Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Clarify the Application of Nasdaq Rules When a Listed Company Combines With a non-Nasdaq Entity, 42848-42850 [E8-16827]
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42848
Federal Register / Vol. 73, No. 142 / Wednesday, July 23, 2008 / Notices
implementation date(s) of the proposed
rule change in a Regulatory Notice to be
published no later than 60 days
following Commission approval.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
2. Statutory Basis
• 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–FINRA–2008–021 on the
subject line.
[Release No. 34–58182; File No. SR–
NASDAQ–2008–062]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Clarify the Application of Nasdaq
Rules When a Listed Company
Combines With a non-Nasdaq Entity
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,19 which
requires, among other things; that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest; and Section 15A(b)(5) of
the Act,20 which requires, among other
things, that FINRA rules provide for the
equitable allocation of reasonable dues,
fees and other charges among members
and issuers and other persons using any
facility or system that FINRA operates
or controls. The proposed rule change
makes non-material changes to rules
that have proven effective in meeting
statutory mandates.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which FINRA 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.
mstockstill on PROD1PC66 with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
July 17, 2008.
Paper Comments
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 10,
2008, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’) filed with the Securities and
All submissions should refer to File
Exchange Commission (‘‘Commission’’)
Number SR–FINRA–2008–021. This file the proposed rule change as described
number should be included on the
in Items I, II, and III below, which Items
subject line if e-mail is used. To help the have been prepared by Nasdaq. The
Commission is publishing this notice to
Commission process and review your
solicit comments on the proposed rule
comments more efficiently, please use
only one method. The Commission will change from interested persons.
post all comments on the Commission’s I. Self-Regulatory Organization’s
Internet Web site (https://www.sec.gov/
Statement of the Terms of Substance of
rules/sro.shtml). Copies of the
the Proposed Rule Change
submission, all subsequent
Nasdaq proposes to clarify the
amendments, all written statements
application of Nasdaq rules when a
with respect to the proposed rule
listed company combines with a nonchange that are filed with the
Nasdaq entity. Nasdaq will implement
Commission, and all written
the proposed rule upon approval. The
communications relating to the
text of the proposed rule change is
proposed rule change between the
below. Proposed new language is in
Commission and any person, other than italics; proposed deletions are in
those that may be withheld from the
brackets.3
public in accordance with the
*
*
*
*
*
provisions of 5 U.S.C. 552, will be
4340. Application for Re-Listing by
available for inspection and copying in
Listed Issuers
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
(a) [Reverse Mergers] Business
DC 20549, on official business days
Combinations With non-Nasdaq Entities
between the hours of 10 a.m. and 3 p.m. Resulting in a Change of Control. An
Copies of the filing also will be available issuer must apply for initial listing in
for inspection and copying at the
connection with a transaction whereby
principal office of FINRA. All comments the issuer combines with a non-Nasdaq
received will be posted without change; entity, resulting in a change of control
of the issuer and potentially allowing
the Commission does not edit personal
the non-Nasdaq entity to obtain a
identifying information from
Nasdaq Listing [(for purposes of this
submissions. You should submit only
rule, such a transaction is referred to as
information that you wish to make
a ‘‘Reverse Merger’’)]. In determining
available publicly. All submissions
should refer to File Number SR–FINRA– whether a [Reverse Merger] change of
control has occurred, Nasdaq shall
2008–021 and should be submitted on
consider all relevant factors including,
or before August 13, 2008.
but not limited to, changes in the
For the Commission, by the Division of
management, board of directors, voting
Trading and Markets, pursuant to delegated
power, ownership, and financial
authority.21
structure of the issuer. Nasdaq shall also
Florence E. Harmon,
consider the nature of the businesses
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
Acting Secretary.
[FR Doc. E8–16826 Filed 7–22–08; 8:45 am]
20 15
U.S.C. 78o–3(b)(6).
U.S.C. 78o–3(b)(5).
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19:28 Jul 22, 2008
21 17
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CFR 200.30–3(a)(12).
