Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Listing Rules 5605 and 5606, 77903-77906 [2022-27497]

Download as PDF Federal Register / Vol. 87, No. 243 / Tuesday, December 20, 2022 / Notices solutions for societal challenges. How might social, behavioral, and economic sciences contribute to understanding possible paths to success and any hurdles? What public engagement and participatory models have shown promise for increasing trust and understanding of biotechnology? Data for the Bioeconomy 3. What data types and sources, to include genomic and multiomic information, are most critical to drive advances in health, climate, energy, food, agriculture, and biomanufacturing, as well as other bioeconomy-related R&D? What data gaps currently exist? 4. How can the Federal Government, in partnership with private, academic, and non-profit sectors, support a data ecosystem to drive breakthroughs for the U.S. bioeconomy? This may include technologies, software, and policies needed for data to remain high-quality, interoperable, accessible, secure, and understandable across multiple stakeholder groups. Building a Vibrant Domestic Biomanufacturing Ecosystem 5. What is the current state of U.S. and global biomanufacturing capacity for health and industrial sectors and what are the limits of current practice? 6. What can the Federal Government do to expand and scale domestic biomanufacturing capacity and infrastructure? What level of investment would be meaningful and what incentive structures could be employed? 7. What are barriers that must be addressed in order to better enable domestic supply chains for biomanufacturing (e.g., feedstocks, reagents, consumables)? 8. How can the Federal Government partner with state and local governments to expand domestic biomanufacturing capacity, with a particular focus on underserved communities? lotter on DSK11XQN23PROD with NOTICES1 Biobased Products Procurement 9. What are new, environmentally sustainable biobased products that the Federal Government could purchase through its BioPreferred Program? How can the Federal Government incentivize development of new categories of sustainable biobased products? Biotechnology and Biomanufacturing Workforce 10. How can the U.S. strengthen and expand the biotechnology and biomanufacturing workforce to meet the needs of industry today and in the future? What role can government play at the local, state, and/or Federal level? VerDate Sep<11>2014 18:41 Dec 19, 2022 Jkt 259001 77903 11. What strategies and program models have shown promise for successfully diversifying access to biomanufacturing and biotechnology jobs—including those involving Historically Black Colleges and Universities, Tribal Colleges and Universities, and other Minority Serving Institutions? What factors have stymied progress in broadening participation in this workforce? SECURITIES AND EXCHANGE COMMISSION Reducing Risk by Advancing Biosafety and Biosecurity Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 12, 2022, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 12. What can the Federal Government do to support applied biosafety research and biosecurity innovation to reduce risk while maximizing benefit throughout the biotechnology and biomanufacturing lifecycles? 13. How can Federal agencies that fund, conduct, or sponsor life sciences research incentivize and enhance biosafety and biosecurity practices throughout the United States and international research enterprises? Measuring the Bioeconomy 14. What quantitative indicators, economic or otherwise, are currently used to measure the contributions of the U.S. bioeconomy? Are there new indicators that should be developed? 15. How should the North American Industry Classification System and the North American Product Classification System be revised to enable characterization of the economic value of the U.S. bioeconomy? Specifically, which codes or categories do not distinguish between functionally identical bio-based and fossil fuel-based commodities? International Engagement 16. What are opportunities for the U.S. Government to advance research and development, a skilled workforce, regulatory cooperation, and data sharing for the bioeconomy through international cooperation? Which partnerships and fora are likely key to advance these priority areas? 17. What risks are associated with international biotechnology development and use, and how can the U.S. Government work with allies and partners to mitigate these risks? Dated: December 15, 2022. Rachel Wallace, Deputy General Counsel. [Release No. 34–96500; File No. SR– NASDAQ–2022–075] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Listing Rules 5605 and 5606 December 14, 2022. