Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Modify the Quorum Requirement, 20556-20560 [2021-08047]
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Federal Register / Vol. 86, No. 74 / Tuesday, April 20, 2021 / Notices
applies to Cboe Options. To the extent
that this discount proves attractive to
Floor Brokers on other options
exchanges, or its results prove attractive
to market participants on other
exchanges, such Floor Brokers or market
participants may elect to become Floor
Brokers or market participants at the
Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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) 10 of the Act.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 11 of the Act to
determine whether the proposed rule
change should be approved or
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 No. SR–
CBOE–2021–021 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 No.
SR–CBOE–2021–021. This file number
should be included on the subject line
if email is used. To help the
10 15
11 15
U.S.C. 78s(b)(3)(A)(ii).
U.S.C. 78s(b)(2)(B).
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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 No.
SR–CBOE–2021–021, and should be
submitted on or before May 11, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–08034 Filed 4–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
II. The Exchange’s Description of the
Proposal, as Modified by Amendment
No. 1
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[Release No. 34–91567; File No. SR–
NASDAQ–2020–100]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Modify the
Quorum Requirement
April 14, 2021.
I. Introduction
On December 31, 2020, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
12 17
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of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
modify the quorum requirement
applicable to a non-U.S. company where
such company’s home country law is in
direct conflict with Nasdaq’s quorum
requirement. The proposed rule change
was published for comment in the
Federal Register on January 15, 2021.3
On February 25, 2021, pursuant to
Section 19(b(2) of the Act,4 the
Commission designated a longer period
within which to either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
On April 8, 2021, the Exchange filed
Amendment No. 1 to the proposed rule
change, which replaced and superseded
the proposed rule change.6 The
Commission received no comments on
the proposed rule change. The
Commission is publishing notice of the
filing of Amendment No. 1 to solicit
comment from interested persons and is
approving the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
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CFR 200.30–3(a)(12).
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1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90883
(January 11, 2021), 86 FR 4158 (January 15, 2021).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 91212,
86 FR 12503 (March 3, 2021). The Commission
designated April 15, 2021, as the date by which it
should approve, disapprove, or institute
proceedings to determine whether to disapprove the
proposed rule change.
6 In Amendment No. 1, the Exchange revised the
rule language and made clarifying, conforming, and
technical changes, as discussed in Section VI, infra.
Amendment No. 1 is available at https://
www.sec.gov/comments/sr-nasdaq-2020-100/
srnasdaq2020100-8652263-231434.pdf.
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq is filing this amendment to
SR–NASDAQ–2020–100 7 in order to: (i)
Make minor technical changes to
improve the structure, clarity and
readability of this proposal; (ii) specify
that Nasdaq will (rather than may)
accept any quorum requirement for a
non-U.S. Company, that is not a foreign
private issuer, if the company’s home
country law mandates such quorum for
the shareholders’ meeting and prohibits
the company from establishing a higher
quorum required by Nasdaq, and the
company cannot obtain an exemption or
waiver from that law; (iii) clarify that
such acceptance of any quorum
requirement is subject to Nasdaq’s
discretionary authority under Listing
Rule 5101; and (iv) add a provision that
a company relying on the exception
from the Nasdaq quorum requirement
must:
(a) Make a public announcement as
promptly as possible but not more than
four business days following the
submission of the independent
counsel’s statement to Nasdaq on or
through the company’s website and
either by filing a Form 8–K, where
required by SEC rules, or by issuing a
press release explaining the company’s
reliance on the exception;
(b) maintain the website disclosure for
the period of time the company
continues to rely on this exception from
the quorum requirements; and
(c) update the website disclosure at
least annually to indicate that the
company is prohibited under its home
country law from complying with
Nasdaq’s quorum requirements as of
such date.
This amendment supersedes and
replaces the Initial Proposal in its
entirety.
Nasdaq is proposing to modify Listing
Rules 5620(c) and 5615(a)(4)(E) to allow
Nasdaq to accept a quorum less than
331⁄3% of the outstanding shares of a
company’s common voting stock where
the company is incorporated outside of
the U.S. and such company’s home
country law prohibits the company from
establishing a quorum that satisfies the
such quorum rules.
Listing Rule 5620(c) establishes
quorum requirements for an annual
meeting of shareholders for Nasdaq
companies listing common stock or
7 Securities Exchange Act Release No. 90883
(January 11, 2021), 86 FR 4158 (January 15, 2021)
(the ‘‘Initial Proposal’’).
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voting preferred stock, and their
equivalents.8 Under this rule, each
company that is not a limited
partnership must provide for a quorum
as specified in its by-laws for any
meeting of the holders of common stock;
provided, however, that in no case shall
such quorum be less than 331⁄3% of the
outstanding shares of the company’s
common voting stock.9 Nasdaq notes
that domestic listed companies are
subject to quorum requirements under
the laws of their states of
incorporation.10
Nasdaq recently discovered that the
laws of certain foreign jurisdictions are
in direct conflict with the Nasdaq
Quorum Requirement. In particular,
Nasdaq was approached by a French
company that took advantage of the
foreign private issuer exception and
relied on home country practices in lieu
of the Nasdaq Quorum Requirement, but
lost its foreign private issuer status and
cannot comply with the Nasdaq
Quorum Requirement due to certain
French law requirements.11 In that
regard, Article L. 225–98 of the French
Commercial code 12 provides that upon
first notice, the ordinary shareholders’
meeting shall have a quorum
requirement of one-fifth (20%) of the
shares entitled to vote. The Article
further provides that by-laws of a
French company whose shares are listed
on a regulated market (which includes
Euronext Paris) cannot provide for a
higher quorum for shareholders’
8 Listing
Rule 5620(a).
