Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend the Procedures Governing the Introduction of Legal Arguments and Material Information by Companies in a Proceeding Before a Hearings Panel, 43900-43904 [2020-15552]
Download as PDF
<![CDATA[
43900
Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Notices
SCI obligations in this regard by
ensuring that unused ports are available
to be allocated based on individual
Members needs and as the Exchange’s
overall order and trade volumes
increase.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX 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.
The proposed rule change will not
impose a burden on competition but
will benefit competition by enhancing
the Exchange’s ability to compete by
providing additional services to market
participants. It is not intended to
address a competitive issue. Rather, the
proposed increase in the number of
additional Limited Service MEO Ports
available per Market Maker is intended
to allow the Exchange to increase its
inventory of MEO Ports to meet
increased Member demand. The
Exchange is increasing the number of
available additional Limited Service
MEO Ports in response to Market Maker
demand for increased connectivity to
the MIAX PEARL System. The
Exchange’s current inventory may soon
be insufficient to meet those needs.
Again, the Exchange is not proposing to
amend the fees for MEO Ports, just to
increase the number of MEO Ports
available per Market Maker. The
Exchange also does not believe that the
proposed rule change will impose a
burden on intramarket competition
because the two additional Limited
Service MEO Ports will be available to
all Market Makers on an equal basis. It
is a business decision of each Market
Maker whether to pay for the additional
Limited Service MEO Ports.
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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,16 and Rule
19b–4(f)(2) 17 thereunder. 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
16 15
U.S.C. 78s(b)(3)(A)(ii).
17 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
18:30 Jul 17, 2020
Jkt 250001
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. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
submissions should refer to File
Number SR–PEARL–2020–09 and
should be submitted on or before
August 10, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
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:
[FR Doc. 2020–15557 Filed 7–17–20; 8:45 am]
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–
PEARL–2020–09 on the subject line.
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend the Procedures Governing the
Introduction of Legal Arguments and
Material Information by Companies in
a Proceeding Before a Hearings Panel
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–PEARL–2020–09. 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
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
July 14, 2020.
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89309; File No. SR–
NASDAQ–2020–002]
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 2,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
procedures governing the introduction
of legal arguments and material
information by companies in a
proceeding before a Hearings Panel.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
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
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\20JYN1.SGM
20JYN1
Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Notices
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
A company may, within seven
calendar days of the date of a staff
delisting determination notification,
public reprimand letter, or written
denial of a listing application, request a
written or oral hearing before a Hearings
Panel to review the staff delisting
determination, public reprimand letter,
or written denial of a listing
application.3 The Hearings Department
will then schedule a hearing to take
place before a Hearings Panel, generally
within 45 days of the request for a
hearing.4 The Hearings Department will
send written acknowledgment of the
company’s hearing request and inform
the company of the date, time, and
location of the hearing, and the
deadlines for written submissions to the
Hearings Panel.5 A company may waive
its right to an oral hearing and instead
seek a decision by the Hearings Panel
based solely on its written submissions.
To improve the hearings process, the
Exchange is proposing to revise the
procedures governing the introduction
of legal arguments and material
information by companies in a written
or oral hearing before a Hearings Panel.
Specifically, the Exchange is
proposing to revise, as discussed below,
Listing Rule 5815(a)(5), which currently
provides that a company may submit to
the Hearings Department a written plan
of compliance and request that the
Hearings Panel grant an exception to the
listing standards for a limited time
period, or may set forth specific grounds
for the company’s contention that the
issuance of a staff delisting
determination, public reprimand letter,
or denial of a listing application, was in
error, and may also submit public
documents or other written material in
support of its position, including any
information not available at the time of
the staff determination. The Exchange is
also proposing to revise Listing Rule
3 See
Listing Rule 5815(a)(1)(A).
Listing Rule 5815(a)(4). Under that rule, the
company will be provided at least ten calendar
days’ notice of the hearing unless the company
waives such notice.
5 Id.
4 See
VerDate Sep<11>2014
18:30 Jul 17, 2020
Jkt 250001
5815(a)(6), which currently provides
that at an oral hearing, the company
may make such presentation as it deems
appropriate, and the Hearings Panel
may question any representative
appearing at the hearing. To improve
the efficient and effective functioning of
the hearings process in connection with
the company’s appeal of a delisting
determination, public reprimand letter,
or denial of a listing application, the
Exchange proposes amending Listing
Rule 5815(a)(5) and (a)(6) to: (1)
Establish a requirement, and set forth
the process, for a company to provide a
written submission and written update
in connection with either a written or
oral hearing; (2) prohibit a company
from introducing in a written update or
during an oral hearing before a Hearings
Panel any legal arguments that were not
previously raised; and (3) prohibit a
company from introducing during an
oral hearing before a Hearings Panel any
material information unless the material
information was previously raised by
the company in writing or was solicited
by the Hearings Panel, or the company
can show that the material information
did not earlier exist or exceptional or
unusual circumstances are present.
The proposed revisions to Listing
Rule 5815 would contain an express
requirement that for both oral and
written hearings a company must state
in writing with specificity the grounds
upon which it is seeking review in
advance of a hearing (the ‘‘Written
Submission’’).6 This requirement will
ensure that a company makes a Written
Submission. In addition, the
requirement that a company state ‘‘with
specificity’’ the grounds on which is it
seeking review will ensure that the
Written Submission includes sufficient
detail to be useful in the Hearings
Panel’s review of the record before the
hearing.
