In the Matter of the Application of the Nasdaq Stock Market, Inc. and the NASDAQ Stock Market LLC for Section 12(b) Registration On Behalf of Certain Issuers, 45246-45359 [06-6708]
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45246
Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54240]
In the Matter of the Application of the
Nasdaq Stock Market, Inc. and the
NASDAQ Stock Market LLC for Section
12(b) Registration On Behalf of Certain
Issuers
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
Currently, companies listed on Nasdaq
have one or more classes of equity
securities registered under Section
12(g) 2 of the Securities Exchange Act of
1934 (‘‘Exchange Act’’),3 registered
under Section 12(b) of the Exchange
Act 4 for listing on another national
securities exchange, or exempt from
registration pursuant to Section
12(g)(2)(B) or 12(g)(2)(G) of the
Exchange Act 5 or Rule 12g3–2(b)
promulgated under the Exchange Act 6
as permitted under NASD Rules 4310
and 4320. Under Section 12(a) of the
Exchange Act,7 brokers and dealers are
prohibited from effecting transactions in
a security on a national securities
exchange unless it has been registered
under Section 12(b) of the Exchange
Act.
Accordingly, absent relief, Nasdaq’s
transition to the Nasdaq Exchange
would require each of the companies
currently listing securities on either the
Nasdaq Global Market or Nasdaq Capital
Market to individually register their
Nasdaq-listed securities under Section
12(b) of the Exchange Act before the
Nasdaq Exchange commences
operations. This process would require
each affected company to file a
registration statement with the
Commission or other appropriate
regulatory agency.8 The Nasdaq
Exchange would then be required to
certify to the Commission and other
regulators that, with respect to each
1 See Release No. 34–53128 (January 13, 2006) [71
FR 3550].
2 15 U.S.C. 78l(g).
3 15 U.S.C. 78a et seq.
4 15 U.S.C. 78l(b).
5 15 U.S.C. 78l(g)(2)(B) or 78l(g)(2)(G).
6 17 CFR 240.12g3–2(b).
7 15 U.S.C. 78l(a).
8 Section 12(i) of the Exchange Act requires
filings relating to certain financial institutions to be
made with the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, or the
Office of Thrift Supervision. 15 U.S.C. 78l(i).
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registration statement, the company’s
securities are approved for listing and
registration on the Nasdaq Exchange.9
The registration would become effective
30 days after the Commission’s receipt
of certification from the Nasdaq
Exchange or within such shorter period
of time as the Commission may
determine.10
On behalf of its listed companies,
Nasdaq and the Nasdaq Exchange have
asked for relief with respect to this
registration process, asserting that it
would place an unnecessary cost and
administrative burden on the listed
companies, investors, the agencies that
regulate the listed companies, and
Nasdaq and the Nasdaq Exchange, and
would not be in the public interest.
With respect to the vast majority of its
listed securities, Nasdaq and the Nasdaq
Exchange assert that information that
would be elicited by registration has
already been required to be publicly
disclosed. Since the vast majority of
Nasdaq-listed companies already have
registered their securities under Section
12 of the Exchange Act 11 or have been
required to file detailed public
information with the Commission,12 the
resulting duplicative disclosure would
not significantly benefit the marketplace
or investors.
To ameliorate the cost and
administrative burden resulting from
the filing of individual Exchange Act
registration statements that would
otherwise be required, Nasdaq and the
Nasdaq Exchange have submitted a
letter, dated July 31, 2006, on behalf of
certain Nasdaq-listed issuers (the
‘‘Issuers’’) to the Commission requesting
that this letter serve as the single
application for registration with respect
to the listed securities of these Issuers,
as well as the Nasdaq Exchange’s
certification of such application (the
9 See Section 12(d) of the Exchange Act [15 U.S.C.
78l(d)].
10 Id.
11 These companies have filed registration
statements pursuant to Section 12(g) or, in a limited
number of cases, Section 12(b) of the Exchange Act.
A separate Section 12(b) registration statement is
required with respect to each national securities
exchange on which a particular class of security is
listed. Accordingly, a new registration statement on
12(b) will be required by the time the Nasdaq
Exchange becomes operational, even as to those
Nasdaq-listed companies that have previously filed
12(b) registration statements.
12 Those Nasdaq-listed companies which have
registered under the Investment Company Act of
1940 (the ‘‘1940 Act’’) have filed registration
statements with the Commission under the 1940
Act and have been required to make periodic filings
under the 1940 Act identical in form to those
required of investment companies that have
registered their securities under Section 12(b) of the
Exchange Act. These investment companies are
exempt from registration under Section 12(g)(2)(B)
of the Exchange Act.
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Frm 00002
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‘‘Nasdaq Application’’).13 Nasdaq and
the Nasdaq Exchange have made a
similar request of the Board of
Governors of the Federal Reserve
System, the Federal Deposit Insurance
Corporation, and the Office of Thrift
Supervision.14 The Nasdaq Application
is provided as an attachment to this
Order.
II. Statutory Standards
Section 12(a) of the Exchange Act
makes it unlawful for an exchange
member, broker, or dealer to effect any
transaction in any security (other than
an exempted security) on a national
securities exchange unless a registration
is effective with respect to that security
on the exchange in accordance with the
provisions of Section 12 and the rules
and regulations promulgated under
Section 12. Exchange Act Section 12(b)
and related rules prescribe the form and
content of the application that may be
used to register a security on a national
exchange. However, Section 12(c) 15
permits the Commission to require
alternative information in lieu of the
informational requirements of Section
12(b) if, in the judgment of the
Commission, some or all of the
information required under Section
12(b) is ‘‘inapplicable to any specified
class or classes of issuers’’ and the
substitute information is of comparable
character as the Commission may deem
applicable to such class of issuers.
Section 12(d) provides that the
registration of a security under the
Exchange Act becomes effective 30 days
after the Commission’s receipt of
certification from the national securities
exchange that the security has been
approved for listing and registration on
the exchange, or within such shorter
period of time as the Commission may
determine.
III. Discussion of NASD Rule 4130 and
Opt-Out Process
To provide notice of its plan to seek
the requested relief on behalf of the
Issuers and to assure sufficient authority
13 See Letter from Edward S. Knight to Nancy M.
Morris (July 31, 2006). For certain of its listed
issuers whose securities are not currently required
to be registered under the Exchange Act, Nasdaq
and the Nasdaq Exchange have requested additional
time for these securities to become registered under
Section 12(b). That portion of the request is being
addressed in a separate Order by the Commission.
See Exchange Act Release No. 34–54241 (July 31,
2006).
14 We understand these agencies will consider the
request for relief with respect to the companies they
oversee pursuant to Section 12(i) of the Exchange
Act. We further understand that the Comptroller of
the Currency does not currently oversee any
affected company pursuant to Section 12(i) of the
Exchange Act.
15 15 U.S.C. 78l(c).
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Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices
for Nasdaq and the Nasdaq Exchange to
submit the Nasdaq Application to the
Commission, the NASD proposed a new
rule specifically permitting Nasdaq and
the Nasdaq Exchange to take the
contemplated action. The Commission
approved this rule on April 6, 2006.16
NASD Rule 4130 explicitly authorizes
Nasdaq and the Nasdaq Exchange, in
connection with Nasdaq’s transition to a
national securities exchange, to file an
application with the Commission and
the Board of Governors of the Federal
Reserve System, the Federal Deposit
Insurance Corporation, and the Office of
Thrift Supervision to register each
Issuer’s listed securities under Section
12(b) of the Exchange Act and request
any appropriate regulatory relief from
the provisions of Section 12, unless the
Issuer informs Nasdaq, pursuant to
procedures set forth by Nasdaq, that it
does not want to be included in this
process.17
Accordingly, prior to filing the
Nasdaq Application, Nasdaq provided
notice of its intention to seek the
requested relief.18 In addition to general
notice through the proposed rule filing,
Nasdaq notified each Issuer,
individually, of its plans to submit the
request and allowed any Issuer that did
not wish its securities to be included in
the request to opt-out of the process.19
At the expiration of the notice period,
16 See Release No. 34–53606 (April 6, 2006) [71
FR 18790].
17 The text of Rule 4130 reads as follows:
In connection with The Nasdaq Exchange
commencing operations as a national securities
exchange, each issuer authorizes Nasdaq and the
Nasdaq Exchange to file an application to register
under Section 12(b) of the Exchange Act any class
of the issuer’s securities that is listed on Nasdaq on
the day immediately preceding the day the Nasdaq
Exchange commences such operations; provided,
however, that this provision shall not be applicable
to any security that the issuer informs Nasdaq,
pursuant to procedures set forth by Nasdaq, should
not be so registered. The application to register
under Section 12(b) of the Exchange Act will be
filed with the Commission or, for those securities
subject to Section 12(i) of the Exchange Act, with
the appropriate banking regulator specified in
Section 12(i). The authorization in this paragraph
includes allowing Nasdaq and the Nasdaq Exchange
to request any appropriate regulatory relief from the
provisions of Section 12.
18 See Nasdaq Application at 3 and Release No.
34–53362 (February 24, 2006) [71 FR 10734].
19 See Nasdaq Application at 3. Notice was
provided through a May 15, 2006 bulletin to Issuers
and a May 17, 2006 press release requesting Issuers
notify Nasdaq by May 30, 2006 if they did not wish
to participate. The result of an Issuer choosing to
opt-out is that the Issuer’s securities will be
ineligible to be listed and traded on the Nasdaq
Exchange as of its operational date; such Issuer
would instead trade on the pink sheets or OTC
Bulletin Board unless it files an individual Section
12(b) registration statement on Form 8–A or Form
10, as applicable, in connection with listing on the
Nasdaq Exchange or another national securities
exchange, and such registration statement
subsequently becomes effective.
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no Issuers had elected to opt-out of the
requested relief.20
Section 12(b) registration of the Issuer
Securities on the date of this Order.