Rule 5615(a)(4)(E) governing the quorum
requirements for limited partnerships listed on
Nasdaq similarly requires that in the event of a
meeting of limited partners, the quorum for such
meeting shall be not less than 331⁄3 percent of the
limited partnership interests outstanding (together
with the requirements of Listing Rule 5620(c), the
‘‘Nasdaq Quorum Requirement’’).
10 For example, Delaware allows companies to
establish their own quorum requirements in their
certificates of incorporation or bylaws, provided
that the quorum must be at least one-third of the
shares entitled to vote on the matter. In the absence
of a quorum provision in the company’s certificate
of incorporation or bylaws, Delaware requires a
quorum of more than 50% of the shares entitled to
vote on the matter. See 8 Del. Code Sec. 216.
11 Ordinary shares of at least one Nasdaq listed
company DBV Technologies S.A. (DBV), are listed
on Euronext Paris which is a regulated market
under French and EU regulations. Accordingly, as
explained below, DBV cannot amend its bylaws to
increase the quorum requirement to comply with
the Nasdaq Quorum Requirement. Since its IPO in
2014, DBV qualified as a foreign private issuer and
relied on home country practices in lieu of
complying with the Nasdaq Quorum Requirement.
See also footnote 15 below.
12 ‘‘It can only validly deliberate upon first notice
if the shareholders present or represented own at
least one fifth of the shares entitled to vote.’’
Available at https://www.legifrance.gouv.fr/affich
CodeArticle.do?idArticle=
LEGIARTI000038799445&cidTexte=
LEGITEXT000005634379&dateTexte=20190721.
9 Listing
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meetings than that set forth above. As
this rule constitutes a public order
under French law, it is required to be
followed and compliance is enforced by
the French courts and by the French
stock exchange authority, the Autorite´
des marche´s financiers. According to
article L. 225–121, any decision taken in
violation of the aforementioned rules on
quorum is deemed null and void. As
such, a French company listed on a
regulated market cannot comply with
the Nasdaq Quorum Requirement.
Listing Rule 5615(a)(3) allows a
foreign private issuer 13 to follow its
home country practice in lieu of the
requirements of the Rule 5600 Series,
including the Nasdaq Quorum
Requirement, subject to certain
disclosure requirements and the
requirement that an independent
counsel in such company’s home
country certify to Nasdaq that the
company’s practices are not prohibited
by the home country’s laws.14
Accordingly, a French foreign private
issuer could rely on Listing Rule
5615(a)(3) to remain in compliance with
the Nasdaq corporate governance
requirements in the Rule 5600 Series.15
A non-U.S. company 16 that is not a
foreign private issuer currently is
required to comply with the Nasdaq
Quorum Requirement without regard to
the requirements of such company’s
home country laws. As described above,
for some companies, including DBV, the
company’s home country law prohibits
the company from establishing a higher
quorum required by the Nasdaq Quorum
Requirement.
Accordingly, Nasdaq proposes to
modify the Nasdaq Quorum
Requirement to allow Nasdaq to accept
13 The term foreign private issuer means any
foreign issuer other than a foreign government
except an issuer meeting the following conditions
as of the last business day of its most recently
completed second fiscal quarter: (i) More than 50
percent of the outstanding voting securities of such
issuer are directly or indirectly owned of record by
residents of the United States; and (ii) Any of the
following: (A) The majority of the executive officers
or directors are United States citizens or residents;
(B) More than 50 percent of the assets of the issuer
are located in the United States; or (C) The business
of the issuer is administered principally in the
United States. See Securities Act Rule 405 and
Exchange Act Rule 3b–4.
14 See Listing Rule 5615(a)(3)(B) and Listing Rule
IM–5615–3.
15 As of December 31, 2019, approximately 62%
of DBV’s outstanding ordinary shares were held by
U.S. residents. See company’s Form 20–F filed on
March 20, 2020. As of June 30, 2020, DBV
determined that it no longer qualified as a foreign
private issuer and would be required to comply
with SEC rules for domestic issuers as of January
1, 2021.
16 For purposes of this rule, the term non-U.S.
company refers to a company incorporated outside
of the U.S. See also Listing Rules 5630 and IM–5640
that use this term.
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any quorum requirement for a non-U.S.
company if such company’s home
country law mandates such quorum for
the shareholders’ meeting and prohibits
the company from establishing the
higher quorum required by the Nasdaq
Quorum Requirement, and the company
cannot obtain an exemption or waiver
from that law.17 This rule change is
consistent with the approach the
Exchange takes in Listing Rule IM–5640
that allows Nasdaq to accept any action
or issuance relating to the voting rights
structure of a non-U.S. company that is
not prohibited by the company’s home
country law.18 Nasdaq proposes to
require that a company relying on this
provision shall submit to Nasdaq a
written statement from an independent
counsel in such company’s home
country describing the home country
law that conflicts with Nasdaq’s quorum
requirement. Nasdaq also proposes to
require such counsel to certify that, as
the result of the conflict with the home
country law, the company is prohibited
from complying with the Nasdaq
Quorum Requirement, and the company
cannot obtain an exemption or waiver
from that law. Finally, to assure
appropriate disclosure, Nasdaq proposes
to require that any company relying on
this exception from the Nasdaq Quorum
Requirement must make a public
announcement as promptly as possible
but not more than four business days
following the submission of the
independent counsel’s statement to
Nasdaq, as described above, on or
through the Company’s website and
either by filing a Form 8–K, where
required by SEC rules, or by issuing a
press release explaining the Company’s
reliance on the exception.
In addition, to help assure continuous
transparency, Nasdaq proposes to
require that such website disclosure is
maintained for the period of time the
company continues to rely on the
exception from the quorum
requirements. Finally, to help assure the
17 Nasdaq notes that under Listing Rule 5101
Nasdaq has broad discretionary authority to deny
initial listing, apply additional or more stringent
criteria for the initial or continued listing of
particular securities, or suspend or delist particular
securities based on any event, condition, or
circumstance that exists or occurs that makes initial
or continued listing of the securities on Nasdaq
inadvisable or unwarranted in the opinion of
Nasdaq, even though the securities meet all
enumerated criteria for initial or continued listing
on Nasdaq.
