Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify Fees for Review of Delisting Determinations and Appeal of Panel Decisions, 4914-4917 [2013-01244]

Download as PDF 4914 Federal Register / Vol. 78, No. 15 / Wednesday, January 23, 2013 / Notices D. Opportunity To Cure Defects NSX proposes, generally, to allow listed companies that fail to comply with the compensation-related rules 45 days from the date of notification by the Exchange to cure any deficiency. If the deficiency is not cured by this time, the company will be subject to the delisting procedures set forth in the Exchange’s rules regarding suspension and delisting. With respect, specifically, to the independence requirements for compensation committee members, the Exchange proposes to provide the cure period permitted by Rule 10C–1 for these rules. The Commission notes that NSX’s rules relating to delisting procedures require the Exchange to provide: (1) Notice to the issuer of the Exchange’s decision to delist the issuer’s securities; (2) an opportunity for the issuer to file an appeal pursuant to the Exchange’s rules governing adverse actions; (3) public notice, no fewer than ten days before the delisting becomes effective, of the Exchange’s final determination to delist the security via a press release and posting on the Exchange’s Web site; and (4) the prompt delivery to the issuer of a copy of the form that the Exchange filed with the Commission, as required, upon its institution of proceedings to delist the issuer’s security.49 The Commission believes that NSX’s proposed grant of 45 days to a company that fails to meet the new standards (other than the independence requirements) before instituting the Exchange’s general procedures for companies out of compliance with its listing requirements, as well as the particular cure period it proposes to provide to a company that fails to meet the new independence standards, adequately meet the mandate of Rule 10C–1. The Commission believes that these cure provisions also are consistent with investor protection and the public interest since they give a company a reasonable time period to cure noncompliance with these important requirements before they will be delisted. wreier-aviles on DSK5TPTVN1PROD with E. Exemptions As NSX notes, its existing rules relating to compensation afford an exemption to controlled companies, limited partnerships, companies in bankruptcy, closed-end and open-end funds registered under the 1940 Act, passive business organizations in the form of trusts (such as royalty trusts), derivatives and special purpose securities as described above, and 49 See NSX Rule 15.7. VerDate Mar<15>2010 15:22 Jan 22, 2013 Jkt 229001 issuers whose only listed equity security is a preferred stock. The Exchange proposes to extend the exemptions for these entities to the new requirements of the proposed rule change. The Commission notes that Rule 10C– 1 allows exchanges to exempt from the listing rules adopted pursuant to Rule 10C–1 certain categories of issuers, as the national securities exchange determines is appropriate.50 The Commission believes that, given the specific characteristics of the aforementioned types of issuers,51 it is reasonable and consistent with Section 6(b)(5) of the Act for the Exchange to extend their existing exemptions from the new requirements. In summary, and for the reasons discussed in more detail above, the Commission believes that the rules being adopted by NSX, taken as whole, should benefit investors by helping listed companies make informed decisions regarding the amount and form of executive compensation. NSX’s new rules will help to meet Congress’s intent that compensation committees that are responsible for setting compensation policy for executives of listed companies consist only of independent directors. NSX’s rules also, consistent with Rule 10C–1, require compensation committees of listed companies to assess the independence of compensation advisers, taking into consideration six specified factors. This should help to assure that compensation committees of NSX-listed companies are better informed about potential conflicts when selecting and receiving advice from advisers. Similarly, the provisions of NSX’s standards that require compensation committees to be given the authority to engage and oversee compensation advisers, and require the listed company to provide for appropriate funding to compensate such advisers, should help to support the compensation committee’s role to oversee executive compensation and help provide compensation committees with the resources necessary to make better informed compensation decisions. For the foregoing reasons, the Commission finds that the proposed 50 The Commission notes, moreover, that, in the case of limited partnerships and open-end funds registered under the 1940 Act, Rule 10C–1 itself provides exemptions from the independence requirements of the Rule. The Commission notes that controlled companies are provided an automatic exemption from the application of the entirety of Rule 10C–1 by Rule 10C–1(b)(5). 