Frm 00078
Fmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Changes are marked to the rule text that appears
in the electronic manual of Nasdaq found at
https://www.complinet.com/nasdaq.
2 17
BILLING CODE 8010–01–P
19 15
1 15
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Federal Register / Vol. 73, No. 142 / Wednesday, July 23, 2008 / Notices
and the relative size of the Nasdaq
issuer and non-Nasdaq entity. The
issuer must submit an application for
the post-transaction entity with
sufficient time to allow Nasdaq to
complete its review before the
transaction is completed. If the issuer’s
application for initial listing has not
been approved prior to consummation
of the transaction, Nasdaq will issue a
Staff Determination Letter as set forth in
Rule 4804 and begin delisting
proceedings pursuant to the Rule 4800
Series.
(b) Bankruptcy.
No change.
*
*
*
*
*
IM–4350–1. Interpretive Material
Regarding Future Priced Securities
Summary
No change.
How the Rules Apply
Shareholder Approval
No change.
Voting Rights
No change.
The Bid Price Requirement
No change.
Listing of Additional Shares
No change.
mstockstill on PROD1PC66 with NOTICES
Public Interest Concerns
No change.
[Reverse Merger] Business
Combinations With non-Nasdaq Entities
Resulting in a Change of Control
Rule 4340(a) provides:
An issuer must apply for initial listing
in connection with a transaction
whereby the issuer combines with a
non-Nasdaq entity, resulting in a change
of control of the issuer and potentially
allowing the non-Nasdaq entity to
obtain a Nasdaq Listing [(for purposes of
this rule, such a transaction is referred
to as a ‘‘Reverse Merger’’)]. In
determining whether a [Reverse Merger]
change of control has occurred, Nasdaq
shall consider all relevant factors
including, but not limited to, changes in
the management, board of directors,
voting power, ownership, and financial
structure of the issuer. Nasdaq shall also
consider the nature of the businesses
and the relative size of the Nasdaq
issuer and non-Nasdaq entity. The
issuer must submit an application for
the post-transaction entity with
sufficient time to allow Nasdaq to
complete its review before the
transaction is completed. If the issuer’s
application for initial listing has not
been approved prior to consummation
VerDate Aug<31>2005
18:14 Jul 22, 2008
Jkt 214001
of the transaction, Nasdaq will issue a
Staff Determination Letter as set forth in
Rule 4804 and begin delisting
proceedings pursuant to the Rule 4800
Series.
This provision, which applies
regardless of whether the issuer obtains
shareholder approval for the
transaction, requires issuers to qualify
under the initial listing standards in
connection with a [Reverse Merger]
combination that results in a change of
control.[4] It is important for issuers to
realize that in certain instances, the
conversion of a Future Priced Security
may implicate this provision. For
example, if there is no limit on the
number of common shares issuable
upon conversion, or if the limit is set
high enough, the exercise of conversion
rights under a Future Priced Security
could result in [a Reverse Merger with]
the holders of the Future Priced
Securities obtaining control of the listed
company. In such event, an issuer may
be required to re-apply for initial listing
and satisfy all initial listing
requirements.
Footnotes to IM–4350–1:
1–3 No change.
[4 This provision is designed to
address situations where a company
attempts to obtain a ‘‘backdoor listing’’
on Nasdaq by merging with a Nasdaq
issuer with minimal assets and/or
operations.]
