Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Approving of a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Listing Rule 5732 To Provide Listing Standards for Contingent Value Rights on Nasdaq Global Market, 7766-7771 [2023-02357]
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Federal Register / Vol. 88, No. 24 / Monday, February 6, 2023 / Notices
Management and Budget is particularly
interested in comments that:
1. Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
2. Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used;
3. Enhance the quality, utility, and
clarity of the information to be
collected; and
4. Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submissions
of responses.
OPM 2809, Health Benefits Election,
is used by annuitants and former
spouses to elect, cancel, suspend, or
change health benefits enrollment
during periods other than open season.
Analysis
Agency: Federal Employee Insurance
Operations, Office of Personnel
Management.
Title: Health Benefits Election Form.
OMB Number: 3206–0141.
Frequency: On occasion.
Affected Public: Individuals or
Households.
Number of Respondents: 30,000
(Forms = 20,000; Verbal/Written
collection = 10,000).
Estimated Time per Respondent: 30
minutes (Telephone/Mail collection =
10 mins).
Total Burden Hours: 11,667 hours.
U.S. Office of Personnel Management.
Stephen Hickman,
Federal Register Liaison.
[FR Doc. 2023–02480 Filed 2–3–23; 8:45 am]
BILLING CODE 6325–38–P
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OFFICE OF PERSONNEL
MANAGEMENT
Submission for Review: 3206–0121,
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Office of Personnel
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ACTION: 60-Day notice and request for
comments.
AGENCY:
Retirement Services, Office of
Personnel Management (OPM) offers the
SUMMARY:
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general public and other federal
agencies the opportunity to comment on
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(ICR), Application for Deferred
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revisions include: Revised instructions
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chapter 35) as amended by the ClingerCohen Act (Pub. L. 104–106), OPM is
soliciting comments for this collection
(OMB No. 3206–0121). The Office of
Management and Budget is particularly
interested in comments that:
1. Evaluate whether the proposed
collection of information is necessary
for the proper performance of functions
of the agency, including whether the
information will have practical utility;
2. Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used;
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3. Enhance the quality, utility, and
clarity of the information to be
collected; and
4. Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submissions
of responses.
OPM Form 1496A is used by eligible
former Federal employees to apply for a
deferred Civil Service annuity.
Analysis
Agency: Retirement Operations,
Retirement Services, Office of Personnel
Management.
Title: Application for Deferred
Retirement (for persons separated on or
after October 1, 1956).
OMB Number: 3206–0121.
Frequency: On occasion.
Affected Public: Individuals or
Households.
Number of Respondents: 2,800.
Estimated Time per Respondent: 1
hour.
Total Burden Hours: 2,800.
Office of Personnel Management.
Kellie Cosgrove Riley,
Director, Office of Privacy and Information
Management.
[FR Doc. 2023–02481 Filed 2–3–23; 8:45 am]
BILLING CODE 6325–38–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96781; File No. SR–
NASDAQ–2022–057]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Order
Approving of a Proposed Rule Change,
as Modified by Amendment No. 1, To
Adopt Listing Rule 5732 To Provide
Listing Standards for Contingent Value
Rights on Nasdaq Global Market
January 31, 2023.
I. Introduction
On October 17, 2022, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt Listing Rule 5732 to provide
listing standards for Contingent Value
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 88, No. 24 / Monday, February 6, 2023 / Notices
Rights (‘‘CVRs’’) on Nasdaq Global
Market. The proposed rule change was
published for comment in the Federal
Register on November 3, 2022.3 On
December 15, 2022, the Commission
extended the time period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change.4 On January 26,
2023, the Exchange filed Amendment
No. 1 to the proposed rule change.5 The
Commission received no comment
letters on the proposed rule change. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as modified by Amendment No.
1, from interested persons and is
approving the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
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II. Description of the Proposal, as
Modified by Amendment No. 1
Nasdaq proposes to adopt Listing Rule
5732 to provide listing standards for
Price-Based and Event-Based Contingent
Value Rights (each a ‘‘CVR’’ and
collectively, ‘‘CVRs’’) on Nasdaq Global
Market, which are unsecured
obligations of the issuer providing for a
possible cash payment at maturity.6 As
discussed in more detail below, CVRs
provide for a possible cash payment for
a ‘‘Price-Based CVR’’ at maturity based
3 See Securities Exchange Act Release No. 96176
(October 28, 2022), 87 FR 66337 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 96509,
87 FR 78166 (December 21, 2022) (extending the
time period to February 1, 2023).
5 In Amendment No. 1, the Exchange revised the
proposal to clarify that: (1) the Exchange will
require the public disclosure of all the material
terms of the CVR before listing; (2) under the CVR
Continued Listing Standards of Nasdaq Proposed
Rule 5732(d)(3), the $1 million market value
threshold requirement refers to Publicly Held
Shares; (3) to initially list a CVR under Nasdaq
Proposed Rule 5732(a)(4), the issuer’s common
stock must be compliant with the listing standards
of the national securities exchange upon which the
common stock is listed, irrespective of whether
listing a Price-Based or Event-Based CVR; and (4)
in Nasdaq Proposed Rule 5732(d)(4), for EventBased CVRs, the primary equity security to which
the Event-Based CVR is linked and the issuer’s
common stock must remain listed. Amendment No.
1 is available at: https://www.sec.gov/comments/srnasdaq-2022-057/srnasdaq2022057.htm. See also
notes 6–7 and accompanying text for definitions of
Price-Based and Event Based CVRs.
6 According to the Exchange, the proposed rule
change is based on Section 703.18 of the NYSE
Listed Company Manual, related to initial listing of
CVRs, and the provisions of Section 802.01D
applicable to ‘‘Specialized Securities’’, related to
continued listing of CVRs. See Securities Exchange
Act Release No. 26072 (May 30, 1990), 55 FR 23166
(June 6, 1990) (SR–NYSE–90–15) (order approving
original listing standards for CVRs (Priced-Based)
on the Exchange); Securities Exchange Act Release
No. 86651 (August 13, 2019), 84 FR 42967 (August
19, 2019) (SR–NYSE–2019–14) (order approving the
listing of Event-Based CVRs on the Exchange).
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upon the price performance of an
affiliate’s equity security or for an
‘‘Event-Based CVR’’, within a specified
time period, upon the occurrence of a
specified event or events related to the
business of the issuer or an affiliate of
the issuer.7
Specifically, under the proposal, at
maturity, the holder of a Price-Based
CVR is entitled to a cash payment if the
average market price of the issuer’s
related affiliate’s equity security is less
than a pre-set target price.8 The
proposal states that the target price is
typically established at the time the
Price-Based CVR is issued.9 Conversely,
should the average market price of the
related equity security equal or exceed
the target price, the Price-Based CVR
would expire worthless.10 In its
proposal, Nasdaq states that Price-Based
CVRs are generally distributed to
shareholders of an acquired company
who are receiving shares of the acquirer
as acquisition consideration.11 Nasdaq
further states that Price-Based CVRs
provide the acquiree’s shareholders
with some medium-term protection
against poor stock price performance of
the shares of the acquirer by
guaranteeing them a specified cash
payment if the acquirer’s average stock
price is below a specified level at the
time of maturity of the Price-Based
CVR.12
The Exchange states that Event-Based
CVRs are also typically issued to the
shareholders of an acquired entity as
consideration in an acquisition
transaction.13 Under the proposal,
Event-Based CVRs entitle their holders
to receive a cash payment upon the
occurrence of a specified event or events
related to the business of the issuer or
an affiliate of the issuer within a
specified period of time that is
determined at the time the Event-Based
CVR is issued.14 In contrast, should the
specified event or events not occur
within the specified time period, the
Event-based CVR would expire
worthless.15 According to the Exchange,
an Event-Based CVR provides the
shareholders of the acquiree an
additional interest in the medium-term
performance of the merged entity upon
occurrence of its specified event(s).16
For initial listing of CVRs on the
Nasdaq Global Market, the issuer must
7 See
Nasdaq Proposed Rule 5732.
