Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt a New Requirement Related to the Qualification of Management for Companies From Restrictive Markets, 57260-57263 [2020-20254]
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Federal Register / Vol. 85, No. 179 / Tuesday, September 15, 2020 / Notices
9. Title and purpose of information
collection: Statement Regarding
Contributions and Support of Children;
OMB 3220–0195.
Section 2(d)(4) of the Railroad
Retirement Act (RRA) (45 U.S.C. 231a),
provides, in part, that a child is deemed
dependent if the conditions set forth in
Section 202(d)(3), (4) and (9) of the
Social Security Act are met. Section
202(d)(4) of the Social Security Act, as
amended by Public Law 104–121,
requires as a condition of dependency,
that a child receives one-half of his or
her support from the stepparent. This
dependency impacts upon the
entitlement of a spouse or survivor of an
employee whose entitlement is based
upon having a stepchild of the
employee in care, or on an individual
seeking a child’s annuity as a stepchild
of an employee. Therefore, depending
on the employee for at least one-half
support is a condition affecting
eligibility for increasing an employee or
spouse annuity under the social security
overall minimum provisions on the
basis of the presence of a dependent
child, the employee’s natural child in
limited situations, adopted children,
stepchildren, grandchildren, stepgrandchildren and equitably adopted
children. The regulations outlining
child support and dependency
requirements are prescribed in 20 CFR
222.50–57.
In order to correctly determine if an
applicant is entitled to a child’s annuity
based on actual dependency, the RRB
uses Form G–139, Statement Regarding
Contributions and Support of Children,
to obtain financial information needed
to make a comparison between the
amount of support received from the
railroad employee and the amount
received from other sources. Completion
is required to obtain a benefit. One
response is required of each respondent.
The RRB proposes a minor editorial
change to Form G–139 to change the
date under Section 1 ‘‘General
Instructions’’.
ESTIMATE OF ANNUAL RESPONDENT BURDEN
Form No.
Annual
responses
Time
(minutes)
Burden
(hours)
G–139 ..........................................................................................................................................
500
60
500
Additional Information or Comments:
To request more information or to
obtain a copy of the information
collection justification, forms, and/or
supporting material, contact Kennisha
Tucker at (312) 469–2591 or
Kennisha.Tucker@rrb.gov. Comments
regarding the information collection
should be addressed to Brian Foster,
Railroad Retirement Board, 844 North
Rush Street, Chicago, Illinois 60611–
1275 or emailed to Brian.Foster@rrb.gov.
Written comments should be received
within 60 days of this notice.
Brian Foster,
Clearance Officer.
[FR Doc. 2020–20306 Filed 9–14–20; 8:45 am]
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COMMISSION
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[Release No. 34–89794; File No. SR–
NASDAQ–2020–026]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt a New
Requirement Related to the
Qualification of Management for
Companies From Restrictive Markets
September 9, 2020.
I. Introduction
On May 29, 2020, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
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filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt a new requirement
related to the qualification of
management for companies whose
business is principally administered in
a jurisdiction that has secrecy laws,
blocking statutes, national security laws,
or other laws or regulations restricting
access to information by regulators of
U.S.-listed companies. The proposed
rule change was published for comment
in the Federal Register on June 12,
2020.3 On July 20, 2020, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On August 21,
2020, the Exchange filed Amendment
No. 1 to the proposed rule change,
which replaced and superseded the
proposed rule change as originally
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 89028
(June 8, 2020), 85 FR 35967 (‘‘Notice’’). Comments
on the proposed rule change can be found at:
https://www.sec.gov/comments/sr-nasdaq-2020026/srnasdaq2020026.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 89342,
85 FR 44951 (July 24, 2020). The Commission
designated September 10, 2020 as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
approve or disapprove, the proposed rule change.
2 17
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filed.6 The Commission is publishing
this notice and order to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons and to institute
proceedings pursuant to Section
19(b)(2)(B) of the Act 7 to determine
whether to approve or disapprove the
proposed rule change, as modified by
Amendment No. 1.