The proposed revisions to Listing
Rule 5815 will clarify the ability of
Nasdaq staff to respond in writing to a
company’s Written Submission. The
proposed revisions to Listing Rule 5815
would also provide a company with the
option to supplement the company’s
Written Submission by providing a
written update to the Hearings
Department no later than two business
6 As noted above, the Hearings Department
generally calendars a hearing within 45 days of the
request for a hearing and will establish deadlines
for written submissions to the Hearings Panel. See
Listing Rule 5815(a)(4). As determined by the
Hearings Department, both oral and written hearing
matters are generally considered on Thursdays, and
the company’s written submission is typically due
on the third Friday before the hearing. The Hearings
Department will generally establish the Thursday
before the Hearing as the deadline for Nasdaq staff
to respond in writing.
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
43901
days in advance of the hearing, briefing
the Hearings Panel on any new material
information that has transpired since its
Written Submission (the ‘‘Written
Update’’).7 The Exchange believes that
allowing for a Written Update will
improve the hearings process by
allowing a company to provide updated
information about fast-moving
transactions, thereby enabling the
Hearings Panel to prepare for the
hearing with the most current data
available on the company’s steps toward
achieving or maintaining compliance.
To ensure that companies provide the
requisite information in a Written
Submission or a Written Update, the
Exchange proposes including certain
evidentiary standards in proposed
Listing Rule 5815. Under the proposed
revisions to Listing Rule 5815, legal
arguments are only permitted in the
Written Submission, and the company
must include in the Written Submission
all legal arguments on which it intends
to rely. A company that does not raise
with specificity a legal argument in its
Written Submission will be prohibited
from introducing a new legal argument
in the Written Update or during the
hearing before the Hearings Panel.8 The
Hearings Panel will determine that a
company has raised a legal argument
with specificity if the legal argument
includes sufficient detail to be useful in
the Hearings Panel’s review of the
record before the hearing.
Otherwise, when a company raises a
legal argument during a hearing or right
before the hearing that was not
7 Because one of the purposes of the Written
Update is to allow a company to supplement its
Written Submission, a company would be
permitted to submit a Written Update even if
Nasdaq staff does not respond in writing to the
company’s Written Submission.
8 There is precedent for the requirement that an
appellant include all legal arguments in an opening
brief, such as the Written Submission, in the SEC
Rules of Practice and by the Federal Rules of
Appellate Procedure. See, e.g., SEC Rules of
Practice 420, 17 CFR 201.420(c) (governing appeals
to the Commission of determinations by SelfRegulatory Organizations, which requires that an
application for review ‘‘set forth in summary form
a brief statement of alleged errors in the
determination and supporting reasons therefor’’ and
that any exception to a determination ‘‘not
supported in an opening brief’’ may ‘‘be deemed to
have been waived’’). See also SEC Rules of Practice
Rule 222, 17 CFR 201.222(a) (governing prehearing
submissions, which allows a hearing officer, on his
or her own motion, or at the request of a party or
other participant, to order any party to furnish
information including ‘‘an outline or narrative
summary of its case or defense’’ and ‘‘the legal
theories upon which it will rely’’). See, e.g., Barna
v. Bd. of Sch. Dirs. of the Panther Valley Sch. Dist.,
877 F.3d 136, 145–46 (3d Cir. 2017) (noting that
Fed. R. App. P. 28 requires an appellant’s opening
brief to set forth and address each argument the
appellant wishes to pursue in an appeal and that
the court will not ‘‘reach arguments raised for the
first time in a reply brief or at oral argument’’).
E:\FR\FM\20JYN1.SGM
20JYN1
43902
Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Notices
contained in its Written Submission, it
deprives Nasdaq staff of the opportunity
to provide a thorough response to the
legal argument and it deprives the
Hearings Panel the benefit of Nasdaq
staff’s views and perspective. As a
result, the Hearings Panel would not be
able to properly adjudicate the legal
issue. While new legal arguments are
not permitted in the Written Update, the
Exchange does not believe that any
prejudice will result to a company from
this requirement because the Exchange
believes a company would have
developed its legal arguments early in
the hearings process as part of
formulating its Written Submission. The
Written Update is solely intended to
give a company the additional
opportunity to provide an update on
any new material information that has
transpired since its Written Submission
and to reply to Nasdaq staff’s response.9
In addition, under the proposed
revisions to Listing Rule 5815, a
company that fails to raise with
specificity any material information
relating to its appeal of a delisting
determination, public reprimand letter,
or denial of a listing application in
either its Written Submission or Written
Update (‘‘New Material Information’’),
with certain exceptions, will be
prohibited from introducing such
information during the oral hearing
before the Hearings Panel. Information
would not be considered New Material
Information if, in the Hearings Panel’s
opinion, the company had previously
included information with sufficient
detail to be useful in the Hearings
Panel’s review of the record before the
hearing. This revision is intended to
improve the Hearings Panel’s timely
access to material information, and the
proposed Listing Rule 5815 includes
certain safeguards to ensure such access.