IV. Findings
Pursuant to Section 12(c) of the
Exchange Act, in the judgment of the
Commission, based on the Nasdaq
Application for Section 12(b)
registration and the representations
made therein and in light of the recent
registration of the Nasdaq Exchange, the
Commission will consider the Nasdaq
Application in lieu of the information
otherwise required under Section 12(b)
of the Exchange Act. In reaching its
determination, the Commission
considered the following:
V. Conclusion
(i) In recognition of the unique
circumstances discussed above in Section I
and in the Nasdaq Application, particularly
the fact that the information to be elicited by
registration under Section 12 of the Exchange
Act or, in the case of investment companies
registered under the 1940 Act, its substantial
equivalent, already has been required to be
made public by the Issuers, it is the judgment
of the Commission that the Nasdaq
Application is sufficient for purposes of
registration of the securities listed in Exhibit
A to the Nasdaq Application (the ‘‘Issuer
Securities’’); 21
(ii) Nasdaq and the Nasdaq Exchange have
represented to the Commission in the Nasdaq
Application that, as of the date of this Order:
a. They have conducted the opt-out process
as described, particularly with respect to
notice of the Nasdaq Application to all
Issuers, generally, pursuant to NASD Rule
4130 and a press release and, specifically, to
each Issuer through the opt-out option,
b. That authorization has not been
withheld by any Issuer with respect to any
of the Issuer Securities, and
c. The Issuer Securities listed in Exhibit A
to the Nasdaq Application accurately reflect
the securities that are to be the subject of its
request;
(iii) The Nasdaq Exchange has certified to
the Commission in the Nasdaq Application
that, as of the date of this Order, all of the
Issuer Securities have been approved by the
Nasdaq Exchange for listing and registration
in accordance with the requirements of
Section 12(d) of the Exchange Act; and
(iv) In accordance with Section 12(d) and
Rule 12d1–2(a) 22 of the Exchange Act,
Nasdaq and the Nasdaq Exchange have
requested in writing the acceleration of the
effective date of the Nasdaq Application for
20 See
Exhibit B to the Nasdaq Application.
to the Nasdaq Application, the
Issuer Securities represent securities: (i) That are
listed on Nasdaq immediately preceding the date
that the Nasdaq Exchange begins operations; (ii)
that are currently either registered under Section
12(b) or 12(g) of the Exchange Act or exempt from
Section 12(g) registration pursuant to Section
12(g)(2)(B) or 12(g)(2)(G) of the Exchange Act or
Exchange Act Rule 12g3–2(b); and (iii) that have not
been requested by the issuer to be opted-out of the
Nasdaq Application pursuant to the procedures
established by Nasdaq as a result of NASD Rule
4130.
22 17 CFR 249,12d1–2(a).
21 According
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The Commission, having reviewed the
Nasdaq Application for Section 12(b)
registration of the Issuer Securities and
in reliance on the representations and
certifications made by Nasdaq and the
Nasdaq Exchange in the Nasdaq
Application, has concluded that it is
appropriate, in the public interest and
consistent with the protection of
investors, to approve the Nasdaq
Application and grant the request by
Nasdaq and the Nasdaq Exchange for
registration of the Issuer Securities
under Section 12(b).
The Commission recognizes that the
use of its authority under Section 12(c)
of the Exchange Act to consider
information other than that prescribed
by Section 12(b) for purposes of Section
12 registration is a variation on the
customary registration process. As
noted, however, the Commission
believes the special circumstances of
Nasdaq’s transition to a national
securities exchange and the existing
public disclosure requirements
applicable to the Issuer Securities
constitute a unique situation meriting
the application of Section 12(c).
With respect to the findings and
conclusions in this Order, it is also to
be expressly understood that the
Commission has not made, and this
Order does not constitute, any
determination regarding the Issuers’
compliance with the listing standards of
the Nasdaq Exchange or of any other
exchange, securities association or
facility on which the Issuers’ securities
trade, or any Commission rule or
regulation, other than the Section 12(b)
registration requirements as they relate
to Nasdaq’s transition to a national
securities exchange. In addition, the
Commission has not made, and this
Order does not constitute, any
determination regarding the regulation
or oversight of Nasdaq or the Nasdaq
Exchange with respect to the Issuer
Securities, other than the Section 12(b)
registration requirements as they relate
to Nasdaq’s transition to a national
securities exchange.
Accordingly, it is ordered that the
Nasdaq Application for Section 12(b)
registration of the Issuer Securities,
made by Nasdaq and the Nasdaq
Exchange on behalf of the Issuers
pursuant to NASD Rule 4130, be, and
hereby is, granted, effective as of July
31, 2006.
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Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices
By the Commission (Chairman Cox and
Commissioners Glassman, Atkins, Campos
and Nazareth).
Nancy M. Morris,
Secretary.
July 31, 2006
Nancy M. Morris, Esq.
Secretary, US Securities and Exchange
Commission, 100 F Street, NE,
Washington, DC 20549
RE: Request for Relief from § 12 of the
Securities Exchange Act of 1934
Dear Ms. Morris:
On January 13, 2006, the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) approved the application of
The NASDAQ Stock Market LLC (‘‘Nasdaq
Exchange’’), a subsidiary of The Nasdaq
Stock Market, Inc. (‘‘Nasdaq’’), to register
under Section 6 of the Securities Exchange
Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) as a
national securities exchange.1 Nasdaq’s
transition of its listing and trading activities
to the Nasdaq Exchange will furehr Congres’s
instruction to promote ‘‘fair competition
* * * between exchange markets.’’ 2 Absent
the relief requested herein, however,
Nasdaq’s transition to a national securities
exchange would require approximaely 3,200
Nasdaq Global Market 3 and Capital market
issuers with securities registered pusuant to
the Act, or exempt from registration under
Section 12(g) of the Act,4 to file registraton
statements 5 to register those securities under
Section 12(b) of the Act.6
Engaging in what would essentially be a reregistration process for the vast majority of
these 3,200 issuers would create a serious
disruption in the trading of securities on The
Nasdaq Stock Market. As explained below,
the confusion and inevitable administrative
delay that would accompany such a process
for issuers registered with the Commission
would achieve no material public benefit and
would place an unnecessary burden on
issuers, investors, Nasdaq, the Nasdaq
Exchange, and the Commission. The
1 Securities Exchange Act Release No. 53128
(January 13, 2006), 71 FR 3550 (January 23, 2006)
(the ‘‘Exchange Approval Order’’).
2 Exchange Act Section 11A(a)(1)(C)(ii).
3 Effective July 1, 2006, Nasdaq renamed the
Nasdaq National Market as the Nasdaq Global
Market and created a new segment within the
Global Market called the Global Select Market.
References to the Nasdaq Global Market include
those securities listed on the Nasdaq Global Market
and the Nasdaq Global Select Market. See Securities
Exchange Act Release No. 54071 (June 29, 2006), 71
FR 38922 (July 10, 2006) (SR–NASD–2006–068);
Securities Exchange Act Release No. 53799 (May
12, 2006), 71 FR 29195 (May 19, 2006) (SR–
NASDAQ–2006–007).
4 15 U.S.C. 78l(g).
5 Most of these registration statements would be
filed with the Commission. However, Section 12(i)
of the Act requires filings relating to certain
financial institutions to be made with the
Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, or the
Office of Thrift Supervision (collectively, the
‘‘Banking Regulators’’). 15 U.S.C. 78l(i). Separate
requests have been sent to the Banking Regulators
seeking similar relief for the companies registered
with them.
6 15 U.S.C. 78l(b).
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Commission can prevent this potential
disruption by granting the relief requested in
this letter. Specifically, Nasdaq and the
Nasdaq Exchange request that this letter
serve as: (1) The registration statement under
Section 12(b) for all classes of listed
securities of Nasdaq Capital Market and
Nasdaq Global Market issuers registered with
the Commission under Sections 12(b) and
12(g), as well as those listed securities
exempt from registration under Section
12(g)(2)(B) of the Act 7; and (2) the Nasdaq
Exchange’s certification pursuant to Section
12(d) of the Act 8 that these securities are
approved for listing and registration
concurrent with the start of operations of the
Nasdaq Exchange. Nasdaq and the Nasdaq
Exchange also request that the Commission
issue an exemption from registration
applicable to issuers that are now exempt
from the registration requirements of Section
12(g) pursuant to Section 12(g)(2)(G) of the
Act 9 and Exchange Act Rule 12g3–2(b)10 to
allow these companies three years from the
date the Nasdaq Exchange begins operations
to become registered under Section 12(b).
NASD Rule 4130 specifically permits Nasdaq
to act on behalf of its issuers in this regard.11
I. Background
Nasdaq presently is a facility of the
National Association of Securities Dealers,
Inc. (‘‘NASD’’), a registered securities
association, and thus is subject to Section
15A of the Act. On March 15, 2001, Nasdaq
filed an application under Section 6 of the
Act for registration as a national securities
exchange (‘‘Form 1’’) with the Commission.
On August 15, 2005, and September 23, 2005,
Nasdaq submitted Amendments 4 and 5,
respectively, to its Form 1. In Amendments
4 and 5 Nasdaq proposed, among other
things, a new corporate structure whereby
Nasdaq would become a holding company
with the Nasdaq Exchange as one of its
subsidiaries. The Commission published
notice of Amendments 4 and 5 on October
11, 2005.12 On January 13, 2006, the Nasdaq
Exchange submitted Amendment 6 to the
Form 1 and the Commission approved the
Nasdaq Exchange’s application for
registration as a national securities
exchange.13 On June 30, 2006, the
Commission modified the approval order so
that the Nasdaq Exchange could begin
operations in a phased manner, with
operations related to trading in Nasdaq-listed
securities beginning before operations related
7 15
U.S.C. 78l(g)(2)(B).
U.S.C. 78l(d),
9 15 U.S.C. 78l(g)(2)(G).
10 17 CFR 240.12g3–2(b).
11 Rule 4130 permits Nasdaq to act on behalf of
its issuers to request registration of their listed
securities under Section 12(b), or seek appropriate
regulatory relief from Section 12(b), in connection
with the transition to the Nasdaq Exchange. See
Securities Exchange Act Release No. 53606 (April
6, 2006), 71 FR 18790 (April 12, 2006) (approving
SR–NASD–2006–28); Securities Exchange Act
Release No. 53262 (February 24, 2006), 71 FR 10734
(March 2, 2006) (providing notice of SR–NASD–
2006–28).
12 Securities Exchange Act Release No. 52559
(October 4, 2005), 70 FR 59097 (October 11, 2005).
13 Exchange Approval Order, supra note 1.
8 15
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Sfmt 4703
to trading in securities listed on other
national securities exchanges.14 The Nasdaq
Exchange has satisfied the conditions
expressed in the amended approval order
with respect to Nasdaq-listed securities and
expects to begin operations as a national
securities exchange for those securities on
August 1, 2006.