II. Exchange’s Description of the
Proposed Rule Change, as Modified by
Amendment No. 1
The Exchange states that it has
observed instances where it appears that
a company’s management lacked
familiarity with the requirements to be
a Nasdaq-listed public company in the
U.S. or was otherwise unprepared for
the rigors of operating as a public
company.8 The Exchange further states
6 Amendment No. 1 is available at https://
www.sec.gov/comments/sr-nasdaq-2020-026/
srnasdaq2020026.htm.
7 15 U.S.C. 78s(b)(2)(B).
8 The Exchange states that, under federal
securities laws, a company’s management is
responsible for preparing financial statements and
for establishing and maintaining disclosure controls
and procedures and internal control over financial
reporting. See Amendment 1, supra note 6, at 4–5
(citing Sections 404(b), 302, and 906 of the
Sarbanes-Oxley Act of 2002, Pub. L. 107–204, 116
Stat. 745 (2002)). In addition, the Exchange states
that its listing requirements include quantitative
criteria based on the company’s financial
statements and market information, impose
disclosure obligations, and establish minimum
corporate governance requirements, and that a
listed company’s management is responsible for
ensuring compliance with these listing
requirements on an ongoing basis. See id. (citing
Nasdaq Listing Rule 5625 (Notification of
Noncompliance)).
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that the risks arising from these
situations are heightened when a
company’s business is principally
administered in a jurisdiction that
restricts access to information by
regulators of U.S.-listed companies. As
a result, the Exchange is now proposing
new requirements that it believes will
heighten compliance by such companies
and enhance investor protection.9
First, the Exchange is proposing to
adopt a new initial listing standard in
Nasdaq Listing Rule 5210(c) to require
any Company 10 that principally
administers its business in a jurisdiction
that Nasdaq determines to have secrecy
laws, blocking statutes, national security
laws, or other laws or regulations
restricting access to information by
regulators of U.S.-listed companies in
such jurisdiction (a ‘‘Restrictive
Market’’) to have, and certify that it will
continue to have until the third
anniversary of its listing date, at least
one member of senior management or a
director who has relevant past
employment experience at a U.S.-listed
public company or other experience,
training, or background that results in
the individual’s general familiarity with
the regulatory and reporting
requirements applicable to a U.S.-listed
public company under Nasdaq rules and
federal securities laws.11 In the absence
of such an individual, the proposal
would require a Company that
principally administers its business in a
Restrictive Market (‘‘Restrictive Market
Company’’) to retain on an ongoing
basis an advisor or advisors, acceptable
to Nasdaq, that will provide such
guidance to the Company.12 In
determining whether a Company’s
business is principally administered in
a Restrictive Market, the proposed rule
provides that Nasdaq may consider the
geographic locations of the Company’s:
(a) Principal business segments,
operations, or assets; (b) board and
shareholders’ meetings; (c) headquarters
or principal executive offices; (d) senior
management and employees; and (e)
books and records.13 The Exchange
states that this definition would capture
both foreign private issuers based in
Restrictive Markets and companies
based in the U.S. or another jurisdiction
that principally administer their
businesses in Restrictive Markets.14
9 See
id. at 6.
Listing Rule 5005(a)(6) defines
‘‘Company’’ as the issuer of a security listed or
applying to list on Nasdaq.
11 The Exchange also proposes to renumber the
remaining provisions of Nasdaq Listing Rule 5210.