18 The proposed modified Nasdaq Quorum
Requirement will apply only in circumstances
where the company’s home country law specifically
prohibits the company from establishing a higher
quorum required by the Nasdaq Quorum
Requirement, whereas Listing Rule IM–5640 allows
Nasdaq to accept any voting rights structure of a
non-U.S. company that is not prohibited by the
company’s home country law.
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exception remains appropriate, Nasdaq
proposes to require the company to
update the website disclosure at least
annually to indicate that the company
continues to be prohibited under its
home country law from complying with
Nasdaq’s quorum requirements as of the
date of such update.
Nasdaq also proposes to modify
Listing Rule 5615(a)(4)(E) governing the
quorum requirements for limited
partnerships listed on Nasdaq to also
reflect this change to the Nasdaq
Quorum Requirement.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,19 in general, and furthers the
objectives of Section 6(b)(5) of the Act,20
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
Nasdaq believes that the proposed
amendments to Listing Rules 5620(c)
and 5615(a)(4)(E) are designed to protect
investors and the public interest
because the proposal would eliminate a
conflict forcing a company to be in
violation of the Nasdaq rule, with a
result of delisting by following the law
in its home jurisdiction. Nasdaq also
believes that Nasdaq’s long experience
of listing foreign private issuers,
including DBV, while allowing such
companies to rely on home country
practices in lieu of the Nasdaq Quorum
Requirement provides evidence of an
appropriate level of investor protection.
In addition, this modification is
consistent with the approach the
Exchange takes in Listing Rule IM–5640
that allows Nasdaq to accept any action
or issuance relating to the voting rights
structure of a non-U.S. company that is
not prohibited by the company’s home
country law. Nasdaq also believes the
proposed amendments to Listing Rules
5620(c) and 5615(a)(4)(E) are designed
to protect investors and the public
interest because any company relying
on the proposed exception from the
Nasdaq Quorum Requirement will be
required to make public disclosure on or
through the Company’s website and
either by filing a Form 8–K, where
required by SEC rules, or by issuing a
press release explaining the company’s
reliance on the exception.
Nasdaq believes that the proposed
requirement that such website
disclosure is maintained for the period
19 15
20 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00083
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of time the company continues to rely
on the exception from the quorum
requirements is designed to protect
investors and the public interest
because such website disclosure would
help assure continuous transparency.
Nasdaq also believes that the proposed
requirement to update the website
disclosure at least annually to indicate
that the company continues to be
prohibited under its home country law
from complying with Nasdaq’s quorum
requirements as of the date of such
update is designed to protect investors
and the public interest because such
disclosure would help Nasdaq assure
that the exception remains appropriate.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change will address
conflicting requirements of jurisdictions
currently affecting only one company,
as described above; and as such, these
changes are neither intended to, nor
expected to, impose any burden on
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Discussion and Commission
Findings
The Commission has carefully
reviewed the proposed rule change, as
modified by Amendment No. 1, and
finds that it is consistent with the
requirements of the Exchange Act and
the rules and regulations thereunder
applicable to a national securities
exchange.21 In particular, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Act,22 which requires, among
other things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest, and are not designed to
21 15 U.S.C. 78f. In approving this proposed rule
change, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
22 15 U.S.C. 78f(b)(4) and (5).
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permit unfair discrimination between
customers, issuers, brokers, or dealers.
The development and enforcement of
meaningful corporate governance listing
standards for a national securities
exchange is of substantial importance to
financial markets and the investing
public, especially given investor
expectations regarding the nature of
companies that have achieved an
exchange listing for their securities. The
corporate governance standards
embodied in the listing standards of
national securities exchanges, in
particular, play an important role in
assuring that exchange-listed companies
observe good governance practices
including safeguarding the interests of
shareholders.23
As discussed above, current Nasdaq
Listing Rule 5620(c) states that a
company that is not a limited
partnership must provide for a quorum
as specified in its by-laws for any
meeting of the holders of common stock;
provided, however, that in no case shall
such quorum be less than 331⁄3% of the
outstanding shares of the company’s
common voting stock, and current
Nasdaq Listing Rule 5615(a)(4)(E) states
that the quorum requirements for a
meeting of limited partners shall not be
less than 331⁄3% of the limited
partnership interests outstanding. The
Exchange proposes to modify the
Nasdaq Quorum Requirement to allow
Nasdaq to accept a quorum of less than
331⁄3% of the outstanding shares of a
company’s common voting stock or
limited partnership interests where the
company is incorporated outside of the
U.S. and such company’s home country
law prohibits the company from
establishing a quorum that satisfies the
Nasdaq Quorum Requirement and the
company cannot obtain an exemption or
waiver from that law.24
The Commission has carefully
considered the proposal and finds that
the proposed rule change is consistent
23 See, e.g., Securities Exchange Act Release No.
76814 (Dec. 31, 2015), 81 FR 820 (Jan. 7, 2016)
(NYSE–2015–02) (approving amendments to the
NYSE Listed Company Manual to exempt early
stage companies from having to obtain shareholder
approval in certain circumstances). See also
Securities Exchange Act Release No. 48108 (June
30, 2003), 68 FR 39995 (July 3, 2003) (approving
equity compensation shareholder approval rules of
both the NYSE and the National Association of
Securities Dealers, Inc. n/k/a NASDAQ); and
Securities Exchange Act Release No. 58375 (August
18, 2008), 73 FR 49498 (August 21, 2008) (In the
Matter of the Application of BATS Exchange, Inc.
for Registration as a National Securities Exchange)
(order approving registration of BATS Exchange,
Inc. noting that qualitative listing requirements are
designed to ensure that companies trading on a
national securities exchange will adequately protect
the interest of public shareholders).
