Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Granting Approval to Proposed Rule Change To Modify the Cure Period Available to an Issuer That Loses an Independent Director or Audit Committee Member, 54698 [E6-15446]

Download as PDF 54698 Federal Register / Vol. 71, No. 180 / Monday, September 18, 2006 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54421; File No. SR– NASDAQ–2006–011] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Granting Approval to Proposed Rule Change To Modify the Cure Period Available to an Issuer That Loses an Independent Director or Audit Committee Member September 11, 2006. On May 23, 2006, The Nasdaq Stock Market LLC (‘‘Nasdaq’’) 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 modify the cure period available to a listed issuer that loses an independent director or audit committee member. The proposed rule change was published for comment in the Federal Register on June 14, 2006.3 The Commission received two comment letters on the proposal.4 This order approves the proposed rule change. 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 exchange,5 and, in particular, Section 6(b)(5) of the Act.6 Nasdaq Rule 4350, among other things, requires each listed issuer to have a majority of independent directors on its board and an audit committee that consists of at least three independent members and meets other composition requirements. The rule also includes provisions affording a cure period for an issuer that fails to comply with the majority independent board requirement, either because a vacancy arises on the board or because a board member ceases to be independent for reasons outside the member’s reasonable control, as well as for an issuer that fails to comply with the audit 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 53941 (June 5, 2006), 71 FR 34408. 4 See letters to Nancy M. Morris, Secretary, Commission, from Sharon H. Lachman, Regulatory Counsel, America’s Community Bankers, dated July 5, 2006, and from Society of Corporate Secretaries and Governance Professionals, Carol Hayes, Chair, Listing Standards Committee, received by e-mail July 5, 2006. Both comment letters supported the proposed rule change. 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(b)(5). cprice-sewell on PROD1PC66 with NOTICES 2 17 VerDate Aug<31>2005 14:48 Sep 15, 2006 Jkt 208001 committee composition requirement because a vacancy arises on the audit committee. The cure period lasts until the earlier of the company’s next annual shareholders’ meeting or one year from the date of the event that caused the non-compliance.7 The proposed rule change would provide that if the annual shareholders meeting occurs no later than 180 days following the event that caused the failure to comply with the majority independent board requirement or the audit committee composition requirement, the issuer will instead have 180 days from the event to regain compliance. The Commission notes that, under the current rule, an issuer that falls out of compliance shortly after its annual meeting is granted a cure period of nearly one year to regain compliance, and believes that the proposal to grant a cure period of 180 days to an issuer that falls out of compliance within 180 days before its annual meeting helps to address an anomaly in Nasdaq’s qualitative listing requirements and should afford such an issuer a reasonable amount of time to find a new director.8 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,9 that the proposed rule change (File No. SR– NASDAQ–2006–011) be, and it hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Nancy M. Morris, Secretary. [FR Doc. E6–15446 Filed 9–15–06; 8:45 am] BILLING CODE 8010–01–P 7 This cure period comports with language in Rule 10A–3 under the Act, 17 CFR 240.10A–3, which states that a national securities exchange may provide a cure period to allow a member of an audit committee who ceases to be independent through reasons outside the member’s reasonable control to remain on the audit committee ‘‘until the earlier of the next annual shareholders meeting of the listed issuer or one year from the occurrence of the event that caused the member to be no longer independent,’’ subject to the condition that the issuer notify the applicable exchange. 17 CFR 240.10A–3(a)(3). 8 The Commission notes that, as indicated by Nasdaq in its proposal, the 180-day period would not apply to allow a director on an issuer’s audit committee who ceases to be independent to remain on the committee beyond the period contemplated in Rule 10A–3(a)(3) under the Act, 17 CFR 240.10A–3(a)(3), and codified in Nasdaq Rule 4350(d)(4)(A). 9 15 U.S.C. 78s(b)(2). 10 17 CFR 200.30–3(a)(12). PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54425; File No. SR– NYSEArca–2006–57] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Exchange Fees and Charges September 11, 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 September 7, 2006, the NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a due, fee, or other charge, pursuant to section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Schedule of Fees and Charges in order to modify the fee that applies to Option Strategy Executions.5 The text of the proposed rule change is available on NYSE Arca’s Web site at (https:// www.nyseacra.com), at the Office of the Secretary at NYSE Arca, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 Fees on Options Strategy Executions are applicable through a Pilot Program until March 1, 2007. 2 17 E:\FR\FM\18SEN1.SGM 18SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 71, Number 180 (Monday, September 18, 2006)]
[Notices]
[Page 54698]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-15446]