12 See proposed Rule 5210(c).
13 See id.
14 See Amendment No. 1, supra note 6 at 7, n.8.
The Exchange further provides the following
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10 Nasdaq
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In addition, the Exchange is
proposing to adopt new Nasdaq Listing
Rule 5250(g) to require any Company
that was subject to proposed Rule
5210(c) upon initial listing and that
continues to be a Restrictive Market
Company to have, until the third
anniversary of its listing date,15 at least
one member of senior management or a
director who has relevant past
employment experience at a U.S.-listed
public company or other experience,
training, or background that results in
the individual’s general familiarity with
the regulatory and reporting
requirements applicable to a U.S.-listed
public company under Nasdaq rules and
federal securities laws or, in the absence
of such an individual, to retain on an
ongoing basis an advisor or advisors,
acceptable to Nasdaq, that will provide
such guidance to the Company. The
Exchange is also proposing changes to
Nasdaq Listing Rule 5810 (Notification
of Deficiency by the Listing
Qualifications Department) to allow a
Restrictive Market Company subject to,
but not in compliance with, proposed
Rule 5250(g) to submit a plan to regain
compliance pursuant to Nasdaq Listing
Rule 5810(c)(2)(iii).16
The proposed rule changes would
apply to Restrictive Market Companies
that apply to list on Nasdaq after the
date of effectiveness of the proposed
rules and would not apply to companies
already listed on Nasdaq.17 Nasdaq
states that it believes this is appropriate
because currently-listed companies are
already subject to Nasdaq’s
requirements and U.S. securities laws
and have gained familiarity with the
example: A company’s headquarters could be
located in Country A, while the majority of its
senior management, employees, assets, operations,
and books and records are located in Country B,
which is a Restrictive Market. In this case, Nasdaq
would consider the company’s business to be
principally administered in Country B, which is a
Restrictive Market, and Nasdaq would require the
company to meet the criteria set forth in proposed
Rule 5210(c). See id. at 7.
15 The Exchange states that it believes three years
will provide a sufficient transition period for
Restrictive Market Companies because by the third
anniversary of a company’s listing date, the
company will have filed at least two annual reports
and gone through the accompanying reporting
processes and procedures, and the company’s staff
will have been subject to federal securities laws and
Nasdaq’s regulatory and reporting requirements for
a sufficient period of time to gain experience with
the requirements and how to comply. See id. at 8.
16 The Exchange states that a Restrictive Market
Company would be required to disclose that it does
not meet the requirement set forth in proposed Rule
5250(g) pursuant to Nasdaq Listing Rule 5810(b)
and that, based on its review of the company’s
compliance plan, Nasdaq Staff generally would be
able to allow the company up to 180 days to regain
compliance under Nasdaq Listing Rule
5810(c)(2)(B). See id.
17 See id. at 9.
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57261
reporting processes and procedures and
disclosure requirements by virtue of
being subject to them.18
III. Summary of the Comment Letters
Received
One commenter stated that it fully
supports the proposed rule change
inasmuch as it seems reasonably
tailored to help ensure full, complete,
and transparent financial and other
disclosure from Restrictive Market
Companies.19 Another commenter
expressed its support for the proposed
requirements relating to management
qualifications for Restrictive Market
Companies, but recommended that the
proposal be revised to apply to all
Restrictive Market Companies listed on
Nasdaq, rather than just those
companies that apply to list on Nasdaq
after the date of the proposed rule
change’s effectiveness.20 This
commenter stated that Nasdaq provided
no basis for this distinction between
companies and suggested that such
distinction may raise issues about
whether the proposal unfairly
discriminates among companies.21 In
response, Nasdaq amended the proposal
to apply the proposed requirements to
Restrictive Market Companies only until
the third anniversary of their listing
date.22 Nasdaq stated that it believes it
is appropriate to impose the proposed
requirement only for three years from
the date that a Restrictive Market
Company lists and that after being
subject to Nasdaq’s requirements for
that period of time, it would potentially
be unfair to treat the company
differently than other listed companies
in the absence of a specific identified
concern.23
IV. Proceedings To Determine Whether
To Approve or Disapprove SR–
NASDAQ–2020–026, as Modified by
Amendment No. 1, and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
18 See id. at 10. Nasdaq further states that, to the
extent there are future concerns about a currentlylisted company that arise from an apparent
unfamiliarity with the requirements to be a U.S.listed public company, Nasdaq would exercise its
regulatory authority and could consider that lack of
familiarity when determining whether to allow the
company to remain listed. See id.
19 See Letter from Annemarie Tierney, Founder
and Principal, Liquid Advisors, Inc. (July 2, 2020),
at 5.
20 See Letter from Jeffrey P. Mahoney, General
Counsel, Council of Institutional Investors (June 25,
2020), at 6–7.