51 See supra Section II.B.5. Frm 00087 Fmt 4703 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–01281 Filed 1–22–13; 8:45 am] BILLING CODE 8011–01–P IV. Conclusion PO 00000 rule change, as modified by Amendment No. 1, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with Section 6(b)(5) of the Act.52 It is therefore ordered, pursuant to Section 19(b)(2) 53 of the Act, that the proposed rule change, SR–NSX–2012– 15, as modified by Amendment No. 1, is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.54 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68574; File No. SR–Phlx– 2012–130] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order Approving Proposed Rule Change To Amend Performance Evaluations With Respect to Quote Submissions of Streaming Quote Traders and Remote Streaming Quote Traders January 3, 2013. Correction In notice document 2013–00201, appearing on pages 1906–1907 in the issue of Wednesday January 9, 2013, make the following correction: On page 1906, in the second column, the Subject is corrected to read as set forth above. [FR Doc. C1–2013–00201 Filed 1–22–13; 8:45 am] BILLING CODE 1505–01–D SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68676; File No. SR– NASDAQ–2013–004] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify Fees for Review of Delisting Determinations and Appeal of Panel Decisions January 16, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 52 15 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 54 17 CFR 200.30–3(a)(12). 53 15 E:\FR\FM\23JAN1.SGM 23JAN1 Federal Register / Vol. 78, No. 15 / Wednesday, January 23, 2013 / Notices (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 2, 2013. The NASDAQ Stock Market LLC (‘‘NASDAQ’’ 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 NASDAQ. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. wreier-aviles on DSK5TPTVN1PROD with I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The NASDAQ Stock Market LLC proposes to modify the fees applicable to companies seeking review of a denial of initial listing or a delisting or reprimand determination. While changes pursuant to this proposal are effective upon filing, the Exchange will implement the proposed rule by imposing the new fee for hearings on companies who receive a Staff Delisting Determination on or after January 2, 2013. NASDAQ will implement the new fee for appeals on companies who receive a Panel Decision on or after January 2, 2013. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are in brackets. * * * * * 5815. Review of Staff Determinations by Hearings Panel When a Company receives a Staff Delisting Determination or a Public Reprimand Letter issued by the Listing Qualifications Department, or when its application for initial listing is denied, it may request in writing that the Hearings Panel review the matter in a written or an oral hearing. This section sets forth the procedures for requesting a hearing before a Hearings Panel, describes the Hearings Panel and the possible outcomes of a hearing, and sets forth Hearings Panel procedures. (a) Procedures for Requesting and Preparing for a Hearing (1)–(2) No changes. (3) Fees Within 15 calendar days of the date of the Staff Delisting Determination, the Company must submit a hearing fee of $10,000. However, if the hearing request relates to a Staff Delisting Determination dated before January 2, 2013, the Company must submit a hearing fee [to The Nasdaq Stock Market, LLC, to cover the cost of the hearing,] as follows: 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 15:22 Jan 22, 2013 Jkt 229001 (A) when the Company has requested a written hearing, $4,000; or (B) when the Company has requested an oral hearing, whether in person or by telephone, $5,000. (4)–(6) No changes. (b)–(d) No changes. 5820. Appeal to the Nasdaq Listing and Hearing Review Council A Company may appeal a Panel Decision to the Listing Council. The Listing Council may also call for review a Panel Decision on its own initiative. This Rule 5820 describes the procedures applicable to appeals and calls for review. (a) Procedure for Requesting Appeal A Company may appeal any Panel Decision to the Listing Council by submitting a written request for appeal and a fee of [$4,000] $10,000 to the Nasdaq Office of Appeals and Review within 15 calendar days of the date of the Panel Decision. However, if the appeal relates to a Panel Decision dated before January 2, 2013, the applicable fee is $4,000. An appeal will not operate as a stay of the Panel Decision. Upon receipt of the appeal request and the applicable fee, the Nasdaq Office of Appeals and Review will acknowledge the Company’s request and provide deadlines for the Company to provide written submissions. (b)–(e) No changes. * * * * * 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. The text of these statements may be examined at the places specified in Item IV below. The Exchange 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 Pursuant to the NASDAQ Listing Rule Series 5800, companies may seek review of a determination by NASDAQ Staff to deny initial listing or delist a company’s securities or to issue a Public Reprimand Letter, by requesting an oral or written hearing before an independent Hearings Panel. Listing Rule 5815(a)(3) provides