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Marketplace Rule 4340(a) requires
that an issuer must apply for initial
listing following a transaction whereby
the issuer combines with a non-Nasdaq
entity, resulting in a change of control
of the issuer and potentially allowing
the non-Nasdaq entity to obtain a
Nasdaq listing. This rule was originally
adopted in 1993 to address concerns
PO 00000
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Sfmt 4703
42849
associated with non-Nasdaq entities
seeking a ‘‘backdoor listing’’ on Nasdaq
through a business combination
involving a Nasdaq issuer.4 In these
combinations, a non-Nasdaq entity
purchased a Nasdaq issuer in a
transaction that resulted in the nonNasdaq entity obtaining a Nasdaq listing
without qualifying for initial listing or
being subject to the background checks
and scrutiny normally applied to issuers
seeking initial listing. The rule was
amended in 2001 to define ‘‘Reverse
Merger’’ and to provide clarification
regarding the factors used by Staff to
determine if a transaction should be
considered a Reverse Merger.5 In 2006,
Nasdaq amended the rule to clarify the
timing of the application of the rule.6
While this Rule was originally
focused on companies seeking a
‘‘backdoor listing’’ by acquiring a listed
shell company, its language is not
limited in that regard, and Nasdaq has
applied the rule to any transaction
where there is a change of control
potentially allowing a non-Nasdaq
entity to obtain a Nasdaq listing. As
such, Nasdaq has applied the rule to
mergers involving operating companies
in substantially similar businesses and,
in appropriate cases, to mergers of
‘‘equals,’’ where the companies are
approximately the same size.7 This
allows Nasdaq staff to review the posttransaction entity, including any new
officers, directors and control persons,
before the transaction is consummated,
thereby allowing staff to confirm that
the post-transaction entity will meet all
initial listing criteria and that there are
no public interest concerns.
Nonetheless, given the use of the term
‘‘Reverse Merger’’ within Rule 4340(a),
and the existence of a footnote in IM–
4350–1 speaking of ‘‘backdoor listings,’’
companies have expressed confusion as
to the scope of the rule. As such, Nasdaq
proposes to remove these references
from Rule 4340(a) and IM–4350–1.8 As
4 Securities Exchange Act Release No. 32264 (May
4, 1993), 58 FR 27760 (May 11, 1993) (approving
SR–NASD–93–07).
5 Securities Exchange Act Release No. 44067
(March 13, 2001), 66 FR 15515 (March 19, 2001)
(approving SR–NASD–01–01).
6 Securities Exchange Act Release No. 55052
(January 5, 2007), 72 FR 1569 (January 12, 2007)
(approving SR–NASDAQ–2006–047).
7 See, e.g., Decision 2002/2003–9 of the Nasdaq
Listing and Hearing Review Council (December
2002), available at: https://www.nasdaq.com/about/
NLHRCDecisions20022003.pdf.
8 Nasdaq has confirmed that the rule would still,
of course, apply to ‘‘backdoor listings’’ or ‘‘reverse
mergers,’’ and that this proposed change is intended
to clarify that the rule also applies to a broader
category of business combinations that result in a
change of control of the issuer. See Telephone
conversation between Arnold Golub, Associate
E:\FR\FM\23JYN1.SGM
Continued
23JYN1
42850
Federal Register / Vol. 73, No. 142 / Wednesday, July 23, 2008 / Notices
revised, Nasdaq believes the rule will
more clearly reflect that a company
must satisfy the initial listing
requirements whenever it enters into a
transaction with a non-Nasdaq entity,
resulting in a change of control of the
listed company and potentially allowing
the non-Nasdaq entity to obtain a
Nasdaq listing.
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange 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.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of section 6 of the Act,9 in
general and with sections 6(b)(5) of the
Act,10 in particular in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and 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
proposed rule change would clarify
Nasdaq’s listing requirements related to
change of control transactions, and
thereby provide additional transparency
to the rules. This proposed clarification
is designed to protect investors and the
public interest by allowing Nasdaq to
confirm that the post-transaction entity
will meet all initial listing criteria and
that there are no public interest
concerns associated with individuals or
entities newly joining the company.
IV. Solicitation of Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
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.
mstockstill on PROD1PC66 with NOTICES
NASDAQ–2008–062 and should be
submitted on or before August 13, 2008.
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
General Counsel, Nasdaq, and Sara Gillis, Special
Counsel, Division of Trading and Markets,
Commission, on July 15, 2008.
9 15 U.S.C. 78f.
10 15 U.S.C. 78f(b)(5).