Nasdaq Proposed Rule 5732.
9 See id.
10 See id.
11 See Notice, supra note 3, 87 FR at 66337.
12 See id.
13 See id.
14 See id; Nasdaq Proposed Rule 5732.
15 See Nasdaq Proposed Rule 5732.
16 See Notice, supra note 3, 87 FR at 66337.
8 See
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7767
have assets in excess of $100 million,
satisfy the requirement of Nasdaq Rule
5315(f)(3)(A) 17 or have at least $200
million in global market capitalization
and satisfy the requirement of Rule
5315(f)(2)(A) and (B) 18 related to Market
Value of Unrestricted Publicly Held
Shares. In order to list a CVR, an issuer
of the CVR must not be considered noncompliant with the listing standards of
the national securities exchange where
either: (i) the equity security to whose
price performance a Price-Based CVR is
linked or the issuer’s common stock is
listed, or (ii) in an Event-Based CVR
where the primary equity security is
linked or the issuer’s common stock is
listed.19
The CVR issue must also have a
minimum of 400 holders; a minimum of
1 million CVRs outstanding; a minimum
of $4 million market value; a minimum
life of one year; and a minimum $4.00
bid price.20 Nasdaq states that while
these distribution and liquidity
standards applicable to CVRs can help
to ensure there should be adequate
depth, liquidity, and investor interest to
support an exchange listing, the issuer
requirements, that are described above,
will provide some minimum level of
indicia that the issuer of a CVR should
be able to meet any future payment
obligations to shareholders of EventBased, as well as Price-Based, CVRs
pursuant to the applicable CVR
agreement.21
Prior to listing a CVR under the
proposed rule, Nasdaq would issue a
circular as described in proposed
Nasdaq Rule 5732(c) reminding its
members that because CVRs have
certain unique characteristics investors
should be afforded an explanation of
such special characteristics and risks
attendant to trading thereof, as well as
the Exchange’s know-your-customer,
suitability, and other rules applicable
thereto.22 Nasdaq will suggest to its
members that transactions in CVRs be
recommended only to investors whose
accounts have been approved for
17 Specifically, to satisfy Nasdaq Rule
5315(f)(3)(A) a Company, other than a closed end
management investment company, must aggregate
income from continuing operations before income
taxes of at least $11 million over the prior three
fiscal years, (ii) positive income from continuing
operations before income taxes in each of the prior
three fiscal years, and (iii) at least $2.2 million
income from continuing operations before income
taxes in each of the two most recent fiscal years.
18 See Nasdaq Rule 5315(f)(2)(A) and (B) requiring
(i) a Market Value of at least $110 million; or (ii)
a Market Value of at least $100 million, if the
Company has stockholders’ equity of at least $110
million.
19 See Amendment No. 1, supra note 5, at 3.
20 See id.
21 See Notice, supra note 3, 87 FR at 66338.
22 See id.; Nasdaq Proposed Rule 5732(c).
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Federal Register / Vol. 88, No. 24 / Monday, February 6, 2023 / Notices
options trading or whom the member
firm has otherwise ascertained that
CVRs are suitable for.23 In its proposal,
Nasdaq stated that like other financial
products with unique features trading
on the Exchange, CVRs combine
features of debt, equity, and securities
derivative instruments.24 Consequently,
Nasdaq states this product may be more
complex than straight stock, bond, or
equity warrants and that the distribution
of the information circular will help to
alert members to the special disclosure
and suitability obligations that apply to
CVRs and that are relevant to making
recommendation for investors in
CVRs.25
Prior to listing a Contingent Value
Right, Nasdaq will require that all
material terms of the Contingent Value
Right be publicly disclosed.26 While
listed, the issuer of an Event-Based CVR
will be required to make public
disclosure: (i) upon the occurrence of
any event that must occur as a condition
to the issuer’s obligation to make a cash
payment with respect to the CVR (or if
such an event is deemed to have
occurred pursuant to the terms of the
documents governing the CVR); or (ii) at
any such time as it becomes clear that
a condition to the cash payment with
respect to the CVR has not been met as
required by the documents governing
the terms of the CVR.27
Nasdaq will delist a CVR pursuant to
the provisions of the Listing Rule 5800
Series if the CVR fails to maintain any
of the following: (1) at least 100,000
Publicly Held Shares; (2) at least 100
Holders; or (3) at least $1 million Market
Value of Publicly Held Shares.28 In
addition, Nasdaq will promptly delist
any CVR if the issuer’s common stock,
the equity security to whose price
performance a Price-Based CVR is
linked, or the primary equity security to
which an Event-Based CVR is linked,
ceases to be listed on a national
securities exchange.29 Also, Nasdaq will
23 See
Notice, supra note 3, 87 FR at 66338.
id.
25 See Notice, supra note 3, 87 FR at 66338.
26 See Amendment No. 1, supra note 5, at 3.
27 See Nasdaq Rule IM–5250–1. Disclosure of
Material Information, among other things, requires
Nasdaq companies to notify Nasdaq’s MarketWatch
Department prior to the distribution of certain
material news at least 10 minutes prior to public
announcement of the news when the public release
of the information is made from 7:00 a.m. to 8:00
p.m. ET. Trading halts are instituted, among other
reasons, to ensure that material information is fairly
and adequately disseminated to the investing public
and the marketplace, and to provide investors with
the opportunity to evaluate the information in
making investment decisions. See also Notice,
supra note 3, 87 FR at 66338,
28 See Notice, supra note 3, 87 FR at 66338;
Nasdaq Proposed Rule 5732(d); Amendment No. 1,
supra note 5, at 3.
29 See Amendment No. 1, supra note 5, at 3–4.
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24 See
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delist an Event-Based CVR once the
occurrence of the specified event or
events related to the business of the
issuer or an affiliate of the issuer has
occurred or once it goes beyond the time
that the specified event or events should
have occurred.30
The Exchange will rely on its existing
trading surveillances, administered by
the Exchange, or the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.31 The Exchange will
monitor activity in CVRs to identify and
deter any potential improper trading
activity in such securities and monitor
CVRs alongside the common equity
securities of the issuer or its affiliates,
as applicable.32 In addition, the
Exchange will adopt enhanced
surveillance procedures if necessary.33
In addition, if the underlying security is
listed and traded on another U.S.
national securities exchange, Nasdaq
will communicate as needed and may
obtain information regarding trading
from markets and other entities that are
members of Intermarket Surveillance
Group.34
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.35 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,36 which requires, among
other things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to 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
permit unfair discrimination between
customers, issuers, brokers, or dealers.
30 See
id.
Notice, supra note 3, 87 FR at 66338.