that to request a hearing, the Company must, within 15 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 4915 calendar days of the date of the Staff Delisting Determination, submit a hearing fee in the amount of $4000 for a written hearing or $5,000 for an oral hearing. Companies may also appeal a Panel decision to the NASDAQ Listing and Hearing Review Council (the ‘‘NLHRC’’). Listing Rule 5820(a) requires a company seeking an appeal to submit a written request and a fee of $4,000 within 15 days of the date of the Panel Decision. NASDAQ last changed these fees in 2001.3 NASDAQ proposes to increase these fees to $10,000. NASDAQ also proposes to eliminate the distinction in fees between a written and an oral hearing. NASDAQ is increasing the fees because the costs incurred in preparing for and conducting appeals have increased since the fees were last changed. The costs of the delisting process include significant Staff time and resources to prepare for and conduct hearings and appeals. Staff prepares written submissions in support of a delisting determination; attends hearings; provides legal counsel and support to independent Panelists and the NLHRC; drafts final decisions; manages and coordinates the appeals dockets; and monitors post-hearing compliance efforts. NASDAQ also incurs the costs of transcription of the proceedings and expenses for the Panelists and members of the NLHRC. In addition, the Exchange incurs costs to upgrade electronic systems for tracking companies and maintaining a clear record. It also maintains lists on its Web site, updated every business day, that reflect the status of all companies in the deficiency process.4 Finally, NASDAQ expends regulatory resources to ensure transparent communication of appeal rules and procedures to listed companies by continually improving our electronic interface with them.5 All of these expenses have increased in the eleven years since the fees were set in 2001. In addition, appeals have become more complicated and 3 Securities Exchange Act Release No. 44374 (April 5, 2001) 66 FR 18837 (April 11, 2001) (approving SR–NASD–2001–17). 4 See https://listingcenter.nasdaqomx.com/assets/ DelDefOpenReport.pdf and https:// listingcenter.nasdaqomx.com/assets/ IssuesPendingDelisting.pdf. 5 NASDAQ has developed a user-friendly electronic NASDAQ Listing Center and Reference Library, the maintenance of which requires resources on an on-going basis. See https:// listingcenter.nasdaqomx.com/ MaterialHome.aspx?mcd=LQ. Users can view more than 30 Frequently Asked Questions about the hearings and appeals processes and summaries of almost 100 NLHRC decisions. See also https:// listingcenter.nasdaqomx.com/assets/ Get_Started_Guide.pdf. E:\FR\FM\23JAN1.SGM 23JAN1 wreier-aviles on DSK5TPTVN1PROD with 4916 Federal Register / Vol. 78, No. 15 / Wednesday, January 23, 2013 / Notices contentious than when fees were last modified. As a result, NASDAQ devotes more Staff time and resources now to a typical appeal than was historically the case. In response to increasing complexities, NASDAQ has made new hires in its investigatory group and on several occasions engaged an outside law firm or an investigative firm to assist in connection with matters under review. Accordingly, NASDAQ proposes to increase fees to $10,000 for a Panel hearing, whether the company elects a written or an oral hearing; and $10,000 for an appeal to the NLRHC. NASDAQ recognizes that in the past, fees for a written hearing have been lower than fees for an oral one. The Exchange believes that the basis for this historical distinction is unclear, and upon review, found to be unwarranted. The cost to a company that elects a written hearing may be lower because the company’s related expenses, such as travel and legal representation, may be avoided. However, the costs to the Exchange associated with a written hearing are virtually identical to those associated with an oral hearing, differing only by the cost of transcribing a hearing. NASDAQ believes that the fees should reflect that Staff and Panels expend the same resources, time, and effort in ensuring a full and fair hearing for all hearing participants, and both processes afford the same benefit to the issuer. Therefore, while the proposed amendment preserves the availability of a written hearing to any company that requests one, NASDAQ proposes to charge the same fee for a written hearing as for an oral one. The revised fees for a hearing will be applicable to issuers that are sent a Staff Delisting Determination on or after January 2, 2013. The revised fees for an appeal of a Panel Decision will be applicable to issuers that receive a Panel Decision on or after January 2, 2013. The current fees will remain in effect for any company that receives a Staff Determination or a Panel Decision before that date.6 The revised fees will allow NASDAQ to recoup a portion of the expenses it incurs in the delisting process that will more closely approximate the actual costs associated with the appeal process. The Exchange has reviewed all costs associated with delisting appeals and does not expect or intend that the 6 Companies are notified of the fees associated