Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Require That Listed Companies Have an Internal Audit Function, 15075-15076 [2013-05454]

Download as PDF Federal Register / Vol. 78, No. 46 / Friday, March 8, 2013 / Notices SECURITIES AND EXCHANGE COMMISSION Number SR–Phlx–2013–18 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–Phlx–2013–18. 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 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–Phlx– 2013–18, and should be submitted on or before March 29, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–05417 Filed 3–7–13; 8:45 am] mstockstill on DSK4VPTVN1PROD with NOTICES BILLING CODE 8011–01–P 15075 after June 30, 2013, must establish an internal audit function prior to listing. * * * * * [Release No. 34–69030; File No. SR– NASDAQ–2013–032] II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the 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. Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Require That Listed Companies Have an Internal Audit Function March 4, 2013. 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 February 20, 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 the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to require that listed companies establish and maintain an internal audit function. The text of the proposed rule change is below. Proposed new language is in italics.3 * * * * * 5645. Internal Audit Function Each Company must establish and maintain an internal audit function to provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control. The Company may choose to outsource this function to a third party service provider other than its independent auditor. The audit committee must meet periodically with the internal auditors (or other personnel responsible for this function) and assist the Board in its oversight of the performance of this function. The audit committee should also discuss with the outside auditor the responsibilities, budget and staffing of the internal audit function. A Company listed on Nasdaq on or before June 30, 2013, must establish an internal audit function by no later than December 31, 2013. A Company listed 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 http:// nasdaqomx.cchwallstreet.com. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to adopt a new rule to require all listed companies to establish and maintain an internal audit function.4 The purpose of the rule is to ensure that listed companies have a mechanism in place to regularly review and assess their system of internal control and, thereby, to identify any weaknesses and develop appropriate remedial measures. The rule is also intended to make sure that the listed company’s management and audit committee are provided with ongoing information about risk management processes and the system of internal control. Nasdaq also believes that the rule will assist listed companies’ efforts to comply with their obligations under federal securities law, including but not limited to Rules 13a–15 and 15d–15 under the Act, which require most companies to maintain and to evaluate, with the participation of their principal executive and principal financial officers, or persons performing similar functions, the effectiveness of the internal control over financial reporting.5 To preserve flexibility, listed companies may choose to outsource this function to a third party service provider other than their independent auditor. However, in all instances, the audit committee has sole responsibility to oversee the internal audit function and cannot allocate or delegate this responsibility to another board committee. 1 15 2 17 15 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:44 Mar 07, 2013 Jkt 229001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 4 The New York Stock Exchange, in Listed Company Manual Section 303A.07(c), has a similar requirement. 5 17 CFR 240.13a–15 and 240.15d–15. E:\FR\FM\08MRN1.SGM 08MRN1 15076 Federal Register / Vol. 78, No. 46 / Friday, March 8, 2013 / Notices Finally, while Nasdaq believes that, consistent with best practices, many listed companies have already established and implemented an internal audit function, to allow sufficient time for companies that have not yet done so, each company listed on Nasdaq on or before June 30, 2013, will be required to establish an internal audit function by no later than December 31, 2013. Companies listed after June 30, 2013, will be required to establish an internal audit function prior to listing. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,6 in general and with Section 6(b)(5) of the Act,7 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 will require listed companies to establish and maintain an internal audit function. It is intended to ensure that listed companies have a mechanism in place to regularly review and assess their system of internal control and, thereby, to identify any weaknesses and develop appropriate remedial measures. It is also intended to make sure that management and the audit committee are provided with ongoing information about the company’s risk management processes and system of internal control. As such, it is designed to protect investors and the public interest. mstockstill on DSK4VPTVN1PROD with NOTICES 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. In this regard, Nasdaq notes that the competition among exchanges for listings is robust and vigorous, and the proposed rule change is not intended, nor is it expected, to reduce or diminish such competition. 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 18:44 Mar 07, 2013 Jkt 229001 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 45 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 shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. BILLING CODE 8011–01–P 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–2013–032 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–2013–032. 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 Frm 00118 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–05454 Filed 3–7–13; 8:45 am] IV. Solicitation of Comments PO 00000 provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room on official business days between the hours of 10:00 a.m. and 3:00 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–2013–032, and should be submitted on or before March 29, 2013. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69025; File No. SR–CBOE– 2013–025] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule March 4, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 19, 2013, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Fees Schedule. The text of the proposed rule change is available on the Exchange’s Web site (http:// www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\08MRN1.SGM 08MRN1