New Material Information would be
permitted in three situations. First, the
prohibition on introducing New
Material Information during the hearing
only applies absent solicitation from the
Hearings Panel. This is to ensure that
the Hearings Panel is not restricted or
limited in its ability to ask questions of
a company and has the latitude needed
to receive answers to its inquiries
during the oral hearing.
Second, if the Hearings Panel
determines that the company has shown
9 Nasdaq has observed that companies are
primarily seeking to introduce material information
such as a new equity offering or merger, as opposed
to legal arguments, at the hearing; thus, the Written
Update will provide companies with an
opportunity to update the Hearings Panel with
material information closer in time to the hearing,
but far enough in advance that the Hearings Panel
has adequate time to consider such information.
VerDate Sep<11>2014
18:30 Jul 17, 2020
Jkt 250001
that the New Material Information did
not exist at the time the company was
permitted to submit a Written Update,
i.e., the information is truly new, then
the company will be permitted to
introduce such evidence at the hearing.
For example, where a key component of
a company’s compliance plan is a
merger, and the company obtains a fully
executed version of the merger
agreement the day before the hearing,
the executed merger agreement would
constitute information that did not exist
at the time the company was permitted
to submit a Written Update. However,
the fact that the company was pursuing
a merger, the potential merger parties,
and the material terms of the
contemplated merger, should have been
previously disclosed by the company, as
some or all of such information likely
existed at the time the company was
permitted to submit a Written Update.
Third, if the Hearings Panel
determines that the company has shown
that ‘‘exceptional or unusual
circumstances’’ exist that warrant
consideration of the New Material
Information, then the company will be
permitted to introduce such evidence at
the oral hearing. As stated in the
proposed revisions to Listing Rule 5815,
‘‘exceptional or unusual circumstances’’
would include, but are not necessarily
limited to, material information that was
not earlier discoverable by the listed
company despite all reasonable
measures having been taken.10 This is
intended to provide a prudent safety
valve for companies that have otherwise
exercised due diligence in providing
timely information to the Hearings
Panel, yet it is circumscribed to the
degree necessary to avoid becoming an
exception that swallows the general
standard.
Where a Hearings Panel permits a
company to introduce New Material
Information, the proposed revisions to
Listing Rule 5815 also provides Nasdaq
staff an opportunity to respond in
writing to the New Material Information
within up to three business days, or
such shorter time as the Hearings Panel
requests, following the oral hearing.
Because the company had the
opportunity to present its view on the
New Material Information at the oral
hearing, the company may respond to
the staff’s submission only if the
Hearings Panel requests it do so. This
approach balances the company’s need
10 Cf. SEC Rules of Practice 452, 17 CFR 201.452
(a party may file a motion for leave to adduce
additional evidence prior to the issuance of a
decision by the Commission upon a ‘‘show[ing]
with particularity that such additional evidence is
material and that there were reasonable grounds for
failure to adduce such evidence previously’’).
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
to introduce new information during a
hearing; the Nasdaq staff’s ability to
provide a fulsome review of such
information to benefit the Hearings
Panel’s ultimate consideration of an
issue; and the interest in timely
resolving a matter after a hearing.
The proposed changes to Listing Rule
5815 will be operative for any company
that requests a hearing to review a staff
delisting determination, public
reprimand letter, or written denial of a
listing application after the date of an
SEC approval of the proposed rule
change.11
The Exchange believes that the abovementioned revisions to Listing Rule
5815 will enhance the hearings process
by providing the Hearings Panel with
the most developed record in as timely
a manner as possible. The Exchange
further believes that the proposed
revisions will avoid situations that
Nasdaq staff has observed where, in
advance of a hearing, companies
provide little information about their
plan to achieve or regain compliance or
regarding their appeal of a public
reprimand letter or denial of an initial
listing application, and instead present
such information for the first time
during the hearing. When companies
belatedly provide information to the
Hearings Panel, Nasdaq staff has
observed that it does not provide the
Hearings Panel with adequate time to
prepare for and consider the
information in advance of the hearing.
Similarly, where companies belatedly
provide legal arguments to the Hearings
Panel, Nasdaq staff is unable to
adequately brief the Hearings Panel
concerning its response to the legal
argument and, as a result, the Hearings
Panel does not have adequate time to
prepare for and consider the legal
argument in advance of the hearing and
thus cannot properly adjudicate the
issue.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,12 in general, and furthers the
objectives of Sections 6(b)(5) and 6(b)(7)
of the Act,13 in particular, in that it is
designed to promote just and equitable
principles of trade, to remove
11 Companies that have requested a written or oral
hearing before a Hearings Panel to review the staff
delisting determination, public reprimand letter, or
written denial of a listing application prior to the
date of SEC approval of the proposed rule change
will be subject to the rule text in Listing Rule
5815(a)(5)–(6) that was effective prior to the date of
such SEC approval. For such companies, the online
rulebook will contain a hyperlink to the older
version of the rule.
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5) and (7).
E:\FR\FM\20JYN1.SGM
20JYN1
Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Notices
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 preventing
companies from engaging in
gamesmanship in the hearings process
while affording companies a fair process
and reasonable opportunity to present
material arguments and evidence to the
Hearings Panel at an appropriate time in
the hearings process.