with a request for a hearing in the Staff Delist Determination letter. They are notified of the fees associated with an appeal in the Panel Decision, which includes a notice of the right to appeal. VerDate Mar<15>2010 15:22 Jan 22, 2013 Jkt 229001 fees will exceed the costs.7 Moreover, the Exchange believes that the proposed fees for a Panel or NLHRC review of a delisting determination are comparable to the appeal fees of other national securities exchanges. For example, NYSE MKT LLC has recently increased its fees for appeal of a Staff delisting determination to $8,000 for a written and $10,000 for an oral hearing, and $10,000 for an appeal of a Panel decision to the Exchange Committee on Securities.8 NYSE rules provide that a listed company must pay a $20,000 fee in connection with a delisting appeal.9 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,10 in general and with Sections 6(b)(4) and (5) of the Act,11 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities, and does not unfairly discriminate between customers, issuers, brokers or dealers. Specifically, the proposed fee increase is reasonable because it will better reflect NASDAQ’s costs related to the appeal process. NASDAQ has not increased the fees for an appeal since 2001,12 but has handled increasingly complex matters while providing issuers and investors with an increasingly efficient and transparent appeal process. The fees will help offset the costs of conducting appeals, which serve to ensure that NASDAQ’s listing standards are properly enforced for the protection of investors. The proposed changes are equitable and not unfairly discriminatory because they would apply equally to all companies that choose to appeal a delisting determination. In addition, aligning the fees for hearings with the underlying costs of the delisting process will help minimize the extent that companies that 7 A precise cost-per-hearing analysis is not possible given the need to maintain an appeals infrastructure for which the Exchange incurs expenses irrespective of the number of hearings requested in a given year. Economies of scale may result in a lower cost-per-hearing in a year when NASDAQ receives more requests than when it receives fewer requests. Over the past 2 years, the number of hearings requests has been lower than in the previous 2 years, but the complexity of the appeal issues has demanded significantly greater Exchange resources. 8 Securities and Exchange Act Release No. 67907 (September 21, 2012), 77 FR 59442 (September 27, 2012) (SR–NYSEMKT–2012–45). See also Sections 1203 and 1205 of the NYSE MKT Company Guide. 9 Section 804.00 of the NYSE Listed Company Manual. 10 15 U.S.C. 78f. 11 15 U.S.C. 78f(b)(4) and (5). 12 Securities Exchange Act Release No. 44374, supra. PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 are compliant with all listing standards may subsidize the costs of review for companies that are non-compliant. NASDAQ also believes that the proposed fees are consistent with the investor protection objectives of Section 6(b)(5) of the Act 13 in that they are designed to promote just and equitable principles of trade, to remove impediments to a free and open market and national market systems, and in general to protect investors and the public interest. Specifically, the fees are designed to provide adequate resources for appropriate preparation to conduct Panel hearings and appeals of Panel Decisions, which help to assure that the Exchanges’ listing standards are properly enforced and investors are protected. Finally, the proposed change maintains a fair procedure by which listed companies may avail themselves of an appeal. NASDAQ also believes that the proposed changes are consistent with Section 6(b)(7) of the Act,14 in that the proposed fees are consistent with the provision by the Exchange of a fair procedure for the prohibition or limitation by the Exchange of any person with respect to access to services offered by the Exchange. In particular, the Exchange believes that the proposed amended fees should not deter listed issuers from availing themselves of the right to appeal because the fees will still be set at a level that will be affordable for listed companies. NASDAQ does not believe that the proposed fee is unduly burdensome or would discourage any company from seeking a hearing or appeal. Finally, NASDAQ notes that the proposed fees are comparable to the fees charged for similar appeal processes by other exchanges.15 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. As discussed above, this proposed fee is based on the increase in costs to the Exchange to provide a delisting review process, which is in turn necessary to ensure investor protection as well as a transparent process for issuers. Moreover, the market for listing services is extremely competitive and listed companies may freely choose alternative venues based on the aggregate fees assessed, and the value provided by 13 15 U.S.C. 78f(b)(5). U.S.C. 78f(b)(7). 