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to simplify implementation and compliance tracking of Listing Rules 5605 and 5606, as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On December 1, 2020, the Exchange filed with the Commission a proposed rule change to adopt listing rules to [FR Doc. 2022–27600 Filed 12–19–22; 8:45 am] 1 15 BILLING CODE 3270–F1–P PO 00000 Frm 00117 Fmt 4703 2 17 Sfmt 4703 E:\FR\FM\20DEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 20DEN1 77904 Federal Register / Vol. 87, No. 243 / Tuesday, December 20, 2022 / Notices lotter on DSK11XQN23PROD with NOTICES1 advance board diversity and enhance transparency of diversity statistics (‘‘Board Diversity Proposal’’).3 On August 6, 2021 (‘‘Approval Date’’), the Commission approved the proposal, as amended (‘‘Board Diversity Rules).4 At the time of filing of the Board Diversity Proposal, Nasdaq and listed companies could not know when the proposal would be approved. Since directors typically are elected in connection with the annual shareholder meeting, Nasdaq wanted to assure that listed companies had at least one year from the approval of the rules, or until their next annual meeting, to take necessary actions to satisfy the requirements of the Board Diversity Rules. Therefore, Nasdaq tied the initial compliance deadlines in the Board Diversity Proposal to one year after the approval date.5 Specifically, on August 8, 2022 (one year after the Approval Date),6 Nasdaq-listed companies became subject to the first compliance condition: disclosing their Board Diversity Matrix (‘‘Matrix’’).7 Subsequent compliance conditions were similarly scheduled to take effect starting two or more years from the Approval Date.8 Nasdaq has found that this formulation of the compliance deadlines is confusing and unnecessarily complicated. Therefore, Nasdaq now proposes to make technical changes to Rule 5605(f)(3) (Alternative Public Disclosure) and Rule 5605(f)(7) (Effective Dates/Transition) to simplify the implementation of the Board Diversity Rules by eliminating references to the Approval Date and the alternative deadline related to the filing of materials for the company’s annual meeting, and instead requiring compliance by December 31st of the applicable year. Nasdaq is also proposing to amend Rule 5605(f)(3) to provide additional flexibility in how a company can notify Nasdaq about the alternative public disclosure permissible under that rule. 3 See Securities Exchange Act Release No. 90574 (December 4, 2020), 85 FR 80472 (SR–NASDAQ– 2020–081). 4 Securities Exchange Act Release No. 92590 (August 6, 2021), 86 FR 44424 (August 12, 2021) (Approval order). Nasdaq filed an amendment to the proposal on February 26, 2021. See Amendment No. 1, available on the Commission’s website at: https://www.sec.gov/comments/srnasdaq-2020-081/ srnasdaq2020081-8425992-229601.pdf. Pursuant to Rule 5605(f)(1), ‘‘Approval Date’’ means the date that the Commission issued an order granting the approval of this proposed Rule 5605(f). 5 See Rule 5605(f)(1); see also Rule 5605(f)(7) and 5606(e). 6 The Approval Date became August 8, 2022 because August 6, 2022 was a Saturday. 7 See Rule 5606. 8 See Rule 5605(f)(7). VerDate Sep<11>2014 18:41 Dec 19, 2022 Jkt 259001 Additionally, Nasdaq is proposing a technical amendment to Rule 5605(f)(3) to change an erroneous reference to a non-existent Rule 5606(f)(2)(D). Effective Dates Pursuant to Rule 5605(f)(7)(A), Nasdaq currently requires each company listed on The Nasdaq Global Select Market, The Nasdaq Global Market and The Nasdaq Capital Market (including a Company with a smaller board under Rule 5606(f)(2)(D)) to have, or explain why it does not have, at least one Diverse 9 director by the later of: (i) two calendar years after the Approval Date, which is August 7, 2023 or (ii) the date the Company files its proxy statement or its information statement (or, if the Company does not file a proxy, in its Form 10–K or 20–F) for the Company’s annual shareholders meeting during the calendar year of the First Effective Date,10 which can be no later than December 31, 2023. The Exchange is proposing to replace this deadline with December 31, 2023, which is the deadline under the current rule for a company with a December 31st fiscal year-end to hold its annual shareholder meeting during the calendar year of the First Effective Date. Similarly, pursuant to Rule 5605(f)(7)(B), Nasdaq currently requires all companies listed on The Nasdaq Global Select Market or The Nasdaq Global Market to have, or explain why it does not have, at least two Diverse directors by the later of: (i) four calendar years after the Approval Date (‘‘Second NGS/NGM Effective Date’’), which is August 6, 2025 or (ii) the date the Company files its proxy statement or its information statement (or, if the Company does not file a proxy, in its Form 10–K or 20–F) for the Company’s annual shareholders meeting during the calendar year of the Second NGS/NGM Effective Date, which