32 See id.
33 See id.
34 See Notice, supra note 3, 87 FR at 66338, n. 8
and accompanying text.
35 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).
36 15 U.S.C. 78f(b)(5).
31 See
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The development and enforcement of
adequate standards governing the initial
and continued listing of securities on an
exchange is an activity of critical
importance to financial markets and the
investing public. Listing standards,
among other things, serve as a means for
an exchange to screen issuers and to
provide listed status only to bona fide
companies that have or will have
sufficient public float, investor base,
and trading interest to provide the depth
and liquidity necessary to promote fair
and orderly markets. Meaningful listing
standards are especially important given
the expectations of investors regarding
the nature of securities that have
achieved an exchange listing and the
role of an exchange in overseeing and
assuring compliance with its listing
standards. Once a security has been
approved for initial listing, maintenance
criteria allow an exchange to monitor
the status and trading characteristics of
that issue to ensure that it continues to
meet the exchange’s standards for
market depth and liquidity so that fair
and orderly markets can be maintained.
For the reasons discussed below, the
Commission believes that the
Exchange’s proposed listing standards,
as modified by Amendment No. 1, are
consistent with the Act and in particular
with Section 6(b)(5). The Exchange, as
described above, has proposed to adopt
listing standards for Price-Based CVRs
and Event-Based CVRs on NASDAQ
Global Market. CVRs are typically used
as consideration offered to the
shareholders of the target company in a
business combination transaction, such
as a merger or an exchange offer. As the
Commission has previously stated CVRs
have unique characteristics that
combine features of debt, equity and
securities derivatives instruments.37
The Commission believes that the
Exchange’s proposal to establish listing
criteria for CVRs should adequately
address the unique concerns raised by
the listing of such securities and should
help to ensure that only substantial
companies capable of meeting their
financial obligations can list such CVRs
on the Exchange, thereby protecting
investors and the public interest
consistent with the Act. The proposal,
as modified by Amendment No. 1,
should also, consistent with the Act, aid
the Exchange in maintaining fair and
orderly markets for CVRs and
37 See Securities Exchange Act Release No. 86651
(August 13, 2019), 84 FR 42967 (August 19, 2019)
(SR–NYSE–2019–14) (order approving the listing of
Event-Based CVRs on the Exchange); See also
Securities Exchange Act Release No. 28072 (May
30, 1990), 55 FR 23166 (June 6, 1990) (SR–NYSE–
90–15) (order approving original listing standards
for CVRs (Priced-Based) on the Exchange).
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Federal Register / Vol. 88, No. 24 / Monday, February 6, 2023 / Notices
preventing fraudulent and manipulative
acts and practices.
The Commission believes the
Exchange’s proposed quantitative listing
standards should help to ensure that
only substantial companies capable of
meeting their financial obligations issue
CVRs. This is important in light of the
contingent financial obligations created
by these instruments, and should serve
to protect investors and the public
interest by ensuring that the companies
listing Price-Based CVRs and EventBased CVRs are of substantial size,
which can help to indicate such
companies have sufficient financial
means to meet their settlement
obligations. Specifically, an issuer of a
CVR must (1) have assets in excess of
$100 million, (2) must satisfy Rule
5315(f)(3)(A) or have at least
$200,000,000 in global market
capitalization, (3) must satisfy the
Market Value of Unrestricted Publicly
Held Shares requirement of Rule
5315(f)(2)(A) and (B) requiring (i) a
Market Value of at least $110 million; or
(ii) a Market Value of at least $100
million, if the Company has
stockholders’ equity of at least $110
million.38 Furthermore, the CVR issue
must have a minimum of 400 holders;
a minimum of 1 million CVRs
outstanding; a minimum of $4 million
market value; a minimum life of one
year; and a minimum $4.00 bid price.
The Commission believes these
distribution and liquidity standards
applicable to CVRs can help to ensure
adequate depth, liquidity, and investor
interest to support an exchange listing.
The Commission also believes the issuer
requirements will provide some
minimum level of indicia that the issuer
of a CVR should be able to meet any
future payment obligations to
shareholders of CVRs pursuant to the
applicable CVR agreement.
Furthermore, the proposed listing
standards are substantially similar to the
CVR listing standards on New York
Stock Exchange (‘‘NYSE).39
In addition, in order to list a CVR, an
issuer of the CVR must not be
considered non-compliant with the
listing standards of the national
securities exchange where either: (i) the
equity security to whose price
performance a Price-Based CVR is
linked or the issuer’s common stock is
listed, or (ii) in an Event-Based CVR
where the primary equity security is
38 See
note 17–18, supra, and accompanying text.
Section 703.18 of the NYSE Listed
Company Manual. See also Securities Exchange Act
Release No. 85812 (May 9, 2019), 84 FR 21861 (May
15, 2019) (SR–NYSE–2019–14) (Notice of Filing of
proposed rule change to permit the listing of EventBased CVRs on the Exchange).
39 See
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18:51 Feb 03, 2023
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linked or the issuer’s common stock is
listed.40 The Commission believes that
this requirement protects investors and
the public interest in accordance with
Section 6(b)(5) of the Act in that it
would not permit a CVR to be listed on
the Exchange if the listed company is
below compliance with listing
standards, and therefore potentially
subject to delisting, on the national
securities exchange where its common
stock, or equity security linked to the
CVR, was listed.
Once listed, Nasdaq will delist a CVR
pursuant to the provisions of the Listing
Rule 5800 Series if the CVR fails to
maintain any of the following: (1) at
least 100,000 Publicly Held Shares; (2)
at least 100 Holders; or (3) at least $1
million Market Value of Publicly Held
Shares. In addition, Nasdaq will
promptly delist any CVR if the issuer’s
common stock, the equity security to
whose price performance a Price-Based
CVR is linked, or the primary equity
security to which an Event-Based CVR
is linked, ceases to be listed on a
national securities exchange.41
Additionally, Nasdaq would delist an
Event-Based CVR once the occurrence of
the specified event or events related to
the business of the issuer or an affiliate
of the issuer has occurred or once it goes
beyond the time that the specified event
or events should have occurred. The
Commission believes the proposed
delisting standards, which are also
substantially similar to those of NYSE,42
provide some indicia of a minimum
level of liquidity for continued listing of
CVRs. Further, the requirement that
Price-Based CVRs and Event-Based
CVRs be promptly delisted if either the
common stock of the issuer of the CVR
or the related linked equity security
ceases to be listed on a national
securities exchange is consistent with
investor protection and the public
interest in that it helps to ensure that
the issuer of the CVR is meeting the
continued quantitative and qualitative
listing standards of a national securities
exchange on an ongoing basis while the
CVR is trading on the Exchange. These
additional requirements for delisting
40 See Amendment No. 1, supra note 5, at 3. The
issuer of a CVR also has to comply with the
corporate governance requirements of the national
securities exchange where its common stock or
equity security linked to the CVR is listed. An
issuer of a CVR may not be below compliance with
these corporate governance standards, as well as the
quantitative continued listing standards, for its
common stock or equity security on the national
securities exchange where such security is listed at
the time of the listing of the CVR. This should
provide additional protections for investors in both
Event-Based and Price-Based CVRs.
41 See Amendment No. 1, supra note 5, at 3–4.
42 See Section 703.18 of the NYSE Listed
Company Manual.