21 See id. at 7.
22 See Amendment No. 1, supra note 6.
23 See id. at 10, n.13.
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Federal Register / Vol. 85, No. 179 / Tuesday, September 15, 2020 / Notices
19(b)(2)(B) of the Act 24 to determine
whether the proposed rule change, as
modified by Amendment No. 1, should
be approved or disapproved. Institution
of such proceedings is appropriate at
this time in view of the legal and policy
issues raised by the proposed rule
change. Institution of proceedings does
not indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described below, the Commission seeks
and encourages interested persons to
provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
approve or disapprove the proposed
rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,25 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with Section
6(b)(5) of the Act, which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and to
protect investors and the public interest,
and not be designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.26
The Exchange’s proposed
requirements: (1) Only apply to
Restrictive Market Companies that
apply to list on Nasdaq after the date of
effectiveness of the proposed rules; (2)
only apply until the third anniversary of
a Restrictive Market Company’s listing
date; and (3) do not apply to Restrictive
Market Companies already listed on
Nasdaq, even if such companies have
been listed on Nasdaq for less than three
years. Accordingly, the Commission
believes there are questions as to
whether the proposal is consistent with
Section 6(b)(5) of the Act and its
requirement, among other things, that
the rules of a national securities
exchange not be designed to permit
unfair discrimination.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
24 15
U.S.C. 78s(b)(2)(B).
25 Id.
26 15
U.S.C. 78f(b)(5).
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consistent with the Exchange Act and
the rules and regulations issued
thereunder . . . is on the [SRO] that
proposed the rule change.’’ 27 The
description of a proposed rule change,
its purpose and operation, its effect, and
a legal analysis of its consistency with
applicable requirements must all be
sufficiently detailed and specific to
support an affirmative Commission
finding,28 and any failure of an SRO to
provide this information may result in
the Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.29
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposal, as modified by
Amendment No. 1, is consistent with
the Act.
V. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposal, as modified by Amendment
No. 1, is consistent with Section
6(b)(5) 30 of the Act or any other
provision of the Act, or the rules and
regulations thereunder. Although there
do not appear to be any issues relevant
to approval or disapproval that would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4 under the Act,31 any request
for an opportunity to make an oral
presentation.32
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change, as modified by
Amendment No. 1, should be approved
27 17
CFR 201.700(b)(3).
id.
29 See id.
30 15 U.S.C. 78f(b)(5).
31 17 CFR 240.19b–4.
32 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
28 See
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or disapproved by October 6, 2020. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by October 20, 2020. The
Commission asks that commenters
address the sufficiency of the
Exchange’s statements in support of the
proposal, which are set forth in
Amendment No. 1,33 in addition to any
other comments they may wish to
submit about the proposed rule change.
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–2020–026 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–2020–026. 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
submissions should refer to File
Number SR–NASDAQ–2020–026 and
should be submitted by October 6, 2020.
33 See
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Rebuttal comments should be submitted
by October 20, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20254 Filed 9–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
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[Release No. 34–89798; File No. SR–NYSE–
2020–72]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Price List
September 9, 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 August
31, 2020, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘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.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to extend through September
2020 the waiver of equipment and
related service charges and trading
license fees for NYSE Trading Floorbased member organizations
implemented for April through August
2020. The Exchange proposes to
implement the fee changes effective
September 1, 2020. 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.
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
34 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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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
1. Purpose
The Exchange proposes to amend its
Price List to extend through September
2020 the waiver of equipment and
related service charges and trading
license fees for NYSE Trading Floorbased member organizations
implemented for April through August
2020.
The proposed changes respond to the
current volatile market environment
that has resulted in unprecedented
average daily volumes and the
temporary closure of the Trading Floor,
which are both related to the ongoing
spread of the novel coronavirus
(‘‘COVID–19’’).
The Exchange proposes to implement
the fee changes effective September 1,
2020.
Background
Beginning on March 16, 2020, in
order to slow the spread of COVID–19
through social distancing measures,
significant limitations were placed on
large gatherings throughout the country.