Specifically, this proposal will
prevent companies from providing
substantive information for the first time
during a hearing, after having provided
the Hearings Panel either no written
compliance plan before the hearing or
little detail regarding their compliance
plan or appeal of a public reprimand
letter or denial of an initial listing
application before the hearing. In such
circumstances, a Hearings Panel has
little or no opportunity to review
material information regarding a
company’s compliance plan or a
company’s appellate position, or to
formulate questions to ask the company,
in advance of the hearing. As a result,
the Hearings Panel may need more time
or information to fully consider the
matter following the hearing. In the
Exchange’s view, these current practices
effectively reward a company that
withholds information by extending the
time it remains listed pending a
Hearings Panel decision.14
Likewise, when companies withhold
legal arguments from their Written
Submissions regarding a compliance
plan or their appellate position, Nasdaq
staff may be unable to fully develop
legal arguments or advise the Hearings
Panel effectively regarding a company’s
request for relief. As a result, the
Hearings Panel would not be able to
properly adjudicate the legal issue
during the hearing. While legal
arguments are not permitted in the
Written Update, the Exchange does not
believe that any prejudice will result to
a company because the Exchange
believes a company would have
developed its legal arguments early in
the hearings process as part of
formulating its Written Submission.
The Exchange believes that this
proposal is in keeping with the
principles described in Sections 6(b)(5)
and 6(b)(7) because it will ensure that
the hearings process operates effectively
and efficiently, allowing companies the
opportunity to present information and
legal arguments about their appellate
14 Generally, a timely request for a hearing stays
the suspension and delisting action pending the
issuance of a written Panel Decision. Listing Rule
5815(a)(1)(B).
VerDate Sep<11>2014
18:30 Jul 17, 2020
Jkt 250001
position or ability to achieve and
maintain compliance, while also
affording the Hearings Panel an
opportunity to review that information
or legal argument and benefit from
Nasdaq staff’s views about the
information presented. As such, the
Exchange believes that this proposal
will strengthen the integrity and
transparency of the hearings process.
Furthermore, the Exchange believes that
the proposed changes to the hearings
process appropriately balance the
potential harm of a delisting decision or
a denial of initial listing to the company
and its current investors with the
expectations of prospective investors,
who are entitled to believe that a
company listed on Nasdaq satisfies all
of Nasdaq’s listing requirements.15
Likewise, the Exchange believes that the
proposed changes to the hearings
process appropriately balance the
potential harm to companies issued a
public reprimand letter with an
improved opportunity to adequately
develop the record in advance of the
oral hearing.
The Exchange believes that the
proposed process is fair because
companies retain the ability to
introduce all relevant information
before a Hearings Panel, and the
proposed changes require that they do
so in a more efficient way that helps to
minimize the length of time a Hearings
Panel needs to make a decision. The
Exchange further believes that the
proposed process limiting legal
arguments to the Written Submission is
fair because the Exchange believes a
company would have developed its
legal arguments early in the hearings
process as part of formulating its
Written Submission. In addition,
building in time for Nasdaq staff to
provide a thorough response to the legal
argument in advance of the hearing
allows the Hearings Panel to properly
adjudicate a legal issue with the benefit
of having fully considered the
company’s and Nasdaq staff’s views in
advance of the hearing.
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
In re Tassaway, Securities Exchange Act
Release No. 11291, 45 S.E.C. 706, 709, 1975 SEC
LEXIS 2057, at *6 (Mar. 13, 1975) (‘‘[P]rimary
emphasis must be placed on the interests of
prospective future investors . . . [who are] entitled
to assume that the securities in [Nasdaq] meet
[Nasdaq’s] standards. Hence the presence in
[Nasdaq] of non-complying securities could have a
serious deceptive effect.’’).
PO 00000
15 See
Frm 00098
Fmt 4703
Sfmt 4703
43903
of the purposes of the Act. All
companies seeking review of a delisting
determination, public reprimand letter,
or denial of an initial listing application
before a Hearings Panel would be
affected in the same manner by this
change. Moreover, as described above,
Nasdaq believes that the proposed rule
change is necessary to enhance investor
protection from companies that
withhold material information or legal
arguments from the Hearings Panel until
the day of the hearing. This conduct
may result in the Hearings Panel’s need
for additional time to review the
information and, thus, potentially
unqualified companies remaining listed
longer pending a Hearings Panel
decision.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will: (a) By order approve 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2020–002 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–2020–002. This
file number should be included on the
E:\FR\FM\20JYN1.SGM
20JYN1
43904
Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Notices
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
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–2020–002 and
should be submitted on or before
August 10, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15552 Filed 7–17–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 203A–2(d); SEC File No. 270–630,
OMB Control No. 3235–0689
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
16 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:30 Jul 17, 2020
Jkt 250001
Office of Management and Budget
(‘‘OMB’’) a request for extension of the
previously approved collection of
information discussed below.
The title of the collection of
information is: ‘‘Exemption for Certain
Multi-State Investment Advisers (Rule
203A–2(d)).’’ Its currently approved
OMB control number is 3235–0689. An
agency may not conduct or sponsor, and
a person is not required to respond to
a collection of information unless it
displays a currently valid control
number.