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
7769
also will protect investors by helping to
maintain fair and orderly markets by
ensuring that a CVR will not remain
listed when the common stock of the
issuer or any linked equity security to
a CVR is delisted. For similar reasons,
the requirement to delist an Event-Based
CVR, when the event has occurred or
the time period for the event or events
has passed will also further investor
protection and fair and orderly markets
since any payout on the CVR should be
conditioned on such events.
In addition, the proposed rule change
would require that, prior to listing a
Price-Based or Event-Based CVR, an
issuer be required to publicly disclose
all material terms of the CVR.43 The
proposed rule change would also
require the issuer of an Event-Based
CVR to make public disclosure, in
accordance with the provisions of Rule
5250(b) and IM–5250–1, upon the
occurrence of any event that must occur
as a condition to the issuer’s obligation
to make a cash payment with respect to
the CVR (or if such an event is deemed
to have occurred pursuant to the terms
of the documents governing the CVR) or
at any such time as it becomes clear that
a condition to the cash payment with
respect to the CVR has not been met as
required by the documents governing
the terms of the CVR.44 The Commission
believes that these disclosure
requirements should help to protect
investors and the public interest by
ensuring that investors have sufficient
information to make investment
decisions relating to CVRs. The
Commission further believes that the
requirement to publicly disclose
whether a specified event has occurred
or failed to occur should help to protect
investors and prevent fraudulent
manipulative acts and practices by
ensuring that investors and market
participants will have access to
important information needed to trade,
and make investment decisions in, the
CVRs and that such information will be
publicly available to all investors at the
same time.45 Notification to the
Exchange, in accordance with the
requirements of Nasdaq Rule 5250(b)
and Nasdaq Rule IM–5250–1, will also
provide the Exchange with the
information necessary for it to
determine whether a temporary trading
halt may be appropriate for an Event43 See
Amendment No. 1, supra note 5, at 3.
Notice, supra note 3, 87 FR at 66338;
Nasdaq Proposed Rule 5732(b).
45 Nasdaq Rule 5250 requires listed companies to
disclose any material information that would
reasonably be expected to affect the value of its
securities or influence investor decisions.
44 See
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DDrumheller on DSK120RN23PROD with NOTICES
Based or Price-Based CVR in order to
ensure fair and orderly markets.46
Under the Exchange’s proposal, as
described above, Event-Based CVRs
must be based upon the occurrence of
a specified event or events related to the
business of the issuer or an affiliate of
the issuer. The Commission believes
that requiring an Event-Based CVR to be
related to the business of the issuer or
an affiliate of the issuer is an essential
requirement that will help to ensure that
the company will have the information
necessary to determine if the required
events have occurred or not occurred
within any required time frames under
the terms of the CVR and make timely
required public disclosure.47
The Exchange’s proposed rule for
listing CVRs also addresses the
additional regulatory concerns raised by
these products. Like other financial
products with unique features trading
on the Exchange, as noted above, CVRs
combine features of debt, equity, and
securities derivative instruments. As a
result, this product may be more
complex than straight stock, bond, or
equity warrants. The Exchange has
proposed to distribute an information
circular apprising member firms of the
special characteristics, risks, and
suitability obligations associated with
CVRs.48 The Commission believes
distribution of this information circular
will help to alert members to the special
characteristics, risks, disclosure and
suitability obligations that apply to
CVRs and the attendant requirements of
members when making
recommendations to investors to
purchase CVRs.49
The Exchange has represented that it
will also monitor activity in CVRs to
46 Notifications of material news to the Exchange
at least 10 minutes prior to its release to the public
when the information is released between 7:00 a.m.
to 8:00 p.m. ET allows Nasdaq to determine if a
trading halt is necessary in accordance with Nasdaq
Rule IM–5250–1. As stated by Nasdaq, trading halts
‘‘ensure that material information is fairly and
adequately disseminated to the investing public and
the marketplace, and to provide investors with the
opportunity to evaluate the information in making
an investment decision.’’ See Notice, supra note 3,
87 FR at 66338 n. 7.
47 The Commission notes that under the
Exchange’s rules, Priced-Based CVRs are similarly
related to the performance of an affiliate’s equity
security.
48 See Nasdaq Proposed Rule 5732(c).
49 For example, the circular states, among other
things, that it is suggested that transactions in CVRs
be recommended only to investors whose accounts
have been approved for options trading and that
members recommending transactions in CVRs
should have a reasonable basis for believing, at the
time of making the recommendation, that the
customer has such knowledge and experience in
financial matters that the customer may reasonably
be expected to be capable of evaluating the risks
and special characteristics, and is financially able
to bear the risks, of a recommendation to invest in
CVRs. See id.
VerDate Sep<11>2014
18:51 Feb 03, 2023
Jkt 259001
identify and deter any potential
improper trading activity in such
securities and will monitor CVRs
alongside the common equity securities
of the issuer or its affiliates, as
applicable.50 The Exchange states it will
adopt enhanced surveillance procedures
to do so if necessary.51 Since news and
information concerning a company and
the linked equity security and issuer’s
common stock can have an impact on
the company’s CVRs, this surveillance
should help to monitor the trading
activity in the CVRs. To the extent the
common equity security is traded on
another national securities exchange,
these procedures are expected to ensure
proper coordination.52 The Commission
believes that these safeguards and
standards should help to ensure that the
listing, and continued listing, of any
CVRs on the Exchange will be
consistent with investor protection, the
public interest, and the maintenance of
fair and orderly markets. In this regard,
the Commission expects the Exchange
to thoroughly review any potential
listing of Price-Based and Event-Based
CVRs to ensure that its listing standards
have been met and continue to be met,
as well as to monitor trading in the
Event-Based and Price-Based CVRs and
related common stock or equity security
of the issuer.
Based on the above, the Commission
believes the proposed rule change, as
modified by Amendment no. 1, is
reasonable and should provide for the
listing of CVRs with baseline investor
protection and other standards. The
Commission believes, as discussed
above, that the Exchange has developed
sufficient standards to allow the listing
of both Price-Based CVRs and Event
Based CVRs on the Exchange and finds
the proposal consistent with the
requirements set forth under the Act,
and in particular, Section 6(b)(5).
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 is consistent with the
Act. Comments may be submitted by
any of the following methods:
50 As noted above, the Exchange will rely on its
existing trading surveillances, administered by the
Exchange, or the FINRA on behalf of the Exchange,
which are designed to detect violations of Exchange
rules and applicable federal securities laws. See
Note 31, supra.
51 See Notice, supra note 3, 87 FR at 66338.
52 See Note 34, supra, and accompanying text.
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Frm 00097
Fmt 4703
Sfmt 4703
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–2022–057 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–2022–057. 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–2022–057, and
should be submitted on or before
February 27, 2023.
V. Accelerated Approval of 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. As discussed above, in
Amendment No. 1, the Exchange
revised the proposal to clarify that: (1)
the Exchange will require the public
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Federal Register / Vol. 88, No. 24 / Monday, February 6, 2023 / Notices
DDrumheller on DSK120RN23PROD with NOTICES
disclosure of all the material terms of
the CVR before listing the CVR; (2)
under the CVR Continued Listing
Standards of Proposed Rule 5732(d)(3),
the $1 million market value threshold
requirement refers to Publicly Held
Shares; (3) to initially list a CVR under
Proposed Rule 5732(a)(4), the issuer’s
common stock must be compliant with
the listing standards of the national
securities exchange upon which the
common stock is listed, irrespective of
whether listing a Price-Based or EventBased CVR; and (4) in Proposed Rule
5732(d)(4), for Event-Based CVRs, the
primary equity security to which the
Event-Based CVR is linked and the
issuer’s common stock must remain
listed.