24 See proposed Listing Rules 5620(c) and
5615(a)(4)(E).
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with the Act. The proposed rules would
only allow the exception to the Nasdaq
Quorum Requirement under limited
circumstances where a non-U.S.
company’s home country law prohibits
the company from establishing a
quorum that satisfies the Nasdaq
Quorum Requirement, and the company
cannot obtain an exemption or waiver
from that law.25 The company would be
required to obtain a written statement
from an independent counsel in the
company’s home country describing the
home country law that conflicts with
the Nasdaq Quorum Requirement and
certifying that the company is
prohibited from complying with the
Nasdaq Quorum Requirement and that
the company cannot obtain an
exemption or waiver from that law.26
According to the Exchange, the
proposed rule change would currently
affect only one listed company.27 The
Exchange states that the proposal would
eliminate the conflict between the
Nasdaq Quorum Requirement and the
company’s home country laws, which
currently would force a company that
follows the law in its home jurisdiction
to be in violation of the Nasdaq Quorum
Requirement, and would result in
delisting.28
In addition, the Exchange states that
it has allowed issuers to rely on home
country rules in other contexts. The
Exchange notes that it allows foreign
private issuers to rely on home country
practices in lieu of the Nasdaq Quorum
Requirement.29 Further, the Exchange
states that the Exchange takes a similar
approach in Listing Rule IM–5640,
which allows Nasdaq to accept any
action or issuance relating to the voting
rights structure of a non-U.S. company
that is not prohibited by the company’s
home country law.30
The proposed rules require that any
company relying on the proposed
exception from the Nasdaq Quorum
25 See
id.
26 See id.
27 See Amendment No. 1, supra note 6 at 14. The
Exchange states that the proposed changes currently
would affect only one listed company, DBV, which
has been listed on Nasdaq since 2014. See supra
note 11. DBV previously qualified as a foreign
private issuer, and therefore relied on home country
practices in lieu of the Nasdaq Quorum
Requirement. See id. As of June 30, 2020, DBV
determined that it no longer qualified as a foreign
private issuer and would be required to comply
with the Commission rules for domestic issuers as
of January 1, 2021. The Exchange states that the
proposed rule change would allow DBV to continue
to follow French law quorum requirements, as it
has been doing, while remaining listed on Nasdaq.
See id.
28 See supra Section II.A.2.
29 See supra Section II.A.2. See also supra note
11.
30 See supra note 18 and accompanying text.
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Requirement make a public
announcement on or through the
company’s website and by filing either
a Form 8–K, where required by
Commission rules, or by issuing a press
release explaining the company’s
reliance on the exception.31 Such
website disclosure would be required to
be maintained for the period of time the
company continues to rely on the
exception from the quorum
requirements, and the company would
be required to update the website
disclosure at least annually to indicate
that the company continues to be
prohibited under its home country law
from complying with Nasdaq’s quorum
requirements as of the date of such
update. The Commission believes that
such requirements will help to maintain
transparency for investors and assist the
Exchange in ensuring that the exception
remains applicable to a company.32
For the reasons discussed above, the
Commission believes that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Exchange Act.
IV. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 1 to 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–2020–100 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–2020–100. 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
31 See proposed Listing Rules 5620(c) and
5615(a)(4)(E).
32 Additionally, a company would have to verify
that there are no changes to home country law that
would allow it to comply with the Nasdaq Quorum
Requirement, or receive a waiver or exemption from
home country law, at least annually when updating
its website disclosure that the company is still
relying on the exception.
E:\FR\FM\20APN1.SGM
20APN1
20560
Federal Register / Vol. 86, No. 74 / Tuesday, April 20, 2021 / Notices
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–2020–100, and
should be submitted on or before May
11, 2021.
VI. Accelerated Approval of the
Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. The Commission notes that
Amendment No. 1 clarifies the proposed
rule change. In particular, Amendment
No. 1: (1) Clarified that the rule applies
to a non-U.S. company that is not a
Foreign Private Issuer; (2) stated that the
alternative quorum requirement will be
applicable only if the company cannot
obtain an exemption or waiver from the
company’s home country law
requirement; (3) stated that Nasdaq
‘‘will’’ accept an alternative quorum
requirement if the company’s home
country law conflicts with the Nasdaq
requirement and the other conditions of
the rule are met (as described above); (4)
stated that a company relying on the
exception must: (i) Make a public
announcement as promptly as possible
but not more than four business days
following the submission of the
independent counsel’s statement to
Nasdaq, on or through the company’s
website and either by filing a Form 8–
K, where required by SEC rules, or by
VerDate Sep<11>2014
17:10 Apr 19, 2021
Jkt 253001
issuing a press release explaining the
company’s reliance on the exception,
(ii) maintain the website disclosure for
the period of time the company
continues to rely on this exception from
the quorum requirements, and (iii)
update the website disclosure at least
annually to indicate that the company is
prohibited from complying with
Nasdaq’s quorum requirements as of
such date; (5) clarified that the proposed
rule change will address conflicting
requirements of jurisdictions currently
affecting only one company; and (6)
stated that the Exchange’s acceptance of
any quorum requirement is subject to
Nasdaq’s discretionary authority under
Listing Rule 5101. In addition, the
Exchange made other clarifying,
conforming, and technical changes.33
The changes in Amendment No. 1
should help to provide greater
transparency in the Exchange’s rules by
requiring companies to provide public
disclosure regarding reliance on the
exception. In addition, Amendment No.
