In order to allow the
amendment to take effect as approved by the stockholders, Nasdaq
requests that, if the Commission finds that the proposed rule change is
consistent with the Act, immediately after Nasdaq's stockholders
approve of the proposed amendments to the Certificate, then the
proposed rule change will be approved on May 25, 2005.\3\ Below is the
text of the revised rule change. Proposed new language is in italics;
proposed deletions are in [brackets].
---------------------------------------------------------------------------
\3\ Telephone conversation between John Yetter, Associate
General Counsel, Nasdaq, and Mia Zur, Attorney, Division of Market
Regulation (``Division''), Commission (April 28, 2005).
---------------------------------------------------------------------------
RESTATED CERTIFICATE OF INCORPORATION OF THE NASDAQ STOCK MARKET, INC.
* * * * *
ARTICLE FIFTH
A. No change.
B. [The] Subject to the provisions of this paragraph B, the Board
(other than those directors elected by the holders of any series of
Preferred Stock provided for or fixed pursuant to the provisions of
Article Fourth hereof, (the ``Preferred Stock Directors'')) shall be
divided into three classes, as nearly equal in number as possible,
designated Class I, Class II and Class III. [Class I directors shall
initially serve until the first] Each director elected or appointed
prior to the effectiveness of this Certificate of Amendment under the
General Corporation Law of the State of Delaware shall serve for his or
her full term, such that the term of each Class I director shall expire
at the 2007 annual meeting of stockholders [following the effectiveness
of this Restated Certificate of Incorporation; Class II directors shall
initially serve until]; the term of each Class II director shall expire
at the [second] 2005 annual meeting of stockholders [following the
effectiveness of this Restated Certificate of Incorporation]; and the
term of each Class III [directors shall initially serve until the
third] director shall expire at the 2006 annual meeting of stockholders
[following the effectiveness of this Restated Certificate of
Incorporation. Commencing with the first annual meeting of stockholders
following the effectiveness of this Restated Certificate of
Incorporation, directors of each class the term of which shall then
expire shall be elected to hold office for a three-year term and until
the election and qualification of their respective successors in
office]. In case of any increase or decrease, from time to time, in the
number of directors (other than Preferred Stock Directors), the number
of directors in each class shall be apportioned as nearly equal as
possible. The term of each director elected at the 2005 annual meeting
of stockholders and at each subsequent annual meeting of stockholders
shall expire at the first annual meeting of stockholders following his
or her election. Commencing with the 2007 annual meeting of
stockholders, the foregoing classification of the Board shall cease,
and the directors, other than the Preferred Stock Directors, shall be
elected by the holders of the Voting Stock (as hereinafter defined) and
shall hold office until the next annual meeting of stockholders and
until their respective successors shall have been duly elected and
qualified, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
C. Subject to the rights of the holders of any one or more series
of Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors or
any vacancies in the Board resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall
only be filled by the Board. [Any director so chosen shall hold office
until the next election of the class for which such directors shall
have been chosen and until his successor shall be elected and
qualified.] No decrease in the number of directors shall shorten the
term of any incumbent director.
D. Except for Preferred Stock Directors, any director, or the
entire Board, may be removed from office at any time, but only [for
cause and only] by the affirmative vote of at least 66\2/3\% of the
total voting power of the outstanding shares of capital stock of Nasdaq
entitled to vote generally in the election of directors (``Voting
Stock''), voting together as a single class.
E. No change.
* * * * *
BY-LAWS OF THE NASDAQ STOCK MARKET, INC.
* * * * *
ARTICLE IV
BOARD OF DIRECTORS
Sec. 4.1-Sec. 4.3 No change.
Election
Sec. 4.4 Except as otherwise provided by law, these By-Laws, or the
Delegation Plan, after the first meeting of Nasdaq at which Directors
are elected, [a class of] Directors of Nasdaq shall be elected each
year at the annual meeting of the stockholders, or at a special meeting
called for such purpose in lieu of the annual meeting. If the annual
election of Directors is not held on the date designated therefore, the
Directors shall cause such election to be held as soon thereafter as
convenient.