As a result, on March 18, 2020, the
Exchange determined that beginning
March 23, 2020, the physical Trading
Floor facilities located at 11 Wall Street
in New York City would close and that
the Exchange would move, on a
temporary basis, to fully electronic
trading.4 Following the temporary
closure of the Trading Floor, the
Exchange waived certain equipment
fees for the booth telephone system on
the Trading Floor and associated service
charges for the months of April and
May.5
On May 14, 2020, the Exchange
announced that on May 26, 2020 trading
operations on the Trading Floor would
resume on a limited basis to a subset of
4 See Press Release, dated March 18, 2020,
available here: https://ir.theice.com/press/pressreleases/allcategories/2020/03-18-2020-204202110.
5 See Securities Exchange Act Release No. 88602
(April 8, 2020), 85 FR 20730 (April 14, 2020) (SR–
NYSE–2020–27); Securities Exchange Act Release
No. 88874 (May 14, 2020), 85 FR 30743 (May 20,
2020) (SR–NYSE–2020–29). See footnote 11 of the
Price List.
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57263
Floor brokers, subject to health and
safety measures designed to prevent the
spread of COVID–19.6 On June 15, 2020,
the Exchange announced that on June
17, 2020, the Trading Floor would
reintroduce a subset of DMMs, also
subject to health and safety measures
designed to prevent the spread of
COVID–19.7 Following this partial
reopening of the Trading Floor, the
Exchange extended the equipment fee
waiver for the months of June, July and
August.8 The Trading Floor continues to
operate with reduced headcount and
additional health and safety
precautions.9
Proposed Rule Change
The proposed rule change responds to
the unprecedented events surrounding
the spread of COVID–19 by extending
the waiver of equipment and related
service charges and trading license fees
for NYSE Trading Floor-based member
organizations for September 2020.
As noted, for the months of April,
May, June, July and August, the
Exchange waived the Annual Telephone
Line Charge of $400 per phone number
and the $129 fee for a single line phone,
jack, and data jack. The Exchange also
waived related service charges, as
follows: $161.25 to install single jack
(voice or data); $107.50 to relocate a
jack; $53.75 to remove a jack; $107.50 to
install voice or data line; $53.75 to
disconnect data line; $53.75 to change a
phone line subscriber; and
miscellaneous telephone charges billed
at $106 per hour in 15 minute
increments.10 These fees were waived
for (1) member organizations with at
least one trading license, a physical
Trading Floor presence, and Floor
broker executions accounting for 40% or
more of the member organization’s
combined adding, taking, and auction
volumes during March 1 to March 20,
2020, or, beginning in August 2020, if
not a member organization during
March 1 to March 20, 2020, based on the
6 See Trader Update, dated May 14, 2020,
available here: https://www.nyse.com/traderupdate/
history#110000251588.
7 See Trader Update, dated June 15, 2020,
available here: https://www.nyse.com/traderupdate/history#110000272018.
8 See Securities Exchange Act Release No. 89050
(June 11, 2020), 85 FR 36637 (June 17, 2020) (SR–
NYSE–2020–49); Securities Exchange Act Release
No. 89324 (July 15, 2020), 85 FR 44129 (July 21,
2020) (SR–NYSE–2020–59); SR–NYSE–2020–71.
9 See Trader Update, dated June 15, 2020,
available here: https://www.nyse.com/traderupdate/history#110000272018. DMMs continue to
support a subset of NYSE-listed securities remotely.
10 The Service Charges also include an internet
Equipment Monthly Hosting Fee that the Exchange
did not waive for April, May, June, July and August
2020 and that the Exchange does not propose to
waive for September 2020.
E:\FR\FM\15SEN1.SGM
15SEN1
]]>Agencies
[Federal Register Volume 85, Number 179 (Tuesday, September 15, 2020)]
[Notices]
[Pages 57260-57263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20254]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89794; File No. SR-NASDAQ-2020-026]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 1 and Order Instituting Proceedings
To Determine Whether To Approve or Disapprove a Proposed Rule Change,
as Modified by Amendment No. 1, To Adopt a New Requirement Related to
the Qualification of Management for Companies From Restrictive Markets
September 9, 2020.