Pursuant to section 203A of the
Investment Advisers Act of 1940 (the
‘‘Act’’) (15 U.S.C. 80b–3a), an
investment adviser that is regulated or
required to be regulated as an
investment adviser in the state in which
it maintains its principal office and
place of business is prohibited from
registering with the Commission unless
that adviser has at least $25 million in
assets under management or advises a
Commission-registered investment
company. Section 203A also prohibits
from Commission registration an adviser
that: (i) Has assets under management
between $25 million and $100 million;
(ii) is required to be registered as an
investment adviser with the state in
which it maintains its principal office
and place of business; and (iii) if
registered, would be subject to
examination as an adviser by that state
(a ‘‘mid-sized adviser’’). A mid-sized
adviser that otherwise would be
prohibited may register with the
Commission if it would be required to
register with 15 or more states.
Similarly, Rule 203A–2(d) under the Act
(17 CFR 275.203a–2(d)) provides that
the prohibition on registration with the
Commission does not apply to an
investment adviser that is required to
register in 15 or more states. An
investment adviser relying on this
exemption also must: (i) Include a
representation on Schedule D of Form
ADV that the investment adviser has
concluded that it must register as an
investment adviser with the required
number of states; (ii) undertake to
withdraw from registration with the
Commission if the adviser indicates on
an annual updating amendment to Form
ADV that it would be required by the
laws of fewer than 15 states to register
as an investment adviser with the state;
and (iii) maintain in an easily accessible
place a record of the states in which the
investment adviser has determined it
would, but for the exemption, be
required to register for a period of not
less than five years from the filing of a
Form ADV relying on the rule.
Respondents to this collection of
information are investment advisers
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
required to register in 15 or more states
absent the exemption that rely on rule
203A–2(d) to register with the
Commission. The information collected
under rule 203A–2(d) permits the
Commission’s examination staff to
determine an adviser’s eligibility for
registration with the Commission under
this exemptive rule and is also
necessary for the Commission staff to
use in its examination and oversight
program. This collection of information
is codified at 17 CFR 275.203a–2(d) and
is mandatory to qualify for and maintain
Commission registration eligibility
under rule 203A–2(d). Responses to the
recordkeeping requirements under rule
203A–2(d) in the context of the
Commission’s examination and
oversight program are generally kept
confidential.
The estimated number of investment
advisers subject to the collection of
information requirements under the rule
is 106. These advisers will incur an
average one-time initial burden of
approximately 8 hours, and an average
ongoing burden of approximately 8
hours per year, to keep records
sufficient to demonstrate that they meet
the 15-state threshold. These estimates
are based on an estimate that each year
an investment adviser will spend
approximately 0.5 hours creating a
record of its determination whether it
must register as an investment adviser
with each of the 15 states required to
rely on the exemption, and
approximately 0.5 hours to maintain
these records. Accordingly, we estimate
that rule 203A–2(d) results in an annual
aggregate burden of collection for SECregistered investment advisers of a total
of 848 hours. Estimates of average
burden hours are made solely for the
purposes of the Paperwork Reduction
Act, and are not derived from a
comprehensive or even a representative
survey or study of the costs of
Commission rules and forms.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission, c/
o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
E:\FR\FM\20JYN1.SGM
20JYN1
]]>Agencies
[Federal Register Volume 85, Number 139 (Monday, July 20, 2020)]
[Notices]
[Pages 43900-43904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15552]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89309; File No. SR-NASDAQ-2020-002]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Amend the Procedures
Governing the Introduction of Legal Arguments and Material Information
by Companies in a Proceeding Before a Hearings Panel
July 14, 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 July 2, 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 amend the procedures governing the
introduction of legal arguments and material information by companies
in a proceeding before a Hearings Panel.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
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
[[Page 43901]]
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
A company may, within seven calendar days of the date of a staff
delisting determination notification, public reprimand letter, or
written denial of a listing application, request a written or oral
hearing before a Hearings Panel to review the staff delisting
determination, public reprimand letter, or written denial of a listing
application.\3\ The Hearings Department will then schedule a hearing to
take place before a Hearings Panel, generally within 45 days of the
request for a hearing.\4\ The Hearings Department will send written
acknowledgment of the company's hearing request and inform the company
of the date, time, and location of the hearing, and the deadlines for
written submissions to the Hearings Panel.\5\ A company may waive its
right to an oral hearing and instead seek a decision by the Hearings
Panel based solely on its written submissions. To improve the hearings
process, the Exchange is proposing to revise the procedures governing
the introduction of legal arguments and material information by
companies in a written or oral hearing before a Hearings Panel.
---------------------------------------------------------------------------
\3\ See Listing Rule 5815(a)(1)(A).
\4\ See Listing Rule 5815(a)(4). Under that rule, the company
will be provided at least ten calendar days' notice of the hearing
unless the company waives such notice.
\5\ Id.
