Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To Revise The Nasdaq Capital Market Listing Requirements, 52351-52356 [E6-14651]
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Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
[Release No. 34–54379; File No. SR–CBOE–
2006–66]
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold the following meeting during
the week of September 5, 2006:
A closed meeting will be held on
Thursday, September 7, 2006 at 2 p.m.
Commissioners, Counsels to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (9)(B) and
(10) and 17 CFR 200.402(a)(3), (5), (6),
7(i)(A), (C), (D), and (E), (9)(ii), and (10)
permit consideration of the scheduled
matters at the closed meeting.
Commissioner Atkins, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matters of the closed
meeting scheduled for Thursday,
September 7, 2006 will be:
Formal orders of investigation;
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings of an
enforcement nature;
Litigation matters; and
Consideration of amicus participation.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact: The Office of the Secretary at
(202) 551–5400.
Dated: August 30, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. 06–7442 Filed 8–31–06; 8:45 am]
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Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change Regarding
Market-Maker Appointments
August 28, 2006.
On July 11, 2006, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend CBOE Rule 8.3 to provide that in
the event a Market-Maker is a nominee
of a member organization or has
registered the Market-Maker’s
membership for a member organization,
the member organization with which
the Market-Maker is associated would
be permitted to request that the
Exchange deem all class appointments
be made to the member organization
instead of to the individual MarketMaker.3 In such a case, if an individual
Market-Maker were no longer associated
with a member organization, the class
appointments would continue to be
held by the member organization and
not the individual Market-Maker. In the
event a member organization did not
request that the class appointments be
held by the member organization, a
Market-Maker’s class appointments
would continue to be held in the name
of the individual Market-Maker and not
the member organization with which
the Market-Maker is associated. The
proposed rule change was published for
comment in the Federal Register on July
27, 2006.4 The Commission received no
comments on the proposal.
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 If such a request is made by a member
organization, CBOE would consider that the
submission of electronic quotations and orders
would be made by and on behalf of the member
organization with which the individual MarketMaker is associated. However, CBOE proposes that
CBOE Rule 8.3 would state that the individual
Market-Maker would continue to have all of the
obligations of a Market-Maker under Exchange rules
in these circumstances.
4 See Securities Exchange Act Release No. 54184
(July 20, 2006), 71 FR 42690.
2 17
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52351
exchange 5 and, in particular, the
requirements of Section 6 of the Act 6
and the rules and regulations
thereunder. The Commission
specifically finds that the proposed rule
change is consistent with Section 6(b)(5)
of the Act 7 in that it is designed to
promote just and equitable principles of
trade, to remove impediments and to
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
Commission believes that the proposal
should provide more flexibility to
Market-Maker organizations in
structuring class appointments.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
proposed rule change (SR–CBOE–2006–
66) is approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Nancy M. Morris,
Secretary.
[FR Doc. E6–14597 Filed 9–1–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54378; File No. SR–
NASDAQ–2006–032]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change and
Amendment No. 1 Thereto To Revise
The Nasdaq Capital Market Listing
Requirements
August 28, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
23, 2006, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by Nasdaq. On August 28,
2006, Nasdaq filed Amendment No. 1 to
the proposed rule change.3 The
EFFECTIVE DATE:
5 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
6 15 U.S.C. 78f.
7 15 U.S.C. 78f(b)(5).
8 15 U.S.C. 78s(b)(2).
9 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, Nasdaq makes clarifying
changes to the rule text in the Nasdaq Capital
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Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Nasdaq proposes to revise certain
listing requirements applicable to the
Nasdaq Capital Market. The text of the
proposed rule change is below.
Proposed new language is in italics;
proposed deletions are in [brackets].4
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4200. Definitions.
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(a) For purposes of the Rule 4000
Series, unless the context requires
otherwise:
(1) No change.
(2) [Reserved
(3) Reserved
(4)] ‘‘Best efforts offering’’ means an
offering of securities by members of a
selling group under an agreement which
imposes no financial commitment on
the members of such group to purchase
any such securities except as they may
elect to do so.
[(5) Reserved
(6) ‘‘Cash available for distribution’’
means cash flow of a limited
partnership less amount set aside for
restoration or creation of reserves.]
[(7)] (3) ‘‘Cash flow’’ means cash
funds provided from limited
partnership operations, including lease
payments on net leases from builders
and sellers, without deduction for
depreciation, but after deducting cash
funds used to pay all other expenses,
debt payments, capital improvements
and replacements.
[(8)] (4) ‘‘Consolidated Quotations
Service’’ (CQS) means the consolidated
quotation collection system for
securities listed on an exchange other
than Nasdaq implementing SEC Rule
602.
[(9)] (5) ‘‘Country of Domicile’’ means
the country under whose laws an issuer
is organized or incorporated.
(6) ‘‘Covered security’’ means a
security described in Section 18(b) of
the Securities Act of 1933.
(7) Reserved
Market convertible debt listing standards. Nasdaq
also makes clarifying changes to the purpose
section regarding convertible debt, rights and
warrants, and non-Canadian foreign securities and
American Depository Receipts.
4 Changes are marked to the rule text that appears
in the electronic manual of Nasdaq found at https://
www.complinet.com/nasdaq. These rules became
effective on August 1, 2006, when Nasdaq
commenced operations as a national securities
exchange for Nasdaq-listed securities. The rule text
incorporates changes made by Amendment No. 1.
See id.
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(8) Reserved
(9) Reserved
(10)—(39) No change.
(b)—(c) No change.
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4310. Listing Requirements for
Domestic and Canadian Securities
To qualify for listing in Nasdaq, a
security of a domestic or Canadian
issuer shall satisfy all applicable
requirements contained in paragraphs
(a), (b), and (c) hereof. Issuers that meet
these requirements, but that are not
listed on the Nasdaq Global Market, are
listed on the Nasdaq Capital Market.
(a) No change.
(b) No change.
(c) In addition to the requirements
contained in paragraph (a) and (b)
above, and unless otherwise indicated,
a security shall satisfy the following
criteria for listing on Nasdaq:
(1) No change
(2)[(A)] For initial listing, the issuer
shall have either:
(A) (i) stockholders’ equity of $5
million; and
(ii) a market value of publicly held
shares of $15 million; and
(iii) an operating history of at least
two years; or
(B) [(ii)] (i) stockholders’ equity of $4
million; and
(ii) market value of listed securities of
$50 million (currently traded issuers
must meet this requirement and the bid
price requirement under Rule 4310(c)(4)
for 90 consecutive trading days prior to
applying for listing); [or] and
(iii) a market value of publicly held
shares of $15 million; or
(C) [(iii)] (i) stockholders’ equity of $4
million; and
(ii) net income from continuing
operations of $750,000 in the most
recently completed fiscal year or in two
of the last three most recently
completed fiscal years; and
(iii) a market value of publicly held
shares of $5 million.