can be no later than December 31, 2025. The Exchange is proposing to replace this deadline with December 31, 2025, which is the deadline under the current rule for a company with a December 31st fiscal year-end to hold its annual shareholder meeting during the calendar year of the Second NGS/NGM Effective Date. Lastly, Rule 5605(f)(7)(C) currently requires each Company listed on The Nasdaq Capital Market to have, or 9 Pursuant to Rule 5605(f)(1), ‘‘Diverse’’ means an individual who self-identifies in one or more of the following categories: Female, Underrepresented Minority, or LGBTQ+. ‘‘Female’’ means an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth. 10 The ‘‘First Effective Date’’ is defined as two calendar years after the Approval Date. See Rule 5605(f)(7)(A). PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 explain why it does not have, at least two Diverse directors by the later of: (i) five calendar years after the Approval Date (‘‘Second NCM Effective Date’’), which is August 6, 2026 or (ii) the date the Company files its proxy statement or its information statement (or, if the Company does not file a proxy, in its Form 10–K or 20–F) for the Company’s annual shareholders meeting during the calendar year of the Second NCM Effective Date, which is no later than December 31, 2026. The Exchange is proposing to replace this deadline with December 31, 2026, which is the deadline under the current rule for a company with a December 31st fiscal year-end to hold its annual shareholder meeting during the calendar year of the Second NCM Effective Date. Nasdaq is also proposing to align the proposed December 31st deadlines for Rule 5605(f)(7) with the Rule 5606(f)(3) deadline for companies to explain why they do not meet the diversity objectives of Rule 5606(f)(2). Therefore, Nasdaq is proposing to amend Rule 5606(f)(3) to allow for companies to provide such disclosure on or before December 31st. Additionally, Rule 5606(e) provides a deadline for a company’s initial Matrix disclosure and requires a company to annually disclose the Matrix thereafter, but the current rule does not provide a specific deadline for subsequent disclosures, other than that such disclosure must be made in the same manner as, and concurrently with, the disclosure required in Rule 5605(f)(3) for those companies that are subject to that provision. Therefore, Nasdaq is proposing to modify Rule 5606(b) to specify the method of disclosure, which is the same as outlined in Rule 5605(f)(3), and the December 31st annual deadline for the required Matrix disclosure. Nasdaq believes that using December 31st as the applicable deadline for various elements of the diversity objectives of Rule 5605(f) and Matrix disclosure of Rule 5606 aligns these deadlines with the end of the fiscal year for most companies,11 which is also the deadline for those companies to hold their annual meeting under Nasdaq’s rules.12 As such, Nasdaq believes that aligning the deadline for these disclosures with the December 31st 11 Approximately 80% of Nasdaq-listed companies subject to the rule have a December 31st fiscal year-end. 12 See Rule 5620 (requiring most listed companies to hold an annual meeting of shareholders no later than one year after the end of the Company’s fiscal year-end). Under Rules 5605(f)(3) and 5606(b), companies can include disclosure about why they do not meet the applicable diversity objectives of Rule 5605(f)(2) and the Matrix in the proxy or information statement for their annual meeting. E:\FR\FM\20DEN1.SGM 20DEN1 Federal Register / Vol. 87, No. 243 / Tuesday, December 20, 2022 / Notices deadline for most companies to hold the annual meeting will simplify both compliance and compliance monitoring with these rules.13 In that regard, Nasdaq notes that while companies tend to hold their annual meetings at a similar time each year, they are not required to do so, and do not necessarily file their proxies or information statements at the same time each year. Moreover, neither Nasdaq nor investors know ahead of time when a company will file their proxy statements or information statements. Establishing a single deadline for all companies will therefore simplify Nasdaq’s ability to review for instances of non-compliance and give investors a final date to expect a company’s disclosure. Notice to Nasdaq Currently, if a Nasdaq-listed company posts its Matrix disclosure or its explanation for why the company does not satisfy the diverse director objective on its website, then the company must also submit a URL link to the disclosure through the Nasdaq Listing Center within one business day after posting on the company’s website.14 To provide additional flexibility to companies, Nasdaq is proposing to also allow companies to submit the URL link via email to ‘‘drivingdiversity@ nasdaq.com’’. Nasdaq notes that providing the additional alternative may simplify compliance for companies and will not affect Nasdaq’s ability to review for instances of non-compliance. lotter on DSK11XQN23PROD with NOTICES1 Technical Changes Nasdaq is proposing a technical amendment to Rule 5605(f)(3) to change an erroneous reference to a non-existent Rule 5606(f)(2)(D). The reference was intended to be 5605(f)(2)(D). Nasdaq is also proposing to remove Rule 5606(e) since the rule became effective and operative over a year ago and Nasdaq believes the provision is no longer relevant. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act,15 in general, and furthers the objectives of section 6(b)(1) of the Act,16 in particular, in that the Exchange is organized and has the capacity to be able to carry out the purposes of the Act and to comply and enforce compliance by its members and persons associated with its member. The Exchange believe 13 Of course, companies will continue to be able to comply earlier than the proposed December 31st deadline. 14 See Rule 5605(f)(3). 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(1). VerDate Sep<11>2014 18:41 Dec 19, 2022 Jkt 259001 the proposal is also consistent with section 6(b)(5) of the Act,17 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. It is consistent with the Act to amend Rule 5605(f)(7) governing the effective dates of the Diverse director objective. When proposing changes to its rulebook, Nasdaq must ensure that the changes remain consistent with other provisions. Presently, companies that opt to publish the alternative public disclosure rather than satisfy the Diverse director objective must do so in the same manner, and concurrently with Rule 5606—the Matrix disclosure.18 The proposed amendments to Rule 5605(f)(7) aligns the annual deadline for companies that opt to explain why they do not satisfy the Diverse director objective with the proposed annual deadline for the Matrix. Companies will continue to have the option of publishing the disclosure sooner than the proposed December 31st deadline. Similarly, the Exchange’s proposal to amend its rule requiring Nasdaq-listed companies to publicly disclose board diversity statistics using the Matrix, or a substantially similar format, at Rule 5606(e), is consistent with the Act. Clarifying the date for subsequent Matrix disclosures ensures that all Nasdaq-listed companies will disclose a Matrix during each calendar year. Additionally, proposing December 31st as the deadline each year simplifies compliance and more closely aligns the deadline with the end of the fiscal year for most companies, which is also their deadline to hold an annual meeting. Moreover, this revised formulation provides all Nasdaq-listed companies with the same compliance deadline, which is the same as the latest calendar date for compliance under the current rule.19 As discussed above, Companies will continue to have the option of publishing the disclosure sooner than the proposed December 31st deadline. Nasdaq also believes that having the same annual deadline date for all companies will simplify Nasdaq’s ability to track non-compliant 17 15 U.S.C. 78f(b)(5). Rule 5605(f)(3) and Rule 5606(b). 19 Currently, all Nasdaq-listed companies are required to file an annual proxy or information statement by the end of the company’s fiscal year. The end of the fiscal year for most Nasdaq-listed companies is December 31st. Therefore, Nasdaq is proposing to simplify the deadlines by aligning the Board Diversity Rule deadlines with the most company’s fiscal year end. 18 See PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 77905 companies and give investors a final date to expect a company’s disclosure. Additionally, it is consistent with the Act to amend Rule 5605(f)(3) to give companies an additional alternative for submitting the URL link to their disclosures. The additional option of submitting the URL via email simplifies compliance and gives companies flexibility in meeting their requirements. Moreover, there will be no impact on Nasdaq’s ability to review for instances of non-compliance. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. All companies would continue to be required to make the same disclosure of their board-level statistical information and will have the same deadline for that disclosure. Additionally, all companies would be given the same flexibility of alternatively submitting the URL link to their disclosure via email. Similarly, all companies would be given the same maximum amount of time to publish their Matrix and to satisfy the Diverse director objective. Moreover, none of the proposed changes will unduly burden intramarket competition among various Exchange participants. Participants will experience no competitive impact from the proposals, as these proposals are merely intended to assist companies in maintaining compliance with the Board Diversity Rules by providing additional flexibility, clarifying certain provisions, and maintaining consistency among the provisions. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A)(iii) of the Act 20 and 20 15 E:\FR\FM\20DEN1.SGM U.S.C. 78s(b)(3)(A)(iii). 20DEN1 77906 Federal Register / Vol. 87, No. 243 / Tuesday, December 20, 2022 / Notices subparagraph (f)(6) of Rule 19b–4 thereunder.21 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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2022–27497 Filed 12–19–22; 8:45 am] Electronic Comments BILLING CODE 8011–01–P • 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–2022–075. SECURITIES AND EXCHANGE COMMISSION 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–2022–075. 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 lotter on DSK11XQN23PROD with NOTICES1 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–2022–075, and should be submitted on or before January 10, 2023. 21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. VerDate Sep<11>2014 18:41 Dec 19, 2022 Jkt 259001 [SEC File No. 270–312, OMB Control No. 3235–0354] Proposed Collection; Comment Request; Extension: Rule 19b–1 Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 350l–3520), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Section 19(b) of the Investment Company Act of 1940 (the ‘‘Act’’) (15 U.S.C. 80a–19(b)) authorizes the Commission to regulate registered investment company (‘‘fund’’) distributions of long-term capital gains made more frequently than once every twelve months. Accordingly, rule 19b– 1 under the Act (17 CFR 270.19b–1) regulates the frequency of fund distributions of capital gains. Rule 19b– 1(c) states that the rule does not apply to a unit investment trust (‘‘UIT’’) if it is engaged exclusively in the business of investing in certain eligible securities 22 17 PO 00000 CFR 200.30–3(a)(12). Frm 00120 Fmt 4703 Sfmt 4703 (generally, fixed-income securities), provided that: (i) the capital gains distribution falls within one of five categories specified in the rule 1 and (ii) the distribution is accompanied by a report to the unitholder that clearly describes the distribution as a capital gains distribution (the ‘‘notice requirement’’).2 Rule 19b–1(e) permits a fund to apply to the Commission for permission to distribute long-term capital gains that would otherwise be prohibited by the rule if the fund did not foresee the circumstances that created the need for the distribution. The application must set forth the pertinent facts and explain the circumstances that justify the distribution.3 An application that meets those requirements is deemed to be granted unless the Commission denies the request within 15 days after the Commission receives the application. Commission staff estimates that one fund will file an application under rule 19b–1(e) each year.4 The staff understands that if a fund files an application it generally uses outside counsel to prepare the application. The cost burden of using outside counsel is discussed in Item 13 below. The staff estimates that, on average, a fund’s investment adviser would spend approximately 4 hours to review an application, including 3.5 hours by an assistant general counsel at a cost of $510 per hour and 0.5 hours by an administrative assistant at a cost of $89 per hour, and the fund’s board of directors would spend an additional 1 hour at a cost of $4,770 per hour, for a total of 5 hours.5 Thus, the staff 1 17 CFR 270.19b–1(c)(1). notice requirement in rule 19b–1(c)(2) supplements the notice requirement of section 19(a) [15 U.S.C. 80a–19(a)], which requires any distribution in the nature of a dividend payment to be accompanied by a notice disclosing the source of the distribution. 3 Rule 19b–1(e) also requires that the application comply with rule 0–2 [17 CFR 270.02] under the Act, which sets forth the general requirements for papers and applications filed with the Commission pursuant to the Act and rules thereunder. 4 This estimate is based on the average number of applications filed with the Commission pursuant to rule 19b–1(e) in the prior three-year period. 5 The estimate for assistant general counsels is from SIFMA’s Management & Professional Earnings in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour workyear and inflation and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. The estimate for administrative assistants is from SIFMA’s Office Salaries in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year and inflation and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead. The staff previously estimated in 2009 that the average cost of board of director time was $4,000 per hour for the board as a whole, based on information received from funds and their counsel. Adjusting for 2 The E:\FR\FM\20DEN1.SGM 20DEN1