Agencies

[Federal Register Volume 78, Number 46 (Friday, March 8, 2013)]
[Notices]
[Pages 15075-15076]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05454]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69030; File No. SR-NASDAQ-2013-032]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Require That Listed 
Companies Have an Internal Audit Function

March 4, 2013.
    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 February 20, 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 the Exchange. 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

    The Exchange proposes to require that listed companies establish 
and maintain an internal audit function. The text of the proposed rule 
change is below. Proposed new language is in italics.\3\
---------------------------------------------------------------------------

    \3\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://nasdaqomx.cchwallstreet.com.
---------------------------------------------------------------------------

* * * * *

5645. Internal Audit Function

    Each Company must establish and maintain an internal audit function 
to provide management and the audit committee with ongoing assessments 
of the Company's risk management processes and system of internal 
control. The Company may choose to outsource this function to a third 
party service provider other than its independent auditor. The audit 
committee must meet periodically with the internal auditors (or other 
personnel responsible for this function) and assist the Board in its 
oversight of the performance of this function. The audit committee 
should also discuss with the outside auditor the responsibilities, 
budget and staffing of the internal audit function.
    A Company listed on Nasdaq on or before June 30, 2013, must 
establish an internal audit function by no later than December 31, 
2013. A Company listed after June 30, 2013, must establish an internal 
audit function prior to listing.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the 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
    Nasdaq proposes to adopt a new rule to require all listed companies 
to establish and maintain an internal audit function.\4\ The purpose of 
the rule is to ensure that listed companies have a mechanism in place 
to regularly review and assess their system of internal control and, 
thereby, to identify any weaknesses and develop appropriate remedial 
measures. The rule is also intended to make sure that the listed 
company's management and audit committee are provided with ongoing 
information about risk management processes and the system of internal 
control. Nasdaq also believes that the rule will assist listed 
companies' efforts to comply with their obligations under federal 
securities law, including but not limited to Rules 13a-15 and 15d-15 
under the Act, which require most companies to maintain and to 
evaluate, with the participation of their principal executive and 
principal financial officers, or persons performing similar functions, 
the effectiveness of the internal control over financial reporting.\5\
---------------------------------------------------------------------------

    \4\ The New York Stock Exchange, in Listed Company Manual 
Section 303A.07(c), has a similar requirement.
    \5\ 17 CFR 240.13a-15 and 240.15d-15.
---------------------------------------------------------------------------

    To preserve flexibility, listed companies may choose to outsource 
this function to a third party service provider other than their 
independent auditor. However, in all instances, the audit committee has 
sole responsibility to oversee the internal audit function and cannot 
allocate or delegate this responsibility to another board committee.

[[Page 15076]]

    Finally, while Nasdaq believes that, consistent with best 
practices, many listed companies have already established and 
implemented an internal audit function, to allow sufficient time for 
companies that have not yet done so, each company listed on Nasdaq on 
or before June 30, 2013, will be required to establish an internal 
audit function by no later than December 31, 2013. Companies listed 
after June 30, 2013, will be required to establish an internal audit 
function prior to listing.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general and with Section 
6(b)(5) of the Act,\7\ 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 
will require listed companies to establish and maintain an internal 
audit function. It is intended to ensure that listed companies have a 
mechanism in place to regularly review and assess their system of 
internal control and, thereby, to identify any weaknesses and develop 
appropriate remedial measures. It is also intended to make sure that 
management and the audit committee are provided with ongoing 
information about the company's risk management processes and system of 
internal control. As such, it is designed to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. In this regard, 
Nasdaq notes that the competition among exchanges for listings is 
robust and vigorous, and the proposed rule change is not intended, nor 
is it expected, to reduce or diminish such competition.

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 45 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 shall: (a) By order approve 
or disapprove 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-032 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-2013-032. 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 on 
official business days between the hours of 10:00 a.m. and 3:00 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-2013-032, and should be submitted 
on or before March 29, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05454 Filed 3-7-13; 8:45 am]
BILLING CODE 8011-01-P