Upon operation of the Nasdaq Exchange,
issuers listed and traded on Nasdaq will
instead be listed and traded on the Nasdaq
Exchange.15 Under current NASD rules, a
security is eligible for listing on Nasdaq if it
is registered under the Exchange Act under
either Section 12(g) or Section 12(b).16 In
addition, three categories of securities
exempt from registration under Section 12(g)
are also eligible for listing on Nasdaq. First,
a security issued by an investment company
registered under the Investment Company
Act of 1940 (the ‘‘1940 Act’’) is exempt from
registration under Section 12(g)(2)(B) of the
Act, but is eligible for listing on Nasdaq.17
Second, a security issued by an insurance
company and exempt from registration under
Section 12(g) pursuant to Section 12(g)(2)(G)
is also eligible for listing.18 Finally, the
securities of certain foreign issuers are
eligible for inclusion in Nasdaq even though
they are exempt from registration pursuant to
Rule 12g3–2(b) under the Exchange Act.19
Once the Nasdaq Exchange begins
operations, issuers will need instead to have
been registered under Section 12(b) so that
brokers and dealers may effect transactions in
these securities on the Nasdaq Exchange
consistent with Section 12(a) of the Act.20
In contemplation of this request, Nasdaq
has adopted Rule 4130, which specifically
permits Nasdaq to act on behalf of its issuers
to request registration of their listed
securities under Section 12(b), or seek
appropriate regulatory relief from Section
12(b), in connection with the transition to the
Nasdaq Exchange.21 In proposing this rule
change, Nasdaq noted that it anticipated
making the requests contained herein and the
process by which it would provide notice to
each issuer and would allow any issuer that
does not wish to register under Section 12(b)
the ability to opt-out of Nasdaq’s request.22
Nasdaq provided that notice by issuing a
14 Securities Exchange Act Release No. 54085
(June 30, 2006), 71 FR 38910 (July 10, 2006).
15 This includes securities listed on the Nasdaq
Capital Market and the Nasdaq Global Market. Note
that the NASD has modified its Plan of Allocation
and Delegation of Functions by NASD to
Subsidiaries and certain NASD rules to reflect
NASD’s direct authority for the activities related to
the OTC Bulletin Board, rather than the prior
delegation of such authority to Nasdaq. As such,
this application does not address the OTC Bulletin
Board and securities quoted on the OTC Bulletin
Board will not be listed on the Nasdaq Exchange.
16 NASD Rules 4310(a)(1) and (2) and 4320(a).
17 NASD Rule 4310(a)(4).
18 NASD Rule 4310(a)(3).
19 NASD Rule 4320(c).
20 15 U.S.C. 78l(a).
21 Securities Exchange Act Release No. 53606,
supra note 11.
22 Securities Exchange Act Release No. 53262,
supra note 11.
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Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Notices
bulletin to issuers 23 on May 15, 2006, and by
issuing a press release 24 on May 17, 2006.
As of July 31, 2006, Nasdaq lists 2,776
securities on the Global Market (including
1,254 securities on the Nasdaq Global Select
Market) and 580 securities on the Capital
Market.25 These securities can be categorized
as follows: 3,257 securities are registered
with the Commission under Section 12(g); 40
securities are also listed on a national
securities exchange and are registered with
the Commission under Section 12(b); 17
investment company issuers’ securities are
exempt from registration under Section
12(g)(2)(B); four insurance company issuers’
securities are exempt from Section 12(g)
registration under Section 12(g)(2)(G); nine
foreign private issuers’ securities are exempt
from Section 12(g) registration under Rule
12g3–2(b); and 29 bank and savings
association issuers’ securities are registered
under Section 12(g) with other regulatory
agencies pursuant to Section 12(i).26
II. Basis for Relief Sought and Anticipated
Benefits
A. Securities Already Registered Under
Section 12(g) and 12(b)
Absent relief, the issuers of approximately
3,297 Nasdaq Global Market and Capital
Market securities that are registered with the
Commission under Sections 12(g) and 12(b)
will be required to file a registration
statement to register their securities under
Section 12(b) on the Nasdaq Exchange once
Nasdaq begins operating as a national
securities exchange. Nasdaq believes that
under the circumstances, this registration
process would be confusing and would place
an unnecessary cost and administrative
burden on Nasdaq, the Nasdaq Exchange, the
Commission, and issuers and would not be
in the public interest. Specifically, each of
those issuers would be required to file with
the Commission and with the Nasdaq
Exchange a new Exchange Act registration
statement describing the securities to be
registered along with all necessary exhibits.
The Nasdaq Exchange would then be
required to certify to the Commission that
each issuer’s securities are approved for
listing and registration. This process would
have to be coordinated to minimize
disruptions to trading in issuer securities,
23 See ‘‘Impact of NASDAQ Exchange Registration
on Listed Companies’’ available at: http;//
www.nasdaq.com/about/
Exchange_Bulletin_051506.pdf.
24 See ‘‘NASDAQ Notifies Listed Companies
About Transition To Exchange Status’’ available at:
https://www.nasdaq.com/newsroom/news/pr2006/
ne_section06_066.stm
25 Some issuers list more than one security on
Nasdaq.
26 To assist the Commission with this request, we
have attached lists of those securities registered
with the Commission or exempt from registration.
Exhibit A contains a list of those securities already
registered with the Commission under Sections
12(b) or 12(g) and those securities exempt from
registration under Rule 12(g)(2)(B), that have not
opted out from this request as provided for in Rule
4130. Exhibit B contains a list of those securities
that have opted out from this request. Exhibit C
contains a list of those securities that are exempt
from registration under Section 12(g) pursuant to
Section 12(g)(2)(G) or Rule 12g3–2(b).
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with the real possibility of some securities
experiencing trading gaps during the
transition. Such a daunting and timesensitive task—which creates no significant
identifiable benefit to the public creates the
unnecessary risk of administrative errors by
the issuers, the Nasdaq Exchange, or the
Commission that could inadvertently delay
or otherwise adversely impact the
registration and trading of securities on the
new exchange. The public interest is served
by having exchanges run smoothly and
efficiently, and the requested relief would
achieve that purpose.
The additional registration process would
not result in any significant benefit to the
marketplace or investors because they would
not receive any additional information
regarding the security. Each Nasdaq Global
Market and Capital Market issuer in this
category has already filed an Exchange Act
registration statement with the Commission
to register the class of securities under
Section 12 of the Act. Those issuers with
securities registered under Section 12(g) were
required to file a registration statement that
contained ‘‘such information and documents
as the Commission may specify comparable
to that which is required in an application to
register a security pursuant to [Section
12(b)].’’ 27
There are also no relevant differences in
the regulatory requirements for securities
registered under Sections 12(b) and 12(g) that
would negatively impact investors. For
example, issuers with securities registered
under Section 12(g) must, like issuers with
securities registered under Section 12(b), file
periodic and other reports with the
Commission under Section 13 of the Act,
comply with the proxy requirements under
Section 14 of the Act, and adhere to the
requirements of the Williams Act. Because
securities registered under Section 12(b) and
Section 12(g) are already treated in a nearly
identical fashion, requiring Nasdaq issuers to
re-register their securities would not result in
any material benefit to the marketplace or
investors.
The Commission would be acting well
within its authority in granting the relief
requested. Congress has provided specific
authorization under Section 12(c) of the
Act,28 which allows the submission of
different information than that required
under Section 12(b).
Accordingly, Nasdaq and the Nasdaq
Exchange request that this letter serve as: (i)
The registration statement under Section
12(b) for all classes of listed securities of
Nasdaq Global Market and Capital Market
issuers registered with the Commission
under Sections 12(b) and 12(g) and included
in Exhibit A; and (ii) the Nasdaq Exchange’s
certification pursuant to Section 12(d) of the
Act that these securities are approved for
listing and registration, concurrent with the
start of operations of the Nasdaq Exchange.
Nasdaq and the Nasdaq Exchange further
request that the Commission accelerate the
effective date of this application for Section
12(b) registration to July 31, 2006.
This action would be in the public’s
interest and consistent with the protection of
27 Section
28 15
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12(g)(1) of the Act, 15 U.S.C. 78l(g)(1).
U.S.C. 78l(c).
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investors because it would prevent the
imposition of a significant administrative
burden on issuers, the Commission, and
others without weakening any of the
protections afforded to investors under the
federal securities laws.29
B. Securities Exempt From Registration
Under Section 12(g)(2)(B)
Nasdaq currently lists 17 investment
companies whose securities are exempted
from Section 12(g) registration pursuant to
Section 12(g)(2)(B) of the Act. No purpose
would be served by requiring these issuers to
file registration statements under Section
12(b) because these companies already are
and would remain subject to registration and
reporting requirements under the 1940 Act
rather than Section 13 of the Act.30 The
Commission’s rules clearly contemplate that
disclosure under the 1940 Act satisfies the
disclosure required by the Exchange Act. In
particular, each registered investment
company has filed a registration statement
with the Commission under the 1940 Act and
has been required to make periodic filings
under the 1940 Act identical in form to those
required of investment companies that have
registered their securities under Section 12(b)
of the Act.31
As such, Nasdaq and the Nasdaq Exchange
request that these issuers be treated in the
same manner as issuers with securities
registered under Sections 12(b) or 12(g) of the
Act and that this letter serve as: (i) The
registration statement under Section 12(b) for
all classes of listed securities of Nasdaq
Global Market and Capital Market issuers
exempt from Section 12(g) registration
pursuant to Section 12(g)(2)(B) and included
in Exhibit A; and (ii) the Nasdaq Exchange’s
certification pursuant to Section 12(d) of the
Act that these securities are approved for
listing and registration, concurrent with the
start of operations of the Nasdaq Exchange.
Nasdaq and the Nasdaq Exchange further
29 This reclassification would apply only to those
issuers listed on Nasdaq when it becomes a national
securities exchange and not to issuers approved for
listing on Nasdaq afterwards. Such later-listed
issuers would be required to file a registration
statement with the Commission to register their
securities under Section 12(b) and Nasdaq would be
required separately to certify such registration
statements. In addition, this reclassification would
not apply to the securities of any issuer that has
opted-out of such treatment, pursuant to NASD
Rule 4130. See SR–NASD–2006–28.
