Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Clarify the Term “Closing Price” in Rule 5635(d)(1)(A) Relating to Shareholder Approval for Transactions Other Than Public Offerings, 6003-6005 [2020-01912]
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Federal Register / Vol. 85, No. 22 / Monday, February 3, 2020 / Notices
Room LL–006 at the Commission’s
headquarters, 100 F Street NE,
Washington, DC 20549.
PLACE: The meeting will begin at 9:30
a.m. (ET) and will be open to the public.
Seating will be on a first-come, firstserved basis. Doors will open at 9:00
a.m. Visitors will be subject to security
checks. The meeting will be webcast on
the Commission’s website at
www.sec.gov.
STATUS: On January 22, 2020, the
Commission published notice of the
Committee meeting (Release No. 33–
10747), indicating that the meeting is
open to the public and inviting the
public to submit written comments to
the Committee. This Sunshine Act
notice is being issued because a majority
of the Commission may attend the
meeting.
MATTER TO BE CONSIDERED: The agenda
for the meeting includes matters relating
to rules and regulations affecting small
and emerging companies under the
federal securities laws.
CONTACT PERSON FOR MORE INFORMATION:
For further information, please contact
the Office of the Secretary at (202) 551–
5400.
Dated: January 29, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–02055 Filed 1–30–20; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88056; File No. SR–
NASDAQ–2020–004]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change to Clarify the
Term ‘‘Closing Price’’ in Rule
5635(d)(1)(A) Relating to Shareholder
Approval for Transactions Other Than
Public Offerings
lotter on DSKBCFDHB2PROD with NOTICES
January 28, 2020.
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 January
15, 2020, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘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 the Exchange. The
Commission is publishing this notice to
1 15
2 17
16:47 Jan 31, 2020
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to clarify Rule
5635(d)(1)(A) without changing its
substance. The text of the proposed rule
change is set forth below. Proposed new
language is in italics; deleted text is in
brackets.
*
*
*
*
*
The Nasdaq Stock Market LLC Rules
*
*
*
*
*
5635. Shareholder Approval
This Rule sets forth the circumstances
under which shareholder approval is
required prior to an issuance of
securities in connection with: (i) the
acquisition of the stock or assets of
another company; (ii) equity-based
compensation of officers, directors,
employees or consultants; (iii) a change
of control; and (iv) transactions other
than public offerings. General
provisions relating to shareholder
approval are set forth in Rule 5635(e),
and the financial viability exception to
the shareholder approval requirement is
set forth in Rule 5635(f). Nasdaq-listed
Companies and their representatives are
encouraged to use the interpretative
letter process described in Rule 5602.
(a) No change.
(b) No change.
(c) No change.
IM–5635–1. No change.
(d) Transactions other than Public
Offerings
(1) For purposes of this Rule 5635(d):
(A) ‘‘Minimum Price’’ means a price
that is the lower of: (i) the Nasdaq
Official Closing Price [closing price] (as
reflected on Nasdaq.com) immediately
preceding the signing of the binding
agreement; or (ii) the average Nasdaq
Official Closing Price [closing price] of
the common stock (as reflected on
Nasdaq.com) for the five trading days
immediately preceding the signing of
the binding agreement.
(B) No change.
(2) No change.
IM–5635–2. No change.
IM–5635–3. No change.
(e) No change.
(f) No change.
IM–5635–4. 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, the
Exchange included statements
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
solicit comments on the proposed rule
change from interested persons.
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Frm 00077
Fmt 4703
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6003
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
On September 26, 2018, the Exchange
amended Rule 5635(d)(1)(A) to change
the definition of market value for
purposes of the shareholder approval
rule and eliminate the requirement for
shareholder approval of issuances at a
price less than book value but greater
than market value (the ‘‘Amendment’’).3
As revised, Rule 5635(d) requires a
Nasdaq-listed company to obtain
shareholder approval prior to the
issuance of securities in connection
with a transaction other than a public
offering 4 involving the sale, issuance or
potential issuance by the company of
common stock (or securities convertible
into or exercisable for common stock),
which alone or together with sales by
officers, directors or Substantial
Shareholders 5 of the company, equals
20% or more of the common stock or
20% or more of the voting power
outstanding before the issuance (a ‘‘20%
Issuance’’) at a price that is less than the
Minimum Price. Rule 5635(d)(1)(A)
defines ‘‘Minimum Price’’ as a price that
is the lower of: (i) The closing price (as
reflected on Nasdaq.com) immediately
preceding the signing of the binding
agreement; or (ii) the average closing
price of the common stock (as reflected
on Nasdaq.com) for the five trading days
immediately preceding the signing of
the binding agreement.
