Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify and Modify the Applicability of Nasdaq Rule 5615 To Exchange Traded Funds, 15480-15482 [2010-6838]

Download as PDF 15480 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices Internet comment form (https:// www.sec.gov/rules/sro.shtml), or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–NSCC–2010–02 on the subject line. Paper Comments cprice-sewell on DSK89S0YB1PROD with NOTICES • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61757; File No. SR– NASDAQ–2010–036)] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify and Modify the Applicability of Nasdaq Rule 5615 To Exchange Traded Funds March 22, 2010. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 All submissions should refer to File (‘‘Act’’) 1, and Rule 19b–4 2 thereunder, Number SR–NSCC–2010–02. This file notice is hereby given that on March 11, number should be included on the 2010, The NASDAQ Stock Market LLC subject line if e-mail is used. To help the (‘‘Nasdaq’’ or ‘‘the Exchange’’) filed with Commission process and review your the Securities and Exchange comments more efficiently, please use Commission (‘‘SEC’’ or ‘‘Commission’’) only one method. The Commission will the proposed rule change as described post all comments on the Commission’s in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq Internet Web site (https://www.sec.gov/ has designated the proposed rule change rules/sro.shtml). Copies of the as constituting a non-controversial rule submission, all subsequent change under Rule 19b–4(f)(6) under the amendments, all written statements Act,3 which renders the proposal with respect to the proposed rule effective upon filing with the change that are filed with the Commission. The Commission is Commission, and all written publishing this notice to solicit communications relating to the comments on the proposed rule change proposed rule change between the from interested persons. Commission and any person, other than I. Self-Regulatory Organization’s those that may be withheld from the Statement of the Terms of Substance of public in accordance with the the Proposed Rule Change provisions of 5 U.S.C. 552, will be available for Web site viewing and The Exchange proposes to clarify and modify the applicability of Nasdaq Rule printing in the Commission’s Public 5615 to Exchange Traded Funds. The Reference Section, 100 F Street, NE., text of the proposed rule change is Washington, DC 20549, on official below. Proposed new language is in business days between the hours of 10 italics; proposed deletions are in a.m. and 3 p.m. Copies of such filings 4 also will be available for inspection and [brackets]. * * * * * copying at the principal office of NSCC and on NSCC’s Web site at https:// 5615. Exemptions from Certain www.dtcc.com/downloads/legal/ Corporate Governance Requirements rule_filings/2010/nscc/2010–02.pdf. This rule provides the exemptions All comments received will be posted from the corporate governance rules without change; the Commission does afforded to certain types of Companies, not edit personal identifying and sets forth the phase-in schedules for information from submissions. You initial public offerings, Companies should submit only information that emerging from bankruptcy and you wish to make available publicly. All Companies transferring from other submissions should refer to file number markets. This rule also describes the applicability of the corporate SR–NSCC–2010–02 and should be governance rules to controlled submitted on or before April 19, 2010. companies and sets forth the phase-in For the Commission, by the Division of schedule afforded to Companies ceasing Trading and Markets, pursuant to delegated to be controlled companies. authority.11 (a) Exemptions to the Corporate Florence E. Harmon, Governance Requirements Deputy Secretary. [FR Doc. 2010–6873 Filed 3–26–10; 8:45 am] CFR 200.30–3(a)(12). VerDate Nov<24>2008 09:18 Apr 05, 2010 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 4 Changes are marked to the rules of The NASDAQ Stock Market LLC found at https:// nasdaq.cchwallstreet.com. 2 17 BILLING CODE 8011–01–P 11 17 1 15 Jkt 220001 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 (1) Asset-backed Issuers and Other Passive Issuers The following are exempt from the requirements relating to Majority Independent Board {Rule 5605(b)}, Audit Committee {Rule 5605(c)}, Independent Director Oversight of Executive Officer Compensation {Rule 5605(d)} and Director Nominations {Rule 5605(e)}, the Controlled Company Exemption {Rule 5615(c)(2)}, and Code of Conduct {Rule 5610}: (A) No change. (B) issuers, such as unit investment trusts, including Portfolio Depository Receipts, which [that] are organized as trusts or other unincorporated associations that do not have a board of directors or persons acting in a similar capacity and whose activities are limited to passively owning or holding (as well as administering and distributing amounts in respect of) securities, rights, collateral or other assets on behalf of or for the benefit of the holders of the listed securities. * * * * * (2)–(4) No change. (5) Management Investment Companies Management investment companies (including business development companies) are subject to all the requirements of the Rule 5600 Series, except that management investment companies registered under the Investment Company Act of 1940 are exempt from the Independent Directors requirement, the Independent Director Oversight of Executive Officer Compensation and Director Nominations requirements, and the Code of Conduct requirement, set forth in Rules 5605(b), (d) and (e) and 5610, respectively. In addition, management investment companies that are Index Fund Shares and Managed Fund Shares, as defined in Rules 5705(b) and 5735, are exempt from the Audit Committee requirements set forth in Rule 5605(c), except for the applicable requirements of SEC Rule 10A–3. IM–5615–4. Management Investment Companies Management investment companies registered under the Investment Company Act of 1940 are already subject to a pervasive system of federal regulation in certain areas of corporate governance covered by 5600. In light of this, Nasdaq exempts from Rules 5605(b), (d), (e) and 5610 management investment companies registered under the Investment Company Act of 1940. Business development companies, which are a type of closed-end management investment company defined in Section 2(a)(48) of the E:\FR\FM\29MRN1.SGM 29MRN1 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices Investment Company Act of 1940 that are not registered under that Act, are required to comply with all of the provisions of the Rule 5600 Series. Management investment companies that are Index Fund Shares and Managed Fund Shares are exempt from the Audit Committee requirements set forth in Rule 5605(c), except for the applicable requirements of SEC Rule 10A–3. (b)–(c) 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 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 cprice-sewell on DSK89S0YB1PROD with NOTICES 1. Purpose Nasdaq is proposing to clarify and modify the applicability of certain of its corporate governance requirements to exchange traded funds (‘‘ETFs’’). Nasdaq currently lists ETFs formed as unit investment trusts (‘‘UITs’’) or as management investment companies.5 ETFs organized as UITs are listed under Rule 5705(a) and called Portfolio Depository Receipts, while ETFs organized as management investment companies are listed under Rule 5705(b) and called Index Fund Shares or listed under Rule 5735 and called Managed Fund Shares. However, the exemptions available to the corporate governance requirements are not presently consistent among ETFs organized under these different legal structures. Nasdaq Rule 5615(a)(1)(B) exempts UITs from certain corporate governance requirements.6 Because Portfolio 5 Section 4 of the Investment Company Act of 1940 classifies investment companies in three principal classes: Face-amount certificate companies, UITs, and management companies. 15 U.S.C. 80a–4. Management companies are further divided into open-end and closed-end companies. 15 U.S.C. 80a–5(a). All ETFs are open-end companies. 6 Specifically, Rule 5615(a)(1)(B) exempts ‘‘issuers, such as unit investment trusts, that are organized as trusts or other unincorporated associations that do not have a board of directors or persons acting in a similar capacity and whose activities are limited to passively owning or holding VerDate Nov<24>2008 09:18 Apr 05, 2010 Jkt 220001 Depository Receipts are UITs, they are exempt from, among other things, the requirements in Rule 5605(b)–(e) and Rule 5610 related to majority independent board, audit committees, independent director oversight of executive officer compensation and director nominations, and the code of conduct under the corporate governance requirements, respectively. Nasdaq proposes to amend Rule 5615(a)(1)(B) to specifically add a reference to Portfolio Depository Receipts in order to remove any ambiguity about the applicability of these exemptions to Portfolio Depository Receipts. Nasdaq Rule 5615(a)(5) and IM–5615– 4 grant exemptions for ETFs that are structured as management investment companies from the requirements of Rule 5605(b) (majority independent board), Rules 5605(d) and (e) (independent director oversight of executive officer compensation and director nominations), and Rule 5610 (code of conduct). Unlike Rule 5615(a)(1), Rule 5615(a)(5) does not include an exemption from Rule 5605(c), relating to Nasdaq’s audit committee requirements. As such, ETFs that are formed as management investment companies and listed as Index Fund Shares or Managed Fund Shares are currently subject to the audit committee requirements, whereas ETFs that are formed as UITs and listed as Portfolio Depository Receipts are