I. Introduction
On May 29, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt a new requirement related to the
qualification of management for companies whose business is principally
administered in a jurisdiction that has secrecy laws, blocking
statutes, national security laws, or other laws or regulations
restricting access to information by regulators of U.S.-listed
companies. The proposed rule change was published for comment in the
Federal Register on June 12, 2020.\3\ On July 20, 2020, pursuant to
Section 19(b)(2) of the Act,\4\ the Commission designated a longer
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On August 21, 2020, the
Exchange filed Amendment No. 1 to the proposed rule change, which
replaced and superseded the proposed rule change as originally
filed.\6\ The Commission is publishing this notice and order to solicit
comments on the proposed rule change, as modified by Amendment No. 1,
from interested persons and to institute proceedings pursuant to
Section 19(b)(2)(B) of the Act \7\ to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 89028 (June 8,
2020), 85 FR 35967 (``Notice''). Comments on the proposed rule
change can be found at: https://www.sec.gov/comments/sr-nasdaq-2020-026/srnasdaq2020026.htm.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 89342, 85 FR 44951
(July 24, 2020). The Commission designated September 10, 2020 as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to approve or disapprove,
the proposed rule change.
\6\ Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2020-026/srnasdaq2020026.htm.
\7\ 15 U.S.C. 78s(b)(2)(B).
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II. Exchange's Description of the Proposed Rule Change, as Modified by
Amendment No. 1
The Exchange states that it has observed instances where it appears
that a company's management lacked familiarity with the requirements to
be a Nasdaq-listed public company in the U.S. or was otherwise
unprepared for the rigors of operating as a public company.\8\ The
Exchange further states
[[Page 57261]]
that the risks arising from these situations are heightened when a
company's business is principally administered in a jurisdiction that
restricts access to information by regulators of U.S.-listed companies.
As a result, the Exchange is now proposing new requirements that it
believes will heighten compliance by such companies and enhance
investor protection.\9\
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\8\ The Exchange states that, under federal securities laws, a
company's management is responsible for preparing financial
statements and for establishing and maintaining disclosure controls
and procedures and internal control over financial reporting. See
Amendment 1, supra note 6, at 4-5 (citing Sections 404(b), 302, and
906 of the Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat.
745 (2002)). In addition, the Exchange states that its listing
requirements include quantitative criteria based on the company's
financial statements and market information, impose disclosure
obligations, and establish minimum corporate governance
requirements, and that a listed company's management is responsible
for ensuring compliance with these listing requirements on an
ongoing basis. See id. (citing Nasdaq Listing Rule 5625
(Notification of Noncompliance)).
\9\ See id. at 6.
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First, the Exchange is proposing to adopt a new initial listing
standard in Nasdaq Listing Rule 5210(c) to require any Company \10\
that principally administers its business in a jurisdiction that Nasdaq
determines to have secrecy laws, blocking statutes, national security
laws, or other laws or regulations restricting access to information by
regulators of U.S.-listed companies in such jurisdiction (a
``Restrictive Market'') to have, and certify that it will continue to
have until the third anniversary of its listing date, at least one
member of senior management or a director who has relevant past
employment experience at a U.S.-listed public company or other
experience, training, or background that results in the individual's
general familiarity with the regulatory and reporting requirements
applicable to a U.S.-listed public company under Nasdaq rules and
federal securities laws.\11\ In the absence of such an individual, the
proposal would require a Company that principally administers its
business in a Restrictive Market (``Restrictive Market Company'') to
retain on an ongoing basis an advisor or advisors, acceptable to
Nasdaq, that will provide such guidance to the Company.\12\ In
determining whether a Company's business is principally administered in
a Restrictive Market, the proposed rule provides that Nasdaq may
consider the geographic locations of the Company's: (a) Principal
business segments, operations, or assets; (b) board and shareholders'
meetings; (c) headquarters or principal executive offices; (d) senior
management and employees; and (e) books and records.\13\ The Exchange
states that this definition would capture both foreign private issuers
based in Restrictive Markets and companies based in the U.S. or another
jurisdiction that principally administer their businesses in
Restrictive Markets.\14\
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\10\ Nasdaq Listing Rule 5005(a)(6) defines ``Company'' as the
issuer of a security listed or applying to list on Nasdaq.