Agencies

[Federal Register Volume 87, Number 243 (Tuesday, December 20, 2022)]
[Notices]
[Pages 77903-77906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27497]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96500; File No. SR-NASDAQ-2022-075]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Listing Rules 5605 and 5606

December 14, 2022.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 12, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to simplify implementation and compliance 
tracking of Listing Rules 5605 and 5606, as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    On December 1, 2020, the Exchange filed with the Commission a 
proposed rule change to adopt listing rules to

[[Page 77904]]

advance board diversity and enhance transparency of diversity 
statistics (``Board Diversity Proposal'').\3\ On August 6, 2021 
(``Approval Date''), the Commission approved the proposal, as amended 
(``Board Diversity Rules).\4\
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    \3\ See Securities Exchange Act Release No. 90574 (December 4, 
2020), 85 FR 80472 (SR-NASDAQ-2020-081).
    \4\ Securities Exchange Act Release No. 92590 (August 6, 2021), 
86 FR 44424 (August 12, 2021) (Approval order). Nasdaq filed an 
amendment to the proposal on February 26, 2021. See Amendment No. 1, 
available on the Commission's website at: https://www.sec.gov/comments/srnasdaq-2020-081/srnasdaq2020081-8425992-229601.pdf. 
Pursuant to Rule 5605(f)(1), ``Approval Date'' means the date that 
the Commission issued an order granting the approval of this 
proposed Rule 5605(f).
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    At the time of filing of the Board Diversity Proposal, Nasdaq and 
listed companies could not know when the proposal would be approved. 
Since directors typically are elected in connection with the annual 
shareholder meeting, Nasdaq wanted to assure that listed companies had 
at least one year from the approval of the rules, or until their next 
annual meeting, to take necessary actions to satisfy the requirements 
of the Board Diversity Rules. Therefore, Nasdaq tied the initial 
compliance deadlines in the Board Diversity Proposal to one year after 
the approval date.\5\ Specifically, on August 8, 2022 (one year after 
the Approval Date),\6\ Nasdaq-listed companies became subject to the 
first compliance condition: disclosing their Board Diversity Matrix 
(``Matrix'').\7\ Subsequent compliance conditions were similarly 
scheduled to take effect starting two or more years from the Approval 
Date.\8\
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    \5\ See Rule 5605(f)(1); see also Rule 5605(f)(7) and 5606(e).
    \6\ The Approval Date became August 8, 2022 because August 6, 
2022 was a Saturday.
    \7\ See Rule 5606.
    \8\ See Rule 5605(f)(7).
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    Nasdaq has found that this formulation of the compliance deadlines 
is confusing and unnecessarily complicated. Therefore, Nasdaq now 
proposes to make technical changes to Rule 5605(f)(3) (Alternative 
Public Disclosure) and Rule 5605(f)(7) (Effective Dates/Transition) to 
simplify the implementation of the Board Diversity Rules by eliminating 
references to the Approval Date and the alternative deadline related to 
the filing of materials for the company's annual meeting, and instead 
requiring compliance by December 31st of the applicable year. Nasdaq is 
also proposing to amend Rule 5605(f)(3) to provide additional 
flexibility in how a company can notify Nasdaq about the alternative 
public disclosure permissible under that rule. Additionally, Nasdaq is 
proposing a technical amendment to Rule 5605(f)(3) to change an 
erroneous reference to a non-existent Rule 5606(f)(2)(D).
Effective Dates
    Pursuant to Rule 5605(f)(7)(A), Nasdaq currently requires each 
company listed on The Nasdaq Global Select Market, The Nasdaq Global 
Market and The Nasdaq Capital Market (including a Company with a 
smaller board under Rule 5606(f)(2)(D)) to have, or explain why it does 
not have, at least one Diverse \9\ director by the later of: (i) two 
calendar years after the Approval Date, which is August 7, 2023 or (ii) 
the date the Company files its proxy statement or its information 
statement (or, if the Company does not file a proxy, in its Form 10-K 
or 20-F) for the Company's annual shareholders meeting during the 
calendar year of the First Effective Date,\10\ which can be no later 
than December 31, 2023. The Exchange is proposing to replace this 
deadline with December 31, 2023, which is the deadline under the 
current rule for a company with a December 31st fiscal year-end to hold 
its annual shareholder meeting during the calendar year of the First 
Effective Date.
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    \9\ Pursuant to Rule 5605(f)(1), ``Diverse'' means an individual 
who self-identifies in one or more of the following categories: 
Female, Underrepresented Minority, or LGBTQ+. ``Female'' means an 
individual who self-identifies her gender as a woman, without regard 
to the individual's designated sex at birth.
    \10\ The ``First Effective Date'' is defined as two calendar 
years after the Approval Date. See Rule 5605(f)(7)(A).
---------------------------------------------------------------------------