[(B)] (3) For continued listing, the
issuer shall maintain either:
(A) [(i)] stockholders’ equity of $2.5
million; or
(B) [(ii)] market value of listed
securities of $35 million; or
(C) [(iii)] net income from continuing
operations of $500,000 in the most
recently completed fiscal year or in two
of the last three most recently
completed fiscal years.
[(3) For initial listing, the issuer shall
have an operating history of at least one
year or a market value of listed
securities of $50 million.]
(4) No change.
(5) (A) In the case of a convertible
debt security, for initial listing, there
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shall be a principal amount outstanding
of at least $10 million.
(B) In addition, for the initial listing
of convertible debt, one of the following
conditions must be satisfied:
(i) the issuer of the debt must have an
equity security that is listed on Nasdaq,
the American Stock Exchange or the
New York Stock Exchange;
(ii) an issuer whose equity security is
listed on Nasdaq, the American Stock
Exchange or the New York Stock
Exchange, directly or indirectly owns a
majority interest in, or is under common
control with, the issuer of the debt
security, or has guaranteed the debt
security;
(iii) a nationally recognized securities
rating organization (an ‘‘NRSRO’’) has
assigned a current rating to the debt
security that is no lower than an S&P
Corporation ‘‘B’’ rating or equivalent
rating by another NRSRO; or,
(iv) if no NRSRO has assigned a rating
to the issue, an NRSRO has currently
assigned: (1) an investment grade rating
to an immediately senior issue; or (2) a
rating that is no lower than an S&P
Corporation ‘‘B’’ rating, or an equivalent
rating by another NRSRO, to a pari
passu or junior issue.
(C) For continued listing of a
convertible debt security, there shall be
a principal amount outstanding of at
least $5 million.
(6)(A) In the case of common stock,
for initial and continued listing, there
shall be at least 300 round lot holders
of the security.
(B) In the case of preferred stock and
secondary classes of common stock, for
initial and continued listing, there shall
be at least 100 round lot holders of the
security, provided in each case that the
issuer’s common stock or common stock
equivalent equity security [is] must be
listed on [either] Nasdaq or [another
national securities exchange] be a
covered security. In the event the
issuer’s common stock or common stock
equivalent security either is not listed
on [either] Nasdaq or [another national
securities exchange] is not a covered
security, the preferred stock and/or
secondary class of common stock may
be listed on Nasdaq so long as the
security satisfies the listing criteria for
common stock.
(C) No change.
(7)(A) In the case of common stock,
there shall be at least 1,000,000 publicly
held shares for initial listing and
500,000 publicly held shares for
continued listing. For initial listing such
shares shall have a market value [of at
least $5 million] as provided in the
applicable provision of Rule 4310(c)(2).
For continued listing such shares shall
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have a market value of at least $1
million.
(B) In the case of preferred stock and
secondary classes of common stock,
there shall be at least 200,000 publicly
held shares having a market value of at
least $[2] 3.5 million for initial listing
and 100,000 publicly held shares having
a market value of [$500,000] $1 million
for continued listing. In addition, the
issuer’s common stock or common stock
equivalent security must be listed on
[either] Nasdaq or [another national
securities exchange] be a covered
security. In the event the issuer’s
common stock or common stock
equivalent security either is not listed
on [either] Nasdaq or [another national
securities exchange] is not a covered
security, the preferred stock and/or
secondary class of common stock may
be traded on Nasdaq so long as the
security satisfies the listing criteria for
common stock.
(C) Shares held directly or indirectly
by any officer or director of the issuer
and by any person who is the beneficial
owner of more than 10 percent of the
total shares outstanding are not
considered to be publicly held.
(8) No change.
(9)(A) In the case of rights and
warrants, for initial listing only, there
shall be at least [100,000] 400,000
issued and the underlying security
[shall] must be listed on Nasdaq or
[another national securities exchange]
be a covered security. For continued
listing, the underlying security must
remain listed on Nasdaq or be a covered
security.
(B) In the case of put warrants (that is,
instruments that grant the holder the
right to sell to the issuing company a
specified number of shares of the
Company’s common stock, at a specified
price until a specified period of time),
for initial listing only, there shall be at
least [100,000] 400,000 issued and the
underlying security [shall] must be
listed on Nasdaq or [another national
securities exchange] be a covered
security. For continued listing, the
underlying security must remain listed
on Nasdaq or be a covered security.
(C) No change.
(10)–(30) No change.
(d) No change.
4320. Listing Requirements for NonCanadian Foreign Securities and
American Depositary Receipts
To qualify for listing on Nasdaq, a
security of a non-Canadian foreign
issuer, an American Depositary Receipt
(ADR) or similar security issued in
respect of a security of a foreign issuer
shall satisfy the requirements of
paragraphs (a), (b), and (e) of this Rule.
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Issuers that meet these requirements,
but that are not listed on the Nasdaq
Global Market, are listed on the Nasdaq
Capital Market.
(a)–(d) No change.
(e) In addition to the requirements
contained in paragraphs (a) and (b), the
security shall satisfy the criteria set out
in this subsection for listing on Nasdaq.
In the case of ADRs, the underlying
security will be considered when
determining the ADR’s qualification for
initial or continued listing on Nasdaq.
(1) No change.
(2)(A) For initial listing, the issue
shall meet the requirements of Rule
4310(c)(2)(A), (B) or (C). [have a
minimum bid price of $4 and the issuer
shall have:
(i) stockholders’ equity of U.S. $5
million;
(ii) market value of listed securities of
U.S. $50 million (currently traded
issuers must meet this requirement for
90 consecutive trading days prior to
applying for listing); or
(iii) net income from continuing
operations of U.S. $750,000 in the most
recently completed fiscal year or in two
of the last three most recently
completed fiscal years.]
(B) For continued listing, the issuer
shall meet the requirements of Rule
4310(c)(3)(A), (B) or (C). [maintain:
(i) stockholders’ equity of U.S. $2.5
million;
(ii) market value of listed securities of
U.S. $35 million; or
(iii) net income from continuing
operations of U.S. $500,000 in the most
recently completed fiscal year or in two
of the last three most recently
completed fiscal years.]
(C) No change.
(D) No change.
(E) No change.
(3)(A) In the case of a convertible debt
security, for initial listing, there shall be
a principal amount outstanding of at
least $10 million.
(B) In addition, for the initial listing
of convertible debt, one of the following
conditions must be satisfied:
(i) the issuer of the debt must have an
equity security that is listed on Nasdaq,
the American Stock Exchange or the
New York Stock Exchange;
(ii) an issuer whose equity security is
listed on Nasdaq, the American Stock
Exchange or the New York Stock
Exchange, directly or indirectly owns a
majority interest in, or is under common
control with, the issuer of the debt
security, or has guaranteed the debt
security;
(iii) a nationally recognized securities
rating organization (an ‘‘NRSRO’’) has
assigned a current rating to the debt
security that is no lower than an S&P
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52353
Corporation ‘‘B’’ rating or equivalent
rating by another NRSRO; or,
(iv) if no NRSRO has assigned a rating
to the issue, an NRSRO has currently
assigned: (1) an investment grade rating
to an immediately senior issue; or (2) a
rating that is no lower than an S&P
Corporation ‘‘B’’ rating, or an equivalent
rating by another NRSRO, to a pari
passu or junior issue.