15 See footnotes 8 and 9, supra, and accompanying text. 14 15. E:\FR\FM\23JAN1.SGM 23JAN1 Federal Register / Vol. 78, No. 15 / Wednesday, January 23, 2013 / Notices each listing. This rule proposal does not burden competition with other listing venues, which are similarly free to align their fees on the costs incurred by the process they offer. For this reason, and the reasons discussed in connection with the statutory basis for the proposed rule change, NASDAQ does not believe that the proposed rule change will result in any burden on competition for listings. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Pursuant to Section 19(b)(3)(A)(ii) of the Act,16 NASDAQ has designated this proposal as establishing or changing a due, fee, or other charge imposed by the self-regulatory organization on any person, whether or not the person is a member of the self-regulatory organization, which renders the proposed rule change effective upon filing. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend 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. 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2013–004 on the subject line. wreier-aviles on DSK5TPTVN1PROD with Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. 16 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Mar<15>2010 15:22 Jan 22, 2013 All submissions should refer to File Number SR–NASDAQ–2013–004. This file number should be included on the subject line if email 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 (http://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, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 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–2013–004 and should be submitted on or before February 13, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–01244 Filed 1–22–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68675, File No. SR–FINRA– 2012–053] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Establish Optional TRACE Data Delivery Services and Related Fees January 16, 2013. I. Introduction On November 30, 2012, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and 17 17 Jkt 229001 PO 00000 CFR 200.30–3(a)(12). Frm 00090 Fmt 4703 Sfmt 4703 4917 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 establish optional TRACE data delivery services and related fees. The proposed rule change was published for comment in the Federal Register on December 13, 2012.3 The Commission received no comments on the proposal. This order approves the proposed rule change. II. Description of the Proposal FINRA utilizes the Trade Reporting and Compliance Engine (‘‘TRACE’’) to collect from its members and to publicly disseminate information on transactions in eligible fixed income securities. The FINRA Automated Data Delivery System (‘‘FINRA ADDS’’) is a secure Web site that provides a firm, by market participant identifier (‘‘MPID’’), access to TRACE trade journal files. These files are available for Asset-Backed Securities transactions and separately for corporate bonds and Agency Debt Securities (‘‘Corporate/Agency Debt Securities’’). The FINRA ADDS service is free, and there are no limits on the number of reports that a firm may request or the number of firm personnel associated with a specified MPID that may submit such requests. Currently, to access the transaction information in FINRA ADDS, entitled users of the MPID must submit a request for a trade journal file for a specified date, which must be within 30 calendar days prior to the date of the request. A single report is a trade journal file for one date listing all transactions to which the requesting MPID was a party that were reported on that date either in Asset-Backed Securities or Corporate/ Agency Debt Securities. The FINRA ADDS report provides all of the transaction reports in which the MPID is a party to a transaction (whether the trade was reported by the firm or another member) on the specified date. If a firm uses multiple MPIDs, persons authorized to use the specified MPID must make the data request to FINRA ADDS and the data provided by FINRA ADDS is limited to transactions involving that MPID. FINRA has proposed to establish two new optional TRACE data delivery services, TRACE Data Delivery Plus and TRACE Data Delivery Secure File Transfer Protocol (‘‘TRACE Data Delivery SFTP’’), and fees in connection 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 68387 (December 7, 2012), 77 FR 74249 (December 13, 2012) (SR–FINRA–2012–053) (the ‘‘Notice’’). 2 17 E:\FR\FM\23JAN1.SGM 23JAN1

Agencies

[Federal Register Volume 78, Number 15 (Wednesday, January 23, 2013)]
[Notices]
[Pages 4914-4917]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01244]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68676; File No. SR-NASDAQ-2013-004]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify Fees for Review of Delisting Determinations and Appeal of 
Panel Decisions

January 16, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 4915]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 2, 2013. The NASDAQ Stock Market LLC (``NASDAQ'' 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 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASDAQ Stock Market LLC proposes to modify the fees applicable 
to companies seeking review of a denial of initial listing or a 
delisting or reprimand determination.