VerDate Aug<31>2005
19:31 Jul 22, 2008
Jkt 214001
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2008–062 on the
subject line.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–16827 Filed 7–22–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58183; File No. SR–
NASDAQ–2008–035]
Self-Regulatory Organizations; The
NASDAQ Stock Market, LLC; Order
Approving a Proposed Rule Change,
as Modified by Amendment No. 1, To
Amend the By-Laws of the NASDAQ
OMX Group, Inc. in Connection With
the Acquisitions of Boston Stock
Exchange, Incorporated and
Philadelphia Stock Exchange, Inc.
July 17, 2008.
I. Introduction
On April 21, 2008, The NASDAQ
• Send paper comments in triplicate
Stock Market, LLC (‘‘Nasdaq’’) filed
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street, with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
NE., Washington, DC 20549–1090.
to Section 19(b)(1) of the Securities
All submissions should refer to File
Exchange Act of 1934 (‘‘Act’’),1 and
Number SR–NASDAQ–2008–062. This
Rule 19b–4 thereunder,2 a proposed rule
file number should be included on the
change (‘‘NASDAQ OMX By-Law
subject line if e-mail is used. To help the Proposal’’) to amend the by-laws
Commission process and review your
(‘‘NASDAQ OMX By-Laws’’) of its
comments more efficiently, please use
parent corporation, The NASDAQ OMX
only one method. The Commission will Group, Inc. (‘‘NASDAQ OMX’’). The
post all comments on the Commission’s NASDAQ OMX By-Law Proposal was
Internet Web site (https://www.sec.gov/
published for comment in the Federal
rules/sro.shtml). Copies of the
Register on May 8, 2008.3 The
submission, all subsequent
Commission received no comment
amendments, all written statements
letters regarding the NASDAQ OMX Bywith respect to the proposed rule
Law Proposal. On July 3, 2008, Nasdaq
change that are filed with the
filed Amendment No. 1 to the NASDAQ
Commission, and all written
OMX By-Law Proposal.4 This order
communications relating to the
approves the NASDAQ OMX By-Law
proposed rule change between the
Proposal, as modified by Amendment
Commission and any person, other than No. 1.
those that may be withheld from the
II. Discussion and Commission
public in accordance with the
Findings
provisions of 5 U.S.C. 552, will be
NASDAQ OMX and the Boston Stock
available for inspection and copying in
Exchange, Incorporated (‘‘BSE’’), a
the Commission’s Public Reference
Room on official business days between national securities exchange, have
the hours of 10 a.m. and 3 p.m. Copies
11 17 CFR 200.30–3(a)(12).
of such filing also will be available for
1 15 U.S.C. 78s(b)(1).
inspection and copying at the principal
2 17 CFR 240.19b–4.
office of Nasdaq. All comments received
3 See Securities Exchange Act Release No. 57761
will be posted without change; the
(May 1, 2008), 73 FR 26182 (SR–NASDAQ–2008–
Commission does not edit personal
035) (‘‘NASDAQ OMX By-Law Proposal Notice’’).
4 In Amendment No. 1, Nasdaq proposes to
identifying information from
correct typographical errors in the proposed
submissions. You should submit only
amendments to NASDAQ OMX By-Laws Sections
information that you wish to make
11.3 and 12.5. Because Amendment No. 1 is
available publicly. All submissions
technical in nature, the Commission is not
publishing it for comment.
should refer to File Number SR–
Paper Comments
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]]>Agencies
[Federal Register Volume 73, Number 142 (Wednesday, July 23, 2008)]
[Notices]
[Pages 42848-42850]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-16827]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58182; File No. SR-NASDAQ-2008-062]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Clarify the Application of
Nasdaq Rules When a Listed Company Combines With a non-Nasdaq Entity
July 17, 2008.
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 10, 2008, 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. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to clarify the application of Nasdaq rules when a
listed company combines with a non-Nasdaq entity. Nasdaq will implement
the proposed rule upon approval. The text of the proposed rule change
is below. Proposed new language is in italics; proposed deletions are
in brackets.\3\
---------------------------------------------------------------------------
\3\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at https://www.complinet.com/
nasdaq.