not subject to those requirements. Nasdaq proposes to expand the exemption in Rule 5615(a)(5) and IM– 5615–4 to also exempt ETFs that are formed as management investment companies from most of the audit committee requirement of Rule 5605(c), thereby largely eliminating this difference.7 Notwithstanding this proposed change, one difference will remain: ETFs formed as management investment companies must comply with the applicable provisions of SEC Rule 10A–3 of the Securities Exchange Act of 1934 8 (‘‘SEC Rule 10A–3’’) and the proposed rule change will specifically state that requirement. This proposed change will conform Nasdaq’s treatment of these ETFs that are management investment companies with that of other markets.9 (as well as administering and distributing amounts in respect of) securities, rights, collateral or other assets on behalf of or for the benefit of the holders of the listed securities.’’ 7 Management investment companies other than ETFs must still comply with the audit committee requirement of Rule 5605(c) and SEC Rule 10A–3. 8 17 CFR 240.10A–3. 9 NYSEArca Equities Rule 5.3, in part, details specifically which corporate governance requirements apply to ‘‘special purpose companies.’’ PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 15481 Moreover, Nasdaq believes that it is appropriate to make these changes because, as stated in IM–5615–4, these entities are subject to the Investment Company Act of 1940 and the pervasive system of federal regulation. This includes, among other things, assigning important duties of investment company governance, such as approval of investment advisory contracts, to independent directors. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of Section 6(b)(5) of the Act 11 in particular, in that it is designed to promote just and equitable principles of trade, 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 change is designed to harmonize the applicability of Nasdaq’s corporate governance rules to various types of ETFs and will treat similarly situated companies in the same manner. 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. 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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time A special purpose company is defined to include a company listed under NYSEArca Equities Rule 5.2(j)(3), which contains NYSEArca’s provisions for listing ETFs, called Investment Company Units, which include registered investment companies organized as UITs or open-end management investment companies. See also NYSE Listed Company Manual Section 303A.00, which similarly provides that the NYSE’s corporate governance requirements contained in Section 303A do not apply to securities listed under Section 703.16, relating to Investment Company Units, which can be organized as unit investment trusts or open-end management investment companies. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). E:\FR\FM\29MRN1.SGM 29MRN1 15482 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices as the Commission may designate, if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b– 4(f)(6)(iii) thereunder.13 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. Normally, a proposed rule change filed under 19b–4(f)(6) may not become operative prior to 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) 14 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. Nasdaq has requested that the Commission waive the 30-day operative delay. In its filing, Nasdaq requested the waiver in order to provide immediate clarity to its rules and to eliminate any disparity between its rules and those of other exchanges with similar exemptions that have been previously approved by the Commission. The Commission believes that waiver of the 30-day operative period is consistent with the protection of investors and the public interest. The proposed rule change will clarify an ambiguity in Nasdaq’s rules, which should benefit investors, Nasdaq members, and regulators. In addition, the Commission notes that, as Nasdaq has pointed out, the changes proposed in this filing would conform certain of Nasdaq’s corporate governance standards to those of other exchanges.15 Accordingly, the Commission designates the proposal to be operative upon filing with the Commission.16 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule 12 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6)(iii). In addition, Rule 19b–4(f)(6)(iii) requires that a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission notes that Nasdaq satisfied the five-day pre-filing notice requirement. 14 17 CFR 240.19b–4(f)(6)(iii). 15 See supra, note 9. 16 For the purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). cprice-sewell on DSK89S0YB1PROD with NOTICES 13 17 VerDate Nov<24>2008 09:18 Apr 05, 2010 Jkt 220001 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–2010–036 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2010–036. 