\11\ The Exchange also proposes to renumber the remaining
provisions of Nasdaq Listing Rule 5210.
\12\ See proposed Rule 5210(c).
\13\ See id.
\14\ See Amendment No. 1, supra note 6 at 7, n.8. The Exchange
further provides the following example: A company's headquarters
could be located in Country A, while the majority of its senior
management, employees, assets, operations, and books and records are
located in Country B, which is a Restrictive Market. In this case,
Nasdaq would consider the company's business to be principally
administered in Country B, which is a Restrictive Market, and Nasdaq
would require the company to meet the criteria set forth in proposed
Rule 5210(c). See id. at 7.
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In addition, the Exchange is proposing to adopt new Nasdaq Listing
Rule 5250(g) to require any Company that was subject to proposed Rule
5210(c) upon initial listing and that continues to be a Restrictive
Market Company to have, until the third anniversary of its listing
date,\15\ at least one member of senior management or a director who
has relevant past employment experience at a U.S.-listed public company
or other experience, training, or background that results in the
individual's general familiarity with the regulatory and reporting
requirements applicable to a U.S.-listed public company under Nasdaq
rules and federal securities laws or, in the absence of such an
individual, to retain on an ongoing basis an advisor or advisors,
acceptable to Nasdaq, that will provide such guidance to the Company.
The Exchange is also proposing changes to Nasdaq Listing Rule 5810
(Notification of Deficiency by the Listing Qualifications Department)
to allow a Restrictive Market Company subject to, but not in compliance
with, proposed Rule 5250(g) to submit a plan to regain compliance
pursuant to Nasdaq Listing Rule 5810(c)(2)(iii).\16\
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\15\ The Exchange states that it believes three years will
provide a sufficient transition period for Restrictive Market
Companies because by the third anniversary of a company's listing
date, the company will have filed at least two annual reports and
gone through the accompanying reporting processes and procedures,
and the company's staff will have been subject to federal securities
laws and Nasdaq's regulatory and reporting requirements for a
sufficient period of time to gain experience with the requirements
and how to comply. See id. at 8.
\16\ The Exchange states that a Restrictive Market Company would
be required to disclose that it does not meet the requirement set
forth in proposed Rule 5250(g) pursuant to Nasdaq Listing Rule
5810(b) and that, based on its review of the company's compliance
plan, Nasdaq Staff generally would be able to allow the company up
to 180 days to regain compliance under Nasdaq Listing Rule
5810(c)(2)(B). See id.
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The proposed rule changes would apply to Restrictive Market
Companies that apply to list on Nasdaq after the date of effectiveness
of the proposed rules and would not apply to companies already listed
on Nasdaq.\17\ Nasdaq states that it believes this is appropriate
because currently-listed companies are already subject to Nasdaq's
requirements and U.S. securities laws and have gained familiarity with
the reporting processes and procedures and disclosure requirements by
virtue of being subject to them.\18\
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\17\ See id. at 9.
\18\ See id. at 10. Nasdaq further states that, to the extent
there are future concerns about a currently-listed company that
arise from an apparent unfamiliarity with the requirements to be a
U.S.-listed public company, Nasdaq would exercise its regulatory
authority and could consider that lack of familiarity when
determining whether to allow the company to remain listed. See id.