(C) For continued listing of a
convertible debt security, there shall be
a principal amount outstanding of at
least $5 million.
(4)(A) [There] In the case of common
stock, for initial and continued listing,
there shall be at least 300 round lot
holders of the security.
(B) In the case of preferred stock and
secondary classes of common stock, for
initial and continued listing, there shall
be at least 100 round lot holders of the
security, provided in each case that the
issuer’s common stock or common stock
equivalent equity security [is] must be
listed on [either] Nasdaq or [another
national securities exchange] be a
covered security. In the event the
issuer’s common stock or common stock
equivalent security either is not listed
on [either] Nasdaq or [another national
securities exchange] is not a covered
security, the preferred stock and/or
secondary class of common stock may
be listed on Nasdaq so long as the
security satisfies the listing criteria for
common stock.
(C) No change.
(5) There shall be at least 1,000,000
publicly held shares for initial listing
and 500,000 publicly held shares for
continued listing. For initial listing,
such shares shall have a market value
[of at least $5 million] as provided in the
applicable provision of Rule 4310(c)(2).
For continued listing, such shares shall
have a market value of at least $1
million. In the case of preferred stock
and secondary classes of common stock,
there shall be at least 200,000 publicly
held shares having a market value of at
least [$2] $3.5 million for initial listing
and 100,000 publicly held shares having
a market value of [$500,000] $1 million
for continued listing. In addition, the
issuer’s common stock or common stock
equivalent security security must be
listed on either Nasdaq or [another
national securities exchange] be a
covered security. In the event the
issuer’s common stock or common stock
equivalent security either is not listed
on [either] Nasdaq or [another national
securities exchange] is not a covered
security, the preferred stock and/or
secondary class of common stock may
be traded on Nasdaq so long as the
security satisfies the listing criteria for
common stock. Shares held directly or
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indirectly by any officer or director of
the issuer and by any person who is the
beneficial owner of more than 10
percent of the total shares outstanding
are not considered to be publicly held.
(6) In the case of rights, warrants and
ADRs for initial listing only, at least
[100,000] 400,000 shall be issued.
Issuers of ADRs must also meet the
round lot holders and publicly held
shares requirements set forth in the
applicable provisions of Rules
4310(c)(2), 4320(e)(4) and 4320(e)(5)
[subsections (4) and (5) above].
(7) In the case of rights and warrants,
for initial and continued listing, the
underlying security shall be listed on
Nasdaq or [another national securities
exchange] be a covered security.
(8)–(26) No change.
(f) No change.
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[4310(c)(2)(B)(ii), 4320(e)(2)(B)(ii),]
4310(c)(3)(B) or 4450(b)(1)(A) (i.e., the
alternative listing requirement relating
to market value of listed securities).
*
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IM–4803. Staff Review of Deficiency
As provided in Rule 4803(a)(1)(A), the
staff of the Listing Department may
accept a plan to regain compliance with
respect to quantitative deficiencies from
standards that do not themselves
provide a compliance period. Such
standards include:
Rules [4310(c)(2)(B)(i) and (iii)]
4310(c)(3)(A) and 4310(c)(3)(C)
Rule 4310(c)(6)
Rule 4310(c)(7) (but only as to the
number of publicly held shares, and not
as to such shares’ market value)
[Rules 4320(e)(2)(B)(i) and (iii)]
Rule 4320(e)(2)(B)
Rules 4320(e)(4) and (5) (but only as
to the number of publicly held shares,
and not as to such shares’ market value)
Rules 4450(a)(1), (3), and (4)
Rules 4450(b)(1)(B), (b)(2), and (b)(5),
and
Rules 4450(h)(1) and (4).
In a case where an issuer fails to
comply with the requirement of Rules
[4310(c)(2)(B)(iii), 4320(e)(2)(B)(iii),]
4310(c)(3)(C) or 4450(b)(1)(B), the
Listing Department shall not accept a
plan to achieve compliance with those
requirements in the future, since
compliance requires stated levels of net
income or assets and revenues during
completed fiscal years and therefore can
only be demonstrated through audited
financial statements. Similarly, an
issuer may not submit a plan relying on
partial-year performance to demonstrate
compliance with these standards. An
issuer cited for non-compliance with
these requirements may, however,
submit a plan that demonstrates current
or near-term compliance with Rules
[4310(c)(2)(B)(i), 4320(e)(2)(B)(i),]
4310(c)(3)(A) or 4450(a)(3) (i.e., the
alternative listing requirement relating
to stockholders’ equity), or Rules
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of, and basis for, the
proposed rule change, as amended, and
discussed any comments it received on
the proposed rule change, as amended.
The text of these statements may be
examined at the places specified in Item
IV below. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
1. Purpose
Nasdaq proposes to increase the
initial and continued listing
requirements applicable to companies
seeking to list, or already listed, on the
Nasdaq Capital Market, as set forth in
Rule 4310 (for domestic and Canadian
securities) and Rule 4320 (for nonCanadian foreign securities and
American Depositary Receipts).5 Nasdaq
believes that these changes will
facilitate a finding by the Commission
that the listing standards for the Capital
Market are substantially similar to the
listing standards applicable to securities
listed on the New York Stock Exchange,
the American Stock Exchange, or the
Nasdaq Global Market. This finding is
required before the Commission can
designate securities listed on the Capital
Market as ‘‘covered securities,’’ which
are exempt from state regulation under
Section 18 of the Securities Act of 1933
(‘‘Securities Act’’).6
Primary Listing Standards
The Exchange states that currently, a
company can list on the Capital Market
by meeting a stockholders’ equity,
income or market value of listed
securities requirement, along with other
applicable listing standards. Nasdaq
proposes to modify the income and
market value of listed securities
components of these listing standards to
also require a minimum of $4 million in
equity in each case. In addition, for
companies listing under the equity
Secondary Classes of Common Stock
and Preferred Stock
Nasdaq states that it currently permits
the listing of secondary classes of
common stock and preferred stock on
the Capital Market under lower liquidity
standards, when the primary class of
common stock is listed on Nasdaq or a
national securities exchange. Nasdaq
proposes to increase the market value of
publicly held shares requirement from
$2 million to $3.5 million for initial
listing and from $500,000 to $1 million
for continued listing of these securities.
In addition, Nasdaq proposes to modify
the listing standards so that the lower
liquidity standards are available only
when a company’s common stock or its
equivalent is listed on Nasdaq or is a
‘‘covered security’’ as defined in Section
18 of the Securities Act. Finally, Nasdaq
proposes to clarify that companies must
have 100 round lot shareholders for
continued listing under these listing
standards.