---------------------------------------------------------------------------
Specifically, the Exchange is proposing to revise, as discussed
below, Listing Rule 5815(a)(5), which currently provides that a company
may submit to the Hearings Department a written plan of compliance and
request that the Hearings Panel grant an exception to the listing
standards for a limited time period, or may set forth specific grounds
for the company's contention that the issuance of a staff delisting
determination, public reprimand letter, or denial of a listing
application, was in error, and may also submit public documents or
other written material in support of its position, including any
information not available at the time of the staff determination. The
Exchange is also proposing to revise Listing Rule 5815(a)(6), which
currently provides that at an oral hearing, the company may make such
presentation as it deems appropriate, and the Hearings Panel may
question any representative appearing at the hearing. To improve the
efficient and effective functioning of the hearings process in
connection with the company's appeal of a delisting determination,
public reprimand letter, or denial of a listing application, the
Exchange proposes amending Listing Rule 5815(a)(5) and (a)(6) to: (1)
Establish a requirement, and set forth the process, for a company to
provide a written submission and written update in connection with
either a written or oral hearing; (2) prohibit a company from
introducing in a written update or during an oral hearing before a
Hearings Panel any legal arguments that were not previously raised; and
(3) prohibit a company from introducing during an oral hearing before a
Hearings Panel any material information unless the material information
was previously raised by the company in writing or was solicited by the
Hearings Panel, or the company can show that the material information
did not earlier exist or exceptional or unusual circumstances are
present.
The proposed revisions to Listing Rule 5815 would contain an
express requirement that for both oral and written hearings a company
must state in writing with specificity the grounds upon which it is
seeking review in advance of a hearing (the ``Written Submission'').\6\
This requirement will ensure that a company makes a Written Submission.
In addition, the requirement that a company state ``with specificity''
the grounds on which is it seeking review will ensure that the Written
Submission includes sufficient detail to be useful in the Hearings
Panel's review of the record before the hearing.
---------------------------------------------------------------------------
\6\ As noted above, the Hearings Department generally calendars
a hearing within 45 days of the request for a hearing and will
establish deadlines for written submissions to the Hearings Panel.
See Listing Rule 5815(a)(4). As determined by the Hearings
Department, both oral and written hearing matters are generally
considered on Thursdays, and the company's written submission is
typically due on the third Friday before the hearing. The Hearings
Department will generally establish the Thursday before the Hearing
as the deadline for Nasdaq staff to respond in writing.
---------------------------------------------------------------------------
The proposed revisions to Listing Rule 5815 will clarify the
ability of Nasdaq staff to respond in writing to a company's Written
Submission. The proposed revisions to Listing Rule 5815 would also
provide a company with the option to supplement the company's Written
Submission by providing a written update to the Hearings Department no
later than two business days in advance of the hearing, briefing the
Hearings Panel on any new material information that has transpired
since its Written Submission (the ``Written Update'').\7\ The Exchange
believes that allowing for a Written Update will improve the hearings
process by allowing a company to provide updated information about
fast-moving transactions, thereby enabling the Hearings Panel to
prepare for the hearing with the most current data available on the
company's steps toward achieving or maintaining compliance.
---------------------------------------------------------------------------
\7\ Because one of the purposes of the Written Update is to
allow a company to supplement its Written Submission, a company
would be permitted to submit a Written Update even if Nasdaq staff
does not respond in writing to the company's Written Submission.
---------------------------------------------------------------------------
To ensure that companies provide the requisite information in a
Written Submission or a Written Update, the Exchange proposes including
certain evidentiary standards in proposed Listing Rule 5815. Under the
proposed revisions to Listing Rule 5815, legal arguments are only
permitted in the Written Submission, and the company must include in
the Written Submission all legal arguments on which it intends to rely.
A company that does not raise with specificity a legal argument in its
Written Submission will be prohibited from introducing a new legal
argument in the Written Update or during the hearing before the
Hearings Panel.\8\ The Hearings Panel will determine that a company has
raised a legal argument with specificity if the legal argument includes
sufficient detail to be useful in the Hearings Panel's review of the
record before the hearing.
---------------------------------------------------------------------------
\8\ There is precedent for the requirement that an appellant
include all legal arguments in an opening brief, such as the Written
Submission, in the SEC Rules of Practice and by the Federal Rules of
Appellate Procedure. See, e.g., SEC Rules of Practice 420, 17 CFR
201.420(c) (governing appeals to the Commission of determinations by
Self-Regulatory Organizations, which requires that an application
for review ``set forth in summary form a brief statement of alleged
errors in the determination and supporting reasons therefor'' and
that any exception to a determination ``not supported in an opening
brief'' may ``be deemed to have been waived''). See also SEC Rules
of Practice Rule 222, 17 CFR 201.222(a) (governing prehearing
submissions, which allows a hearing officer, on his or her own
motion, or at the request of a party or other participant, to order
any party to furnish information including ``an outline or narrative
summary of its case or defense'' and ``the legal theories upon which
it will rely''). See, e.g., Barna v. Bd. of Sch. Dirs. of the
Panther Valley Sch. Dist., 877 F.3d 136, 145-46 (3d Cir. 2017)
(noting that Fed. R. App. P. 28 requires an appellant's opening
brief to set forth and address each argument the appellant wishes to
pursue in an appeal and that the court will not ``reach arguments
raised for the first time in a reply brief or at oral argument'').