    While changes pursuant to this proposal are effective upon filing, 
the Exchange will implement the proposed rule by imposing the new fee 
for hearings on companies who receive a Staff Delisting Determination 
on or after January 2, 2013. NASDAQ will implement the new fee for 
appeals on companies who receive a Panel Decision on or after January 
2, 2013.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *

5815. Review of Staff Determinations by Hearings Panel

    When a Company receives a Staff Delisting Determination or a Public 
Reprimand Letter issued by the Listing Qualifications Department, or 
when its application for initial listing is denied, it may request in 
writing that the Hearings Panel review the matter in a written or an 
oral hearing. This section sets forth the procedures for requesting a 
hearing before a Hearings Panel, describes the Hearings Panel and the 
possible outcomes of a hearing, and sets forth Hearings Panel 
procedures.
    (a) Procedures for Requesting and Preparing for a Hearing
    (1)-(2) No changes.
    (3) Fees
    Within 15 calendar days of the date of the Staff Delisting 
Determination, the Company must submit a hearing fee of $10,000. 
However, if the hearing request relates to a Staff Delisting 
Determination dated before January 2, 2013, the Company must submit a 
hearing fee [to The Nasdaq Stock Market, LLC, to cover the cost of the 
hearing,] as follows:
    (A) when the Company has requested a written hearing, $4,000; or
    (B) when the Company has requested an oral hearing, whether in 
person or by telephone, $5,000.
    (4)-(6) No changes.
    (b)-(d) No changes.

5820. Appeal to the Nasdaq Listing and Hearing Review Council

    A Company may appeal a Panel Decision to the Listing Council. The 
Listing Council may also call for review a Panel Decision on its own 
initiative. This Rule 5820 describes the procedures applicable to 
appeals and calls for review.
    (a) Procedure for Requesting Appeal
    A Company may appeal any Panel Decision to the Listing Council by 
submitting a written request for appeal and a fee of [$4,000] $10,000 
to the Nasdaq Office of Appeals and Review within 15 calendar days of 
the date of the Panel Decision. However, if the appeal relates to a 
Panel Decision dated before January 2, 2013, the applicable fee is 
$4,000. An appeal will not operate as a stay of the Panel Decision. 
Upon receipt of the appeal request and the applicable fee, the Nasdaq 
Office of Appeals and Review will acknowledge the Company's request and 
provide deadlines for the Company to provide written submissions.
    (b)-(e) No changes.
* * * * *

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. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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
    Pursuant to the NASDAQ Listing Rule Series 5800, companies may seek 
review of a determination by NASDAQ Staff to deny initial listing or 
delist a company's securities or to issue a Public Reprimand Letter, by 
requesting an oral or written hearing before an independent Hearings 
Panel. Listing Rule 5815(a)(3) provides that to request a hearing, the 
Company must, within 15 calendar days of the date of the Staff 
Delisting Determination, submit a hearing fee in the amount of $4000 
for a written hearing or $5,000 for an oral hearing. Companies may also 
appeal a Panel decision to the NASDAQ Listing and Hearing Review 
Council (the ``NLHRC''). Listing Rule 5820(a) requires a company 
seeking an appeal to submit a written request and a fee of $4,000 
within 15 days of the date of the Panel Decision.
    NASDAQ last changed these fees in 2001.\3\ NASDAQ proposes to 
increase these fees to $10,000. NASDAQ also proposes to eliminate the 
distinction in fees between a written and an oral hearing.
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    \3\ Securities Exchange Act Release No. 44374 (April 5, 2001) 66 
FR 18837 (April 11, 2001) (approving SR-NASD-2001-17).