Rights and Warrants
Nasdaq proposes to increase the
requirement for initial listing of rights
and warrants to require that there be
400,000 outstanding. In addition,
Nasdaq proposes to require that for
initial and continued listing, the
security underlying a right or warrant
must be listed on Nasdaq or be a
covered security.7
Convertible Debt
Nasdaq states that its rules currently
permit the listing of convertible debt on
the Capital Market. Nasdaq proposes to
modify those rules, to require that for
the initial listing of convertible debt
either that: (i) The issuer of the debt
must have an equity security that is
listed on Nasdaq, the American Stock
Exchange or the New York Stock
Exchange; (ii) an issuer whose equity
security is listed on Nasdaq, the
American Stock Exchange or the New
York Stock Exchange, directly or
indirectly owns a majority interest in, or
is under common control with, the
5 See
6 15
PO 00000
Amendment No. 1, supra note 3.
U.S.C. 77r(b).
alternative, Nasdaq proposes to require
a two year operating history, instead of
the one year history currently required.
Further, for companies listing under the
market value of listed securities and
equity alternatives, Nasdaq proposes to
increase the market value of publicly
held shares requirement for initial
listing from $5 million to $15 million.
Finally, Nasdaq proposes to clarify that
all companies must have 300 round lot
shareholders for continued listing of a
primary class of common stock.
Frm 00038
Fmt 4703
Sfmt 4703
7 See
E:\FR\FM\05SEN1.SGM
Amendment No. 1, supra note 3.
05SEN1
Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Notices
issuer of the debt security, or has
guaranteed the debt security; (iii) a
nationally recognized securities rating
organization (an ‘‘NRSRO’’) has
assigned a current rating to the debt
security that is no lower than an S&P
Corporation ‘‘B’’ rating or equivalent
rating by another NRSRO; or, (iv) if no
NRSRO has assigned a rating to the
issue, an NRSRO has currently assigned:
(1) An investment grade rating to an
immediately senior issue; or (2) a rating
that is no lower than an S&P
Corporation ‘‘B’’ rating, or an equivalent
rating by another NRSRO, to a pari
passu or junior issue.8
Other Changes
Nasdaq also proposes to make
technical and conforming changes to the
rules by adding a definition of ‘‘covered
security’’ in Rule 4200, deleting certain
other definitions in Rule 4200 that have
no current applicability under Nasdaq
rules, and adjusting cross references
contained in IM–4803.9
Implementation
Nasdaq states that it recognizes that
the proposed changes could result in a
security that currently meets all the
listing requirements becoming noncompliant. Therefore, Nasdaq proposes
that the changes to the continued listing
requirements be made effective 30
days 10 after the proposed rule change is
approved by the Commission. Nasdaq
believes that this period would provide
currently-listed companies with
adequate time to comply.
In the case of companies applying for
initial listing, Nasdaq proposes that the
new requirements be effective upon
approval for companies that apply after
the date this proposed rule change is
submitted to the SEC. Nasdaq states that
companies that had applied for listing
prior to the date this proposed rule
change is submitted to the SEC would
be able to continue to qualify under the
prior standards, provided that they
complete the listing process not later
than 30 days 11 after the proposed rule
change is approved by the Commission.
Companies that apply after the date this
proposed rule change is submitted to
the SEC would be approved for listing
based on the rules in effect at the time
of the approval. The Exchange believes
8 See
Amendment No. 1, supra note 3.
notes that the references to Rule 4320 in
the final paragraph of IM–4803 have been deleted
based on the new structure of the rules.
Nonetheless, the substance of this interpretive
material continues to apply to non-U.S. companies
in the same manner that it applies to domestic
companies due to the cross reference to Rule
4310(c)(3) contained in Rule 4320(e)(2)(B).
10 See Amendment No. 1, supra note 3.
11 See Amendment No. 1, supra note 3.
sroberts on PROD1PC70 with NOTICES
9 Nasdaq
VerDate Aug<31>2005
17:24 Sep 01, 2006
Jkt 208001
that this schedule provides notice to
companies applying for listing that they
would be subject to higher standards
upon approval of the rule, so such
companies would not be prejudiced, but
recognizes that companies that have
previously applied did so in reliance on
the prior listing standards, and therefore
provides them a reasonable period of
time to complete the listing process on
that basis.
The Exchange states that these
procedures are similar to those used
when the listing standards were revised
in 1997 and 2001.12
2. Statutory Basis
Nasdaq believes that the proposed
rule change, as amended, is consistent
with the provisions of Section 6 of the
Act 13 in general and with Section
6(b)(5) of the Act,14 in particular.
Section 6(b)(5) requires that Nasdaq’s
rules be designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market,
and to protect investors and the public
interest. The Exchange believes that the
proposed rule change, as amended,
would raise the listing standards on the
Nasdaq Capital Market, which will help
protect investors. Further, Nasdaq
believes that the proposed rule change
will facilitate the Commission’s review
of Nasdaq’s petition to treat securities
listed on the Capital Market as covered
securities under Section 18(b) of the
Securities Act,15 which would remove
an impediment to the mechanism of a
free and open market.16
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change, as amended, will
result in any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
12 See Securities Exchange Act Release Nos.
38961 (August 22, 1997), 62 FR 45895 (Aug. 29,
1997) (approving SR–NASD–1997–16); and 44499
(June 29, 2001), 66 FR 35819 (July 9, 2001)
(approving SR–NASD–2001–14).
13 15 U.S.C. 78f.
14 15 U.S.C. 78f(b)(5).
15 15 U.S.C. 77r(b).
16 Petition to Amend Rule 146(b) to Designate
Securities Listed on the Nasdaq Capital Market as
Covered Securities for the Purpose of Section 18 of
the Securities Act of 1933 (February 28, 2006)
(designated as Commission File No. 4–513,
available at: https://www.sec.gov/rules/petitions/
petn4-513.pdf).
PO 00000
Frm 00039
Fmt 4703
Sfmt 4703
52355
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding, or
(ii) as to which Nasdaq consents, the
Commission will:
A. By order approve such proposed
rule change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2006–032 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2006–032. This
file number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of Nasdaq. All
E:\FR\FM\05SEN1.SGM
05SEN1
52356
Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Notices
approval to implement the proposed
rule change retroactively as of August 1,
2006. The text of the proposed rule
change is set forth below. Proposed new
language is in italics; proposed
deletions are in [brackets].4
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
All submissions should refer to File
Number SR–NASDAQ–2006–032 and
should be submitted on or before
September 26, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.17
Nancy M. Morris,
Secretary.
[FR Doc. E6–14651 Filed 9–1–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54376; File No. SR–NASD–
2006–093]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change Regarding
Pricing for Non-Members Using
Nasdaq’s Brut and Inet Facilities
August 28, 2006.
sroberts on PROD1PC70 with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 31,
2006, the National Association of
Securities Dealers, Inc. (‘‘NASD’’),
through its subsidiary, The Nasdaq
Stock Market, Inc. (‘‘Nasdaq’’), filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by Nasdaq. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons. In
addition, the Commission is granting
accelerated approval of the proposed
rule change.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to modify the
pricing for non-NASD members using
Nasdaq’s Brut and Inet Facilities to
trade non-Nasdaq securities. The filing
will apply to these non-members the
same rule change that Nasdaq is
instituting for members.3 Nasdaq seeks
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 54375
(August 28, 2006) (File No. SR–NASD–2006–092).