The Commission believes that
Amendment No. 1 does not raise any
novel regulatory issues from the original
proposal, which was subject to a full
notice and comment period during
which no comments were received.
Rather, Amendment No. 1 strengthens
the original proposal by requiring the
material terms of the CVR to be publicly
disclosed prior to the Exchange listing
of a CVR which will increase
transparency to investors in CVRs and
potential investors seeking to make an
informed investment decision. In
addition, the change to the continued
listing standards to require the market
value standard to include only Publicly
Held Shares strengthens the
requirements for continued listing in the
original proposal and can help in
ensuring adequate liquidity for
continued listing of CVRs. Finally, the
changes in Amendment No. 1 applicable
to Nasdaq Proposed Rules 5732(a)(4)
and (d)(4) provide additional specificity
and clarity regarding the circumstances
in which the Exchange would list and
delist a CVR, which will provide
additional protections for potential
investors and current investors in CVRs.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,53 to approve the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
VI. Conclusion
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,54 that the
proposed rule change (SR–NASDAQ–
53 15
54 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
VerDate Sep<11>2014
18:51 Feb 03, 2023
2022–57), as modified by Amendment
No. 1, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.55
Sherry R. Haywood,
Assistant Secretary.
Authority: 5 U.S.C. 552b.
Dated: February 2, 2023.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2023–02576 Filed 2–2–23; 4:15 pm]
BILLING CODE 8011–01–P
[FR Doc. 2023–02357 Filed 2–3–23; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF TRANSPORTATION
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
February 9, 2023.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
TIME AND DATE:
55 17
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CFR 200.30–3(a)(12).
Frm 00098
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Federal Aviation Administration
Notice of Request To Release Airport
Property for Land Disposal at the
Liberal Mid-America Regional Airport
(LBL), Liberal, Kansas
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of intent to rule on
request to release airport property.
AGENCY:
The FAA proposes to rule and
invites public comment on the release
and sale of one parcel of land at the
Liberal Mid-America Regional Airport
(LBL), Liberal, Kansas.
DATES: Comments must be received on
or before March 8, 2023.
ADDRESSES: Comments on this
application may be mailed or delivered
to the FAA at the following address:
Amy J. Walter, Airports Land Specialist,
Federal Aviation Administration,
Airports Division, ACE–620G, 901
Locust Room 364, Kansas City, MO
64106.
In addition, one copy of any
comments submitted to the FAA must
be mailed or delivered to: Brian
Fornwalt, Airport Manager, Liberal MidAmerica Regional Airport, 302 Terminal
Road, P.O. Box 2199, Liberal, KS 67901,
(620) 626–0188.
FOR FURTHER INFORMATION CONTACT:
Amy J. Walter, Airports Land Specialist,
Federal Aviation Administration,
Airports Division, ACE–620G, 901
Locust Room 364, Kansas City, MO
64106, (816) 329–2603, amy.walter@
faa.gov.
The request to release property may
be reviewed, by appointment, in person
at this same location.
SUPPLEMENTARY INFORMATION: The FAA
invites public comment on the request
to release approximately 0.87 acres of
airport property at the Liberal MidAmerica Regional Airport (LBL) under
the provisions of 49 U.S.C. 47107(h)(2).
The Airport Manager has requested from
the FAA the release of a 0.87 acre parcel
of airport property be released for sale
for commercial development. The FAA
determined the request to release and
sell property at Liberal Mid-America
Regional Airport (LBL) submitted by the
Sponsor meets the procedural
SUMMARY:
E:\FR\FM\06FEN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 24 (Monday, February 6, 2023)]
[Notices]
[Pages 7766-7771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02357]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96781; File No. SR-NASDAQ-2022-057]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order
Approving of a Proposed Rule Change, as Modified by Amendment No. 1, To
Adopt Listing Rule 5732 To Provide Listing Standards for Contingent
Value Rights on Nasdaq Global Market
January 31, 2023.
I. Introduction
On October 17, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt Listing Rule 5732 to provide listing
standards for Contingent Value
[[Page 7767]]
Rights (``CVRs'') on Nasdaq Global Market. The proposed rule change was
published for comment in the Federal Register on November 3, 2022.\3\
On December 15, 2022, the Commission extended the time period within
which to approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to approve or
disapprove the proposed rule change.\4\ On January 26, 2023, the
Exchange filed Amendment No. 1 to the proposed rule change.\5\ The
Commission received no comment letters on the proposed rule change. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, 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. 96176 (October 28,
2022), 87 FR 66337 (``Notice'').
\4\ See Securities Exchange Act Release No. 96509, 87 FR 78166
(December 21, 2022) (extending the time period to February 1, 2023).
\5\ In Amendment No. 1, the Exchange revised the proposal to
clarify that: (1) the Exchange will require the public disclosure of
all the material terms of the CVR before listing; (2) under the CVR
Continued Listing Standards of Nasdaq Proposed Rule 5732(d)(3), the
$1 million market value threshold requirement refers to Publicly
Held Shares; (3) to initially list a CVR under Nasdaq Proposed Rule
5732(a)(4), the issuer's common stock must be compliant with the
listing standards of the national securities exchange upon which the
common stock is listed, irrespective of whether listing a Price-
Based or Event-Based CVR; and (4) in Nasdaq Proposed Rule
5732(d)(4), for Event-Based CVRs, the primary equity security to
which the Event-Based CVR is linked and the issuer's common stock
must remain listed. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nasdaq-2022-057/srnasdaq2022057.htm. See
also notes 6-7 and accompanying text for definitions of Price-Based
and Event Based CVRs.
---------------------------------------------------------------------------
II. Description of the Proposal, as Modified by Amendment No. 1
Nasdaq proposes to adopt Listing Rule 5732 to provide listing
standards for Price-Based and Event-Based Contingent Value Rights (each
a ``CVR'' and collectively, ``CVRs'') on Nasdaq Global Market, which
are unsecured obligations of the issuer providing for a possible cash
payment at maturity.\6\ As discussed in more detail below, CVRs provide
for a possible cash payment for a ``Price-Based CVR'' at maturity based
upon the price performance of an affiliate's equity security or for an
``Event-Based CVR'', within a specified time period, upon the
occurrence of a specified event or events related to the business of
the issuer or an affiliate of the issuer.\7\
---------------------------------------------------------------------------
\6\ According to the Exchange, the proposed rule change is based
on Section 703.18 of the NYSE Listed Company Manual, related to
initial listing of CVRs, and the provisions of Section 802.01D
applicable to ``Specialized Securities'', related to continued
listing of CVRs. See Securities Exchange Act Release No. 26072 (May
30, 1990), 55 FR 23166 (June 6, 1990) (SR-NYSE-90-15) (order
approving original listing standards for CVRs (Priced-Based) on the
Exchange); Securities Exchange Act Release No. 86651 (August 13,
2019), 84 FR 42967 (August 19, 2019) (SR-NYSE-2019-14) (order
approving the listing of Event-Based CVRs on the Exchange).
