In the Matter of the Application of the Nasdaq Stock Market, Inc. and the NASDAQ Stock Market LLC for an Exemption From Section 12(a) Allowing Trading of Certain Unregistered Securities, 45359-45360 [06-6707]

Download as PDF Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices [FR Doc. 06–6708 Filed 8–7–06; 8:45 am] BILLING CODE 8010–01–C SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54241] In the Matter of the Application of the Nasdaq Stock Market, Inc. and the NASDAQ Stock Market LLC for an Exemption From Section 12(a) Allowing Trading of Certain Unregistered Securities July 31, 2006. I. Introduction On January 13, 2006, the Commission approved the application of the Nasdaq Stock Market, Inc. (‘‘Nasdaq’’) to register one of its subsidiaries, the NASDAQ Stock Market LLC (‘‘Nasdaq Exchange’’) as a national securities exchange.1 Prior to Nasdaq’s submission of the application to become an exchange, Nasdaq was a wholly-owned subsidiary of the National Association of Securities Dealers, Inc. (‘‘NASD’’) that operated as an interdealer quotation system. Historically under NASD rules, a company’s securities were eligible for listing on Nasdaq if the security was registered under either Section 12(g) 2 or Section 12(b) 3 of the Securities Exchange Act of 1934 (‘‘Exchange Act’’).4 However, in certain circumstances, NASD rules also permitted the trading of securities that are exempt from registration under Section 12(g) of the Exchange Act. Among other exempt securities, NASD rules allow the trading of any security of an insurance company that is exempt from registration under Section 12(g)(2)(G) of the Exchange Act 5 and the 1 See Release No. 34–53128 (January 13, 2006) [71 FR 3550]. 2 15 U.S.C. 78l(g). 3 15 U.S.C. 78l(b). 4 15 U.S.C. 78a et seq. 5 15 U.S.C. 78l(g)(2)(G). Section 12(g)(2)(G) provides that any security issued by an insurance company is exempt from registration if all of the following conditions are met: • Such insurance company is required to and does file an annual statement with the Commissioner of Insurance (or other officer or agency performing a similar function) of its domiciliary State, and such annual statement conforms to that prescribed by the National Association of Insurance Commissioners or in the determination of such State commissioner, officer or agency substantially conforms to that so prescribed. • Such insurance company is subject to regulation by its domiciliary State of proxies, consents, or authorizations in respect of securities issued by such company and such regulation conforms to that prescribed by the National Association of Insurance Commissioners. • After July 1, 1966, the purchase and sales of securities issued by such insurance company by VerDate Aug<31>2005 22:10 Aug 07, 2006 Jkt 208001 securities of certain foreign private issuers that are exempt from Section 12(g) registration pursuant to Exchange Act Rule 12g3–2(b).6 Once the Nasdaq Exchange begins to operate as a national securities exchange, Section 12(a) of the Exchange Act 7 would prohibit any Nasdaq Exchange member, broker, or dealer from effecting any transaction in any security, other than an ‘‘exempted security’’ as defined in Section 3(a)(12) of the Exchange Act,8 on the Nasdaq Exchange, unless the security is registered under Section 12(b) of the Exchange Act. There are no exemptions from Section 12(b) registration afforded to insurance companies and foreign private issuers that correspond to the exemptions available to these issuers under Section 12(g)(2)(G) of the Exchange Act and Exchange Act Rule 12g3–2(b). Accordingly, the securities of these issuers would need to be registered under Section 12(b) of the Exchange Act before transactions in those securities could be effected by Nasdaq Exchange members, brokers and dealers, consistent with Section 12(a) on the Nasdaq Exchange, absent the exemption provided by this order. II. Request by Nasdaq and the Nasdaq Exchange for an Exemption From Section 12(a) of the Exchange Act On July 31, 2006, the Commission received an application (the ‘‘Nasdaq Application’’) 9 from the Nasdaq and the Nasdaq Exchange for an exemption pursuant to Section 36 of the Exchange Act,10 in accordance with the procedures set forth in Exchange Act Rule 0–12.11 Section 36 of the Exchange Act gives the Commission the authority to exempt any person, security or transaction from any Exchange Act provision by rule, regulation or order, to the extent that the exemption is necessary or appropriate in the public interest and consistent with the protection of investors. Nasdaq and the Nasdaq Exchange have requested a three-year exemption from Section 12(a) of the Exchange Act, with respect to transactions in securities of the issuers beneficial owners, directors, or officers of such company are subject to regulation (including reporting) by its domiciliary State substantially in the manner provided in Section 16. 6 See 17 CFR 240.12g3–2(b). 7 15 U.S.C. 78l(a). 8 15 U.S.C. 78c(a)(12). 9 Letter from Edward S. Knight to Nancy M. Morris (July 31, 2006). The Nasdaq Application is included in accompanying Release No. 34–54240 (July 31, 2006). 