1 provides greater clarity to the proposal
and provides greater transparency about
the application of the rule changes being
adopted herein. Accordingly, the
Commission finds good cause, pursuant
to Section 19(b)(2) of the Act,34 to
approve the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
VII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,35 that the
proposed rule change (SR–NASDAQ–
2020–100), as modified by Amendment
No. 1, be, and it hereby is, approved on
an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–08047 Filed 4–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91550; File No. SR–
NYSECHX–2021–06]
Self-Regulatory Organizations; NYSE
Chicago, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the Current
Pilot Program Related to Rule 7.10
April 14, 2021.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on April 2,
2021, the NYSE Chicago, Inc. (‘‘NYSE
Chicago’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. 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 extend the
current pilot program related to Rule
7.10 (Clearly Erroneous Executions) to
the close of business on October 20,
2021. 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
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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to extend the current pilot
33 See
34 15
supra note 6.
U.S.C. 78s(b)(2).
1 15
35 Id.
36 17
PO 00000
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
CFR 200.30–3(a)(12).
Frm 00085
Fmt 4703
Sfmt 4703
E:\FR\FM\20APN1.SGM
20APN1
]]>Agencies
[Federal Register Volume 86, Number 74 (Tuesday, April 20, 2021)]
[Notices]
[Pages 20556-20560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08047]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91567; File No. SR-NASDAQ-2020-100]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Modify the Quorum Requirement
April 14, 2021.
I. Introduction
On December 31, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
the ``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 modify the quorum requirement applicable to a
non-U.S. company where such company's home country law is in direct
conflict with Nasdaq's quorum requirement. The proposed rule change was
published for comment in the Federal Register on January 15, 2021.\3\
On February 25, 2021, pursuant to Section 19(b(2) of the Act,\4\ the
Commission designated a longer period within which to either approve
the proposed rule change, disapprove the proposed rule change, or
institute proceedings to determine whether to disapprove the proposed
rule change.\5\ On April 8, 2021, the Exchange filed Amendment No. 1 to
the proposed rule change, which replaced and superseded the proposed
rule change.\6\ The Commission received no comments on the proposed
rule change. The Commission is publishing notice of the filing of
Amendment No. 1 to solicit comment from interested persons and is
approving the proposed rule change, as modified by Amendment No. 1, on
an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 90883 (January 11,
2021), 86 FR 4158 (January 15, 2021).
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 91212, 86 FR 12503
(March 3, 2021). The Commission designated April 15, 2021, as the
date by which it should approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change.
\6\ In Amendment No. 1, the Exchange revised the rule language
and made clarifying, conforming, and technical changes, as discussed
in Section VI, infra. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2020-100/srnasdaq2020100-8652263-231434.pdf.
---------------------------------------------------------------------------
II. The Exchange's Description of the Proposal, as Modified by
Amendment No. 1
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 20557]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq is filing this amendment to SR-NASDAQ-2020-100 \7\ in order
to: (i) Make minor technical changes to improve the structure, clarity
and readability of this proposal; (ii) specify that Nasdaq will (rather
than may) accept any quorum requirement for a non-U.S. Company, that is
not a foreign private issuer, if the company's home country law
mandates such quorum for the shareholders' meeting and prohibits the
company from establishing a higher quorum required by Nasdaq, and the
company cannot obtain an exemption or waiver from that law; (iii)
clarify that such acceptance of any quorum requirement is subject to
Nasdaq's discretionary authority under Listing Rule 5101; and (iv) add
a provision that a company relying on the exception from the Nasdaq
quorum requirement must:
---------------------------------------------------------------------------
\7\ Securities Exchange Act Release No. 90883 (January 11,
2021), 86 FR 4158 (January 15, 2021) (the ``Initial Proposal'').
---------------------------------------------------------------------------
(a) Make a public announcement as promptly as possible but not more
than four business days following the submission of the independent
counsel's statement to Nasdaq on or through the company's website and
either by filing a Form 8-K, where required by SEC rules, or by issuing
a press release explaining the company's reliance on the exception;
(b) maintain the website disclosure for the period of time the
company continues to rely on this exception from the quorum
requirements; and
(c) update the website disclosure at least annually to indicate
that the company is prohibited under its home country law from
complying with Nasdaq's quorum requirements as of such date.
This amendment supersedes and replaces the Initial Proposal in its
entirety.
Nasdaq is proposing to modify Listing Rules 5620(c) and
5615(a)(4)(E) to allow Nasdaq to accept a quorum less than 33\1/3\% of
the outstanding shares of a company's common voting stock where the
company is incorporated outside of the U.S. and such company's home
country law prohibits the company from establishing a quorum that
satisfies the such quorum rules.
Listing Rule 5620(c) establishes quorum requirements for an annual
meeting of shareholders for Nasdaq companies listing common stock or
voting preferred stock, and their equivalents.\8\ Under this rule, each
company that is not a limited partnership must provide for a quorum as
specified in its by-laws for any meeting of the holders of common
stock; provided, however, that in no case shall such quorum be less
than 33\1/3\% of the outstanding shares of the company's common voting
stock.\9\ Nasdaq notes that domestic listed companies are subject to
quorum requirements under the laws of their states of
incorporation.\10\
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\8\ Listing Rule 5620(a).
\9\ Listing Rule 5615(a)(4)(E) governing the quorum requirements
for limited partnerships listed on Nasdaq similarly requires that in
the event of a meeting of limited partners, the quorum for such
meeting shall be not less than 33\1/3\ percent of the limited
partnership interests outstanding (together with the requirements of
Listing Rule 5620(c), the ``Nasdaq Quorum Requirement'').
\10\ For example, Delaware allows companies to establish their
own quorum requirements in their certificates of incorporation or
bylaws, provided that the quorum must be at least one-third of the
shares entitled to vote on the matter. In the absence of a quorum
provision in the company's certificate of incorporation or bylaws,
Delaware requires a quorum of more than 50% of the shares entitled
to vote on the matter. See 8 Del. Code Sec. 216.