1 15
VerDate Aug<31>2005
17:24 Sep 01, 2006
Jkt 208001
7010. System Services
(a)–(h) No change.
(i) ITS/CAES System, Brut, and Inet
Order Execution and Routing
(1)–(8) No change.
(9) The fees applicable to nonmembers using Nasdaq’s Brut and Inet
Facilities shall be the fees established
for members under Rule 7010(i), as
amended by SR–NASD–2005–019, SR–
NASD–2005–035, SR–NASD–2005–048,
SR–NASD–2005–071, SR–NASD–2005–
125, SR–NASD–2005–137, SR–NASD–
2005–154, SR–NASD–2006–013, SR–
NASD–2006–023, SR–NASD–2006–031,
SR–NASD–2006–057, [and] SR–NASD–
2006–078, and SR–NASD–2006–092 and
as applied to non–members by SR–
NASD–2005–020, SR–NASD–2005–038,
SR–NASD–2005–049, SR–NASD–2005–
072, SR–NASD–2005–126, SR–NASD–
2005–138, SR–NASD–2005–155, SR–
NASD–2006–014, SR–NASD–2006–024,
SR–NASD–2006–032, SR–NASD–2006–
058, [and] SR–NASD–2006–079, and
SR–NASD–2006–093.
(j)–(y) No change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it had received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item III below.
Nasdaq has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In SR–NASD–2006–092,5 Nasdaq
amended NASD Rule 7010(i), which has
4 Changes are marked to the rule text that appears
in the electronic NASD Manual found at https://
www.nasd.com. The Nasdaq Exchange states that it
will not file conforming changes to its rules with
regard to order execution and routing by nonmembers, since persons that are not members of the
Nasdaq Exchange will not be permitted to use its
order execution and routing systems.
5 See supra note 3.
PO 00000
Frm 00040
Fmt 4703
Sfmt 4703
historically contained the fees for the
trading systems of The Nasdaq Stock
Market, to reflect the Nasdaq Exchange’s
commencing operations for trading of
securities listed on the Nasdaq
Exchange. During a transitional period,
the Nasdaq Exchange will operate for its
own listed stocks, while The Nasdaq
Stock Market, Inc. continues to operate
under authority delegated by NASD to
provide quotation, execution, and trade
reporting services for non-Nasdaq listed
securities. Nasdaq states that the Brut
and Inet platforms owned by Nasdaq
will be operated as facilities of the
Nasdaq Exchange for purposes of
trading Nasdaq-listed securities, and as
facilities of NASD for purposes of
trading non-Nasdaq securities.
Accordingly, SR–NASD–2006–092
amended NASD Rule 7010(i) to remove
fees and credits associated with trading
Nasdaq-listed stocks, which are now
contained in Rule 7018 of the Nasdaq
Exchange.6 Nasdaq states that NASD
Rule 7010(i) would continue to govern
fees and credits for the ITS/CAES
System (formerly the Nasdaq Market
Center) operated by Nasdaq for trading
non-Nasdaq securities, as well as Brut
and Inet to the extent that they are used
for trading non-Nasdaq securities. The
ITS/CAES System, Brut and Inet are
collectively referred to in the rule as the
Nasdaq Facilities.
SR–NASD–2006–092 also added a
sentence to the rule to provide that for
purposes of determining a member’s
volume in all securities under NASD
Rule 7010(i), the term ‘‘Nasdaq
Facilities,’’ shall also be deemed to
include the member’s volume in
Nasdaq-listed securities traded through
the facilities of the Nasdaq Exchange
(i.e., the Nasdaq Market Center, Brut
and Inet). Nasdaq states that this
clarification was necessary to ensure
that fees and credits for trading nonNasdaq securities remain at their
current levels during the transitional
period before the Nasdaq Exchange
begins to trade non-Nasdaq securities.
In SR–NASD–2006–092, Nasdaq also
changed its fees for routing orders to the
New York Stock Exchange (‘‘NYSE’’)
through its DOT system. NYSE recently
announced that it would impose a
significant fee increase on brokerdealers, such as Nasdaq’s Brut broker6 See Securities Exchange Act Release No. 54285
(August 8, 2006) (File No. SR–NASDAQ–2006–023)
(notice of filing and immediate effectiveness of
proposed rule change regarding technical and
conforming changes to Nasdaq Rule 7018).
Telephone conversation among John Yetter, Senior
Associate General Counsel, Nasdaq, David Liu,
Special Counsel, Division of Market Regulation
(‘‘Division’’), Commission, and Theodore S. Venuti,
Attorney, Division, Commission, on August 14,
2006.
E:\FR\FM\05SEN1.SGM
05SEN1
]]>Agencies
[Federal Register Volume 71, Number 171 (Tuesday, September 5, 2006)]
[Notices]
[Pages 52351-52356]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-14651]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54378; File No. SR-NASDAQ-2006-032]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
Revise The Nasdaq Capital Market Listing Requirements
EFFECTIVE DATE: August 28, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 23, 2006, The NASDAQ Stock Market LLC (``Nasdaq''), filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by Nasdaq. On August 28, 2006, Nasdaq filed
Amendment No. 1 to the proposed rule change.\3\ The
[[Page 52352]]
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, Nasdaq makes clarifying changes to the
rule text in the Nasdaq Capital Market convertible debt listing
standards. Nasdaq also makes clarifying changes to the purpose
section regarding convertible debt, rights and warrants, and non-
Canadian foreign securities and American Depository Receipts.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Nasdaq proposes to revise certain listing requirements applicable
to the Nasdaq Capital Market. The text of the proposed rule change is
below. Proposed new language is in italics; proposed deletions are in
[brackets].\4\
---------------------------------------------------------------------------
\4\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at https://www.complinet.com/
nasdaq. These rules became effective on August 1, 2006, when Nasdaq
commenced operations as a national securities exchange for Nasdaq-
listed securities. The rule text incorporates changes made by
Amendment No. 1. See id.
---------------------------------------------------------------------------
* * * * *
4200. Definitions.
(a) For purposes of the Rule 4000 Series, unless the context
requires otherwise:
(1) No change.
(2) [Reserved
(3) Reserved
(4)] ``Best efforts offering'' means an offering of securities by
members of a selling group under an agreement which imposes no
financial commitment on the members of such group to purchase any such
securities except as they may elect to do so.
[(5) Reserved
(6) ``Cash available for distribution'' means cash flow of a
limited partnership less amount set aside for restoration or creation
of reserves.]
[(7)] (3) ``Cash flow'' means cash funds provided from limited
partnership operations, including lease payments on net leases from
builders and sellers, without deduction for depreciation, but after
deducting cash funds used to pay all other expenses, debt payments,
capital improvements and replacements.