10 15 U.S.C. 78mm. 11 17 CFR 240.0–12. Exchange Act Rule 0–12 sets forth procedures for filing applications for orders for exemptive relief pursuant to Section 36. PO 00000 Frm 00115 Fmt 4701 Sfmt 4703 45359 listed in Exhibit C to the Nasdaq Application that are currently exempt from registration under Section 12(g) of the Exchange Act. According to Nasdaq and the Nasdaq Exchange, the securities of four insurance companies and nine foreign private issuers currently are trading on Nasdaq in reliance on these exemptions.12 An exemption from Section 12(a) would permit Nasdaq Exchange members and brokers or dealers to effect transactions in these securities on the Nasdaq Exchange without registration under Section 12(b) of the Exchange Act. Nasdaq and the Nasdaq Exchange believe that the three-year period will provide these issuers with adequate time to complete the Section 12(b) registration process and prepare financial statements should they choose to continue to have their securities traded on the Nasdaq Exchange after expiration of the three-year period. Under the terms of the requested exemption, the insurance companies would have to continue to satisfy the conditions set forth in Section 12(g)(2)(G) of the Exchange Act and the foreign private issuers would have to remain in compliance with the conditions set forth in Exchange Act Rule 12g3–2(b) to qualify for the exemption. Prior to submitting this request, Nasdaq and the Nasdaq Exchange notified the insurance companies and the foreign private issuers of their plan to request a Section 12(a) exemption on the issuers’ behalf and allowed each issuer that did not wish to be the subject of the request to opt-out of the process. Nasdaq and the Nasdaq Exchange provided these issuers a period of 10 business days to notify Nasdaq of an opt-out preference. The issuers that chose to opt-out from the request are listed in Exhibit B to the Nasdaq Application. III. Order Granting Nasdaq’s Application for an Exemption Pursuant to Section 36 of the Exchange Act We believe that exempting Nasdaq Exchange members, brokers and dealers for a limited time from the requirements of Section 12(a) regarding the trading of the securities listed in Exhibit C to the Nasdaq Application is necessary and appropriate in the public interest, and is consistent with the protection of investors in order to afford these issuers time to comply with the Section 12(b) registration requirements. As represented by Nasdaq and the Nasdaq Exchange in their request, immediate registration under Section 12(b) could 12 See E:\FR\FM\08AUN2.SGM the Nasdaq Application. 08AUN2 45360 Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices force these issuers to withdraw from Nasdaq, consequently depriving U.S. investors of the accustomed market for the securities of those issuers and, in some cases, potentially reducing the depth and liquidity of the market for these securities. We believe that a threeyear exemption will serve the public interest by minimizing any unnecessary disruptions that could result from the sudden withdrawal of these securities from Nasdaq, thereby potentially exposing investors in these securities to a less liquid market, absence of market surveillance by an exchange, and delays in execution of transfers. We concur with Nasdaq and the Nasdaq Exchange that the requested three-year exemption period is appropriate and will provide the affected issuers with sufficient transition time to register their securities.13 Until the expiration of the 13 Issuers whose securities are exempt from Section 12(g) under Section 12(g)(2)(G) of the Exchange Act or Exchange Act Rule 12g3–2(b) would be required to prepare and file a registration statement on Form 10 for domestic companies or Form 20–F for foreign private issuers. Under Form VerDate Aug<31>2005 22:10 Aug 07, 2006 Jkt 208001 exemption granted by this Order, Nasdaq Exchange members, brokers and dealers will be permitted to effect transactions in the securities subject to this exemption so long as the issuers of these securities continue to satisfy the conditions of Section 12(g)(2)(G) of the Exchange Act or Exchange Act Rule 12g3–2(b), whichever is applicable. Accordingly, it is ordered pursuant to Section 36 of the Exchange Act that, under the terms and conditions set forth below, a Nasdaq Exchange member, broker or dealer may effect a transaction on the Nasdaq Exchange in a security of an issuer listed in Exhibit C to the Nasdaq Application that has not been registered under Section 12(b) of the Exchange Act without violating Section 20–F, foreign private issuers would have to restate their financial statements in accordance with U.S. generally accepted accounting principles, or provide a reconciliation of their primary financial statements to U.S. GAAP, for at least two fiscal years. Thus, the three year period would give these issuers sufficient time to prepare the required financial statements should they choose to continue to have their securities traded on the Nasdaq Exchange. PO 00000 Frm 00116 Fmt 4701 Sfmt 4703 12(a) of the Exchange Act. This exemption shall take effect on August 1, 2006, the same date as the start of Nasdaq Exchange’s operation, and shall expire on August 1, 2009. This exemption is limited to the securities of the issuers listed in Exhibit C to the Nasdaq Application and is conditioned on the continued satisfaction of the conditions set forth in Section 12(g)(2)(G) of the Exchange Act with respect to the securities of the insurance companies, or Exchange Act Rule 12g3–2(b) with respect to the securities of the foreign private issuers. As specified in the Nasdaq Application, Nasdaq will verify the satisfaction of these conditions. In addition, this exemption does not extend to any other section or provision of the Exchange Act. By the Commission (Chairman Cox and Commissioners Glassman, Atkins, Campos and Nazareth). Nancy M. Morris, Secretary. [FR Doc. 06–6707 Filed 8–7–06; 8:45 am] BILLING CODE 8010–01–P E:\FR\FM\08AUN2.SGM 08AUN2