Prior to the Amendment, shareholder
approval was required for a 20%
Issuance at a price less than the greater
of book or market value.6 In the
3 See Securities Exchange Act Release No. 84287
(September 26, 2018), 83 FR 49599 (October 2,
2018) (approving SR-Nasdaq-2018–008) (the
‘‘Approval Order’’).
4 See Nasdaq Rule IM–5635–3 (Definition of a
Public Offering).
5 An interest consisting of less than either 5% of
the number of shares of common stock or 5% of the
voting power outstanding of a Company or party
will not be considered a substantial interest or
cause the holder of such interest to be regarded as
a ‘‘Substantial Shareholder.’’ See Nasdaq Rule
5635(e)(3).
6 ‘‘Market value’’ is defined in Nasdaq Rule
5005(a)(23) as the consolidated closing bid price
E:\FR\FM\03FEN1.SGM
Continued
03FEN1
6004
Federal Register / Vol. 85, No. 22 / Monday, February 3, 2020 / Notices
Exchange’s proposal to use the closing
price reported on Nasdaq.com, rather
than the market value, the Exchange
explained that ‘‘[t]he closing price
reported on Nasdaq.com is the Nasdaq
Official Closing Price, which is derived
from the closing auction on Nasdaq and
reflects actual sale prices at one of the
most liquid times of the day.’’ 7 At the
time, Nasdaq believed that ‘‘codify[ing]
within the rule that Nasdaq.com is the
appropriate source of the closing price
information’’ would ‘‘assure that
companies and investors use the Nasdaq
Official Closing Price when pricing
transactions.’’ 8 However, Rule
5635(d)(1)(A) does not specify that the
closing price refers to the Nasdaq
Official Closing Price, which may create
confusion. Nasdaq proposes to amend
Rule 5635(d)(1)(A) to revise ‘‘closing
price (as reflected on Nasdaq.com)’’ to
‘‘Nasdaq Official Closing Price (as
reflected on Nasdaq.com).’’ 9 The
Exchange believes that this change will
reflect the Exchange’s original intention
in adopting the Amendment.
lotter on DSKBCFDHB2PROD with NOTICES
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, by
eliminating potential confusion and
enhancing clarity and transparency in
its rules. The proposal is consistent with
multiplied by the measure to be valued (e.g., a
company’s market value of publicly held shares is
equal to the consolidated closing bid price
multiplied by a company’s publicly held shares).
See Nasdaq Rule 5005(a)(23).
7 See Securities Exchange Act Release No. 82702
(February 13, 2018), 83 FR 7269 (February 20, 2018)
at 7270. See also Approval Order at 49602 (‘‘the
proposal to use the Nasdaq Official Closing Price for
purposes of market value should help to ensure
transparency to investors in calculating market
value for purposes of the rule.’’).
8 Id.
9 See Nasdaq Rule 4754(b)(4) (‘‘All orders
executed in the Nasdaq Closing Cross will be
executed at the Nasdaq Closing Cross price, trade
reported anonymously, and disseminated via the
consolidated tape. The Nasdaq Closing Cross price
will be the Nasdaq Official Closing Price for stocks
that participate in the Nasdaq Closing Cross. Fifteen
minutes after the close of trading, Nasdaq will
disseminate via the network processor a trade
message setting the Nasdaq Official Closing Price as
the official Consolidated Last Sale Price in each
Nasdaq-listed security in which one round lot or
more is executed in the Nasdaq Closing Cross where
the closing price differs from the Consolidated Last
Sale Price.’’).