30 Registered investment companies file annual
and semiannual reports on Forms N–CSR and N–
SAR, rather than on Forms 10–K and 10–Q, even
if registered under the Exchange Act. See General
Instruction A. to Form N–CSR, General Instruction
A. to Form 10–K, and Exchange Act Rules 13a–
11(b) and 13a–13(b). Registered investment
companies are also subject to proxy regulation
under Rule 20a–1 of the 1940 Act. See also Item 22
of Schedule 14A.
31 Under Exchange Act Rule 12g–2, the
Commission already has made provision for these
companies to be deemed registered under the
Exchange Act without the need for a filing. That
relief is automatic upon the termination of the
issuer’s registration under the 1940 Act. Given that
relief, it would make no sense to impose a filing
requirement when the investment company has
maintained, rather than terminated, its registration
under the 1940 Act.
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request that the Commission accelerate the
effective date of this application for Section
12(b) registration to July 31, 2006.
This action would be in the public’s
interest and consistent with the protection of
investors because it would prevent the
imposition of a significant administrative
burden on issuers, the Commission, and
others without weakening any of the
protections afforded to investors under the
federal securities laws.32
C. Other Securities Exempt From Registration
Under Section 12(g)
As described above, Nasdaq lists 13
securities—out of more than 3,300—that are
otherwise exempt from registration under
Section 12(g). The Nasdaq Exchange will
operate in all relevant, material respects just
as Nasdaq operates today.33 In fact, while as
early as 1983 the Commission recognized
that ‘‘trading on [Nasdaq] is substantially the
same as trading on an exchange,’’ 34 the
Commission has nonetheless permitted
securities of these exempt issuers to trade on
Nasdaq.
Section 36 of the Act 35 grants the
Commission broad authority to make
exemptions to any part of the Act when
‘‘such exemption is necessary or appropriate
in the public interest, and is consistent with
the protection of investors.’’ Granting a
temporary continuation of an exemption
from registration is ‘‘necessary or appropriate
in the public interest’’ and is ‘‘consistent
with the protection of investors.’’ This
exemption for a transitional period would
provide issuers that have traded on Nasdaq
without incident for many years with
sufficient time to undertake Exchange Act
registration requirements and to make an
orderly transition to the Nasdaq Exchange
and therefore is in the public interest. The
Commission has used its authority in the past
to resolve administrative hurdles for complex
transactions and to relieve unnecessary
administrative burdens. Finally, given that
these securities have traded on Nasdaq
pursuant to an exemption for an extended
period of time, the continuation of a similar
exemption for a limited time should not raise
any new concerns regarding the protection of
investors.
Forcing Section 12(g) exempt issuers to
immediately register would be inequitable
and wholly unrelated to any act or failure to
act by these issuers. In the absence of
exemptive relief, each of the Section 12(g)
exempt issuers would be required to prepare
and file a registration statement on Form 10
or 20–F. Foreign issuers would also have to
restate or reconcile their financial statements
32 As noted in footnote 29, supra, this
reclassification would apply only to those issuers
listed on Nasdaq when it becomes a national
securities exchange that have not opted-out of such
treatment pursuant to NASD Rule 4130.
33 The primary difference in market structure that
Nasdaq contemplates is the establishment of a
holding company structure under which Nasdaq
would own the Nasdaq Exchange, which would
execute quotes and orders in accordance with a
strict price-time priority algorithm.
34 Securities Act Release No. 6493 (October 14,
1983) (‘‘Rule 12g3–2(b) Amendments’’).
35 15 U.S.C. 78mm.
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to U.S. generally accepted accounting
principles (‘‘U.S. GAAP’’). But it is Nasdaq’s
becoming an exchange rather than any
affirmative act by these exempt issuers that
would trigger the imposition of this
registration requirement. Companies that list
on the Nasdaq Exchange after it begins
operations could be required to meet all the
registration requirements applicable to an
exchange listing without disrupting an
existing market in those securities. But for
those companies already listed, requiring
immediate registration is potentially
disruptive and unfair. The mere fact of
Nasdaq’s conversion to an exchange should
not adversely impact these companies or
their investors.
Thus, Nasdaq and the Nasdaq Exchange
request that the Commission temporarily
continue the exemption from registration for
the following classes of Nasdaq-listed issuers.
In connection with this request, the Nasdaq
Exchange represents that it will continue to
monitor these companies in the same manner
Nasdaq does, to assure compliance with all
applicable listing requirements.
1. Insurance Companies
The Commission need not immediately
impose registration requirements on the four
insurance companies listed on Nasdaq but
exempt from Section 12(g) registration.36
These issuers have not taken any action on
their own to trigger a registration requirement
and the additional reporting requirements
required by such registration. In fact, if the
Commission determines not to temporarily
continue these companies’ exemptions and
they choose to delist rather than register,
investors would be harmed by the potential
loss of a liquid trading market. As such,
Nasdaq requests that the Commission grant
an exemption for the securities of these
insurance companies (identified on Exhibit
C) from the requirements of Sections 12(a)
and 12(b) with respect to the trading of these
securities on the Nasdaq Exchange for a
three-year period from the date the Nasdaq
Exchange begins to operate as an exchange,
provided these companies continue to
comply with the requirements of Section
12(g)(2)(G) of the Act and the applicable
requirements for continued listing on the
Nasdaq Exchange. This transitional
exemption will permit these issuers to
complete the registration process without
undue burden.
2. Foreign Private Issuers
There are nine foreign issuers that trade on
The Nasdaq Capital Market pursuant to the
‘‘grandfathering’’ exemption of Rule 12g3–
2(b).37 This exemption originated in 1983,
when the Commission first required foreign
private issuers whose securities were trading
on Nasdaq to be registered. Prior to that time,
a foreign private issuer whose securities were
not trading on a national securities exchange
36 Pursuant to Section 12(g)(2)(G) of the Act, these
issuers generally must file an annual statement with
the Commissioner of Insurance of their domiciliary
state and must be subject to regulation by their
domiciliary state of proxies, consents, or
authorizations.
37 These issuers are not eligible for listing on the
Nasdaq Global Market, nor are they subject to the
Global Market listing requirements.
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was exempt from registration where the
foreign issuer did not voluntarily enter the
United States markets by, for example,
conducting a public offering or listing on an
exchange. In 1983 the Commission amended
Rule 12g3–2(b) to deny the exemption to
non-U.S. issuers that voluntarily listed on
Nasdaq. In order not to disrupt the trading of
these issuers, however, the Commission
grandfathered in all non-Canadian foreign
issuers, allowing those companies to
continue to trade on Nasdaq without
registration under the Exchange Act.38 In
doing so, the Commission heeded the
concerns of commenters that many foreign
issuers would withdraw from Nasdaq, rather
than register, leaving the pink sheets as the
only source of trading information related to
these companies and resulting in increased
price spreads, a decrease in information,
price quotes not carried in newspapers, less
liquid markets and fewer institutions in the
market, absence of NASD surveillance, and
delays in execution of transfers.39
The same considerations that compelled
that treatment of foreign issuers in 1983 are
relevant to the relief requested today. These
issuers have not acted to jeopardize their
ability to trade on Nasdaq or Rule 12g3–2(b)
exempt status. If forced to immediately
register their securities, a significant number
of these issuers may delist rather than
register, thereby relegating the U.S. investors
in those foreign issuers to potentially less
liquid and transparent markets.
For these reasons, the Nasdaq Exchange’s
registration as an exchange should not force
these companies to immediately register or
delist.40 Nasdaq and the Nasdaq Exchange
therefore request that the Commission grant
an exemption for those securities included in
Exhibit C that are exempt from Section 12(g)
registration under Rule 12g3–2(b) from the
requirements of Sections 12(a) and 12(b) with
respect to the trading of these securities on
the Nasdaq Exchange for a three-year period
from the date the Nasdaq Exchange begins to
operate as an exchange, provided the issuers
continue to comply with the requirements of
Rule 12g3–2(b) and the applicable
requirements for continued listing on the
Nasdaq Exchange. This transitional
exemption will permit these issuers to
complete the registration process without
undue burden.41
38 Exchange Act Rule 12g3–2(b). The exemption
is maintained by submitting the issuer’s home
country reports to the Commission.
39 Rule 12g3–2(b) Amendments, supra note 34.
These factors, according to one estimate, would
cause prices to drop 20 percent. Id.
40 One exempt foreign issuer, Nissan Motor Co.,
Ltd., submitted a comment letter to the Commission
in connection with Nasdaq’s application to become
an exchange, requesting that the Rule 12g3–2(b)
grandfathering be allowed to continue indefinitely,
or, in the alternative, that a reasonable transition
period be allowed. See footnote 208 to the Exchange
Approval Order, supra, note 1.
41 Nasdaq notes that the proposed three-year
period is consistent with the time-line the
Commission has set forth to eliminate the
requirement for foreign private issuers to reconcile
financial statements prepared according to
International Financial Reporting Standards to US
GAAP. See SEC Press Release 2006–17, available at:
https://www.sec.gov/news/press/2006-17.htm.
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III. Conclusion
The relief requested above is in the public
interest because it will ensure the continued
smooth operation of this market immediately
from the time the Nasdaq Exchange begins
operations as an exchange and avoid
confusion and a number of potentially
disruptive administrative hurdles. The relief
is necessary and appropriate to avoid the
disruption that could occur if members,
brokers, and dealers were prohibited from
effecting transactions in Nasdaq securities
due to the lack of an effective registration
once the Nasdaq Exchange begins operating
as a registered exchange.
The Commission has specific authority
provided by Section 12(c) to effect the relief
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requested with respect to those securities
already registered under Section 12(b) or
12(g) and those securities exempt from
Section 12(g) registration pursuant to Section
12(g)(2)(B). Further, the Commission has
general exemptive authority pursuant to
Section 36 of the Act and Rule 0–12
thereunder, in pertinent part, to exempt any
person, security, or transaction, or any class
or classes of persons, securities, or
transactions, from any provision or
provisions of this title or of any rule or
regulation thereunder, to the extent that such
exemption is necessary or appropriate in the
public interest, and is consistent with the
protection of investors. The unique facts
surrounding Nasdaq’s transition to a national
securities exchange provide ample
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justification for the Commission to exercise
its authority under Section 36 under the
circumstances described in this letter.
If you have any questions concerning the
foregoing you may contact the undersigned at
(301) 978–8480, Arnold Golub at (301) 978–
8075 or John Yetter at (301) 978–8497.