[(8)] (4) ``Consolidated Quotations Service'' (CQS) means the
consolidated quotation collection system for securities listed on an
exchange other than Nasdaq implementing SEC Rule 602.
[(9)] (5) ``Country of Domicile'' means the country under whose
laws an issuer is organized or incorporated.
(6) ``Covered security'' means a security described in Section
18(b) of the Securities Act of 1933.
(7) Reserved
(8) Reserved
(9) Reserved
(10)--(39) No change.
(b)--(c) No change.
* * * * *
4310. Listing Requirements for Domestic and Canadian Securities
To qualify for listing in Nasdaq, a security of a domestic or
Canadian issuer shall satisfy all applicable requirements contained in
paragraphs (a), (b), and (c) hereof. Issuers that meet these
requirements, but that are not listed on the Nasdaq Global Market, are
listed on the Nasdaq Capital Market.
(a) No change.
(b) No change.
(c) In addition to the requirements contained in paragraph (a) and
(b) above, and unless otherwise indicated, a security shall satisfy the
following criteria for listing on Nasdaq:
(1) No change
(2)[(A)] For initial listing, the issuer shall have either:
(A) (i) stockholders' equity of $5 million; and
(ii) a market value of publicly held shares of $15 million; and
(iii) an operating history of at least two years; or
(B) [(ii)] (i) stockholders' equity of $4 million; and
(ii) market value of listed securities of $50 million (currently
traded issuers must meet this requirement and the bid price requirement
under Rule 4310(c)(4) for 90 consecutive trading days prior to applying
for listing); [or] and
(iii) a market value of publicly held shares of $15 million; or
(C) [(iii)] (i) stockholders' equity of $4 million; and
(ii) net income from continuing operations of $750,000 in the most
recently completed fiscal year or in two of the last three most
recently completed fiscal years; and
(iii) a market value of publicly held shares of $5 million.
[(B)] (3) For continued listing, the issuer shall maintain either:
(A) [(i)] stockholders' equity of $2.5 million; or
(B) [(ii)] market value of listed securities of $35 million; or
(C) [(iii)] net income from continuing operations of $500,000 in
the most recently completed fiscal year or in two of the last three
most recently completed fiscal years.
[(3) For initial listing, the issuer shall have an operating
history of at least one year or a market value of listed securities of
$50 million.]
(4) No change.
(5) (A) In the case of a convertible debt security, for initial
listing, there shall be a principal amount outstanding of at least $10
million.
(B) In addition, for the initial listing of convertible debt, one
of the following conditions must be satisfied:
(i) the issuer of the debt must have an equity security that is
listed on Nasdaq, the American Stock Exchange or the New York Stock
Exchange;
(ii) an issuer whose equity security is listed on Nasdaq, the
American Stock Exchange or the New York Stock Exchange, directly or
indirectly owns a majority interest in, or is under common control
with, the issuer of the debt security, or has guaranteed the debt
security;
(iii) a nationally recognized securities rating organization (an
``NRSRO'') has assigned a current rating to the debt security that is
no lower than an S&P Corporation ``B'' rating or equivalent rating by
another NRSRO; or,
(iv) if no NRSRO has assigned a rating to the issue, an NRSRO has
currently assigned: (1) an investment grade rating to an immediately
senior issue; or (2) a rating that is no lower than an S&P Corporation
``B'' rating, or an equivalent rating by another NRSRO, to a pari passu
or junior issue.
(C) For continued listing of a convertible debt security, there
shall be a principal amount outstanding of at least $5 million.
(6)(A) In the case of common stock, for initial and continued
listing, there shall be at least 300 round lot holders of the security.
(B) In the case of preferred stock and secondary classes of common
stock, for initial and continued listing, there shall be at least 100
round lot holders of the security, provided in each case that the
issuer's common stock or common stock equivalent equity security [is]
must be listed on [either] Nasdaq or [another national securities
exchange] be a covered security. In the event the issuer's common stock
or common stock equivalent security either is not listed on [either]
Nasdaq or [another national securities exchange] is not a covered
security, the preferred stock and/or secondary class of common stock
may be listed on Nasdaq so long as the security satisfies the listing
criteria for common stock.
(C) No change.
(7)(A) In the case of common stock, there shall be at least
1,000,000 publicly held shares for initial listing and 500,000 publicly
held shares for continued listing. For initial listing such shares
shall have a market value [of at least $5 million] as provided in the
applicable provision of Rule 4310(c)(2). For continued listing such
shares shall
[[Page 52353]]
have a market value of at least $1 million.
(B) In the case of preferred stock and secondary classes of common
stock, there shall be at least 200,000 publicly held shares having a
market value of at least $[2] 3.5 million for initial listing and
100,000 publicly held shares having a market value of [$500,000] $1
million for continued listing. In addition, the issuer's common stock
or common stock equivalent security must be listed on [either] Nasdaq
or [another national securities exchange] be a covered security. In the
event the issuer's common stock or common stock equivalent security
either is not listed on [either] Nasdaq or [another national securities
exchange] is not a covered security, the preferred stock and/or
secondary class of common stock may be traded on Nasdaq so long as the
security satisfies the listing criteria for common stock.
(C) Shares held directly or indirectly by any officer or director
of the issuer and by any person who is the beneficial owner of more
than 10 percent of the total shares outstanding are not considered to
be publicly held.
(8) No change.
(9)(A) In the case of rights and warrants, for initial listing
only, there shall be at least [100,000] 400,000 issued and the
underlying security [shall] must be listed on Nasdaq or [another
national securities exchange] be a covered security. For continued
listing, the underlying security must remain listed on Nasdaq or be a
covered security.
(B) In the case of put warrants (that is, instruments that grant
the holder the right to sell to the issuing company a specified number
of shares of the Company's common stock, at a specified price until a
specified period of time), for initial listing only, there shall be at
least [100,000] 400,000 issued and the underlying security [shall] must
be listed on Nasdaq or [another national securities exchange] be a
covered security. For continued listing, the underlying security must
remain listed on Nasdaq or be a covered security.
(C) No change.
(10)-(30) No change.
(d) No change.
4320. Listing Requirements for Non-Canadian Foreign Securities and
American Depositary Receipts
To qualify for listing on Nasdaq, a security of a non-Canadian
foreign issuer, an American Depositary Receipt (ADR) or similar
security issued in respect of a security of a foreign issuer shall
satisfy the requirements of paragraphs (a), (b), and (e) of this Rule.
Issuers that meet these requirements, but that are not listed on the
Nasdaq Global Market, are listed on the Nasdaq Capital Market.
(a)-(d) No change.
(e) In addition to the requirements contained in paragraphs (a) and
(b), the security shall satisfy the criteria set out in this subsection
for listing on Nasdaq. In the case of ADRs, the underlying security
will be considered when determining the ADR's qualification for initial
or continued listing on Nasdaq.
(1) No change.