---------------------------------------------------------------------------
Nasdaq recently discovered that the laws of certain foreign
jurisdictions are in direct conflict with the Nasdaq Quorum
Requirement. In particular, Nasdaq was approached by a French company
that took advantage of the foreign private issuer exception and relied
on home country practices in lieu of the Nasdaq Quorum Requirement, but
lost its foreign private issuer status and cannot comply with the
Nasdaq Quorum Requirement due to certain French law requirements.\11\
In that regard, Article L. 225-98 of the French Commercial code \12\
provides that upon first notice, the ordinary shareholders' meeting
shall have a quorum requirement of one-fifth (20%) of the shares
entitled to vote. The Article further provides that by-laws of a French
company whose shares are listed on a regulated market (which includes
Euronext Paris) cannot provide for a higher quorum for shareholders'
meetings than that set forth above. As this rule constitutes a public
order under French law, it is required to be followed and compliance is
enforced by the French courts and by the French stock exchange
authority, the Autorit[eacute] des march[eacute]s financiers. According
to article L. 225-121, any decision taken in violation of the
aforementioned rules on quorum is deemed null and void. As such, a
French company listed on a regulated market cannot comply with the
Nasdaq Quorum Requirement.
---------------------------------------------------------------------------
\11\ Ordinary shares of at least one Nasdaq listed company DBV
Technologies S.A. (DBV), are listed on Euronext Paris which is a
regulated market under French and EU regulations. Accordingly, as
explained below, DBV cannot amend its bylaws to increase the quorum
requirement to comply with the Nasdaq Quorum Requirement. Since its
IPO in 2014, DBV qualified as a foreign private issuer and relied on
home country practices in lieu of complying with the Nasdaq Quorum
Requirement. See also footnote 15 below.
\12\ ``It can only validly deliberate upon first notice if the
shareholders present or represented own at least one fifth of the
shares entitled to vote.'' Available at https://www.legifrance.gouv.fr/affichCodeArticle.do?idArticle=LEGIARTI000038799445&cidTexte=LEGITEXT000005634379&dateTexte=20190721.
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Listing Rule 5615(a)(3) allows a foreign private issuer \13\ to
follow its home country practice in lieu of the requirements of the
Rule 5600 Series, including the Nasdaq Quorum Requirement, subject to
certain disclosure requirements and the requirement that an independent
counsel in such company's home country certify to Nasdaq that the
company's practices are not prohibited by the home country's laws.\14\
Accordingly, a French foreign private issuer could rely on Listing Rule
5615(a)(3) to remain in compliance with the Nasdaq corporate governance
requirements in the Rule 5600 Series.\15\
---------------------------------------------------------------------------
\13\ The term foreign private issuer means any foreign issuer
other than a foreign government except an issuer meeting the
following conditions as of the last business day of its most
recently completed second fiscal quarter: (i) More than 50 percent
of the outstanding voting securities of such issuer are directly or
indirectly owned of record by residents of the United States; and
(ii) Any of the following: (A) The majority of the executive
officers or directors are United States citizens or residents; (B)
More than 50 percent of the assets of the issuer are located in the
United States; or (C) The business of the issuer is administered
principally in the United States. See Securities Act Rule 405 and
Exchange Act Rule 3b-4.
\14\ See Listing Rule 5615(a)(3)(B) and Listing Rule IM-5615-3.
\15\ As of December 31, 2019, approximately 62% of DBV's
outstanding ordinary shares were held by U.S. residents. See
company's Form 20-F filed on March 20, 2020. As of June 30, 2020,
DBV determined that it no longer qualified as a foreign private
issuer and would be required to comply with SEC rules for domestic
issuers as of January 1, 2021.
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A non-U.S. company \16\ that is not a foreign private issuer
currently is required to comply with the Nasdaq Quorum Requirement
without regard to the requirements of such company's home country laws.
As described above, for some companies, including DBV, the company's
home country law prohibits the company from establishing a higher
quorum required by the Nasdaq Quorum Requirement.
---------------------------------------------------------------------------
\16\ For purposes of this rule, the term non-U.S. company refers
to a company incorporated outside of the U.S. See also Listing Rules
5630 and IM-5640 that use this term.
---------------------------------------------------------------------------
Accordingly, Nasdaq proposes to modify the Nasdaq Quorum
Requirement to allow Nasdaq to accept
[[Page 20558]]
any quorum requirement for a non-U.S. company if such company's home
country law mandates such quorum for the shareholders' meeting and
prohibits the company from establishing the higher quorum required by
the Nasdaq Quorum Requirement, and the company cannot obtain an
exemption or waiver from that law.\17\ This rule change is consistent
with the approach the Exchange takes in Listing Rule IM-5640 that
allows Nasdaq to accept any action or issuance relating to the voting
rights structure of a non-U.S. company that is not prohibited by the
company's home country law.\18\ Nasdaq proposes to require that a
company relying on this provision shall submit to Nasdaq a written
statement from an independent counsel in such company's home country
describing the home country law that conflicts with Nasdaq's quorum
requirement. Nasdaq also proposes to require such counsel to certify
that, as the result of the conflict with the home country law, the
company is prohibited from complying with the Nasdaq Quorum
Requirement, and the company cannot obtain an exemption or waiver from
that law. Finally, to assure appropriate disclosure, Nasdaq proposes to
require that any company relying on this exception from the Nasdaq
Quorum Requirement must make a public announcement as promptly as
possible but not more than four business days following the submission
of the independent counsel's statement to Nasdaq, as described above,
on or through the Company's website and either by filing a Form 8-K,
where required by SEC rules, or by issuing a press release explaining
the Company's reliance on the exception.