    Similarly, pursuant to Rule 5605(f)(7)(B), Nasdaq currently 
requires all companies listed on The Nasdaq Global Select Market or The 
Nasdaq Global Market to have, or explain why it does not have, at least 
two Diverse directors by the later of: (i) four calendar years after 
the Approval Date (``Second NGS/NGM Effective Date''), which is August 
6, 2025 or (ii) the date the Company files its proxy statement or its 
information statement (or, if the Company does not file a proxy, in its 
Form 10-K or 20-F) for the Company's annual shareholders meeting during 
the calendar year of the Second NGS/NGM Effective Date, which can be no 
later than December 31, 2025. The Exchange is proposing to replace this 
deadline with December 31, 2025, which is the deadline under the 
current rule for a company with a December 31st fiscal year-end to hold 
its annual shareholder meeting during the calendar year of the Second 
NGS/NGM Effective Date.
    Lastly, Rule 5605(f)(7)(C) currently requires each Company listed 
on The Nasdaq Capital Market to have, or explain why it does not have, 
at least two Diverse directors by the later of: (i) five calendar years 
after the Approval Date (``Second NCM Effective Date''), which is 
August 6, 2026 or (ii) the date the Company files its proxy statement 
or its information statement (or, if the Company does not file a proxy, 
in its Form 10-K or 20-F) for the Company's annual shareholders meeting 
during the calendar year of the Second NCM Effective Date, which is no 
later than December 31, 2026. The Exchange is proposing to replace this 
deadline with December 31, 2026, which is the deadline under the 
current rule for a company with a December 31st fiscal year-end to hold 
its annual shareholder meeting during the calendar year of the Second 
NCM Effective Date.
    Nasdaq is also proposing to align the proposed December 31st 
deadlines for Rule 5605(f)(7) with the Rule 5606(f)(3) deadline for 
companies to explain why they do not meet the diversity objectives of 
Rule 5606(f)(2). Therefore, Nasdaq is proposing to amend Rule 
5606(f)(3) to allow for companies to provide such disclosure on or 
before December 31st.
    Additionally, Rule 5606(e) provides a deadline for a company's 
initial Matrix disclosure and requires a company to annually disclose 
the Matrix thereafter, but the current rule does not provide a specific 
deadline for subsequent disclosures, other than that such disclosure 
must be made in the same manner as, and concurrently with, the 
disclosure required in Rule 5605(f)(3) for those companies that are 
subject to that provision. Therefore, Nasdaq is proposing to modify 
Rule 5606(b) to specify the method of disclosure, which is the same as 
outlined in Rule 5605(f)(3), and the December 31st annual deadline for 
the required Matrix disclosure.
    Nasdaq believes that using December 31st as the applicable deadline 
for various elements of the diversity objectives of Rule 5605(f) and 
Matrix disclosure of Rule 5606 aligns these deadlines with the end of 
the fiscal year for most companies,\11\ which is also the deadline for 
those companies to hold their annual meeting under Nasdaq's rules.\12\ 
As such, Nasdaq believes that aligning the deadline for these 
disclosures with the December 31st

[[Page 77905]]

deadline for most companies to hold the annual meeting will simplify 
both compliance and compliance monitoring with these rules.\13\ In that 
regard, Nasdaq notes that while companies tend to hold their annual 
meetings at a similar time each year, they are not required to do so, 
and do not necessarily file their proxies or information statements at 
the same time each year. Moreover, neither Nasdaq nor investors know 
ahead of time when a company will file their proxy statements or 
information statements. Establishing a single deadline for all 
companies will therefore simplify Nasdaq's ability to review for 
instances of non-compliance and give investors a final date to expect a 
company's disclosure.
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    \11\ Approximately 80% of Nasdaq-listed companies subject to the 
rule have a December 31st fiscal year-end.
    \12\ See Rule 5620 (requiring most listed companies to hold an 
annual meeting of shareholders no later than one year after the end 
of the Company's fiscal year-end). Under Rules 5605(f)(3) and 
5606(b), companies can include disclosure about why they do not meet 
the applicable diversity objectives of Rule 5605(f)(2) and the 
Matrix in the proxy or information statement for their annual 
meeting.
    \13\ Of course, companies will continue to be able to comply 
earlier than the proposed December 31st deadline.
---------------------------------------------------------------------------

Notice to Nasdaq
    Currently, if a Nasdaq-listed company posts its Matrix disclosure 
or its explanation for why the company does not satisfy the diverse 
director objective on its website, then the company must also submit a 
URL link to the disclosure through the Nasdaq Listing Center within one 
business day after posting on the company's website.\14\ To provide 
additional flexibility to companies, Nasdaq is proposing to also allow 
companies to submit the URL link via email to 
``[email protected]''. Nasdaq notes that providing the 
additional alternative may simplify compliance for companies and will 
not affect Nasdaq's ability to review for instances of non-compliance.
---------------------------------------------------------------------------