\7\ See Nasdaq Proposed Rule 5732.
---------------------------------------------------------------------------
Specifically, under the proposal, at maturity, the holder of a
Price-Based CVR is entitled to a cash payment if the average market
price of the issuer's related affiliate's equity security is less than
a pre-set target price.\8\ The proposal states that the target price is
typically established at the time the Price-Based CVR is issued.\9\
Conversely, should the average market price of the related equity
security equal or exceed the target price, the Price-Based CVR would
expire worthless.\10\ In its proposal, Nasdaq states that Price-Based
CVRs are generally distributed to shareholders of an acquired company
who are receiving shares of the acquirer as acquisition
consideration.\11\ Nasdaq further states that Price-Based CVRs provide
the acquiree's shareholders with some medium-term protection against
poor stock price performance of the shares of the acquirer by
guaranteeing them a specified cash payment if the acquirer's average
stock price is below a specified level at the time of maturity of the
Price-Based CVR.\12\
---------------------------------------------------------------------------
\8\ See Nasdaq Proposed Rule 5732.
\9\ See id.
\10\ See id.
\11\ See Notice, supra note 3, 87 FR at 66337.
\12\ See id.
---------------------------------------------------------------------------
The Exchange states that Event-Based CVRs are also typically issued
to the shareholders of an acquired entity as consideration in an
acquisition transaction.\13\ Under the proposal, Event-Based CVRs
entitle their holders to receive a cash payment upon the occurrence of
a specified event or events related to the business of the issuer or an
affiliate of the issuer within a specified period of time that is
determined at the time the Event-Based CVR is issued.\14\ In contrast,
should the specified event or events not occur within the specified
time period, the Event-based CVR would expire worthless.\15\ According
to the Exchange, an Event-Based CVR provides the shareholders of the
acquiree an additional interest in the medium-term performance of the
merged entity upon occurrence of its specified event(s).\16\
---------------------------------------------------------------------------
\13\ See id.
\14\ See id; Nasdaq Proposed Rule 5732.
\15\ See Nasdaq Proposed Rule 5732.
\16\ See Notice, supra note 3, 87 FR at 66337.
---------------------------------------------------------------------------
For initial listing of CVRs on the Nasdaq Global Market, the issuer
must have assets in excess of $100 million, satisfy the requirement of
Nasdaq Rule 5315(f)(3)(A) \17\ or have at least $200 million in global
market capitalization and satisfy the requirement of Rule 5315(f)(2)(A)
and (B) \18\ related to Market Value of Unrestricted Publicly Held
Shares. In order to list a CVR, an issuer of the CVR must not be
considered non-compliant with the listing standards of the national
securities exchange where either: (i) the equity security to whose
price performance a Price-Based CVR is linked or the issuer's common
stock is listed, or (ii) in an Event-Based CVR where the primary equity
security is linked or the issuer's common stock is listed.\19\
---------------------------------------------------------------------------
\17\ Specifically, to satisfy Nasdaq Rule 5315(f)(3)(A) a
Company, other than a closed end management investment company, must
aggregate income from continuing operations before income taxes of
at least $11 million over the prior three fiscal years, (ii)
positive income from continuing operations before income taxes in
each of the prior three fiscal years, and (iii) at least $2.2
million income from continuing operations before income taxes in
each of the two most recent fiscal years.
\18\ See Nasdaq Rule 5315(f)(2)(A) and (B) requiring (i) a
Market Value of at least $110 million; or (ii) a Market Value of at
least $100 million, if the Company has stockholders' equity of at
least $110 million.
\19\ See Amendment No. 1, supra note 5, at 3.
---------------------------------------------------------------------------
The CVR issue must also have a minimum of 400 holders; a minimum of
1 million CVRs outstanding; a minimum of $4 million market value; a
minimum life of one year; and a minimum $4.00 bid price.\20\ Nasdaq
states that while these distribution and liquidity standards applicable
to CVRs can help to ensure there should be adequate depth, liquidity,
and investor interest to support an exchange listing, the issuer
requirements, that are described above, will provide some minimum level
of indicia that the issuer of a CVR should be able to meet any future
payment obligations to shareholders of Event-Based, as well as Price-
Based, CVRs pursuant to the applicable CVR agreement.\21\
---------------------------------------------------------------------------
\20\ See id.
\21\ See Notice, supra note 3, 87 FR at 66338.
---------------------------------------------------------------------------
Prior to listing a CVR under the proposed rule, Nasdaq would issue
a circular as described in proposed Nasdaq Rule 5732(c) reminding its
members that because CVRs have certain unique characteristics investors
should be afforded an explanation of such special characteristics and
risks attendant to trading thereof, as well as the Exchange's know-
your-customer, suitability, and other rules applicable thereto.\22\
Nasdaq will suggest to its members that transactions in CVRs be
recommended only to investors whose accounts have been approved for
[[Page 7768]]
options trading or whom the member firm has otherwise ascertained that
CVRs are suitable for.\23\ In its proposal, Nasdaq stated that like
other financial products with unique features trading on the Exchange,
CVRs combine features of debt, equity, and securities derivative
instruments.\24\ Consequently, Nasdaq states this product may be more
complex than straight stock, bond, or equity warrants and that the
distribution of the information circular will help to alert members to
the special disclosure and suitability obligations that apply to CVRs
and that are relevant to making recommendation for investors in
CVRs.\25\
---------------------------------------------------------------------------
\22\ See id.; Nasdaq Proposed Rule 5732(c).
\23\ See Notice, supra note 3, 87 FR at 66338.
\24\ See id.
\25\ See Notice, supra note 3, 87 FR at 66338.
---------------------------------------------------------------------------
Prior to listing a Contingent Value Right, Nasdaq will require that
all material terms of the Contingent Value Right be publicly
disclosed.\26\ While listed, the issuer of an Event-Based CVR will be
required to make public disclosure: (i) upon the occurrence of any
event that must occur as a condition to the issuer's obligation to make
a cash payment with respect to the CVR (or if such an event is deemed
to have occurred pursuant to the terms of the documents governing the
CVR); or (ii) at any such time as it becomes clear that a condition to
the cash payment with respect to the CVR has not been met as required
by the documents governing the terms of the CVR.\27\
---------------------------------------------------------------------------
\26\ See Amendment No. 1, supra note 5, at 3.
\27\ See Nasdaq Rule IM-5250-1. Disclosure of Material
Information, among other things, requires Nasdaq companies to notify
Nasdaq's MarketWatch Department prior to the distribution of certain
material news at least 10 minutes prior to public announcement of
the news when the public release of the information is made from
7:00 a.m. to 8:00 p.m. ET. Trading halts are instituted, among other
reasons, to ensure that material information is fairly and
adequately disseminated to the investing public and the marketplace,
and to provide investors with the opportunity to evaluate the
information in making investment decisions. See also Notice, supra
note 3, 87 FR at 66338,
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Nasdaq will delist a CVR pursuant to the provisions of the Listing
Rule 5800 Series if the CVR fails to maintain any of the following: (1)
at least 100,000 Publicly Held Shares; (2) at least 100 Holders; or (3)
at least $1 million Market Value of Publicly Held Shares.\28\ In
addition, Nasdaq will promptly delist any CVR if the issuer's common
stock, the equity security to whose price performance a Price-Based CVR
is linked, or the primary equity security to which an Event-Based CVR
is linked, ceases to be listed on a national securities exchange.\29\
Also, Nasdaq will delist an Event-Based CVR once the occurrence of the
specified event or events related to the business of the issuer or an
affiliate of the issuer has occurred or once it goes beyond the time
that the specified event or events should have occurred.\30\
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\28\ See Notice, supra note 3, 87 FR at 66338; Nasdaq Proposed
Rule 5732(d); Amendment No. 1, supra note 5, at 3.