---------------------------------------------------------------------------
Otherwise, when a company raises a legal argument during a hearing
or right before the hearing that was not
[[Page 43902]]
contained in its Written Submission, it deprives Nasdaq staff of the
opportunity to provide a thorough response to the legal argument and it
deprives the Hearings Panel the benefit of Nasdaq staff's views and
perspective. As a result, the Hearings Panel would not be able to
properly adjudicate the legal issue. While new legal arguments are not
permitted in the Written Update, the Exchange does not believe that any
prejudice will result to a company from this requirement because the
Exchange believes a company would have developed its legal arguments
early in the hearings process as part of formulating its Written
Submission. The Written Update is solely intended to give a company the
additional opportunity to provide an update on any new material
information that has transpired since its Written Submission and to
reply to Nasdaq staff's response.\9\
---------------------------------------------------------------------------
\9\ Nasdaq has observed that companies are primarily seeking to
introduce material information such as a new equity offering or
merger, as opposed to legal arguments, at the hearing; thus, the
Written Update will provide companies with an opportunity to update
the Hearings Panel with material information closer in time to the
hearing, but far enough in advance that the Hearings Panel has
adequate time to consider such information.
---------------------------------------------------------------------------
In addition, under the proposed revisions to Listing Rule 5815, a
company that fails to raise with specificity any material information
relating to its appeal of a delisting determination, public reprimand
letter, or denial of a listing application in either its Written
Submission or Written Update (``New Material Information''), with
certain exceptions, will be prohibited from introducing such
information during the oral hearing before the Hearings Panel.
Information would not be considered New Material Information if, in the
Hearings Panel's opinion, the company had previously included
information with sufficient detail to be useful in the Hearings Panel's
review of the record before the hearing. This revision is intended to
improve the Hearings Panel's timely access to material information, and
the proposed Listing Rule 5815 includes certain safeguards to ensure
such access.
New Material Information would be permitted in three situations.
First, the prohibition on introducing New Material Information during
the hearing only applies absent solicitation from the Hearings Panel.
This is to ensure that the Hearings Panel is not restricted or limited
in its ability to ask questions of a company and has the latitude
needed to receive answers to its inquiries during the oral hearing.
Second, if the Hearings Panel determines that the company has shown
that the New Material Information did not exist at the time the company
was permitted to submit a Written Update, i.e., the information is
truly new, then the company will be permitted to introduce such
evidence at the hearing. For example, where a key component of a
company's compliance plan is a merger, and the company obtains a fully
executed version of the merger agreement the day before the hearing,
the executed merger agreement would constitute information that did not
exist at the time the company was permitted to submit a Written Update.
However, the fact that the company was pursuing a merger, the potential
merger parties, and the material terms of the contemplated merger,
should have been previously disclosed by the company, as some or all of
such information likely existed at the time the company was permitted
to submit a Written Update.
Third, if the Hearings Panel determines that the company has shown
that ``exceptional or unusual circumstances'' exist that warrant
consideration of the New Material Information, then the company will be
permitted to introduce such evidence at the oral hearing. As stated in
the proposed revisions to Listing Rule 5815, ``exceptional or unusual
circumstances'' would include, but are not necessarily limited to,
material information that was not earlier discoverable by the listed
company despite all reasonable measures having been taken.\10\ This is
intended to provide a prudent safety valve for companies that have
otherwise exercised due diligence in providing timely information to
the Hearings Panel, yet it is circumscribed to the degree necessary to
avoid becoming an exception that swallows the general standard.
---------------------------------------------------------------------------
\10\ Cf. SEC Rules of Practice 452, 17 CFR 201.452 (a party may
file a motion for leave to adduce additional evidence prior to the
issuance of a decision by the Commission upon a ``show[ing] with
particularity that such additional evidence is material and that
there were reasonable grounds for failure to adduce such evidence
previously'').
---------------------------------------------------------------------------
Where a Hearings Panel permits a company to introduce New Material
Information, the proposed revisions to Listing Rule 5815 also provides
Nasdaq staff an opportunity to respond in writing to the New Material
Information within up to three business days, or such shorter time as
the Hearings Panel requests, following the oral hearing. Because the
company had the opportunity to present its view on the New Material
Information at the oral hearing, the company may respond to the staff's
submission only if the Hearings Panel requests it do so. This approach
balances the company's need to introduce new information during a
hearing; the Nasdaq staff's ability to provide a fulsome review of such
information to benefit the Hearings Panel's ultimate consideration of
an issue; and the interest in timely resolving a matter after a
hearing.
The proposed changes to Listing Rule 5815 will be operative for any
company that requests a hearing to review a staff delisting
determination, public reprimand letter, or written denial of a listing
application after the date of an SEC approval of the proposed rule
change.\11\
---------------------------------------------------------------------------
\11\ Companies that have requested a written or oral hearing
before a Hearings Panel to review the staff delisting determination,
public reprimand letter, or written denial of a listing application
prior to the date of SEC approval of the proposed rule change will
be subject to the rule text in Listing Rule 5815(a)(5)-(6) that was
effective prior to the date of such SEC approval. For such
companies, the online rulebook will contain a hyperlink to the older
version of the rule.
---------------------------------------------------------------------------
The Exchange believes that the above-mentioned revisions to Listing
Rule 5815 will enhance the hearings process by providing the Hearings
Panel with the most developed record in as timely a manner as possible.
The Exchange further believes that the proposed revisions will avoid
situations that Nasdaq staff has observed where, in advance of a
hearing, companies provide little information about their plan to
achieve or regain compliance or regarding their appeal of a public
reprimand letter or denial of an initial listing application, and
instead present such information for the first time during the hearing.