Sincerely yours, Edward S. Knight
Exhibit A: List of securities whose
registration will be transferred to Section
12(b)
Exhibit B: List of securities of issuers that
have elected to opt-out of requested relief
Exhibit C: List of securities exempt from
Section 12(g) registration under Section
12(g)(2)(G) and Rule 12g3–2(b)
BILLING CODE 8010–01–P
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[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
Agencies
[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Notices]
[Pages 45246-45359]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-6708]
[[Page 45245]]
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Part V
Securities and Exchange Commission
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Applications, Hearings, Determinations, etc.: Nasdaq Stock Market, Inc.
and NASDAQ Stock Market LLC; Notices
Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 /
Notices
[[Page 45246]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54240]
In the Matter of the Application of the Nasdaq Stock Market, Inc.
and the NASDAQ Stock Market LLC for Section 12(b) Registration On
Behalf of Certain Issuers
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\ Currently, companies listed on Nasdaq
have one or more classes of equity securities registered under Section
12(g) \2\ of the Securities Exchange Act of 1934 (``Exchange Act''),\3\
registered under Section 12(b) of the Exchange Act \4\ for listing on
another national securities exchange, or exempt from registration
pursuant to Section 12(g)(2)(B) or 12(g)(2)(G) of the Exchange Act \5\
or Rule 12g3-2(b) promulgated under the Exchange Act \6\ as permitted
under NASD Rules 4310 and 4320. Under Section 12(a) of the Exchange
Act,\7\ brokers and dealers are prohibited from effecting transactions
in a security on a national securities exchange unless it has been
registered under Section 12(b) 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. 78a et seq.
\4\ 15 U.S.C. 78l(b).
\5\ 15 U.S.C. 78l(g)(2)(B) or 78l(g)(2)(G).
\6\ 17 CFR 240.12g3-2(b).
\7\ 15 U.S.C. 78l(a).
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Accordingly, absent relief, Nasdaq's transition to the Nasdaq
Exchange would require each of the companies currently listing
securities on either the Nasdaq Global Market or Nasdaq Capital Market
to individually register their Nasdaq-listed securities under Section
12(b) of the Exchange Act before the Nasdaq Exchange commences
operations. This process would require each affected company to file a
registration statement with the Commission or other appropriate
regulatory agency.\8\ The Nasdaq Exchange would then be required to
certify to the Commission and other regulators that, with respect to
each registration statement, the company's securities are approved for
listing and registration on the Nasdaq Exchange.\9\ The registration
would become effective 30 days after the Commission's receipt of
certification from the Nasdaq Exchange or within such shorter period of
time as the Commission may determine.\10\
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\8\ Section 12(i) of the Exchange Act requires filings relating
to certain financial institutions to be made with the Comptroller of
the Currency, the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, or the Office of Thrift
Supervision. 15 U.S.C. 78l(i).
\9\ See Section 12(d) of the Exchange Act [15 U.S.C. 78l(d)].
\10\ Id.
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On behalf of its listed companies, Nasdaq and the Nasdaq Exchange
have asked for relief with respect to this registration process,
asserting that it would place an unnecessary cost and administrative
burden on the listed companies, investors, the agencies that regulate
the listed companies, and Nasdaq and the Nasdaq Exchange, and would not
be in the public interest. With respect to the vast majority of its
listed securities, Nasdaq and the Nasdaq Exchange assert that
information that would be elicited by registration has already been
required to be publicly disclosed. Since the vast majority of Nasdaq-
listed companies already have registered their securities under Section
12 of the Exchange Act \11\ or have been required to file detailed
public information with the Commission,\12\ the resulting duplicative
disclosure would not significantly benefit the marketplace or
investors.
---------------------------------------------------------------------------
\11\ These companies have filed registration statements pursuant
to Section 12(g) or, in a limited number of cases, Section 12(b) of
the Exchange Act. A separate Section 12(b) registration statement is
required with respect to each national securities exchange on which
a particular class of security is listed. Accordingly, a new
registration statement on 12(b) will be required by the time the
Nasdaq Exchange becomes operational, even as to those Nasdaq-listed
companies that have previously filed 12(b) registration statements.
\12\ Those Nasdaq-listed companies which have registered under
the Investment Company Act of 1940 (the ``1940 Act'') have filed
registration statements with the Commission under the 1940 Act and
have been required to make periodic filings under the 1940 Act
identical in form to those required of investment companies that
have registered their securities under Section 12(b) of the Exchange
Act. These investment companies are exempt from registration under
Section 12(g)(2)(B) of the Exchange Act.
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To ameliorate the cost and administrative burden resulting from the
filing of individual Exchange Act registration statements that would
otherwise be required, Nasdaq and the Nasdaq Exchange have submitted a
letter, dated July 31, 2006, on behalf of certain Nasdaq-listed issuers
(the ``Issuers'') to the Commission requesting that this letter serve
as the single application for registration with respect to the listed
securities of these Issuers, as well as the Nasdaq Exchange's
certification of such application (the ``Nasdaq Application'').\13\
Nasdaq and the Nasdaq Exchange have made a similar request of the Board
of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, and the Office of Thrift Supervision.\14\ The
Nasdaq Application is provided as an attachment to this Order.
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\13\ See Letter from Edward S. Knight to Nancy M. Morris (July
31, 2006). For certain of its listed issuers whose securities are
not currently required to be registered under the Exchange Act,
Nasdaq and the Nasdaq Exchange have requested additional time for
these securities to become registered under Section 12(b). That
portion of the request is being addressed in a separate Order by the
Commission. See Exchange Act Release No. 34-54241 (July 31, 2006).
\14\ We understand these agencies will consider the request for
relief with respect to the companies they oversee pursuant to
Section 12(i) of the Exchange Act. We further understand that the
Comptroller of the Currency does not currently oversee any affected
company pursuant to Section 12(i) of the Exchange Act.
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II. Statutory Standards
Section 12(a) of the Exchange Act makes it unlawful for an exchange
member, broker, or dealer to effect any transaction in any security
(other than an exempted security) on a national securities exchange
unless a registration is effective with respect to that security on the
exchange in accordance with the provisions of Section 12 and the rules
and regulations promulgated under Section 12. Exchange Act Section
12(b) and related rules prescribe the form and content of the
application that may be used to register a security on a national
exchange. However, Section 12(c) \15\ permits the Commission to require
alternative information in lieu of the informational requirements of
Section 12(b) if, in the judgment of the Commission, some or all of the
information required under Section 12(b) is ``inapplicable to any
specified class or classes of issuers'' and the substitute information
is of comparable character as the Commission may deem applicable to
such class of issuers.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78l(c).
---------------------------------------------------------------------------
Section 12(d) provides that the registration of a security under
the Exchange Act becomes effective 30 days after the Commission's
receipt of certification from the national securities exchange that the
security has been approved for listing and registration on the
exchange, or within such shorter period of time as the Commission may
determine.
III. Discussion of NASD Rule 4130 and Opt-Out Process
To provide notice of its plan to seek the requested relief on
behalf of the Issuers and to assure sufficient authority
[[Page 45247]]
for Nasdaq and the Nasdaq Exchange to submit the Nasdaq Application to
the Commission, the NASD proposed a new rule specifically permitting
Nasdaq and the Nasdaq Exchange to take the contemplated action. The
Commission approved this rule on April 6, 2006.\16\ NASD Rule 4130
explicitly authorizes Nasdaq and the Nasdaq Exchange, in connection
with Nasdaq's transition to a national securities exchange, to file an
application with the Commission and the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, and
the Office of Thrift Supervision to register each Issuer's listed
securities under Section 12(b) of the Exchange Act and request any
appropriate regulatory relief from the provisions of Section 12, unless
the Issuer informs Nasdaq, pursuant to procedures set forth by Nasdaq,
that it does not want to be included in this process.\17\
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\16\ See Release No. 34-53606 (April 6, 2006) [71 FR 18790].
\17\ The text of Rule 4130 reads as follows:
In connection with The Nasdaq Exchange commencing operations as
a national securities exchange, each issuer authorizes Nasdaq and
the Nasdaq Exchange to file an application to register under Section
12(b) of the Exchange Act any class of the issuer's securities that
is listed on Nasdaq on the day immediately preceding the day the
Nasdaq Exchange commences such operations; provided, however, that
this provision shall not be applicable to any security that the
issuer informs Nasdaq, pursuant to procedures set forth by Nasdaq,
should not be so registered. The application to register under
Section 12(b) of the Exchange Act will be filed with the Commission
or, for those securities subject to Section 12(i) of the Exchange
Act, with the appropriate banking regulator specified in Section
12(i). The authorization in this paragraph includes allowing Nasdaq
and the Nasdaq Exchange to request any appropriate regulatory relief
from the provisions of Section 12.
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Accordingly, prior to filing the Nasdaq Application, Nasdaq
provided notice of its intention to seek the requested relief.\18\ In
addition to general notice through the proposed rule filing, Nasdaq
notified each Issuer, individually, of its plans to submit the request
and allowed any Issuer that did not wish its securities to be included
in the request to opt-out of the process.\19\ At the expiration of the
notice period, no Issuers had elected to opt-out of the requested
relief.\20\
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\18\ See Nasdaq Application at 3 and Release No. 34-53362
(February 24, 2006) [71 FR 10734].
\19\ See Nasdaq Application at 3. Notice was provided through a
May 15, 2006 bulletin to Issuers and a May 17, 2006 press release
requesting Issuers notify Nasdaq by May 30, 2006 if they did not
wish to participate. The result of an Issuer choosing to opt-out is
that the Issuer's securities will be ineligible to be listed and
traded on the Nasdaq Exchange as of its operational date; such
Issuer would instead trade on the pink sheets or OTC Bulletin Board
unless it files an individual Section 12(b) registration statement
on Form 8-A or Form 10, as applicable, in connection with listing on
the Nasdaq Exchange or another national securities exchange, and
such registration statement subsequently becomes effective.
\20\ See Exhibit B to the Nasdaq Application.