\29\ See Amendment No. 1, supra note 5, at 3-4.
\30\ See id.
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The Exchange will rely on its existing trading surveillances,
administered by the Exchange, or the Financial Industry Regulatory
Authority (``FINRA'') on behalf of the Exchange, which are designed to
detect violations of Exchange rules and applicable federal securities
laws.\31\ The Exchange will monitor activity in CVRs to identify and
deter any potential improper trading activity in such securities and
monitor CVRs alongside the common equity securities of the issuer or
its affiliates, as applicable.\32\ In addition, the Exchange will adopt
enhanced surveillance procedures if necessary.\33\ In addition, if the
underlying security is listed and traded on another U.S. national
securities exchange, Nasdaq will communicate as needed and may obtain
information regarding trading from markets and other entities that are
members of Intermarket Surveillance Group.\34\
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\31\ See Notice, supra note 3, 87 FR at 66338.
\32\ See id.
\33\ See id.
\34\ See Notice, supra note 3, 87 FR at 66338, n. 8 and
accompanying text.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\35\ 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,\36\
which requires, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to 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 permit
unfair discrimination between customers, issuers, brokers, or dealers.
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\35\ 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).
\36\ 15 U.S.C. 78f(b)(5).
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The development and enforcement of adequate standards governing the
initial and continued listing of securities on an exchange is an
activity of critical importance to financial markets and the investing
public. Listing standards, among other things, serve as a means for an
exchange to screen issuers and to provide listed status only to bona
fide companies that have or will have sufficient public float, investor
base, and trading interest to provide the depth and liquidity necessary
to promote fair and orderly markets. Meaningful listing standards are
especially important given the expectations of investors regarding the
nature of securities that have achieved an exchange listing and the
role of an exchange in overseeing and assuring compliance with its
listing standards. Once a security has been approved for initial
listing, maintenance criteria allow an exchange to monitor the status
and trading characteristics of that issue to ensure that it continues
to meet the exchange's standards for market depth and liquidity so that
fair and orderly markets can be maintained.
For the reasons discussed below, the Commission believes that the
Exchange's proposed listing standards, as modified by Amendment No. 1,
are consistent with the Act and in particular with Section 6(b)(5). The
Exchange, as described above, has proposed to adopt listing standards
for Price-Based CVRs and Event-Based CVRs on NASDAQ Global Market. CVRs
are typically used as consideration offered to the shareholders of the
target company in a business combination transaction, such as a merger
or an exchange offer. As the Commission has previously stated CVRs have
unique characteristics that combine features of debt, equity and
securities derivatives instruments.\37\ The Commission believes that
the Exchange's proposal to establish listing criteria for CVRs should
adequately address the unique concerns raised by the listing of such
securities and should help to ensure that only substantial companies
capable of meeting their financial obligations can list such CVRs on
the Exchange, thereby protecting investors and the public interest
consistent with the Act. The proposal, as modified by Amendment No. 1,
should also, consistent with the Act, aid the Exchange in maintaining
fair and orderly markets for CVRs and
[[Page 7769]]
preventing fraudulent and manipulative acts and practices.
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\37\ See Securities Exchange Act Release No. 86651 (August 13,
2019), 84 FR 42967 (August 19, 2019) (SR-NYSE-2019-14) (order
approving the listing of Event-Based CVRs on the Exchange); See also
Securities Exchange Act Release No. 28072 (May 30, 1990), 55 FR
23166 (June 6, 1990) (SR-NYSE-90-15) (order approving original
listing standards for CVRs (Priced-Based) on the Exchange).
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The Commission believes the Exchange's proposed quantitative
listing standards should help to ensure that only substantial companies
capable of meeting their financial obligations issue CVRs. This is
important in light of the contingent financial obligations created by
these instruments, and should serve to protect investors and the public
interest by ensuring that the companies listing Price-Based CVRs and
Event-Based CVRs are of substantial size, which can help to indicate
such companies have sufficient financial means to meet their settlement
obligations. Specifically, an issuer of a CVR must (1) have assets in
excess of $100 million, (2) must satisfy Rule 5315(f)(3)(A) or have at
least $200,000,000 in global market capitalization, (3) must satisfy
the Market Value of Unrestricted Publicly Held Shares requirement of
Rule 5315(f)(2)(A) and (B) requiring (i) a Market Value of at least
$110 million; or (ii) a Market Value of at least $100 million, if the
Company has stockholders' equity of at least $110 million.\38\
Furthermore, the CVR issue must have a minimum of 400 holders; a
minimum of 1 million CVRs outstanding; a minimum of $4 million market
value; a minimum life of one year; and a minimum $4.00 bid price. The
Commission believes these distribution and liquidity standards
applicable to CVRs can help to ensure adequate depth, liquidity, and
investor interest to support an exchange listing. The Commission also
believes the issuer requirements will provide some minimum level of
indicia that the issuer of a CVR should be able to meet any future
payment obligations to shareholders of CVRs pursuant to the applicable
CVR agreement. Furthermore, the proposed listing standards are
substantially similar to the CVR listing standards on New York Stock
Exchange (``NYSE).\39\
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\38\ See note 17-18, supra, and accompanying text.
\39\ See Section 703.18 of the NYSE Listed Company Manual. See
also Securities Exchange Act Release No. 85812 (May 9, 2019), 84 FR
21861 (May 15, 2019) (SR-NYSE-2019-14) (Notice of Filing of proposed
rule change to permit the listing of Event-Based CVRs on the
Exchange).
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In addition, in order to list a CVR, an issuer of the CVR must not
be considered non-compliant with the listing standards of the national
securities exchange where either: (i) the equity security to whose
price performance a Price-Based CVR is linked or the issuer's common
stock is listed, or (ii) in an Event-Based CVR where the primary equity
security is linked or the issuer's common stock is listed.\40\ The
Commission believes that this requirement protects investors and the
public interest in accordance with Section 6(b)(5) of the Act in that
it would not permit a CVR to be listed on the Exchange if the listed
company is below compliance with listing standards, and therefore
potentially subject to delisting, on the national securities exchange
where its common stock, or equity security linked to the CVR, was
listed.
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\40\ See Amendment No. 1, supra note 5, at 3. The issuer of a
CVR also has to comply with the corporate governance requirements of
the national securities exchange where its common stock or equity
security linked to the CVR is listed. An issuer of a CVR may not be
below compliance with these corporate governance standards, as well
as the quantitative continued listing standards, for its common
stock or equity security on the national securities exchange where
such security is listed at the time of the listing of the CVR. This
should provide additional protections for investors in both Event-
Based and Price-Based CVRs.