Agencies

[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Notices]
[Pages 45359-45360]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-6707]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54241]


In the Matter of the Application of the Nasdaq Stock Market, Inc. 
and the NASDAQ Stock Market LLC for an Exemption From Section 12(a) 
Allowing Trading of Certain Unregistered Securities

July 31, 2006.

I. Introduction

    On January 13, 2006, the Commission approved the application of the 
Nasdaq Stock Market, Inc. (``Nasdaq'') to register one of its 
subsidiaries, the NASDAQ Stock Market LLC (``Nasdaq Exchange'') as a 
national securities exchange.\1\ Prior to Nasdaq's submission of the 
application to become an exchange, Nasdaq was a wholly-owned subsidiary 
of the National Association of Securities Dealers, Inc. (``NASD'') that 
operated as an interdealer quotation system. Historically under NASD 
rules, a company's securities were eligible for listing on Nasdaq if 
the security was registered under either Section 12(g) \2\ or Section 
12(b) \3\ of the Securities Exchange Act of 1934 (``Exchange Act'').\4\ 
However, in certain circumstances, NASD rules also permitted the 
trading of securities that are exempt from registration under Section 
12(g) of the Exchange Act.
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    \1\ See Release No. 34-53128 (January 13, 2006) [71 FR 3550].
    \2\ 15 U.S.C. 78l(g).
    \3\ 15 U.S.C. 78l(b).
    \4\ 15 U.S.C. 78a et seq.
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    Among other exempt securities, NASD rules allow the trading of any 
security of an insurance company that is exempt from registration under 
Section 12(g)(2)(G) of the Exchange Act \5\ and the securities of 
certain foreign private issuers that are exempt from Section 12(g) 
registration pursuant to Exchange Act Rule 12g3-2(b).\6\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78l(g)(2)(G). Section 12(g)(2)(G) provides that 
any security issued by an insurance company is exempt from 
registration if all of the following conditions are met:
     Such insurance company is required to and does file an 
annual statement with the Commissioner of Insurance (or other 
officer or agency performing a similar function) of its domiciliary 
State, and such annual statement conforms to that prescribed by the 
National Association of Insurance Commissioners or in the 
determination of such State commissioner, officer or agency 
substantially conforms to that so prescribed.
     Such insurance company is subject to regulation by its 
domiciliary State of proxies, consents, or authorizations in respect 
of securities issued by such company and such regulation conforms to 
that prescribed by the National Association of Insurance 
Commissioners.
     After July 1, 1966, the purchase and sales of 
securities issued by such insurance company by beneficial owners, 
directors, or officers of such company are subject to regulation 
(including reporting) by its domiciliary State substantially in the 
manner provided in Section 16.
    \6\ See 17 CFR 240.12g3-2(b).
---------------------------------------------------------------------------