---------------------------------------------------------------------------
\17\ Nasdaq notes that under Listing Rule 5101 Nasdaq has broad
discretionary authority to deny initial listing, apply additional or
more stringent criteria for the initial or continued listing of
particular securities, or suspend or delist particular securities
based on any event, condition, or circumstance that exists or occurs
that makes initial or continued listing of the securities on Nasdaq
inadvisable or unwarranted in the opinion of Nasdaq, even though the
securities meet all enumerated criteria for initial or continued
listing on Nasdaq.
\18\ The proposed modified Nasdaq Quorum Requirement will apply
only in circumstances where the company's home country law
specifically prohibits the company from establishing a higher quorum
required by the Nasdaq Quorum Requirement, whereas Listing Rule IM-
5640 allows Nasdaq to accept any voting rights structure of a non-
U.S. company that is not prohibited by the company's home country
law.
---------------------------------------------------------------------------
In addition, to help assure continuous transparency, Nasdaq
proposes to require that such website disclosure is maintained for the
period of time the company continues to rely on the exception from the
quorum requirements. Finally, to help assure the exception remains
appropriate, Nasdaq proposes to require the company to update the
website disclosure at least annually to indicate that the company
continues to be prohibited under its home country law from complying
with Nasdaq's quorum requirements as of the date of such update.
Nasdaq also proposes to modify Listing Rule 5615(a)(4)(E) governing
the quorum requirements for limited partnerships listed on Nasdaq to
also reflect this change to the Nasdaq Quorum Requirement.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\20\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Nasdaq believes that the proposed amendments to Listing Rules
5620(c) and 5615(a)(4)(E) are designed to protect investors and the
public interest because the proposal would eliminate a conflict forcing
a company to be in violation of the Nasdaq rule, with a result of
delisting by following the law in its home jurisdiction. Nasdaq also
believes that Nasdaq's long experience of listing foreign private
issuers, including DBV, while allowing such companies to rely on home
country practices in lieu of the Nasdaq Quorum Requirement provides
evidence of an appropriate level of investor protection. In addition,
this modification is consistent with the approach the Exchange takes in
Listing Rule IM-5640 that allows Nasdaq to accept any action or
issuance relating to the voting rights structure of a non-U.S. company
that is not prohibited by the company's home country law. Nasdaq also
believes the proposed amendments to Listing Rules 5620(c) and
5615(a)(4)(E) are designed to protect investors and the public interest
because any company relying on the proposed exception from the Nasdaq
Quorum Requirement will be required to make public disclosure on or
through the Company's website and either by filing a Form 8-K, where
required by SEC rules, or by issuing a press release explaining the
company's reliance on the exception.
Nasdaq believes that the proposed requirement that such website
disclosure is maintained for the period of time the company continues
to rely on the exception from the quorum requirements is designed to
protect investors and the public interest because such website
disclosure would help assure continuous transparency. Nasdaq also
believes that the proposed requirement to update the website disclosure
at least annually to indicate that the company continues to be
prohibited under its home country law from complying with Nasdaq's
quorum requirements as of the date of such update is designed to
protect investors and the public interest because such disclosure would
help Nasdaq assure that the exception remains appropriate.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change will
address conflicting requirements of jurisdictions currently affecting
only one company, as described above; and as such, these changes are
neither intended to, nor expected to, impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Discussion and Commission Findings
The Commission has carefully reviewed the proposed rule change, as
modified by Amendment No. 1, and finds that it is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange.\21\ In
particular, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the
Act,\22\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest, and are
not designed to
[[Page 20559]]
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\21\ 15 U.S.C. 78f. In approving this proposed rule change, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\22\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The development and enforcement of meaningful corporate governance
listing standards for a national securities exchange is of substantial
importance to financial markets and the investing public, especially
given investor expectations regarding the nature of companies that have
achieved an exchange listing for their securities. The corporate
governance standards embodied in the listing standards of national
securities exchanges, in particular, play an important role in assuring
that exchange-listed companies observe good governance practices
including safeguarding the interests of shareholders.\23\
---------------------------------------------------------------------------
\23\ See, e.g., Securities Exchange Act Release No. 76814 (Dec.
31, 2015), 81 FR 820 (Jan. 7, 2016) (NYSE-2015-02) (approving
amendments to the NYSE Listed Company Manual to exempt early stage
companies from having to obtain shareholder approval in certain
circumstances). See also Securities Exchange Act Release No. 48108
(June 30, 2003), 68 FR 39995 (July 3, 2003) (approving equity
compensation shareholder approval rules of both the NYSE and the
National Association of Securities Dealers, Inc. n/k/a NASDAQ); and
Securities Exchange Act Release No. 58375 (August 18, 2008), 73 FR
49498 (August 21, 2008) (In the Matter of the Application of BATS
Exchange, Inc. for Registration as a National Securities Exchange)
(order approving registration of BATS Exchange, Inc. noting that
qualitative listing requirements are designed to ensure that
companies trading on a national securities exchange will adequately
protect the interest of public shareholders).
---------------------------------------------------------------------------
As discussed above, current Nasdaq Listing Rule 5620(c) states that
a company that is not a limited partnership must provide for a quorum
as specified in its by-laws for any meeting of the holders of common
stock; provided, however, that in no case shall such quorum be less
than 33\1/3\% of the outstanding shares of the company's common voting
stock, and current Nasdaq Listing Rule 5615(a)(4)(E) states that the
quorum requirements for a meeting of limited partners shall not be less
than 33\1/3\% of the limited partnership interests outstanding. The
Exchange proposes to modify the Nasdaq Quorum Requirement to allow
Nasdaq to accept a quorum of less than 33\1/3\% of the outstanding
shares of a company's common voting stock or limited partnership
interests where the company is incorporated outside of the U.S. and
such company's home country law prohibits the company from establishing
a quorum that satisfies the Nasdaq Quorum Requirement and the company
cannot obtain an exemption or waiver from that law.\24\
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\24\ See proposed Listing Rules 5620(c) and 5615(a)(4)(E).