(2)(A) For initial listing, the issue shall meet the requirements
of Rule 4310(c)(2)(A), (B) or (C). [have a minimum bid price of $4 and
the issuer shall have:
(i) stockholders' equity of U.S. $5 million;
(ii) market value of listed securities of U.S. $50 million
(currently traded issuers must meet this requirement for 90 consecutive
trading days prior to applying for listing); or
(iii) net income from continuing operations of U.S. $750,000 in the
most recently completed fiscal year or in two of the last three most
recently completed fiscal years.]
(B) For continued listing, the issuer shall meet the requirements
of Rule 4310(c)(3)(A), (B) or (C). [maintain:
(i) stockholders' equity of U.S. $2.5 million;
(ii) market value of listed securities of U.S. $35 million; or
(iii) net income from continuing operations of U.S. $500,000 in the
most recently completed fiscal year or in two of the last three most
recently completed fiscal years.]
(C) No change.
(D) No change.
(E) No change.
(3)(A) In the case of a convertible debt security, for initial
listing, there shall be a principal amount outstanding of at least $10
million.
(B) In addition, for the initial listing of convertible debt, one
of the following conditions must be satisfied:
(i) the issuer of the debt must have an equity security that is
listed on Nasdaq, the American Stock Exchange or the New York Stock
Exchange;
(ii) an issuer whose equity security is listed on Nasdaq, the
American Stock Exchange or the New York Stock Exchange, directly or
indirectly owns a majority interest in, or is under common control
with, the issuer of the debt security, or has guaranteed the debt
security;
(iii) a nationally recognized securities rating organization (an
``NRSRO'') has assigned a current rating to the debt security that is
no lower than an S&P Corporation ``B'' rating or equivalent rating by
another NRSRO; or,
(iv) if no NRSRO has assigned a rating to the issue, an NRSRO has
currently assigned: (1) an investment grade rating to an immediately
senior issue; or (2) a rating that is no lower than an S&P Corporation
``B'' rating, or an equivalent rating by another NRSRO, to a pari passu
or junior issue.
(C) For continued listing of a convertible debt security, there
shall be a principal amount outstanding of at least $5 million.
(4)(A) [There] In the case of common stock, for initial and
continued listing, there shall be at least 300 round lot holders of the
security.
(B) In the case of preferred stock and secondary classes of common
stock, for initial and continued listing, there shall be at least 100
round lot holders of the security, provided in each case that the
issuer's common stock or common stock equivalent equity security [is]
must be listed on [either] Nasdaq or [another national securities
exchange] be a covered security. In the event the issuer's common stock
or common stock equivalent security either is not listed on [either]
Nasdaq or [another national securities exchange] is not a covered
security, the preferred stock and/or secondary class of common stock
may be listed on Nasdaq so long as the security satisfies the listing
criteria for common stock.
(C) No change.
(5) There shall be at least 1,000,000 publicly held shares for
initial listing and 500,000 publicly held shares for continued listing.
For initial listing, such shares shall have a market value [of at least
$5 million] as provided in the applicable provision of Rule 4310(c)(2).
For continued listing, such shares shall have a market value of at
least $1 million. In the case of preferred stock and secondary classes
of common stock, there shall be at least 200,000 publicly held shares
having a market value of at least [$2] $3.5 million for initial listing
and 100,000 publicly held shares having a market value of [$500,000] $1
million for continued listing. In addition, the issuer's common stock
or common stock equivalent security security must be listed on either
Nasdaq or [another national securities exchange] be a covered security.
In the event the issuer's common stock or common stock equivalent
security either is not listed on [either] Nasdaq or [another national
securities exchange] is not a covered security, the preferred stock
and/or secondary class of common stock may be traded on Nasdaq so long
as the security satisfies the listing criteria for common stock. Shares
held directly or
[[Page 52354]]
indirectly by any officer or director of the issuer and by any person
who is the beneficial owner of more than 10 percent of the total shares
outstanding are not considered to be publicly held.
(6) In the case of rights, warrants and ADRs for initial listing
only, at least [100,000] 400,000 shall be issued. Issuers of ADRs must
also meet the round lot holders and publicly held shares requirements
set forth in the applicable provisions of Rules 4310(c)(2), 4320(e)(4)
and 4320(e)(5) [subsections (4) and (5) above].
(7) In the case of rights and warrants, for initial and continued
listing, the underlying security shall be listed on Nasdaq or [another
national securities exchange] be a covered security.
(8)-(26) No change.
(f) No change.
* * * * *
IM-4803. Staff Review of Deficiency
As provided in Rule 4803(a)(1)(A), the staff of the Listing
Department may accept a plan to regain compliance with respect to
quantitative deficiencies from standards that do not themselves provide
a compliance period. Such standards include:
Rules [4310(c)(2)(B)(i) and (iii)] 4310(c)(3)(A) and 4310(c)(3)(C)
Rule 4310(c)(6)
Rule 4310(c)(7) (but only as to the number of publicly held shares,
and not as to such shares' market value)
[Rules 4320(e)(2)(B)(i) and (iii)]
Rule 4320(e)(2)(B)
Rules 4320(e)(4) and (5) (but only as to the number of publicly
held shares, and not as to such shares' market value)
Rules 4450(a)(1), (3), and (4)
Rules 4450(b)(1)(B), (b)(2), and (b)(5), and
Rules 4450(h)(1) and (4).
In a case where an issuer fails to comply with the requirement of
Rules [4310(c)(2)(B)(iii), 4320(e)(2)(B)(iii),] 4310(c)(3)(C) or
4450(b)(1)(B), the Listing Department shall not accept a plan to
achieve compliance with those requirements in the future, since
compliance requires stated levels of net income or assets and revenues
during completed fiscal years and therefore can only be demonstrated
through audited financial statements. Similarly, an issuer may not
submit a plan relying on partial-year performance to demonstrate
compliance with these standards. An issuer cited for non-compliance
with these requirements may, however, submit a plan that demonstrates
current or near-term compliance with Rules [4310(c)(2)(B)(i),
4320(e)(2)(B)(i),] 4310(c)(3)(A) or 4450(a)(3) (i.e., the alternative
listing requirement relating to stockholders' equity), or Rules
[4310(c)(2)(B)(ii), 4320(e)(2)(B)(ii),] 4310(c)(3)(B) or 4450(b)(1)(A)
(i.e., the alternative listing requirement relating to market value of
listed securities).
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of, and basis for, the proposed rule change, as
amended, and discussed any comments it received on the proposed rule
change, as amended. The text of these statements may be examined at the
places specified in Item IV below. Nasdaq has prepared summaries, set
forth in Sections A, B, and C below, of the most significant aspects of
such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to increase the initial and continued listing
requirements applicable to companies seeking to list, or already
listed, on the Nasdaq Capital Market, as set forth in Rule 4310 (for
domestic and Canadian securities) and Rule 4320 (for non-Canadian
foreign securities and American Depositary Receipts).\5\ Nasdaq
believes that these changes will facilitate a finding by the Commission
that the listing standards for the Capital Market are substantially
similar to the listing standards applicable to securities listed on the
New York Stock Exchange, the American Stock Exchange, or the Nasdaq
Global Market. This finding is required before the Commission can
designate securities listed on the Capital Market as ``covered
securities,'' which are exempt from state regulation under Section 18
of the Securities Act of 1933 (``Securities Act'').\6\
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\5\ See Amendment No. 1, supra note 3.