---------------------------------------------------------------------------
* * * * *
4340. Application for Re-Listing by Listed Issuers
(a) [Reverse Mergers] Business Combinations With non-Nasdaq
Entities Resulting in a Change of Control. An issuer must apply for
initial listing in connection with a transaction whereby the issuer
combines with a non-Nasdaq entity, resulting in a change of control of
the issuer and potentially allowing the non-Nasdaq entity to obtain a
Nasdaq Listing [(for purposes of this rule, such a transaction is
referred to as a ``Reverse Merger'')]. In determining whether a
[Reverse Merger] change of control has occurred, Nasdaq shall consider
all relevant factors including, but not limited to, changes in the
management, board of directors, voting power, ownership, and financial
structure of the issuer. Nasdaq shall also consider the nature of the
businesses
[[Page 42849]]
and the relative size of the Nasdaq issuer and non-Nasdaq entity. The
issuer must submit an application for the post-transaction entity with
sufficient time to allow Nasdaq to complete its review before the
transaction is completed. If the issuer's application for initial
listing has not been approved prior to consummation of the transaction,
Nasdaq will issue a Staff Determination Letter as set forth in Rule
4804 and begin delisting proceedings pursuant to the Rule 4800 Series.
(b) Bankruptcy.
No change.
* * * * *
IM-4350-1. Interpretive Material Regarding Future Priced Securities
Summary
No change.
How the Rules Apply
Shareholder Approval
No change.
Voting Rights
No change.
The Bid Price Requirement
No change.
Listing of Additional Shares
No change.
Public Interest Concerns
No change.
[Reverse Merger] Business Combinations With non-Nasdaq Entities
Resulting in a Change of Control
Rule 4340(a) provides:
An issuer must apply for initial listing in connection with a
transaction whereby the issuer combines with a non-Nasdaq entity,
resulting in a change of control of the issuer and potentially allowing
the non-Nasdaq entity to obtain a Nasdaq Listing [(for purposes of this
rule, such a transaction is referred to as a ``Reverse Merger'')]. In
determining whether a [Reverse Merger] change of control has occurred,
Nasdaq shall consider all relevant factors including, but not limited
to, changes in the management, board of directors, voting power,
ownership, and financial structure of the issuer. Nasdaq shall also
consider the nature of the businesses and the relative size of the
Nasdaq issuer and non-Nasdaq entity. The issuer must submit an
application for the post-transaction entity with sufficient time to
allow Nasdaq to complete its review before the transaction is
completed. If the issuer's application for initial listing has not been
approved prior to consummation of the transaction, Nasdaq will issue a
Staff Determination Letter as set forth in Rule 4804 and begin
delisting proceedings pursuant to the Rule 4800 Series.
This provision, which applies regardless of whether the issuer
obtains shareholder approval for the transaction, requires issuers to
qualify under the initial listing standards in connection with a
[Reverse Merger] combination that results in a change of
control.[4] It is important for issuers to realize that in
certain instances, the conversion of a Future Priced Security may
implicate this provision. For example, if there is no limit on the
number of common shares issuable upon conversion, or if the limit is
set high enough, the exercise of conversion rights under a Future
Priced Security could result in [a Reverse Merger with] the holders of
the Future Priced Securities obtaining control of the listed company.
In such event, an issuer may be required to re-apply for initial
listing and satisfy all initial listing requirements.
Footnotes to IM-4350-1:
1-3 No change.
[\4\ This provision is designed to address situations where a
company attempts to obtain a ``backdoor listing'' on Nasdaq by merging
with a Nasdaq issuer with minimal assets and/or operations.]