When companies belatedly provide information to the Hearings Panel,
Nasdaq staff has observed that it does not provide the Hearings Panel
with adequate time to prepare for and consider the information in
advance of the hearing. Similarly, where companies belatedly provide
legal arguments to the Hearings Panel, Nasdaq staff is unable to
adequately brief the Hearings Panel concerning its response to the
legal argument and, as a result, the Hearings Panel does not have
adequate time to prepare for and consider the legal argument in advance
of the hearing and thus cannot properly adjudicate the issue.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of
Sections 6(b)(5) and 6(b)(7) of the Act,\13\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove
[[Page 43903]]
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 preventing companies from engaging in gamesmanship
in the hearings process while affording companies a fair process and
reasonable opportunity to present material arguments and evidence to
the Hearings Panel at an appropriate time in the hearings process.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5) and (7).
---------------------------------------------------------------------------
Specifically, this proposal will prevent companies from providing
substantive information for the first time during a hearing, after
having provided the Hearings Panel either no written compliance plan
before the hearing or little detail regarding their compliance plan or
appeal of a public reprimand letter or denial of an initial listing
application before the hearing. In such circumstances, a Hearings Panel
has little or no opportunity to review material information regarding a
company's compliance plan or a company's appellate position, or to
formulate questions to ask the company, in advance of the hearing. As a
result, the Hearings Panel may need more time or information to fully
consider the matter following the hearing. In the Exchange's view,
these current practices effectively reward a company that withholds
information by extending the time it remains listed pending a Hearings
Panel decision.\14\
---------------------------------------------------------------------------
\14\ Generally, a timely request for a hearing stays the
suspension and delisting action pending the issuance of a written
Panel Decision. Listing Rule 5815(a)(1)(B).
---------------------------------------------------------------------------
Likewise, when companies withhold legal arguments from their
Written Submissions regarding a compliance plan or their appellate
position, Nasdaq staff may be unable to fully develop legal arguments
or advise the Hearings Panel effectively regarding a company's request
for relief. As a result, the Hearings Panel would not be able to
properly adjudicate the legal issue during the hearing. While legal
arguments are not permitted in the Written Update, the Exchange does
not believe that any prejudice will result to a company because the
Exchange believes a company would have developed its legal arguments
early in the hearings process as part of formulating its Written
Submission.
The Exchange believes that this proposal is in keeping with the
principles described in Sections 6(b)(5) and 6(b)(7) because it will
ensure that the hearings process operates effectively and efficiently,
allowing companies the opportunity to present information and legal
arguments about their appellate position or ability to achieve and
maintain compliance, while also affording the Hearings Panel an
opportunity to review that information or legal argument and benefit
from Nasdaq staff's views about the information presented. As such, the
Exchange believes that this proposal will strengthen the integrity and
transparency of the hearings process. Furthermore, the Exchange
believes that the proposed changes to the hearings process
appropriately balance the potential harm of a delisting decision or a
denial of initial listing to the company and its current investors with
the expectations of prospective investors, who are entitled to believe
that a company listed on Nasdaq satisfies all of Nasdaq's listing
requirements.\15\ Likewise, the Exchange believes that the proposed
changes to the hearings process appropriately balance the potential
harm to companies issued a public reprimand letter with an improved
opportunity to adequately develop the record in advance of the oral
hearing.
---------------------------------------------------------------------------
\15\ See In re Tassaway, Securities Exchange Act Release No.
11291, 45 S.E.C. 706, 709, 1975 SEC LEXIS 2057, at *6 (Mar. 13,
1975) (``[P]rimary emphasis must be placed on the interests of
prospective future investors . . . [who are] entitled to assume that
the securities in [Nasdaq] meet [Nasdaq's] standards. Hence the
presence in [Nasdaq] of non-complying securities could have a
serious deceptive effect.'').
---------------------------------------------------------------------------
The Exchange believes that the proposed process is fair because
companies retain the ability to introduce all relevant information
before a Hearings Panel, and the proposed changes require that they do
so in a more efficient way that helps to minimize the length of time a
Hearings Panel needs to make a decision. The Exchange further believes
that the proposed process limiting legal arguments to the Written
Submission is fair because the Exchange believes a company would have
developed its legal arguments early in the hearings process as part of
formulating its Written Submission. In addition, building in time for
Nasdaq staff to provide a thorough response to the legal argument in
advance of the hearing allows the Hearings Panel to properly adjudicate
a legal issue with the benefit of having fully considered the company's
and Nasdaq staff's views in advance of the hearing.
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. All companies seeking review of
a delisting determination, public reprimand letter, or denial of an
initial listing application before a Hearings Panel would be affected
in the same manner by this change. Moreover, as described above, Nasdaq
believes that the proposed rule change is necessary to enhance investor
protection from companies that withhold material information or legal
arguments from the Hearings Panel until the day of the hearing. This
conduct may result in the Hearings Panel's need for additional time to
review the information and, thus, potentially unqualified companies
remaining listed longer pending a Hearings Panel decision.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2020-002 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-2020-002. This
file number should be included on the
[[Page 43904]]
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
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-2020-002 and should be submitted on or before August 10, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15552 Filed 7-17-20; 8:45 am]
BILLING CODE 8011-01-P