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IV. Findings
Pursuant to Section 12(c) of the Exchange Act, in the judgment of
the Commission, based on the Nasdaq Application for Section 12(b)
registration and the representations made therein and in light of the
recent registration of the Nasdaq Exchange, the Commission will
consider the Nasdaq Application in lieu of the information otherwise
required under Section 12(b) of the Exchange Act. In reaching its
determination, the Commission considered the following:
(i) In recognition of the unique circumstances discussed above
in Section I and in the Nasdaq Application, particularly the fact
that the information to be elicited by registration under Section 12
of the Exchange Act or, in the case of investment companies
registered under the 1940 Act, its substantial equivalent, already
has been required to be made public by the Issuers, it is the
judgment of the Commission that the Nasdaq Application is sufficient
for purposes of registration of the securities listed in Exhibit A
to the Nasdaq Application (the ``Issuer Securities''); \21\
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\21\ According to the Nasdaq Application, the Issuer Securities
represent securities: (i) That are listed on Nasdaq immediately
preceding the date that the Nasdaq Exchange begins operations; (ii)
that are currently either registered under Section 12(b) or 12(g) of
the Exchange Act or exempt from Section 12(g) registration pursuant
to Section 12(g)(2)(B) or 12(g)(2)(G) of the Exchange Act or
Exchange Act Rule 12g3-2(b); and (iii) that have not been requested
by the issuer to be opted-out of the Nasdaq Application pursuant to
the procedures established by Nasdaq as a result of NASD Rule 4130.
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(ii) Nasdaq and the Nasdaq Exchange have represented to the
Commission in the Nasdaq Application that, as of the date of this
Order:
a. They have conducted the opt-out process as described,
particularly with respect to notice of the Nasdaq Application to all
Issuers, generally, pursuant to NASD Rule 4130 and a press release
and, specifically, to each Issuer through the opt-out option,
b. That authorization has not been withheld by any Issuer with
respect to any of the Issuer Securities, and
c. The Issuer Securities listed in Exhibit A to the Nasdaq
Application accurately reflect the securities that are to be the
subject of its request;
(iii) The Nasdaq Exchange has certified to the Commission in the
Nasdaq Application that, as of the date of this Order, all of the
Issuer Securities have been approved by the Nasdaq Exchange for
listing and registration in accordance with the requirements of
Section 12(d) of the Exchange Act; and
(iv) In accordance with Section 12(d) and Rule 12d1-2(a) \22\ of
the Exchange Act, Nasdaq and the Nasdaq Exchange have requested in
writing the acceleration of the effective date of the Nasdaq
Application for Section 12(b) registration of the Issuer Securities
on the date of this Order.
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\22\ 17 CFR 249,12d1-2(a).
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V. Conclusion
The Commission, having reviewed the Nasdaq Application for Section
12(b) registration of the Issuer Securities and in reliance on the
representations and certifications made by Nasdaq and the Nasdaq
Exchange in the Nasdaq Application, has concluded that it is
appropriate, in the public interest and consistent with the protection
of investors, to approve the Nasdaq Application and grant the request
by Nasdaq and the Nasdaq Exchange for registration of the Issuer
Securities under Section 12(b).
The Commission recognizes that the use of its authority under
Section 12(c) of the Exchange Act to consider information other than
that prescribed by Section 12(b) for purposes of Section 12
registration is a variation on the customary registration process. As
noted, however, the Commission believes the special circumstances of
Nasdaq's transition to a national securities exchange and the existing
public disclosure requirements applicable to the Issuer Securities
constitute a unique situation meriting the application of Section
12(c).
With respect to the findings and conclusions in this Order, it is
also to be expressly understood that the Commission has not made, and
this Order does not constitute, any determination regarding the
Issuers' compliance with the listing standards of the Nasdaq Exchange
or of any other exchange, securities association or facility on which
the Issuers' securities trade, or any Commission rule or regulation,
other than the Section 12(b) registration requirements as they relate
to Nasdaq's transition to a national securities exchange. In addition,
the Commission has not made, and this Order does not constitute, any
determination regarding the regulation or oversight of Nasdaq or the
Nasdaq Exchange with respect to the Issuer Securities, other than the
Section 12(b) registration requirements as they relate to Nasdaq's
transition to a national securities exchange.
Accordingly, it is ordered that the Nasdaq Application for Section
12(b) registration of the Issuer Securities, made by Nasdaq and the
Nasdaq Exchange on behalf of the Issuers pursuant to NASD Rule 4130,
be, and hereby is, granted, effective as of July 31, 2006.
[[Page 45248]]
By the Commission (Chairman Cox and Commissioners Glassman,
Atkins, Campos and Nazareth).
Nancy M. Morris,
Secretary.
July 31, 2006
Nancy M. Morris, Esq.
Secretary, US Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549
RE: Request for Relief from Sec. 12 of the Securities Exchange Act
of 1934
Dear Ms. Morris:
On January 13, 2006, the Securities and Exchange Commission
(``SEC'' or ``Commission'') approved the application of The NASDAQ
Stock Market LLC (``Nasdaq Exchange''), a subsidiary of The Nasdaq
Stock Market, Inc. (``Nasdaq''), to register under Section 6 of the
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') as a
national securities exchange.\1\ Nasdaq's transition of its listing
and trading activities to the Nasdaq Exchange will furehr Congres's
instruction to promote ``fair competition * * * between exchange
markets.'' \2\ Absent the relief requested herein, however, Nasdaq's
transition to a national securities exchange would require
approximaely 3,200 Nasdaq Global Market \3\ and Capital market
issuers with securities registered pusuant to the Act, or exempt
from registration under Section 12(g) of the Act,\4\ to file
registraton statements \5\ to register those securities under
Section 12(b) of the Act.\6\
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\1\ Securities Exchange Act Release No. 53128 (January 13,
2006), 71 FR 3550 (January 23, 2006) (the ``Exchange Approval
Order'').
\2\ Exchange Act Section 11A(a)(1)(C)(ii).
\3\ Effective July 1, 2006, Nasdaq renamed the Nasdaq National
Market as the Nasdaq Global Market and created a new segment within
the Global Market called the Global Select Market. References to the
Nasdaq Global Market include those securities listed on the Nasdaq
Global Market and the Nasdaq Global Select Market. See Securities
Exchange Act Release No. 54071 (June 29, 2006), 71 FR 38922 (July
10, 2006) (SR-NASD-2006-068); Securities Exchange Act Release No.
53799 (May 12, 2006), 71 FR 29195 (May 19, 2006) (SR-NASDAQ-2006-
007).
\4\ 15 U.S.C. 78l(g).
\5\ Most of these registration statements would be filed with
the Commission. However, Section 12(i) of the Act requires filings
relating to certain financial institutions to be made with the
Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, or the
Office of Thrift Supervision (collectively, the ``Banking
Regulators''). 15 U.S.C. 78l(i). Separate requests have been sent to
the Banking Regulators seeking similar relief for the companies
registered with them.
\6\ 15 U.S.C. 78l(b).
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Engaging in what would essentially be a re-registration process
for the vast majority of these 3,200 issuers would create a serious
disruption in the trading of securities on The Nasdaq Stock Market.
As explained below, the confusion and inevitable administrative
delay that would accompany such a process for issuers registered
with the Commission would achieve no material public benefit and
would place an unnecessary burden on issuers, investors, Nasdaq, the
Nasdaq Exchange, and the Commission. The Commission can prevent this
potential disruption by granting the relief requested in this
letter. Specifically, Nasdaq and the Nasdaq Exchange request that
this letter serve as: (1) The registration statement under Section
12(b) for all classes of listed securities of Nasdaq Capital Market
and Nasdaq Global Market issuers registered with the Commission
under Sections 12(b) and 12(g), as well as those listed securities
exempt from registration under Section 12(g)(2)(B) of the Act \7\;
and (2) the Nasdaq Exchange's certification pursuant to Section
12(d) of the Act \8\ that these securities are approved for listing
and registration concurrent with the start of operations of the
Nasdaq Exchange. Nasdaq and the Nasdaq Exchange also request that
the Commission issue an exemption from registration applicable to
issuers that are now exempt from the registration requirements of
Section 12(g) pursuant to Section 12(g)(2)(G) of the Act \9\ and
Exchange Act Rule 12g3-2(b)\10 \to allow these companies three years
from the date the Nasdaq Exchange begins operations to become
registered under Section 12(b). NASD Rule 4130 specifically permits
Nasdaq to act on behalf of its issuers in this regard.\11\
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\7\ 15 U.S.C. 78l(g)(2)(B).
\8\ 15 U.S.C. 78l(d),
\9\ 15 U.S.C. 78l(g)(2)(G).
\10\ 17 CFR 240.12g3-2(b).
\11\ Rule 4130 permits Nasdaq to act on behalf of its issuers to
request registration of their listed securities under Section 12(b),
or seek appropriate regulatory relief from Section 12(b), in
connection with the transition to the Nasdaq Exchange. See
Securities Exchange Act Release No. 53606 (April 6, 2006), 71 FR
18790 (April 12, 2006) (approving SR-NASD-2006-28); Securities
Exchange Act Release No. 53262 (February 24, 2006), 71 FR 10734
(March 2, 2006) (providing notice of SR-NASD-2006-28).
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I. Background
Nasdaq presently is a facility of the National Association of
Securities Dealers, Inc. (``NASD''), a registered securities
association, and thus is subject to Section 15A of the Act. On March
15, 2001, Nasdaq filed an application under Section 6 of the Act for
registration as a national securities exchange (``Form 1'') with the
Commission. On August 15, 2005, and September 23, 2005, Nasdaq
submitted Amendments 4 and 5, respectively, to its Form 1. In
Amendments 4 and 5 Nasdaq proposed, among other things, a new
corporate structure whereby Nasdaq would become a holding company
with the Nasdaq Exchange as one of its subsidiaries. The Commission
published notice of Amendments 4 and 5 on October 11, 2005.\12\ On
January 13, 2006, the Nasdaq Exchange submitted Amendment 6 to the
Form 1 and the Commission approved the Nasdaq Exchange's application
for registration as a national securities exchange.\13\ On June 30,
2006, the Commission modified the approval order so that the Nasdaq
Exchange could begin operations in a phased manner, with operations
related to trading in Nasdaq-listed securities beginning before
operations related to trading in securities listed on other national
securities exchanges.\14\ The Nasdaq Exchange has satisfied the
conditions expressed in the amended approval order with respect to
Nasdaq-listed securities and expects to begin operations as a
national securities exchange for those securities on August 1, 2006.
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\12\ Securities Exchange Act Release No. 52559 (October 4,
2005), 70 FR 59097 (October 11, 2005).
\13\ Exchange Approval Order, supra note 1.