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549–1090 on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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–2010–036 and should be submitted on or before April 19, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–6838 Filed 3–26–10; 8:45 am] BILLING CODE 8011–01–P 17 17 PO 00000 CFR 200.30–3(a)(12). Frm 00082 Fmt 4703 Sfmt 4703 DEPARTMENT OF STATE Bureau of Diplomatic Security, Office of Foreign Missions [Public Notice: 6932] Notice of Request for Public Comments; 60-Day Notice of Proposed Information Collection: Forms DS– 4138, Request for Escort Screening Courtesies; DS–4139, Photograph and Signature Card; & DS–4140, Application for OFM Web Site Account; Foreign Diplomatic Services Applications, OMB Collection Number 1405–0105 Notice of request for public comments. ACTION: SUMMARY: The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. The purpose of this notice is to allow 60 days for public comment in the Federal Register preceding submission to OMB. We are conducting this process in accordance with the Paperwork Reduction Act of 1995. • Title of Information Collection: Request for Escort Screening Courtesies. • OMB Control Number: 1405–0105. • Type of Request: Revision of Currently Approved Collection. • Originating Office: Diplomatic Security/Office of Foreign Missions (DS/ OFM). • Form Numbers: DS–4138. • Respondents: Foreign government representatives assigned to the United States. • Estimated Number of Respondents: 350 missions. • Estimated Number of Responses: 3,000 responses . • Average Hours per Response: 10 minutes. • Total Estimated Burden: 500 hours divided among the missions. • Frequency: On occasion. • Obligation to Respond: Required to obtain or retain a benefit. • Title of Information Collection: Photograph and Signature Card. • OMB Control Number: 1405–0105. • Type of Request: Revision of Currently Approved Collection. • Originating Office: Diplomatic Security/Office of Foreign Missions (DS/ OFM). • Form Number: DS–4139. • Respondents: Foreign government representatives assigned to the United States. • Estimated Number of Respondents: 350 missions. • Estimated Number of Responses: 18,000 forms per year. E:\FR\FM\29MRN1.SGM 29MRN1

Agencies

[Federal Register Volume 75, Number 59 (Monday, March 29, 2010)]
[Notices]
[Pages 15480-15482]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-6838]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61757; File No. SR-NASDAQ-2010-036)]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Clarify and Modify the Applicability of Nasdaq Rule 5615 To Exchange 
Traded Funds

March 22, 2010.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on March 11, 2010, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``the Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by Nasdaq. Nasdaq 
has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\ 
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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify and modify the applicability of 
Nasdaq Rule 5615 to Exchange Traded Funds. 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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    \4\ Changes are marked to the rules of The NASDAQ Stock Market 
LLC found at https://nasdaq.cchwallstreet.com.
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* * * * *
5615. Exemptions from Certain Corporate Governance Requirements
    This rule provides the exemptions from the corporate governance 
rules afforded to certain types of Companies, and sets forth the phase-
in schedules for initial public offerings, Companies emerging from 
bankruptcy and Companies transferring from other markets. This rule 
also describes the applicability of the corporate governance rules to 
controlled companies and sets forth the phase-in schedule afforded to 
Companies ceasing to be controlled companies.
    (a) Exemptions to the Corporate Governance Requirements
    (1) Asset-backed Issuers and Other Passive Issuers
    The following are exempt from the requirements relating to Majority 
Independent Board {Rule 5605(b){time} , Audit Committee {Rule 
5605(c){time} , Independent Director Oversight of Executive Officer 
Compensation {Rule 5605(d){time}  and Director Nominations {Rule 
5605(e){time} , the Controlled Company Exemption {Rule 
5615(c)(2){time} , and Code of Conduct {Rule 5610{time} :
    (A) No change.
    (B) issuers, such as unit investment trusts, including Portfolio 
Depository Receipts, which [that] are organized as trusts or other 
unincorporated associations that do not have a board of directors or 
persons acting in a similar capacity and whose activities are limited 
to passively owning or holding (as well as administering and 
distributing amounts in respect of) securities, rights, collateral or 
other assets on behalf of or for the benefit of the holders of the 
listed securities.