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
16:47 Jan 31, 2020
Jkt 250001
the Exchange’s original intent as
approved by the Commission and does
not have any substantive effect on the
rule.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change is designed to more
clearly describe the current operation
and original intent of an existing rule
without changing its substance and,
therefore, Nasdaq believes that the
proposed change will not impose a
burden on competition.
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
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
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 12 and Rule 19b–
4(f)(6) thereunder.13
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 14 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 15
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that Rule
5635(d)(1)(A) may be amended to reflect
the Exchange’s original intent and
reduce potential confusion for
companies and investors.
The Commission believes that waiver
of the operative delay should, as noted
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give 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 Exchange
has satisfied this requirement.
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
13 17
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
by Nasdaq, help to avoid potential
confusion for investors and listed
companies. The Commission further
notes that the current proposal is
consistent with Nasdaq’s original
proposal to adopt the current rule
language.16 For these reasons, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal as operative upon filing.17
At any time within 60 days of the
filing of the 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2020–004 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2020–004. 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 website (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
16 See
supra note 7 and accompanying text.
purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
17 For
E:\FR\FM\03FEN1.SGM
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Federal Register / Vol. 85, No. 22 / Monday, February 3, 2020 / Notices
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 website 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 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2020–004 and
should be submitted on or before
February 24, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–01912 Filed 1–31–20; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–88058; File No. SR–NYSE–
2020–04]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
104(f)(5) To Extend the Operative Date
of the Requirements of Rules 104(f)(2)
and (3) to Exchange Traded Products
lotter on DSKBCFDHB2PROD with NOTICES
January 28, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on January
17, 2020, New York Stock Exchange
LLC (‘‘NYSE’’ 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
16:47 Jan 31, 2020
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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
18 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 104(f)(5) to extend the operative
date of the requirements of Rules
104(f)(2) and (3) to Exchange Traded
Products (‘‘ETPs’’) to no later than
eighteen weeks after ETPs listed on the
Exchange pursuant to Rules 5P and 8P
begin trading. The proposed rule change
is available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
1. Purpose
The Exchange proposes to amend
Rule 104(f)(5) to extend the operative
date of the requirements of Rules
104(f)(2) and (3) to ETPs to no later than
eighteen weeks after ETPs listed on the
Exchange pursuant to Rules 5P and 8P
begin trading.
Rule 104(f) imposes an affirmative
obligation on Designated Market Makers
(‘‘DMM’’) to maintain, insofar as
reasonably practicable, a fair and
orderly market on the Exchange in
assigned securities, including
maintaining price continuity with
reasonable depth and trading for the
DMM’s own account when lack of price
continuity, lack of depth, or disparity
between supply and demand exists or is
reasonably to be anticipated. The
Exchange supplies DMMs with
suggested Depth Guidelines for each
security in which a DMM is registered,
and DMMs are expected to quote and
trade with reference to those Depth
Guidelines.4
The Exchange amended Rule 104 to
specify DMM requirements for ETPs
listed on the Exchange pursuant to
4 See
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PO 00000
Rule 104(f)(3).
Frm 00079
Fmt 4703
Sfmt 4703
6005
Rules 5P and 8P.5 In that filing, the
Exchange added subsection (5) to Rule
104(f) providing that, for those ETPs in
which they are registered, DMM units
are responsible for the affirmative
obligation of maintaining a fair and
orderly market, including maintaining
price continuity with reasonable depth
for their registered ETPs in accordance
with Depth Guidelines published by the
Exchange. To provide the Exchange
time to collect trading data adequate to
calculate appropriate Depth Guidelines
for listed ETPs, the Exchange proposed
that Rule 104(f)(2) and (3) would not be
operative until eighteen weeks after the
approval of the proposed rule change by
the Commission.6 The Commission
approved the rule filing on September
23, 2019. Rules 104(f)(2) and (3) would
accordingly be operative for ETPs on
January 27, 2020.