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III. Summary of the Comment Letters Received
One commenter stated that it fully supports the proposed rule
change inasmuch as it seems reasonably tailored to help ensure full,
complete, and transparent financial and other disclosure from
Restrictive Market Companies.\19\ Another commenter expressed its
support for the proposed requirements relating to management
qualifications for Restrictive Market Companies, but recommended that
the proposal be revised to apply to all Restrictive Market Companies
listed on Nasdaq, rather than just those companies that apply to list
on Nasdaq after the date of the proposed rule change's
effectiveness.\20\ This commenter stated that Nasdaq provided no basis
for this distinction between companies and suggested that such
distinction may raise issues about whether the proposal unfairly
discriminates among companies.\21\ In response, Nasdaq amended the
proposal to apply the proposed requirements to Restrictive Market
Companies only until the third anniversary of their listing date.\22\
Nasdaq stated that it believes it is appropriate to impose the proposed
requirement only for three years from the date that a Restrictive
Market Company lists and that after being subject to Nasdaq's
requirements for that period of time, it would potentially be unfair to
treat the company differently than other listed companies in the
absence of a specific identified concern.\23\
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\19\ See Letter from Annemarie Tierney, Founder and Principal,
Liquid Advisors, Inc. (July 2, 2020), at 5.
\20\ See Letter from Jeffrey P. Mahoney, General Counsel,
Council of Institutional Investors (June 25, 2020), at 6-7.
\21\ See id. at 7.
\22\ See Amendment No. 1, supra note 6.
\23\ See id. at 10, n.13.
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IV. Proceedings To Determine Whether To Approve or Disapprove SR-
NASDAQ-2020-026, as Modified by Amendment No. 1, and Grounds for
Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
[[Page 57262]]
19(b)(2)(B) of the Act \24\ to determine whether the proposed rule
change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described below, the Commission seeks and
encourages interested persons to provide additional comment on the
proposed rule change to inform the Commission's analysis of whether to
approve or disapprove the proposed rule change.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\25\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and to protect
investors and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.\26\
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\25\ Id.
\26\ 15 U.S.C. 78f(b)(5).
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The Exchange's proposed requirements: (1) Only apply to Restrictive
Market Companies that apply to list on Nasdaq after the date of
effectiveness of the proposed rules; (2) only apply until the third
anniversary of a Restrictive Market Company's listing date; and (3) do
not apply to Restrictive Market Companies already listed on Nasdaq,
even if such companies have been listed on Nasdaq for less than three
years. Accordingly, the Commission believes there are questions as to
whether the proposal is consistent with Section 6(b)(5) of the Act and
its requirement, among other things, that the rules of a national
securities exchange not be designed to permit unfair discrimination.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
[SRO] that proposed the rule change.'' \27\ The description of a
proposed rule change, its purpose and operation, its effect, and a
legal analysis of its consistency with applicable requirements must all
be sufficiently detailed and specific to support an affirmative
Commission finding,\28\ and any failure of an SRO to provide this
information may result in the Commission not having a sufficient basis
to make an affirmative finding that a proposed rule change is
consistent with the Act and the applicable rules and regulations.\29\
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\27\ 17 CFR 201.700(b)(3).
\28\ See id.
\29\ See id.
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The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposal, as modified by Amendment No. 1, is consistent
with the Act.
V. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal, as
modified by Amendment No. 1, is consistent with Section 6(b)(5) \30\ of
the Act or any other provision of the Act, or the rules and regulations
thereunder. Although there do not appear to be any issues relevant to
approval or disapproval that would be facilitated by an oral
presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4 under the Act,\31\ any request for an
opportunity to make an oral presentation.\32\
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\30\ 15 U.S.C. 78f(b)(5).
\31\ 17 CFR 240.19b-4.
\32\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change, as modified by
Amendment No. 1, should be approved or disapproved by October 6, 2020.
Any person who wishes to file a rebuttal to any other person's
submission must file that rebuttal by October 20, 2020. The Commission
asks that commenters address the sufficiency of the Exchange's
statements in support of the proposal, which are set forth in Amendment
No. 1,\33\ in addition to any other comments they may wish to submit
about the proposed rule change.
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\33\ See supra note 6.
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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-2020-026 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-2020-026. 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 submissions
should refer to File Number SR-NASDAQ-2020-026 and should be submitted
by October 6, 2020.
[[Page 57263]]
Rebuttal comments should be submitted by October 20, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20254 Filed 9-14-20; 8:45 am]
BILLING CODE 8011-01-P