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. Nasdaq has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Marketplace Rule 4340(a) requires that an issuer must apply for
initial listing following a transaction whereby the issuer combines
with a non-Nasdaq entity, resulting in a change of control of the
issuer and potentially allowing the non-Nasdaq entity to obtain a
Nasdaq listing. This rule was originally adopted in 1993 to address
concerns associated with non-Nasdaq entities seeking a ``backdoor
listing'' on Nasdaq through a business combination involving a Nasdaq
issuer.\4\ In these combinations, a non-Nasdaq entity purchased a
Nasdaq issuer in a transaction that resulted in the non-Nasdaq entity
obtaining a Nasdaq listing without qualifying for initial listing or
being subject to the background checks and scrutiny normally applied to
issuers seeking initial listing. The rule was amended in 2001 to define
``Reverse Merger'' and to provide clarification regarding the factors
used by Staff to determine if a transaction should be considered a
Reverse Merger.\5\ In 2006, Nasdaq amended the rule to clarify the
timing of the application of the rule.\6\
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\4\ Securities Exchange Act Release No. 32264 (May 4, 1993), 58
FR 27760 (May 11, 1993) (approving SR-NASD-93-07).
\5\ Securities Exchange Act Release No. 44067 (March 13, 2001),
66 FR 15515 (March 19, 2001) (approving SR-NASD-01-01).
\6\ Securities Exchange Act Release No. 55052 (January 5, 2007),
72 FR 1569 (January 12, 2007) (approving SR-NASDAQ-2006-047).
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While this Rule was originally focused on companies seeking a
``backdoor listing'' by acquiring a listed shell company, its language
is not limited in that regard, and Nasdaq has applied the rule to any
transaction where there is a change of control potentially allowing a
non-Nasdaq entity to obtain a Nasdaq listing. As such, Nasdaq has
applied the rule to mergers involving operating companies in
substantially similar businesses and, in appropriate cases, to mergers
of ``equals,'' where the companies are approximately the same size.\7\
This allows Nasdaq staff to review the post-transaction entity,
including any new officers, directors and control persons, before the
transaction is consummated, thereby allowing staff to confirm that the
post-transaction entity will meet all initial listing criteria and that
there are no public interest concerns. Nonetheless, given the use of
the term ``Reverse Merger'' within Rule 4340(a), and the existence of a
footnote in IM-4350-1 speaking of ``backdoor listings,'' companies have
expressed confusion as to the scope of the rule. As such, Nasdaq
proposes to remove these references from Rule 4340(a) and IM-4350-1.\8\
As
[[Page 42850]]
revised, Nasdaq believes the rule will more clearly reflect that a
company must satisfy the initial listing requirements whenever it
enters into a transaction with a non-Nasdaq entity, resulting in a
change of control of the listed company and potentially allowing the
non-Nasdaq entity to obtain a Nasdaq listing.
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\7\ See, e.g., Decision 2002/2003-9 of the Nasdaq Listing and
Hearing Review Council (December 2002), available at: https://
www.nasdaq.com/about/NLHRCDecisions20022003.pdf.
\8\ Nasdaq has confirmed that the rule would still, of course,
apply to ``backdoor listings'' or ``reverse mergers,'' and that this
proposed change is intended to clarify that the rule also applies to
a broader category of business combinations that result in a change
of control of the issuer. See Telephone conversation between Arnold
Golub, Associate General Counsel, Nasdaq, and Sara Gillis, Special
Counsel, Division of Trading and Markets, Commission, on July 15,
2008.
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2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of section 6 of the Act,\9\ in general and with sections
6(b)(5) of the Act,\10\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and 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 proposed rule change
would clarify Nasdaq's listing requirements related to change of
control transactions, and thereby provide additional transparency to
the rules. This proposed clarification is designed to protect investors
and the public interest by allowing Nasdaq to confirm that the post-
transaction entity will meet all initial listing criteria and that
there are no public interest concerns associated with individuals or
entities newly joining the company.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2008-062 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-062. 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 on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing also will be available for inspection and copying at the
principal office of Nasdaq. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NASDAQ-2008-062 and should be submitted on or before
August 13, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16827 Filed 7-22-08; 8:45 am]
BILLING CODE 8010-01-P