To date, no ETPs have listed on the
Exchange. In order to provide the
Exchange with adequate time to
calculate the appropriate Depth
Guidelines for ETPs based on actual
trading data, the Exchange proposes to
specify in Rule 104(f)(5) that the outside
date for the requirements Rule 104(f)(2)
and (3) to be operative with respect to
ETPs would be no later than eighteen
weeks after ETPs listed on the Exchange
pursuant to Rules 5P and 8P begin
trading.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Sections 6(b)(5) of the Act,8
in particular, because 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 mechanisms of, a free
and open market and a national market
system and, in general, to protect
investors and the public interest and
because it is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that delaying implementation of Depth
Guidelines no later than eighteen weeks
after ETPs listed on the Exchange
pursuant to Rules 5P and 8P begin
trading would remove impediments to
5 See Securities Exchange Act Release No. 87056
(September 23, 2019), 84 FR 51205 (September 27,
2019) (SR–NYSE–2019–34).
6 See id., 84 FR at 51207.
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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]]>Agencies
[Federal Register Volume 85, Number 22 (Monday, February 3, 2020)]
[Notices]
[Pages 6003-6005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01912]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88056; File No. SR-NASDAQ-2020-004]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
to Clarify the Term ``Closing Price'' in Rule 5635(d)(1)(A) Relating to
Shareholder Approval for Transactions Other Than Public Offerings
January 28, 2020.
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 January 15, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``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 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 clarify Rule 5635(d)(1)(A) without
changing its substance. The text of the proposed rule change is set
forth below. Proposed new language is in italics; deleted text is in
brackets.
* * * * *
The Nasdaq Stock Market LLC Rules
* * * * *
5635. Shareholder Approval
This Rule sets forth the circumstances under which shareholder
approval is required prior to an issuance of securities in connection
with: (i) the acquisition of the stock or assets of another company;
(ii) equity-based compensation of officers, directors, employees or
consultants; (iii) a change of control; and (iv) transactions other
than public offerings. General provisions relating to shareholder
approval are set forth in Rule 5635(e), and the financial viability
exception to the shareholder approval requirement is set forth in Rule
5635(f). Nasdaq-listed Companies and their representatives are
encouraged to use the interpretative letter process described in Rule
5602.
(a) No change.
(b) No change.
(c) No change.
IM-5635-1. No change.
(d) Transactions other than Public Offerings
(1) For purposes of this Rule 5635(d):
(A) ``Minimum Price'' means a price that is the lower of: (i) the
Nasdaq Official Closing Price [closing price] (as reflected on
Nasdaq.com) immediately preceding the signing of the binding agreement;
or (ii) the average Nasdaq Official Closing Price [closing price] of
the common stock (as reflected on Nasdaq.com) for the five trading days
immediately preceding the signing of the binding agreement.
(B) No change.
(2) No change.
IM-5635-2. No change.
IM-5635-3. No change.
(e) No change.
(f) No change.
IM-5635-4. 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, 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
On September 26, 2018, the Exchange amended Rule 5635(d)(1)(A) to
change the definition of market value for purposes of the shareholder
approval rule and eliminate the requirement for shareholder approval of
issuances at a price less than book value but greater than market value
(the ``Amendment'').\3\ As revised, Rule 5635(d) requires a Nasdaq-
listed company to obtain shareholder approval prior to the issuance of
securities in connection with a transaction other than a public
offering \4\ involving the sale, issuance or potential issuance by the
company of common stock (or securities convertible into or exercisable
for common stock), which alone or together with sales by officers,
directors or Substantial Shareholders \5\ of the company, equals 20% or
more of the common stock or 20% or more of the voting power outstanding
before the issuance (a ``20% Issuance'') at a price that is less than
the Minimum Price. Rule 5635(d)(1)(A) defines ``Minimum Price'' as a
price that is the lower of: (i) The closing price (as reflected on
Nasdaq.com) immediately preceding the signing of the binding agreement;
or (ii) the average closing price of the common stock (as reflected on
Nasdaq.com) for the five trading days immediately preceding the signing
of the binding agreement.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 84287 (September 26,
2018), 83 FR 49599 (October 2, 2018) (approving SR-Nasdaq-2018-008)
(the ``Approval Order'').