* * * * *
    (2)-(4) No change.
    (5) Management Investment Companies
    Management investment companies (including business development 
companies) are subject to all the requirements of the Rule 5600 Series, 
except that management investment companies registered under the 
Investment Company Act of 1940 are exempt from the Independent 
Directors requirement, the Independent Director Oversight of Executive 
Officer Compensation and Director Nominations requirements, and the 
Code of Conduct requirement, set forth in Rules 5605(b), (d) and (e) 
and 5610, respectively. In addition, management investment companies 
that are Index Fund Shares and Managed Fund Shares, as defined in Rules 
5705(b) and 5735, are exempt from the Audit Committee requirements set 
forth in Rule 5605(c), except for the applicable requirements of SEC 
Rule 10A-3.
IM-5615-4. Management Investment Companies
    Management investment companies registered under the Investment 
Company Act of 1940 are already subject to a pervasive system of 
federal regulation in certain areas of corporate governance covered by 
5600. In light of this, Nasdaq exempts from Rules 5605(b), (d), (e) and 
5610 management investment companies registered under the Investment 
Company Act of 1940. Business development companies, which are a type 
of closed-end management investment company defined in Section 2(a)(48) 
of the

[[Page 15481]]

Investment Company Act of 1940 that are not registered under that Act, 
are required to comply with all of the provisions of the Rule 5600 
Series. Management investment companies that are Index Fund Shares and 
Managed Fund Shares are exempt from the Audit Committee requirements 
set forth in Rule 5605(c), except for the applicable requirements of 
SEC Rule 10A-3.
    (b)-(c) 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 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
    Nasdaq is proposing to clarify and modify the applicability of 
certain of its corporate governance requirements to exchange traded 
funds (``ETFs''). Nasdaq currently lists ETFs formed as unit investment 
trusts (``UITs'') or as management investment companies.\5\ ETFs 
organized as UITs are listed under Rule 5705(a) and called Portfolio 
Depository Receipts, while ETFs organized as management investment 
companies are listed under Rule 5705(b) and called Index Fund Shares or 
listed under Rule 5735 and called Managed Fund Shares. However, the 
exemptions available to the corporate governance requirements are not 
presently consistent among ETFs organized under these different legal 
structures.
---------------------------------------------------------------------------

    \5\ Section 4 of the Investment Company Act of 1940 classifies 
investment companies in three principal classes: Face-amount 
certificate companies, UITs, and management companies. 15 U.S.C. 
80a-4. Management companies are further divided into open-end and 
closed-end companies. 15 U.S.C. 80a-5(a). All ETFs are open-end 
companies.
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    Nasdaq Rule 5615(a)(1)(B) exempts UITs from certain corporate 
governance requirements.\6\ Because Portfolio Depository Receipts are 
UITs, they are exempt from, among other things, the requirements in 
Rule 5605(b)-(e) and Rule 5610 related to majority independent board, 
audit committees, independent director oversight of executive officer 
compensation and director nominations, and the code of conduct under 
the corporate governance requirements, respectively. Nasdaq proposes to 
amend Rule 5615(a)(1)(B) to specifically add a reference to Portfolio 
Depository Receipts in order to remove any ambiguity about the 
applicability of these exemptions to Portfolio Depository Receipts.
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    \6\ Specifically, Rule 5615(a)(1)(B) exempts ``issuers, such as 
unit investment trusts, that are organized as trusts or other 
unincorporated associations that do not have a board of directors or 
persons acting in a similar capacity and whose activities are 
limited to passively owning or holding (as well as administering and 
distributing amounts in respect of) securities, rights, collateral 
or other assets on behalf of or for the benefit of the holders of 
the listed securities.''