    \14\ See Rule 5605(f)(3).
---------------------------------------------------------------------------

Technical Changes
    Nasdaq is proposing a technical amendment to Rule 5605(f)(3) to 
change an erroneous reference to a non-existent Rule 5606(f)(2)(D). The 
reference was intended to be 5605(f)(2)(D). Nasdaq is also proposing to 
remove Rule 5606(e) since the rule became effective and operative over 
a year ago and Nasdaq believes the provision is no longer relevant.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\15\ in general, and furthers the objectives of section 
6(b)(1) of the Act,\16\ in particular, in that the Exchange is 
organized and has the capacity to be able to carry out the purposes of 
the Act and to comply and enforce compliance by its members and persons 
associated with its member. The Exchange believe the proposal is also 
consistent with section 6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(1).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    It is consistent with the Act to amend Rule 5605(f)(7) governing 
the effective dates of the Diverse director objective. When proposing 
changes to its rulebook, Nasdaq must ensure that the changes remain 
consistent with other provisions. Presently, companies that opt to 
publish the alternative public disclosure rather than satisfy the 
Diverse director objective must do so in the same manner, and 
concurrently with Rule 5606--the Matrix disclosure.\18\ The proposed 
amendments to Rule 5605(f)(7) aligns the annual deadline for companies 
that opt to explain why they do not satisfy the Diverse director 
objective with the proposed annual deadline for the Matrix. Companies 
will continue to have the option of publishing the disclosure sooner 
than the proposed December 31st deadline.
---------------------------------------------------------------------------

    \18\ See Rule 5605(f)(3) and Rule 5606(b).
---------------------------------------------------------------------------

    Similarly, the Exchange's proposal to amend its rule requiring 
Nasdaq-listed companies to publicly disclose board diversity statistics 
using the Matrix, or a substantially similar format, at Rule 5606(e), 
is consistent with the Act. Clarifying the date for subsequent Matrix 
disclosures ensures that all Nasdaq-listed companies will disclose a 
Matrix during each calendar year. Additionally, proposing December 31st 
as the deadline each year simplifies compliance and more closely aligns 
the deadline with the end of the fiscal year for most companies, which 
is also their deadline to hold an annual meeting. Moreover, this 
revised formulation provides all Nasdaq-listed companies with the same 
compliance deadline, which is the same as the latest calendar date for 
compliance under the current rule.\19\ As discussed above, Companies 
will continue to have the option of publishing the disclosure sooner 
than the proposed December 31st deadline. Nasdaq also believes that 
having the same annual deadline date for all companies will simplify 
Nasdaq's ability to track non-compliant companies and give investors a 
final date to expect a company's disclosure.
---------------------------------------------------------------------------

    \19\ Currently, all Nasdaq-listed companies are required to file 
an annual proxy or information statement by the end of the company's 
fiscal year. The end of the fiscal year for most Nasdaq-listed 
companies is December 31st. Therefore, Nasdaq is proposing to 
simplify the deadlines by aligning the Board Diversity Rule 
deadlines with the most company's fiscal year end.
---------------------------------------------------------------------------

    Additionally, it is consistent with the Act to amend Rule 
5605(f)(3) to give companies an additional alternative for submitting 
the URL link to their disclosures. The additional option of submitting 
the URL via email simplifies compliance and gives companies flexibility 
in meeting their requirements. Moreover, there will be no impact on 
Nasdaq's ability to review for instances of non-compliance.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. All companies would continue to 
be required to make the same disclosure of their board-level 
statistical information and will have the same deadline for that 
disclosure. Additionally, all companies would be given the same 
flexibility of alternatively submitting the URL link to their 
disclosure via email. Similarly, all companies would be given the same 
maximum amount of time to publish their Matrix and to satisfy the 
Diverse director objective.
    Moreover, none of the proposed changes will unduly burden intra-
market competition among various Exchange participants. Participants 
will experience no competitive impact from the proposals, as these 
proposals are merely intended to assist companies in maintaining 
compliance with the Board Diversity Rules by providing additional 
flexibility, clarifying certain provisions, and maintaining consistency 
among the provisions.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A)(iii) of the Act \20\ and

[[Page 77906]]

subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2022-075.

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-2022-075. 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-2022-075, and should be submitted 
on or before January 10, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27497 Filed 12-19-22; 8:45 am]
BILLING CODE 8011-01-P
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