    Once the Nasdaq Exchange begins to operate as a national securities 
exchange, Section 12(a) of the Exchange Act \7\ would prohibit any 
Nasdaq Exchange member, broker, or dealer from effecting any 
transaction in any security, other than an ``exempted security'' as 
defined in Section 3(a)(12) of the Exchange Act,\8\ on the Nasdaq 
Exchange, unless the security is registered under Section 12(b) of the 
Exchange Act. There are no exemptions from Section 12(b) registration 
afforded to insurance companies and foreign private issuers that 
correspond to the exemptions available to these issuers under Section 
12(g)(2)(G) of the Exchange Act and Exchange Act Rule 12g3-2(b). 
Accordingly, the securities of these issuers would need to be 
registered under Section 12(b) of the Exchange Act before transactions 
in those securities could be effected by Nasdaq Exchange members, 
brokers and dealers, consistent with Section 12(a) on the Nasdaq 
Exchange, absent the exemption provided by this order.
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    \7\ 15 U.S.C. 78l(a).
    \8\ 15 U.S.C. 78c(a)(12).
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II. Request by Nasdaq and the Nasdaq Exchange for an Exemption From 
Section 12(a) of the Exchange Act

    On July 31, 2006, the Commission received an application (the 
``Nasdaq Application'') \9\ from the Nasdaq and the Nasdaq Exchange for 
an exemption pursuant to Section 36 of the Exchange Act,\10\ in 
accordance with the procedures set forth in Exchange Act Rule 0-12.\11\ 
Section 36 of the Exchange Act gives the Commission the authority to 
exempt any person, security or transaction from any Exchange Act 
provision by rule, regulation or order, to the extent that the 
exemption is necessary or appropriate in the public interest and 
consistent with the protection of investors. Nasdaq and the Nasdaq 
Exchange have requested a three-year exemption from Section 12(a) of 
the Exchange Act, with respect to transactions in securities of the 
issuers listed in Exhibit C to the Nasdaq Application that are 
currently exempt from registration under Section 12(g) of the Exchange 
Act. According to Nasdaq and the Nasdaq Exchange, the securities of 
four insurance companies and nine foreign private issuers currently are 
trading on Nasdaq in reliance on these exemptions.\12\
---------------------------------------------------------------------------

    \9\ Letter from Edward S. Knight to Nancy M. Morris (July 31, 
2006). The Nasdaq Application is included in accompanying Release 
No. 34-54240 (July 31, 2006).
    \10\ 15 U.S.C. 78mm.
    \11\ 17 CFR 240.0-12. Exchange Act Rule 0-12 sets forth 
procedures for filing applications for orders for exemptive relief 
pursuant to Section 36.
    \12\ See the Nasdaq Application.
---------------------------------------------------------------------------

    An exemption from Section 12(a) would permit Nasdaq Exchange 
members and brokers or dealers to effect transactions in these 
securities on the Nasdaq Exchange without registration under Section 
12(b) of the Exchange Act. Nasdaq and the Nasdaq Exchange believe that 
the three-year period will provide these issuers with adequate time to 
complete the Section 12(b) registration process and prepare financial 
statements should they choose to continue to have their securities 
traded on the Nasdaq Exchange after expiration of the three-year 
period. Under the terms of the requested exemption, the insurance 
companies would have to continue to satisfy the conditions set forth in 
Section 12(g)(2)(G) of the Exchange Act and the foreign private issuers 
would have to remain in compliance with the conditions set forth in 
Exchange Act Rule 12g3-2(b) to qualify for the exemption.
    Prior to submitting this request, Nasdaq and the Nasdaq Exchange 
notified the insurance companies and the foreign private issuers of 
their plan to request a Section 12(a) exemption on the issuers' behalf 
and allowed each issuer that did not wish to be the subject of the 
request to opt-out of the process. Nasdaq and the Nasdaq Exchange 
provided these issuers a period of 10 business days to notify Nasdaq of 
an opt-out preference. The issuers that chose to opt-out from the 
request are listed in Exhibit B to the Nasdaq Application.