\14\ Securities Exchange Act Release No. 54085 (June 30, 2006),
71 FR 38910 (July 10, 2006).
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Upon operation of the Nasdaq Exchange, issuers listed and traded
on Nasdaq will instead be listed and traded on the Nasdaq
Exchange.\15\ Under current NASD rules, a security is eligible for
listing on Nasdaq if it is registered under the Exchange Act under
either Section 12(g) or Section 12(b).\16\ In addition, three
categories of securities exempt from registration under Section
12(g) are also eligible for listing on Nasdaq. First, a security
issued by an investment company registered under the Investment
Company Act of 1940 (the ``1940 Act'') is exempt from registration
under Section 12(g)(2)(B) of the Act, but is eligible for listing on
Nasdaq.\17\ Second, a security issued by an insurance company and
exempt from registration under Section 12(g) pursuant to Section
12(g)(2)(G) is also eligible for listing.\18 \Finally, the
securities of certain foreign issuers are eligible for inclusion in
Nasdaq even though they are exempt from registration pursuant to
Rule 12g3-2(b) under the Exchange Act.\19\ Once the Nasdaq Exchange
begins operations, issuers will need instead to have been registered
under Section 12(b) so that brokers and dealers may effect
transactions in these securities on the Nasdaq Exchange consistent
with Section 12(a) of the Act.\20 \
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\15\ This includes securities listed on the Nasdaq Capital
Market and the Nasdaq Global Market. Note that the NASD has modified
its Plan of Allocation and Delegation of Functions by NASD to
Subsidiaries and certain NASD rules to reflect NASD's direct
authority for the activities related to the OTC Bulletin Board,
rather than the prior delegation of such authority to Nasdaq. As
such, this application does not address the OTC Bulletin Board and
securities quoted on the OTC Bulletin Board will not be listed on
the Nasdaq Exchange.
\16\ NASD Rules 4310(a)(1) and (2) and 4320(a).
\17\ NASD Rule 4310(a)(4).
\18\ NASD Rule 4310(a)(3).
\19\ NASD Rule 4320(c).
\20\ 15 U.S.C. 78l(a).
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In contemplation of this request, Nasdaq has adopted Rule 4130,
which specifically permits Nasdaq to act on behalf of its issuers to
request registration of their listed securities under Section 12(b),
or seek appropriate regulatory relief from Section 12(b), in
connection with the transition to the Nasdaq Exchange.\21\ In
proposing this rule change, Nasdaq noted that it anticipated making
the requests contained herein and the process by which it would
provide notice to each issuer and would allow any issuer that does
not wish to register under Section 12(b) the ability to opt-out of
Nasdaq's request.\22\ Nasdaq provided that notice by issuing a
[[Page 45249]]
bulletin to issuers \23\ on May 15, 2006, and by issuing a press
release \24\ on May 17, 2006.
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\21\ Securities Exchange Act Release No. 53606, supra note 11.
\22\ Securities Exchange Act Release No. 53262, supra note 11.
\23\ See ``Impact of NASDAQ Exchange Registration on Listed
Companies'' available at: http;//www.nasdaq.com/about/Exchange_
Bulletin_051506.pdf.
\24\ See ``NASDAQ Notifies Listed Companies About Transition To
Exchange Status'' available at: https://www.nasdaq.com/newsroom/news/
pr2006/ne_section06_066.stm
_____________________________________-
As of July 31, 2006, Nasdaq lists 2,776 securities on the Global
Market (including 1,254 securities on the Nasdaq Global Select
Market) and 580 securities on the Capital Market.\25\ These
securities can be categorized as follows: 3,257 securities are
registered with the Commission under Section 12(g); 40 securities
are also listed on a national securities exchange and are registered
with the Commission under Section 12(b); 17 investment company
issuers' securities are exempt from registration under Section
12(g)(2)(B); four insurance company issuers' securities are exempt
from Section 12(g) registration under Section 12(g)(2)(G); nine
foreign private issuers' securities are exempt from Section 12(g)
registration under Rule 12g3-2(b); and 29 bank and savings
association issuers' securities are registered under Section 12(g)
with other regulatory agencies pursuant to Section 12(i).\26\
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\25\ Some issuers list more than one security on Nasdaq.
\26\ To assist the Commission with this request, we have
attached lists of those securities registered with the Commission or
exempt from registration. Exhibit A contains a list of those
securities already registered with the Commission under Sections
12(b) or 12(g) and those securities exempt from registration under
Rule 12(g)(2)(B), that have not opted out from this request as
provided for in Rule 4130. Exhibit B contains a list of those
securities that have opted out from this request. Exhibit C contains
a list of those securities that are exempt from registration under
Section 12(g) pursuant to Section 12(g)(2)(G) or Rule 12g3-2(b).
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II. Basis for Relief Sought and Anticipated Benefits
A. Securities Already Registered Under Section 12(g) and 12(b)
Absent relief, the issuers of approximately 3,297 Nasdaq Global
Market and Capital Market securities that are registered with the
Commission under Sections 12(g) and 12(b) will be required to file a
registration statement to register their securities under Section
12(b) on the Nasdaq Exchange once Nasdaq begins operating as a
national securities exchange. Nasdaq believes that under the
circumstances, this registration process would be confusing and
would place an unnecessary cost and administrative burden on Nasdaq,
the Nasdaq Exchange, the Commission, and issuers and would not be in
the public interest. Specifically, each of those issuers would be
required to file with the Commission and with the Nasdaq Exchange a
new Exchange Act registration statement describing the securities to
be registered along with all necessary exhibits. The Nasdaq Exchange
would then be required to certify to the Commission that each
issuer's securities are approved for listing and registration. This
process would have to be coordinated to minimize disruptions to
trading in issuer securities, with the real possibility of some
securities experiencing trading gaps during the transition. Such a
daunting and time-sensitive task--which creates no significant
identifiable benefit to the public creates the unnecessary risk of
administrative errors by the issuers, the Nasdaq Exchange, or the
Commission that could inadvertently delay or otherwise adversely
impact the registration and trading of securities on the new
exchange. The public interest is served by having exchanges run
smoothly and efficiently, and the requested relief would achieve
that purpose.
The additional registration process would not result in any
significant benefit to the marketplace or investors because they
would not receive any additional information regarding the security.
Each Nasdaq Global Market and Capital Market issuer in this category
has already filed an Exchange Act registration statement with the
Commission to register the class of securities under Section 12 of
the Act. Those issuers with securities registered under Section
12(g) were required to file a registration statement that contained
``such information and documents as the Commission may specify
comparable to that which is required in an application to register a
security pursuant to [Section 12(b)].'' \27\
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\27\ Section 12(g)(1) of the Act, 15 U.S.C. 78l(g)(1).
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There are also no relevant differences in the regulatory
requirements for securities registered under Sections 12(b) and
12(g) that would negatively impact investors. For example, issuers
with securities registered under Section 12(g) must, like issuers
with securities registered under Section 12(b), file periodic and
other reports with the Commission under Section 13 of the Act,
comply with the proxy requirements under Section 14 of the Act, and
adhere to the requirements of the Williams Act. Because securities
registered under Section 12(b) and Section 12(g) are already treated
in a nearly identical fashion, requiring Nasdaq issuers to re-
register their securities would not result in any material benefit
to the marketplace or investors.
The Commission would be acting well within its authority in
granting the relief requested. Congress has provided specific
authorization under Section 12(c) of the Act,\28 \which allows the
submission of different information than that required under Section
12(b).
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\28\ 15 U.S.C. 78l(c).
---------------------------------------------------------------------------
Accordingly, Nasdaq and the Nasdaq Exchange request that this
letter serve as: (i) The registration statement under Section 12(b)
for all classes of listed securities of Nasdaq Global Market and
Capital Market issuers registered with the Commission under Sections
12(b) and 12(g) and included in Exhibit A; and (ii) the Nasdaq
Exchange's certification pursuant to Section 12(d) of the Act that
these securities are approved for listing and registration,
concurrent with the start of operations of the Nasdaq Exchange.
Nasdaq and the Nasdaq Exchange further request that the Commission
accelerate the effective date of this application for Section 12(b)
registration to July 31, 2006.
This action would be in the public's interest and consistent
with the protection of investors because it would prevent the
imposition of a significant administrative burden on issuers, the
Commission, and others without weakening any of the protections
afforded to investors under the federal securities laws.\29\
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\29\ This reclassification would apply only to those issuers
listed on Nasdaq when it becomes a national securities exchange and
not to issuers approved for listing on Nasdaq afterwards. Such
later-listed issuers would be required to file a registration
statement with the Commission to register their securities under
Section 12(b) and Nasdaq would be required separately to certify
such registration statements. In addition, this reclassification
would not apply to the securities of any issuer that has opted-out
of such treatment, pursuant to NASD Rule 4130. See SR-NASD-2006-28.
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B. Securities Exempt From Registration Under Section 12(g)(2)(B)
Nasdaq currently lists 17 investment companies whose securities
are exempted from Section 12(g) registration pursuant to Section
12(g)(2)(B) of the Act. No purpose would be served by requiring
these issuers to file registration statements under Section 12(b)
because these companies already are and would remain subject to
registration and reporting requirements under the 1940 Act rather
than Section 13 of the Act.\30\ The Commission's rules clearly
contemplate that disclosure under the 1940 Act satisfies the
disclosure required by the Exchange Act. In particular, each
registered investment company has filed a registration statement
with the Commission under the 1940 Act and has been required to make
periodic filings under the 1940 Act identical in form to those
required of investment companies that have registered their
securities under Section 12(b) of the Act.\31\
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\30\ Registered investment companies file annual and semiannual
reports on Forms N-CSR and N-SAR, rather than on Forms 10-K and 10-
Q, even if registered under the Exchange Act. See General
Instruction A. to Form N-CSR, General Instruction A. to Form 10-K,
and Exchange Act Rules 13a-11(b) and 13a-13(b). Registered
investment companies are also subject to proxy regulation under Rule
20a-1 of the 1940 Act. See also Item 22 of Schedule 14A.
\31\ Under Exchange Act Rule 12g-2, the Commission already has
made provision for these companies to be deemed registered under the
Exchange Act without the need for a filing. That relief is automatic
upon the termination of the issuer's registration under the 1940
Act. Given that relief, it would make no sense to impose a filing
requirement when the investment company has maintained, rather than
terminated, its registration under the 1940 Act.