---------------------------------------------------------------------------

    NASDAQ is increasing the fees because the costs incurred in 
preparing for and conducting appeals have increased since the fees were 
last changed. The costs of the delisting process include significant 
Staff time and resources to prepare for and conduct hearings and 
appeals. Staff prepares written submissions in support of a delisting 
determination; attends hearings; provides legal counsel and support to 
independent Panelists and the NLHRC; drafts final decisions; manages 
and coordinates the appeals dockets; and monitors post-hearing 
compliance efforts. NASDAQ also incurs the costs of transcription of 
the proceedings and expenses for the Panelists and members of the 
NLHRC. In addition, the Exchange incurs costs to upgrade electronic 
systems for tracking companies and maintaining a clear record. It also 
maintains lists on its Web site, updated every business day, that 
reflect the status of all companies in the deficiency process.\4\ 
Finally, NASDAQ expends regulatory resources to ensure transparent 
communication of appeal rules and procedures to listed companies by 
continually improving our electronic interface with them.\5\
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    \4\ See https://listingcenter.nasdaqomx.com/assets/DelDefOpenReport.pdf and https://listingcenter.nasdaqomx.com/assets/IssuesPendingDelisting.pdf.
    \5\ NASDAQ has developed a user-friendly electronic NASDAQ 
Listing Center and Reference Library, the maintenance of which 
requires resources on an on-going basis. See https://listingcenter.nasdaqomx.com/MaterialHome.aspx?mcd=LQ. Users can view 
more than 30 Frequently Asked Questions about the hearings and 
appeals processes and summaries of almost 100 NLHRC decisions. See 
also https://listingcenter.nasdaqomx.com/assets/Get_Started_Guide.pdf.
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    All of these expenses have increased in the eleven years since the 
fees were set in 2001. In addition, appeals have become more 
complicated and

[[Page 4916]]

contentious than when fees were last modified. As a result, NASDAQ 
devotes more Staff time and resources now to a typical appeal than was 
historically the case. In response to increasing complexities, NASDAQ 
has made new hires in its investigatory group and on several occasions 
engaged an outside law firm or an investigative firm to assist in 
connection with matters under review.
    Accordingly, NASDAQ proposes to increase fees to $10,000 for a 
Panel hearing, whether the company elects a written or an oral hearing; 
and $10,000 for an appeal to the NLRHC. NASDAQ recognizes that in the 
past, fees for a written hearing have been lower than fees for an oral 
one. The Exchange believes that the basis for this historical 
distinction is unclear, and upon review, found to be unwarranted. The 
cost to a company that elects a written hearing may be lower because 
the company's related expenses, such as travel and legal 
representation, may be avoided. However, the costs to the Exchange 
associated with a written hearing are virtually identical to those 
associated with an oral hearing, differing only by the cost of 
transcribing a hearing. NASDAQ believes that the fees should reflect 
that Staff and Panels expend the same resources, time, and effort in 
ensuring a full and fair hearing for all hearing participants, and both 
processes afford the same benefit to the issuer. Therefore, while the 
proposed amendment preserves the availability of a written hearing to 
any company that requests one, NASDAQ proposes to charge the same fee 
for a written hearing as for an oral one.
    The revised fees for a hearing will be applicable to issuers that 
are sent a Staff Delisting Determination on or after January 2, 2013. 
The revised fees for an appeal of a Panel Decision will be applicable 
to issuers that receive a Panel Decision on or after January 2, 2013. 
The current fees will remain in effect for any company that receives a 
Staff Determination or a Panel Decision before that date.\6\
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    \6\ Companies are notified of the fees associated with a request 
for a hearing in the Staff Delist Determination letter. They are 
notified of the fees associated with an appeal in the Panel 
Decision, which includes a notice of the right to appeal.
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    The revised fees will allow NASDAQ to recoup a portion of the 
expenses it incurs in the delisting process that will more closely 
approximate the actual costs associated with the appeal process. The 
Exchange has reviewed all costs associated with delisting appeals and 
does not expect or intend that the fees will exceed the costs.\7\ 
Moreover, the Exchange believes that the proposed fees for a Panel or 
NLHRC review of a delisting determination are comparable to the appeal 
fees of other national securities exchanges. For example, NYSE MKT LLC 
has recently increased its fees for appeal of a Staff delisting 
determination to $8,000 for a written and $10,000 for an oral hearing, 
and $10,000 for an appeal of a Panel decision to the Exchange Committee 
on Securities.\8\ NYSE rules provide that a listed company must pay a 
$20,000 fee in connection with a delisting appeal.\9\
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    \7\ A precise cost-per-hearing analysis is not possible given 
the need to maintain an appeals infrastructure for which the 
Exchange incurs expenses irrespective of the number of hearings 
requested in a given year. Economies of scale may result in a lower 
cost-per-hearing in a year when NASDAQ receives more requests than 
when it receives fewer requests. Over the past 2 years, the number 
of hearings requests has been lower than in the previous 2 years, 
but the complexity of the appeal issues has demanded significantly 
greater Exchange resources.