\4\ See Nasdaq Rule IM-5635-3 (Definition of a Public Offering).
\5\ An interest consisting of less than either 5% of the number
of shares of common stock or 5% of the voting power outstanding of a
Company or party will not be considered a substantial interest or
cause the holder of such interest to be regarded as a ``Substantial
Shareholder.'' See Nasdaq Rule 5635(e)(3).
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Prior to the Amendment, shareholder approval was required for a 20%
Issuance at a price less than the greater of book or market value.\6\
In the
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Exchange's proposal to use the closing price reported on Nasdaq.com,
rather than the market value, the Exchange explained that ``[t]he
closing price reported on Nasdaq.com is the Nasdaq Official Closing
Price, which is derived from the closing auction on Nasdaq and reflects
actual sale prices at one of the most liquid times of the day.'' \7\ At
the time, Nasdaq believed that ``codify[ing] within the rule that
Nasdaq.com is the appropriate source of the closing price information''
would ``assure that companies and investors use the Nasdaq Official
Closing Price when pricing transactions.'' \8\ However, Rule
5635(d)(1)(A) does not specify that the closing price refers to the
Nasdaq Official Closing Price, which may create confusion. Nasdaq
proposes to amend Rule 5635(d)(1)(A) to revise ``closing price (as
reflected on Nasdaq.com)'' to ``Nasdaq Official Closing Price (as
reflected on Nasdaq.com).'' \9\ The Exchange believes that this change
will reflect the Exchange's original intention in adopting the
Amendment.
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\6\ ``Market value'' is defined in Nasdaq Rule 5005(a)(23) as
the consolidated closing bid price multiplied by the measure to be
valued (e.g., a company's market value of publicly held shares is
equal to the consolidated closing bid price multiplied by a
company's publicly held shares). See Nasdaq Rule 5005(a)(23).
\7\ See Securities Exchange Act Release No. 82702 (February 13,
2018), 83 FR 7269 (February 20, 2018) at 7270. See also Approval
Order at 49602 (``the proposal to use the Nasdaq Official Closing
Price for purposes of market value should help to ensure
transparency to investors in calculating market value for purposes
of the rule.'').
\8\ Id.
\9\ See Nasdaq Rule 4754(b)(4) (``All orders executed in the
Nasdaq Closing Cross will be executed at the Nasdaq Closing Cross
price, trade reported anonymously, and disseminated via the
consolidated tape. The Nasdaq Closing Cross price will be the Nasdaq
Official Closing Price for stocks that participate in the Nasdaq
Closing Cross. Fifteen minutes after the close of trading, Nasdaq
will disseminate via the network processor a trade message setting
the Nasdaq Official Closing Price as the official Consolidated Last
Sale Price in each Nasdaq-listed security in which one round lot or
more is executed in the Nasdaq Closing Cross where the closing price
differs from the Consolidated Last Sale Price.'').
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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, by eliminating potential confusion and enhancing clarity and
transparency in its rules. The proposal is consistent with the
Exchange's original intent as approved by the Commission and does not
have any substantive effect on the rule.
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\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
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed change is designed
to more clearly describe the current operation and original intent of
an existing rule without changing its substance and, therefore, Nasdaq
believes that the proposed change will not impose a burden on
competition.
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
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 as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give 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 Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \14\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
Rule 5635(d)(1)(A) may be amended to reflect the Exchange's original
intent and reduce potential confusion for companies and investors.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the operative delay should,
as noted by Nasdaq, help to avoid potential confusion for investors and
listed companies. The Commission further notes that the current
proposal is consistent with Nasdaq's original proposal to adopt the
current rule language.\16\ For these reasons, the Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Therefore, the
Commission hereby waives the operative delay and designates the
proposal as operative upon filing.\17\
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\16\ See supra note 7 and accompanying text.
\17\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2020-004 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2020-004. 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 website (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
[[Page 6005]]
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 website 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
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. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NASDAQ-2020-004 and should be submitted on or before February 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-01912 Filed 1-31-20; 8:45 am]
BILLING CODE 8011-01-P