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As such, Nasdaq and the Nasdaq Exchange request that these
issuers be treated in the same manner as issuers with securities
registered under Sections 12(b) or 12(g) of the Act and that this
letter serve as: (i) The registration statement under Section 12(b)
for all classes of listed securities of Nasdaq Global Market and
Capital Market issuers exempt from Section 12(g) registration
pursuant to Section 12(g)(2)(B) and included in Exhibit A; and (ii)
the Nasdaq Exchange's certification pursuant to Section 12(d) of the
Act that these securities are approved for listing and registration,
concurrent with the start of operations of the Nasdaq Exchange.
Nasdaq and the Nasdaq Exchange further
[[Page 45250]]
request that the Commission accelerate the effective date of this
application for Section 12(b) registration to July 31, 2006.
This action would be in the public's interest and consistent
with the protection of investors because it would prevent the
imposition of a significant administrative burden on issuers, the
Commission, and others without weakening any of the protections
afforded to investors under the federal securities laws.\32\
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\32\ As noted in footnote 29, supra, this reclassification would
apply only to those issuers listed on Nasdaq when it becomes a
national securities exchange that have not opted-out of such
treatment pursuant to NASD Rule 4130.
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C. Other Securities Exempt From Registration Under Section 12(g)
As described above, Nasdaq lists 13 securities--out of more than
3,300--that are otherwise exempt from registration under Section
12(g). The Nasdaq Exchange will operate in all relevant, material
respects just as Nasdaq operates today.\33\ In fact, while as early
as 1983 the Commission recognized that ``trading on [Nasdaq] is
substantially the same as trading on an exchange,'' \34\ the
Commission has nonetheless permitted securities of these exempt
issuers to trade on Nasdaq.
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\33\ The primary difference in market structure that Nasdaq
contemplates is the establishment of a holding company structure
under which Nasdaq would own the Nasdaq Exchange, which would
execute quotes and orders in accordance with a strict price-time
priority algorithm.
\34\ Securities Act Release No. 6493 (October 14, 1983) (``Rule
12g3-2(b) Amendments'').
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Section 36 of the Act \35\ grants the Commission broad authority
to make exemptions to any part of the Act when ``such exemption is
necessary or appropriate in the public interest, and is consistent
with the protection of investors.'' Granting a temporary
continuation of an exemption from registration is ``necessary or
appropriate in the public interest'' and is ``consistent with the
protection of investors.'' This exemption for a transitional period
would provide issuers that have traded on Nasdaq without incident
for many years with sufficient time to undertake Exchange Act
registration requirements and to make an orderly transition to the
Nasdaq Exchange and therefore is in the public interest. The
Commission has used its authority in the past to resolve
administrative hurdles for complex transactions and to relieve
unnecessary administrative burdens. Finally, given that these
securities have traded on Nasdaq pursuant to an exemption for an
extended period of time, the continuation of a similar exemption for
a limited time should not raise any new concerns regarding the
protection of investors.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78mm.
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Forcing Section 12(g) exempt issuers to immediately register
would be inequitable and wholly unrelated to any act or failure to
act by these issuers. In the absence of exemptive relief, each of
the Section 12(g) exempt issuers would be required to prepare and
file a registration statement on Form 10 or 20-F. Foreign issuers
would also have to restate or reconcile their financial statements
to U.S. generally accepted accounting principles (``U.S. GAAP'').
But it is Nasdaq's becoming an exchange rather than any affirmative
act by these exempt issuers that would trigger the imposition of
this registration requirement. Companies that list on the Nasdaq
Exchange after it begins operations could be required to meet all
the registration requirements applicable to an exchange listing
without disrupting an existing market in those securities. But for
those companies already listed, requiring immediate registration is
potentially disruptive and unfair. The mere fact of Nasdaq's
conversion to an exchange should not adversely impact these
companies or their investors.
Thus, Nasdaq and the Nasdaq Exchange request that the Commission
temporarily continue the exemption from registration for the
following classes of Nasdaq-listed issuers. In connection with this
request, the Nasdaq Exchange represents that it will continue to
monitor these companies in the same manner Nasdaq does, to assure
compliance with all applicable listing requirements.
1. Insurance Companies
The Commission need not immediately impose registration
requirements on the four insurance companies listed on Nasdaq but
exempt from Section 12(g) registration.\36\ These issuers have not
taken any action on their own to trigger a registration requirement
and the additional reporting requirements required by such
registration. In fact, if the Commission determines not to
temporarily continue these companies' exemptions and they choose to
delist rather than register, investors would be harmed by the
potential loss of a liquid trading market. As such, Nasdaq requests
that the Commission grant an exemption for the securities of these
insurance companies (identified on Exhibit C) from the requirements
of Sections 12(a) and 12(b) with respect to the trading of these
securities on the Nasdaq Exchange for a three-year period from the
date the Nasdaq Exchange begins to operate as an exchange, provided
these companies continue to comply with the requirements of Section
12(g)(2)(G) of the Act and the applicable requirements for continued
listing on the Nasdaq Exchange. This transitional exemption will
permit these issuers to complete the registration process without
undue burden.
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\36\ Pursuant to Section 12(g)(2)(G) of the Act, these issuers
generally must file an annual statement with the Commissioner of
Insurance of their domiciliary state and must be subject to
regulation by their domiciliary state of proxies, consents, or
authorizations.
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2. Foreign Private Issuers
There are nine foreign issuers that trade on The Nasdaq Capital
Market pursuant to the ``grandfathering'' exemption of Rule 12g3-
2(b).\37\ This exemption originated in 1983, when the Commission
first required foreign private issuers whose securities were trading
on Nasdaq to be registered. Prior to that time, a foreign private
issuer whose securities were not trading on a national securities
exchange was exempt from registration where the foreign issuer did
not voluntarily enter the United States markets by, for example,
conducting a public offering or listing on an exchange. In 1983 the
Commission amended Rule 12g3-2(b) to deny the exemption to non-U.S.
issuers that voluntarily listed on Nasdaq. In order not to disrupt
the trading of these issuers, however, the Commission grandfathered
in all non-Canadian foreign issuers, allowing those companies to
continue to trade on Nasdaq without registration under the Exchange
Act.\38\ In doing so, the Commission heeded the concerns of
commenters that many foreign issuers would withdraw from Nasdaq,
rather than register, leaving the pink sheets as the only source of
trading information related to these companies and resulting in
increased price spreads, a decrease in information, price quotes not
carried in newspapers, less liquid markets and fewer institutions in
the market, absence of NASD surveillance, and delays in execution of
transfers.\39\
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\37\ These issuers are not eligible for listing on the Nasdaq
Global Market, nor are they subject to the Global Market listing
requirements.
\38\ Exchange Act Rule 12g3-2(b). The exemption is maintained by
submitting the issuer's home country reports to the Commission.
\39\ Rule 12g3-2(b) Amendments, supra note 34. These factors,
according to one estimate, would cause prices to drop 20 percent.
Id.
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The same considerations that compelled that treatment of foreign
issuers in 1983 are relevant to the relief requested today. These
issuers have not acted to jeopardize their ability to trade on
Nasdaq or Rule 12g3-2(b) exempt status. If forced to immediately
register their securities, a significant number of these issuers may
delist rather than register, thereby relegating the U.S. investors
in those foreign issuers to potentially less liquid and transparent
markets.
For these reasons, the Nasdaq Exchange's registration as an
exchange should not force these companies to immediately register or
delist.\40\ Nasdaq and the Nasdaq Exchange therefore request that
the Commission grant an exemption for those securities included in
Exhibit C that are exempt from Section 12(g) registration under Rule
12g3-2(b) from the requirements of Sections 12(a) and 12(b) with
respect to the trading of these securities on the Nasdaq Exchange
for a three-year period from the date the Nasdaq Exchange begins to
operate as an exchange, provided the issuers continue to comply with
the requirements of Rule 12g3-2(b) and the applicable requirements
for continued listing on the Nasdaq Exchange. This transitional
exemption will permit these issuers to complete the registration
process without undue burden.\41\
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\40\ One exempt foreign issuer, Nissan Motor Co., Ltd.,
submitted a comment letter to the Commission in connection with
Nasdaq's application to become an exchange, requesting that the Rule
12g3-2(b) grandfathering be allowed to continue indefinitely, or, in
the alternative, that a reasonable transition period be allowed. See
footnote 208 to the Exchange Approval Order, supra, note 1.
\41\ Nasdaq notes that the proposed three-year period is
consistent with the time-line the Commission has set forth to
eliminate the requirement for foreign private issuers to reconcile
financial statements prepared according to International Financial
Reporting Standards to US GAAP. See SEC Press Release 2006-17,
available at: https://www.sec.gov/news/press/2006-17.htm.
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[[Page 45251]]
III. Conclusion
The relief requested above is in the public interest because it
will ensure the continued smooth operation of this market
immediately from the time the Nasdaq Exchange begins operations as
an exchange and avoid confusion and a number of potentially
disruptive administrative hurdles. The relief is necessary and
appropriate to avoid the disruption that could occur if members,
brokers, and dealers were prohibited from effecting transactions in
Nasdaq securities due to the lack of an effective registration once
the Nasdaq Exchange begins operating as a registered exchange.
The Commission has specific authority provided by Section 12(c)
to effect the relief requested with respect to those securities
already registered under Section 12(b) or 12(g) and those securities
exempt from Section 12(g) registration pursuant to Section
12(g)(2)(B). Further, the Commission has general exemptive authority
pursuant to Section 36 of the Act and Rule 0-12 thereunder, in
pertinent part, to exempt any person, security, or transaction, or
any class or classes of persons, securities, or transactions, from
any provision or provisions of this title or of any rule or
regulation thereunder, to the extent that such exemption is
necessary or appropriate in the public interest, and is consistent
with the protection of investors. The unique facts surrounding
Nasdaq's transition to a national securities exchange provide ample
justification for the Commission to exercise its authority under
Section 36 under the circumstances described in this letter.
If you have any questions concerning the foregoing you may
contact the undersigned at (301) 978-8480, Arnold Golub at (301)
978-8075 or John Yetter at (301) 978-8497.
Sincerely yours, Edward S. Knight
Exhibit A: List of securities whose registration will be
transferred to Section 12(b)
Exhibit B: List of securities of issuers that have elected to
opt-out of requested relief
Exhibit C: List of securities exempt from Section 12(g)
registration under Section 12(g)(2)(G) and Rule 12g3-2(b)
BILLING CODE 8010-01-P
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[FR Doc. 06-6708 Filed 8-7-06; 8:45 am]
BILLING CODE 8010-01-C