    \8\ Securities and Exchange Act Release No. 67907 (September 21, 
2012), 77 FR 59442 (September 27, 2012) (SR-NYSEMKT-2012-45). See 
also Sections 1203 and 1205 of the NYSE MKT Company Guide.
    \9\ Section 804.00 of the NYSE Listed Company Manual.
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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,\10\ in general and with 
Sections 6(b)(4) and (5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities, and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    Specifically, the proposed fee increase is reasonable because it 
will better reflect NASDAQ's costs related to the appeal process. 
NASDAQ has not increased the fees for an appeal since 2001,\12\ but has 
handled increasingly complex matters while providing issuers and 
investors with an increasingly efficient and transparent appeal 
process. The fees will help offset the costs of conducting appeals, 
which serve to ensure that NASDAQ's listing standards are properly 
enforced for the protection of investors. The proposed changes are 
equitable and not unfairly discriminatory because they would apply 
equally to all companies that choose to appeal a delisting 
determination. In addition, aligning the fees for hearings with the 
underlying costs of the delisting process will help minimize the extent 
that companies that are compliant with all listing standards may 
subsidize the costs of review for companies that are non-compliant.
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    \12\ Securities Exchange Act Release No. 44374, supra.
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    NASDAQ also believes that the proposed fees are consistent with the 
investor protection objectives of Section 6(b)(5) of the Act \13\ in 
that they are designed to promote just and equitable principles of 
trade, to remove impediments to a free and open market and national 
market systems, and in general to protect investors and the public 
interest. Specifically, the fees are designed to provide adequate 
resources for appropriate preparation to conduct Panel hearings and 
appeals of Panel Decisions, which help to assure that the Exchanges' 
listing standards are properly enforced and investors are protected. 
Finally, the proposed change maintains a fair procedure by which listed 
companies may avail themselves of an appeal.
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    \13\ 15 U.S.C. 78f(b)(5).
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    NASDAQ also believes that the proposed changes are consistent with 
Section 6(b)(7) of the Act,\14\ in that the proposed fees are 
consistent with the provision by the Exchange of a fair procedure for 
the prohibition or limitation by the Exchange of any person with 
respect to access to services offered by the Exchange. In particular, 
the Exchange believes that the proposed amended fees should not deter 
listed issuers from availing themselves of the right to appeal because 
the fees will still be set at a level that will be affordable for 
listed companies. NASDAQ does not believe that the proposed fee is 
unduly burdensome or would discourage any company from seeking a 
hearing or appeal. Finally, NASDAQ notes that the proposed fees are 
comparable to the fees charged for similar appeal processes by other 
exchanges.\15\
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    \14\ 15. U.S.C. 78f(b)(7).
    \15\ See footnotes 8 and 9, supra, and accompanying text.
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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. As discussed above, 
this proposed fee is based on the increase in costs to the Exchange to 
provide a delisting review process, which is in turn necessary to 
ensure investor protection as well as a transparent process for 
issuers. Moreover, the market for listing services is extremely 
competitive and listed companies may freely choose alternative venues 
based on the aggregate fees assessed, and the value provided by

[[Page 4917]]

each listing. This rule proposal does not burden competition with other 
listing venues, which are similarly free to align their fees on the 
costs incurred by the process they offer. For this reason, and the 
reasons discussed in connection with the statutory basis for the 
proposed rule change, NASDAQ does not believe that the proposed rule 
change will result in any burden on competition for listings.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A)(ii) of the Act,\16\ NASDAQ has 
designated this proposal as establishing or changing a due, fee, or 
other charge imposed by the self-regulatory organization on any person, 
whether or not the person is a member of the self-regulatory 
organization, which renders the proposed rule change effective upon 
filing.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-004 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-2013-004. This 
file number should be included on the subject line if email 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 (http://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, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such 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-2013-004 and should 
be submitted on or before February 13, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
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    \17\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-01244 Filed 1-22-13; 8:45 am]
BILLING CODE 8011-01-P