\6\ 15 U.S.C. 77r(b).
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Primary Listing Standards
The Exchange states that currently, a company can list on the
Capital Market by meeting a stockholders' equity, income or market
value of listed securities requirement, along with other applicable
listing standards. Nasdaq proposes to modify the income and market
value of listed securities components of these listing standards to
also require a minimum of $4 million in equity in each case. In
addition, for companies listing under the equity alternative, Nasdaq
proposes to require a two year operating history, instead of the one
year history currently required. Further, for companies listing under
the market value of listed securities and equity alternatives, Nasdaq
proposes to increase the market value of publicly held shares
requirement for initial listing from $5 million to $15 million.
Finally, Nasdaq proposes to clarify that all companies must have 300
round lot shareholders for continued listing of a primary class of
common stock.
Secondary Classes of Common Stock and Preferred Stock
Nasdaq states that it currently permits the listing of secondary
classes of common stock and preferred stock on the Capital Market under
lower liquidity standards, when the primary class of common stock is
listed on Nasdaq or a national securities exchange. Nasdaq proposes to
increase the market value of publicly held shares requirement from $2
million to $3.5 million for initial listing and from $500,000 to $1
million for continued listing of these securities. In addition, Nasdaq
proposes to modify the listing standards so that the lower liquidity
standards are available only when a company's common stock or its
equivalent is listed on Nasdaq or is a ``covered security'' as defined
in Section 18 of the Securities Act. Finally, Nasdaq proposes to
clarify that companies must have 100 round lot shareholders for
continued listing under these listing standards.
Rights and Warrants
Nasdaq proposes to increase the requirement for initial listing of
rights and warrants to require that there be 400,000 outstanding. In
addition, Nasdaq proposes to require that for initial and continued
listing, the security underlying a right or warrant must be listed on
Nasdaq or be a covered security.\7\
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\7\ See Amendment No. 1, supra note 3.
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Convertible Debt
Nasdaq states that its rules currently permit the listing of
convertible debt on the Capital Market. Nasdaq proposes to modify those
rules, to require that for the initial listing of convertible debt
either that: (i) The issuer of the debt must have an equity security
that is listed on Nasdaq, the American Stock Exchange or the New York
Stock Exchange; (ii) an issuer whose equity security is listed on
Nasdaq, the American Stock Exchange or the New York Stock Exchange,
directly or indirectly owns a majority interest in, or is under common
control with, the
[[Page 52355]]
issuer of the debt security, or has guaranteed the debt security; (iii)
a nationally recognized securities rating organization (an ``NRSRO'')
has assigned a current rating to the debt security that is no lower
than an S&P Corporation ``B'' rating or equivalent rating by another
NRSRO; or, (iv) if no NRSRO has assigned a rating to the issue, an
NRSRO has currently assigned: (1) An investment grade rating to an
immediately senior issue; or (2) a rating that is no lower than an S&P
Corporation ``B'' rating, or an equivalent rating by another NRSRO, to
a pari passu or junior issue.\8\
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\8\ See Amendment No. 1, supra note 3.
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Other Changes
Nasdaq also proposes to make technical and conforming changes to
the rules by adding a definition of ``covered security'' in Rule 4200,
deleting certain other definitions in Rule 4200 that have no current
applicability under Nasdaq rules, and adjusting cross references
contained in IM-4803.\9\
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\9\ Nasdaq notes that the references to Rule 4320 in the final
paragraph of IM-4803 have been deleted based on the new structure of
the rules. Nonetheless, the substance of this interpretive material
continues to apply to non-U.S. companies in the same manner that it
applies to domestic companies due to the cross reference to Rule
4310(c)(3) contained in Rule 4320(e)(2)(B).
---------------------------------------------------------------------------
Implementation
Nasdaq states that it recognizes that the proposed changes could
result in a security that currently meets all the listing requirements
becoming non-compliant. Therefore, Nasdaq proposes that the changes to
the continued listing requirements be made effective 30 days \10\ after
the proposed rule change is approved by the Commission. Nasdaq believes
that this period would provide currently-listed companies with adequate
time to comply.
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\10\ See Amendment No. 1, supra note 3.
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In the case of companies applying for initial listing, Nasdaq
proposes that the new requirements be effective upon approval for
companies that apply after the date this proposed rule change is
submitted to the SEC. Nasdaq states that companies that had applied for
listing prior to the date this proposed rule change is submitted to the
SEC would be able to continue to qualify under the prior standards,
provided that they complete the listing process not later than 30 days
\11\ after the proposed rule change is approved by the Commission.
Companies that apply after the date this proposed rule change is
submitted to the SEC would be approved for listing based on the rules
in effect at the time of the approval. The Exchange believes that this
schedule provides notice to companies applying for listing that they
would be subject to higher standards upon approval of the rule, so such
companies would not be prejudiced, but recognizes that companies that
have previously applied did so in reliance on the prior listing
standards, and therefore provides them a reasonable period of time to
complete the listing process on that basis.
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\11\ See Amendment No. 1, supra note 3.
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The Exchange states that these procedures are similar to those used
when the listing standards were revised in 1997 and 2001.\12\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release Nos. 38961 (August 22,
1997), 62 FR 45895 (Aug. 29, 1997) (approving SR-NASD-1997-16); and
44499 (June 29, 2001), 66 FR 35819 (July 9, 2001) (approving SR-
NASD-2001-14).
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2. Statutory Basis
Nasdaq believes that the proposed rule change, as amended, is
consistent with the provisions of Section 6 of the Act \13\ in general
and with Section 6(b)(5) of the Act,\14\ in particular. Section 6(b)(5)
requires that Nasdaq's rules be designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market, and to protect investors and the public
interest. The Exchange believes that the proposed rule change, as
amended, would raise the listing standards on the Nasdaq Capital
Market, which will help protect investors. Further, Nasdaq believes
that the proposed rule change will facilitate the Commission's review
of Nasdaq's petition to treat securities listed on the Capital Market
as covered securities under Section 18(b) of the Securities Act,\15\
which would remove an impediment to the mechanism of a free and open
market.\16\
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\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 77r(b).
\16\ Petition to Amend Rule 146(b) to Designate Securities
Listed on the Nasdaq Capital Market as Covered Securities for the
Purpose of Section 18 of the Securities Act of 1933 (February 28,
2006) (designated as Commission File No. 4-513, available at: http:/
/www.sec.gov/rules/petitions/petn4-513.pdf).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change, as amended,
will result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which Nasdaq consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2006-032 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2006-032. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of Nasdaq. All
[[Page 52356]]
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-NASDAQ-2006-032 and
should be submitted on or before September 26, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-14651 Filed 9-1-06; 8:45 am]
BILLING CODE 8010-01-P