III. Order Granting Nasdaq's Application for an Exemption Pursuant to 
Section 36 of the Exchange Act

    We believe that exempting Nasdaq Exchange members, brokers and 
dealers for a limited time from the requirements of Section 12(a) 
regarding the trading of the securities listed in Exhibit C to the 
Nasdaq Application is necessary and appropriate in the public interest, 
and is consistent with the protection of investors in order to afford 
these issuers time to comply with the Section 12(b) registration 
requirements. As represented by Nasdaq and the Nasdaq Exchange in their 
request, immediate registration under Section 12(b) could

[[Page 45360]]

force these issuers to withdraw from Nasdaq, consequently depriving 
U.S. investors of the accustomed market for the securities of those 
issuers and, in some cases, potentially reducing the depth and 
liquidity of the market for these securities. We believe that a three-
year exemption will serve the public interest by minimizing any 
unnecessary disruptions that could result from the sudden withdrawal of 
these securities from Nasdaq, thereby potentially exposing investors in 
these securities to a less liquid market, absence of market 
surveillance by an exchange, and delays in execution of transfers.
    We concur with Nasdaq and the Nasdaq Exchange that the requested 
three-year exemption period is appropriate and will provide the 
affected issuers with sufficient transition time to register their 
securities.\13\ Until the expiration of the exemption granted by this 
Order, Nasdaq Exchange members, brokers and dealers will be permitted 
to effect transactions in the securities subject to this exemption so 
long as the issuers of these securities continue to satisfy the 
conditions of Section 12(g)(2)(G) of the Exchange Act or Exchange Act 
Rule 12g3-2(b), whichever is applicable.
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    \13\ Issuers whose securities are exempt from Section 12(g) 
under Section 12(g)(2)(G) of the Exchange Act or Exchange Act Rule 
12g3-2(b) would be required to prepare and file a registration 
statement on Form 10 for domestic companies or Form 20-F for foreign 
private issuers. Under Form 20-F, foreign private issuers would have 
to restate their financial statements in accordance with U.S. 
generally accepted accounting principles, or provide a 
reconciliation of their primary financial statements to U.S. GAAP, 
for at least two fiscal years. Thus, the three year period would 
give these issuers sufficient time to prepare the required financial 
statements should they choose to continue to have their securities 
traded on the Nasdaq Exchange.
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    Accordingly, it is ordered pursuant to Section 36 of the Exchange 
Act that, under the terms and conditions set forth below, a Nasdaq 
Exchange member, broker or dealer may effect a transaction on the 
Nasdaq Exchange in a security of an issuer listed in Exhibit C to the 
Nasdaq Application that has not been registered under Section 12(b) of 
the Exchange Act without violating Section 12(a) of the Exchange Act. 
This exemption shall take effect on August 1, 2006, the same date as 
the start of Nasdaq Exchange's operation, and shall expire on August 1, 
2009.
    This exemption is limited to the securities of the issuers listed 
in Exhibit C to the Nasdaq Application and is conditioned on the 
continued satisfaction of the conditions set forth in Section 
12(g)(2)(G) of the Exchange Act with respect to the securities of the 
insurance companies, or Exchange Act Rule 12g3-2(b) with respect to the 
securities of the foreign private issuers. As specified in the Nasdaq 
Application, Nasdaq will verify the satisfaction of these conditions. 
In addition, this exemption does not extend to any other section or 
provision of the Exchange Act.

    By the Commission (Chairman Cox and Commissioners Glassman, 
Atkins, Campos and Nazareth).
Nancy M. Morris,
Secretary.
[FR Doc. 06-6707 Filed 8-7-06; 8:45 am]
BILLING CODE 8010-01-P