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The Commission has carefully considered the proposal and finds that
the proposed rule change is consistent with the Act. The proposed rules
would only allow the exception to the Nasdaq Quorum Requirement under
limited circumstances where a non-U.S. company's home country law
prohibits the company from establishing a quorum that satisfies the
Nasdaq Quorum Requirement, and the company cannot obtain an exemption
or waiver from that law.\25\ The company would be required to obtain a
written statement from an independent counsel in the company's home
country describing the home country law that conflicts with the Nasdaq
Quorum Requirement and certifying that the company is prohibited from
complying with the Nasdaq Quorum Requirement and that the company
cannot obtain an exemption or waiver from that law.\26\ According to
the Exchange, the proposed rule change would currently affect only one
listed company.\27\ The Exchange states that the proposal would
eliminate the conflict between the Nasdaq Quorum Requirement and the
company's home country laws, which currently would force a company that
follows the law in its home jurisdiction to be in violation of the
Nasdaq Quorum Requirement, and would result in delisting.\28\
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\25\ See id.
\26\ See id.
\27\ See Amendment No. 1, supra note 6 at 14. The Exchange
states that the proposed changes currently would affect only one
listed company, DBV, which has been listed on Nasdaq since 2014. See
supra note 11. DBV previously qualified as a foreign private issuer,
and therefore relied on home country practices in lieu of the Nasdaq
Quorum Requirement. See id. As of June 30, 2020, DBV determined that
it no longer qualified as a foreign private issuer and would be
required to comply with the Commission rules for domestic issuers as
of January 1, 2021. The Exchange states that the proposed rule
change would allow DBV to continue to follow French law quorum
requirements, as it has been doing, while remaining listed on
Nasdaq. See id.
\28\ See supra Section II.A.2.
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In addition, the Exchange states that it has allowed issuers to
rely on home country rules in other contexts. The Exchange notes that
it allows foreign private issuers to rely on home country practices in
lieu of the Nasdaq Quorum Requirement.\29\ Further, the Exchange states
that the Exchange takes a similar approach in Listing Rule IM-5640,
which allows Nasdaq to accept any action or issuance relating to the
voting rights structure of a non-U.S. company that is not prohibited by
the company's home country law.\30\
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\29\ See supra Section II.A.2. See also supra note 11.
\30\ See supra note 18 and accompanying text.
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The proposed rules require that any company relying on the proposed
exception from the Nasdaq Quorum Requirement make a public announcement
on or through the company's website and by filing either a Form 8-K,
where required by Commission rules, or by issuing a press release
explaining the company's reliance on the exception.\31\ Such website
disclosure would be required to be maintained for the period of time
the company continues to rely on the exception from the quorum
requirements, and the company would be required to update the website
disclosure at least annually to indicate that the company continues to
be prohibited under its home country law from complying with Nasdaq's
quorum requirements as of the date of such update. The Commission
believes that such requirements will help to maintain transparency for
investors and assist the Exchange in ensuring that the exception
remains applicable to a company.\32\
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\31\ See proposed Listing Rules 5620(c) and 5615(a)(4)(E).
\32\ Additionally, a company would have to verify that there are
no changes to home country law that would allow it to comply with
the Nasdaq Quorum Requirement, or receive a waiver or exemption from
home country law, at least annually when updating its website
disclosure that the company is still relying on the exception.
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For the reasons discussed above, the Commission believes that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Exchange Act.
IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 to 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-2020-100 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-2020-100. 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
[[Page 20560]]
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-2020-100, and should be submitted on or before May 11, 2021.
VI. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. The Commission notes that Amendment No. 1
clarifies the proposed rule change. In particular, Amendment No. 1: (1)
Clarified that the rule applies to a non-U.S. company that is not a
Foreign Private Issuer; (2) stated that the alternative quorum
requirement will be applicable only if the company cannot obtain an
exemption or waiver from the company's home country law requirement;
(3) stated that Nasdaq ``will'' accept an alternative quorum
requirement if the company's home country law conflicts with the Nasdaq
requirement and the other conditions of the rule are met (as described
above); (4) stated that a company relying on the exception must: (i)
Make a public announcement as promptly as possible but not more than
four business days following the submission of the independent
counsel's statement to Nasdaq, on or through the company's website and
either by filing a Form 8-K, where required by SEC rules, or by issuing
a press release explaining the company's reliance on the exception,
(ii) maintain the website disclosure for the period of time the company
continues to rely on this exception from the quorum requirements, and
(iii) update the website disclosure at least annually to indicate that
the company is prohibited from complying with Nasdaq's quorum
requirements as of such date; (5) clarified that the proposed rule
change will address conflicting requirements of jurisdictions currently
affecting only one company; and (6) stated that the Exchange's
acceptance of any quorum requirement is subject to Nasdaq's
discretionary authority under Listing Rule 5101. In addition, the
Exchange made other clarifying, conforming, and technical changes.\33\
The changes in Amendment No. 1 should help to provide greater
transparency in the Exchange's rules by requiring companies to provide
public disclosure regarding reliance on the exception. In addition,
Amendment No. 1 provides greater clarity to the proposal and provides
greater transparency about the application of the rule changes being
adopted herein. Accordingly, the Commission finds good cause, pursuant
to Section 19(b)(2) of the Act,\34\ to approve the proposed rule
change, as modified by Amendment No. 1, on an accelerated basis.
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\33\ See supra note 6.
\34\ 15 U.S.C. 78s(b)(2).
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VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\35\ that the proposed rule change (SR-NASDAQ-2020-100), as
modified by Amendment No. 1, be, and it hereby is, approved on an
accelerated basis.
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\35\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08047 Filed 4-19-21; 8:45 am]
BILLING CODE 8011-01-P