[[Page 54698]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54421; File No. SR-NASDAQ-2006-011]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order 
Granting Approval to Proposed Rule Change To Modify the Cure Period 
Available to an Issuer That Loses an Independent Director or Audit 
Committee Member

September 11, 2006.
    On May 23, 2006, The Nasdaq Stock Market LLC (``Nasdaq'') 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 modify the 
cure period available to a listed issuer that loses an independent 
director or audit committee member. The proposed rule change was 
published for comment in the Federal Register on June 14, 2006.\3\ The 
Commission received two comment letters on the proposal.\4\ This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 53941 (June 5, 
2006), 71 FR 34408.
    \4\ See letters to Nancy M. Morris, Secretary, Commission, from 
Sharon H. Lachman, Regulatory Counsel, America's Community Bankers, 
dated July 5, 2006, and from Society of Corporate Secretaries and 
Governance Professionals, Carol Hayes, Chair, Listing Standards 
Committee, received by e-mail July 5, 2006. Both comment letters 
supported the proposed rule change.
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    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 exchange,\5\ and, in 
particular, Section 6(b)(5) of the Act.\6\
---------------------------------------------------------------------------

    \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(b)(5).
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    Nasdaq Rule 4350, among other things, requires each listed issuer 
to have a majority of independent directors on its board and an audit 
committee that consists of at least three independent members and meets 
other composition requirements. The rule also includes provisions 
affording a cure period for an issuer that fails to comply with the 
majority independent board requirement, either because a vacancy arises 
on the board or because a board member ceases to be independent for 
reasons outside the member's reasonable control, as well as for an 
issuer that fails to comply with the audit committee composition 
requirement because a vacancy arises on the audit committee. The cure 
period lasts until the earlier of the company's next annual 
shareholders' meeting or one year from the date of the event that 
caused the non-compliance.\7\ The proposed rule change would provide 
that if the annual shareholders meeting occurs no later than 180 days 
following the event that caused the failure to comply with the majority 
independent board requirement or the audit committee composition 
requirement, the issuer will instead have 180 days from the event to 
regain compliance.
---------------------------------------------------------------------------

    \7\ This cure period comports with language in Rule 10A-3 under 
the Act, 17 CFR 240.10A-3, which states that a national securities 
exchange may provide a cure period to allow a member of an audit 
committee who ceases to be independent through reasons outside the 
member's reasonable control to remain on the audit committee ``until 
the earlier of the next annual shareholders meeting of the listed 
issuer or one year from the occurrence of the event that caused the 
member to be no longer independent,'' subject to the condition that 
the issuer notify the applicable exchange. 17 CFR 240.10A-3(a)(3).
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    The Commission notes that, under the current rule, an issuer that 
falls out of compliance shortly after its annual meeting is granted a 
cure period of nearly one year to regain compliance, and believes that 
the proposal to grant a cure period of 180 days to an issuer that falls 
out of compliance within 180 days before its annual meeting helps to 
address an anomaly in Nasdaq's qualitative listing requirements and 
should afford such an issuer a reasonable amount of time to find a new 
director.\8\
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    \8\ The Commission notes that, as indicated by Nasdaq in its 
proposal, the 180-day period would not apply to allow a director on 
an issuer's audit committee who ceases to be independent to remain 
on the committee beyond the period contemplated in Rule 10A-3(a)(3) 
under the Act, 17 CFR 240.10A-3(a)(3), and codified in Nasdaq Rule 
4350(d)(4)(A).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-NASDAQ-2006-011) be, 
and it hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-15446 Filed 9-15-06; 8:45 am]
BILLING CODE 8010-01-P

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