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    Nasdaq Rule 5615(a)(5) and IM-5615-4 grant exemptions for ETFs that 
are structured as management investment companies from the requirements 
of Rule 5605(b) (majority independent board), Rules 5605(d) and (e) 
(independent director oversight of executive officer compensation and 
director nominations), and Rule 5610 (code of conduct). Unlike Rule 
5615(a)(1), Rule 5615(a)(5) does not include an exemption from Rule 
5605(c), relating to Nasdaq's audit committee requirements. As such, 
ETFs that are formed as management investment companies and listed as 
Index Fund Shares or Managed Fund Shares are currently subject to the 
audit committee requirements, whereas ETFs that are formed as UITs and 
listed as Portfolio Depository Receipts are not subject to those 
requirements.
    Nasdaq proposes to expand the exemption in Rule 5615(a)(5) and IM-
5615-4 to also exempt ETFs that are formed as management investment 
companies from most of the audit committee requirement of Rule 5605(c), 
thereby largely eliminating this difference.\7\ Notwithstanding this 
proposed change, one difference will remain: ETFs formed as management 
investment companies must comply with the applicable provisions of SEC 
Rule 10A-3 of the Securities Exchange Act of 1934 \8\ (``SEC Rule 10A-
3'') and the proposed rule change will specifically state that 
requirement. This proposed change will conform Nasdaq's treatment of 
these ETFs that are management investment companies with that of other 
markets.\9\
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    \7\ Management investment companies other than ETFs must still 
comply with the audit committee requirement of Rule 5605(c) and SEC 
Rule 10A-3.
    \8\ 17 CFR 240.10A-3.
    \9\ NYSEArca Equities Rule 5.3, in part, details specifically 
which corporate governance requirements apply to ``special purpose 
companies.'' A special purpose company is defined to include a 
company listed under NYSEArca Equities Rule 5.2(j)(3), which 
contains NYSEArca's provisions for listing ETFs, called Investment 
Company Units, which include registered investment companies 
organized as UITs or open-end management investment companies. See 
also NYSE Listed Company Manual Section 303A.00, which similarly 
provides that the NYSE's corporate governance requirements contained 
in Section 303A do not apply to securities listed under Section 
703.16, relating to Investment Company Units, which can be organized 
as unit investment trusts or open-end management investment 
companies.
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    Moreover, Nasdaq believes that it is appropriate to make these 
changes because, as stated in IM-5615-4, these entities are subject to 
the Investment Company Act of 1940 and the pervasive system of federal 
regulation. This includes, among other things, assigning important 
duties of investment company governance, such as approval of investment 
advisory contracts, to independent directors.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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 change is designed to harmonize the 
applicability of Nasdaq's corporate governance rules to various types 
of ETFs and will treat similarly situated companies in the same manner.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 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.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time

[[Page 15482]]

as the Commission may designate, if consistent with the protection of 
investors and the public interest, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)(iii) 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Commission notes that Nasdaq satisfied the five-
day pre-filing notice requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
    Normally, a proposed rule change filed under 19b-4(f)(6) may not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. Nasdaq has requested that the 
Commission waive the 30-day operative delay. In its filing, Nasdaq 
requested the waiver in order to provide immediate clarity to its rules 
and to eliminate any disparity between its rules and those of other 
exchanges with similar exemptions that have been previously approved by 
the Commission.
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30-day operative period 
is consistent with the protection of investors and the public interest. 
The proposed rule change will clarify an ambiguity in Nasdaq's rules, 
which should benefit investors, Nasdaq members, and regulators. In 
addition, the Commission notes that, as Nasdaq has pointed out, the 
changes proposed in this filing would conform certain of Nasdaq's 
corporate governance standards to those of other exchanges.\15\ 
Accordingly, the Commission designates the proposal to be operative 
upon filing with the Commission.\16\
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    \15\ See supra, note 9.
    \16\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-2010-036 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2010-036. 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 Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549-1090 on official business days 
between the hours of 10 a.m. and 3 p.m. Copies of the filing also will 
be available for inspection and copying at the principal office of the 
Exchange. 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-2010-036 and should be submitted on or before April 19, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6838 Filed 3-26-10; 8:45 am]
BILLING CODE 8011-01-P
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