Sec. 4.5 No change.
[[Page 23287]]
Removal
Sec. 4.6 Any or all of the Directors may be removed from office at
any time[, but only for cause,] by the affirmative vote of at least
66\2/3\ percent of the total voting power of the outstanding shares of
capital stock of Nasdaq entitled to vote generally in the election of
directors, voting together as a single class.
Sec. 4.7-Sec. 4.16 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, 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 seeks to phase out its current classified board structure
and provide for the annual election of the entire Nasdaq Board. The
Certificate provides in Article Fifth, paragraph B that the Nasdaq
Board be divided into three classes, with one class elected at each
annual meeting and members of each class serving three-year terms. The
Certificate and Nasdaq's By-Laws provide, in accordance with Delaware
law applicable to classified boards of directors, that directors may be
removed only for cause. This system for electing directors was
established in June 2000 while Nasdaq was still a wholly-owned
subsidiary of NASD in anticipation of NASD's sale of a portion of its
interest in Nasdaq in 2000 and 2001 that led to Nasdaq becoming a
publicly traded corporation.
Nasdaq believes that the determination of whether a classified
board of directors serves the interests of stockholders of a
corporation requires an examination of all relevant factors by the
directors and stockholders of the corporation. In light of Nasdaq's
particular situation, including its unique role as regulator and
operator of a securities market, Nasdaq believes that the annual
election of directors may better serve its investors by enhancing
accountability through more frequent elections. Nasdaq also believes
that the size and diversified experience of the Nasdaq Board are likely
to assist Nasdaq in retaining seasoned directors despite more frequent
election. While a classified board generally may discourage takeover
attempts because the extended terms of directors can delay a change in
control of the board of directors, Nasdaq does not believe that there
is a clear consensus on whether this is a positive or negative result
for stockholders.
In order to ensure a smooth transition to the system of annual
election of the entire Nasdaq Board, the proposed rule change would not
shorten the terms of directors elected prior to the Annual Meeting. As
a result, the terms of Class 2 directors, who are up for election at
the Annual Meeting, would be for one year and would expire at the 2006
annual meeting if the amendment is approved by stockholders and the
Commission. Class 1 and Class 3 directors would continue to serve until
their current terms expire in 2007 and 2006, respectively, and annual
election would apply to these directors thereafter. Directors elected
by the Nasdaq Board to fill vacancies that may arise will serve for the
remainder of the term of the class to which the director was elected.
Beginning in 2007, the classification of the Nasdaq Board would end and
all directors would be subject to annual election.
The proposed amendments to the Certificate also would delete the
existing requirement which provides, in accordance with the provisions
of Delaware law applicable to classified boards of directors, that
directors may be removed only for cause. Under Delaware law, directors
of companies that do not have classified boards may be removed by
stockholders with or without cause. The Nasdaq Board has approved
conforming amendments to the By-Laws that would be effective only in
the event the proposed amendment is approved by the stockholders at the
Annual Meeting and by the Commission. The conforming amendments are
also included as proposed rule changes in this filing.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the Act, including section 15A(b)(2) and (6) of the Act,\4\ which
require, among other things, that Nasdaq be so organized and have the
capacity to be able to carry out the purposes of the Act and to comply
with and enforce compliance with the provisions of the Act, and that
Nasdaq's rules are 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. Nasdaq
believes that the changes proposed to the Certificate and By-Laws will
serve the public interest by enhancing the accountability of board
members through more frequent elections. Nasdaq also believes that
enhancing the accountability of its board members will also help Nasdaq
fulfill its obligations arising under the Act.
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\4\ 15 U.S.C. 78o-3(b)(2) and (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 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
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 NASD 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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2005-054 on the subject line.
Paper comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary,
[[Page 23288]]
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549-0609.
All submissions should refer to File Number SR-NASD-2005-054. 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 (https://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 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 also will be available for inspection and copying at the
principal office of the 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-2005-054 and should be submitted on or before May
25, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2166 Filed 5-3-05; 8:45 am]
BILLING CODE 8010-01-P