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Once listed, Nasdaq will delist a CVR pursuant to the provisions of
the Listing Rule 5800 Series if the CVR fails to maintain any of the
following: (1) at least 100,000 Publicly Held Shares; (2) at least 100
Holders; or (3) at least $1 million Market Value of Publicly Held
Shares. In addition, Nasdaq will promptly delist any CVR if the
issuer's common stock, the equity security to whose price performance a
Price-Based CVR is linked, or the primary equity security to which an
Event-Based CVR is linked, ceases to be listed on a national securities
exchange.\41\ Additionally, Nasdaq would delist an Event-Based CVR once
the occurrence of the specified event or events related to the business
of the issuer or an affiliate of the issuer has occurred or once it
goes beyond the time that the specified event or events should have
occurred. The Commission believes the proposed delisting standards,
which are also substantially similar to those of NYSE,\42\ provide some
indicia of a minimum level of liquidity for continued listing of CVRs.
Further, the requirement that Price-Based CVRs and Event-Based CVRs be
promptly delisted if either the common stock of the issuer of the CVR
or the related linked equity security ceases to be listed on a national
securities exchange is consistent with investor protection and the
public interest in that it helps to ensure that the issuer of the CVR
is meeting the continued quantitative and qualitative listing standards
of a national securities exchange on an ongoing basis while the CVR is
trading on the Exchange. These additional requirements for delisting
also will protect investors by helping to maintain fair and orderly
markets by ensuring that a CVR will not remain listed when the common
stock of the issuer or any linked equity security to a CVR is delisted.
For similar reasons, the requirement to delist an Event-Based CVR, when
the event has occurred or the time period for the event or events has
passed will also further investor protection and fair and orderly
markets since any payout on the CVR should be conditioned on such
events.
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\41\ See Amendment No. 1, supra note 5, at 3-4.
\42\ See Section 703.18 of the NYSE Listed Company Manual.
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In addition, the proposed rule change would require that, prior to
listing a Price-Based or Event-Based CVR, an issuer be required to
publicly disclose all material terms of the CVR.\43\ The proposed rule
change would also require the issuer of an Event-Based CVR to make
public disclosure, in accordance with the provisions of Rule 5250(b)
and IM-5250-1, upon the occurrence of any event that must occur as a
condition to the issuer's obligation to make a cash payment with
respect to the CVR (or if such an event is deemed to have occurred
pursuant to the terms of the documents governing the CVR) or at any
such time as it becomes clear that a condition to the cash payment with
respect to the CVR has not been met as required by the documents
governing the terms of the CVR.\44\ The Commission believes that these
disclosure requirements should help to protect investors and the public
interest by ensuring that investors have sufficient information to make
investment decisions relating to CVRs. The Commission further believes
that the requirement to publicly disclose whether a specified event has
occurred or failed to occur should help to protect investors and
prevent fraudulent manipulative acts and practices by ensuring that
investors and market participants will have access to important
information needed to trade, and make investment decisions in, the CVRs
and that such information will be publicly available to all investors
at the same time.\45\ Notification to the Exchange, in accordance with
the requirements of Nasdaq Rule 5250(b) and Nasdaq Rule IM-5250-1, will
also provide the Exchange with the information necessary for it to
determine whether a temporary trading halt may be appropriate for an
Event-
[[Page 7770]]
Based or Price-Based CVR in order to ensure fair and orderly
markets.\46\
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\43\ See Amendment No. 1, supra note 5, at 3.
\44\ See Notice, supra note 3, 87 FR at 66338; Nasdaq Proposed
Rule 5732(b).
\45\ Nasdaq Rule 5250 requires listed companies to disclose any
material information that would reasonably be expected to affect the
value of its securities or influence investor decisions.
\46\ Notifications of material news to the Exchange at least 10
minutes prior to its release to the public when the information is
released between 7:00 a.m. to 8:00 p.m. ET allows Nasdaq to
determine if a trading halt is necessary in accordance with Nasdaq
Rule IM-5250-1. As stated by Nasdaq, trading halts ``ensure that
material information is fairly and adequately disseminated to the
investing public and the marketplace, and to provide investors with
the opportunity to evaluate the information in making an investment
decision.'' See Notice, supra note 3, 87 FR at 66338 n. 7.
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Under the Exchange's proposal, as described above, Event-Based CVRs
must be based upon the occurrence of a specified event or events
related to the business of the issuer or an affiliate of the issuer.
The Commission believes that requiring an Event-Based CVR to be related
to the business of the issuer or an affiliate of the issuer is an
essential requirement that will help to ensure that the company will
have the information necessary to determine if the required events have
occurred or not occurred within any required time frames under the
terms of the CVR and make timely required public disclosure.\47\
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\47\ The Commission notes that under the Exchange's rules,
Priced-Based CVRs are similarly related to the performance of an
affiliate's equity security.
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The Exchange's proposed rule for listing CVRs also addresses the
additional regulatory concerns raised by these products. Like other
financial products with unique features trading on the Exchange, as
noted above, CVRs combine features of debt, equity, and securities
derivative instruments. As a result, this product may be more complex
than straight stock, bond, or equity warrants. The Exchange has
proposed to distribute an information circular apprising member firms
of the special characteristics, risks, and suitability obligations
associated with CVRs.\48\ The Commission believes distribution of this
information circular will help to alert members to the special
characteristics, risks, disclosure and suitability obligations that
apply to CVRs and the attendant requirements of members when making
recommendations to investors to purchase CVRs.\49\
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\48\ See Nasdaq Proposed Rule 5732(c).
\49\ For example, the circular states, among other things, that
it is suggested that transactions in CVRs be recommended only to
investors whose accounts have been approved for options trading and
that members recommending transactions in CVRs should have a
reasonable basis for believing, at the time of making the
recommendation, that the customer has such knowledge and experience
in financial matters that the customer may reasonably be expected to
be capable of evaluating the risks and special characteristics, and
is financially able to bear the risks, of a recommendation to invest
in CVRs. See id.
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The Exchange has represented that it will also monitor activity in
CVRs to identify and deter any potential improper trading activity in
such securities and will monitor CVRs alongside the common equity
securities of the issuer or its affiliates, as applicable.\50\ The
Exchange states it will adopt enhanced surveillance procedures to do so
if necessary.\51\ Since news and information concerning a company and
the linked equity security and issuer's common stock can have an impact
on the company's CVRs, this surveillance should help to monitor the
trading activity in the CVRs. To the extent the common equity security
is traded on another national securities exchange, these procedures are
expected to ensure proper coordination.\52\ The Commission believes
that these safeguards and standards should help to ensure that the
listing, and continued listing, of any CVRs on the Exchange will be
consistent with investor protection, the public interest, and the
maintenance of fair and orderly markets. In this regard, the Commission
expects the Exchange to thoroughly review any potential listing of
Price-Based and Event-Based CVRs to ensure that its listing standards
have been met and continue to be met, as well as to monitor trading in
the Event-Based and Price-Based CVRs and related common stock or equity
security of the issuer.
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\50\ As noted above, the Exchange will rely on its existing
trading surveillances, administered by the Exchange, or the FINRA on
behalf of the Exchange, which are designed to detect violations of
Exchange rules and applicable federal securities laws. See Note 31,
supra.
\51\ See Notice, supra note 3, 87 FR at 66338.
\52\ See Note 34, supra, and accompanying text.
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Based on the above, the Commission believes the proposed rule
change, as modified by Amendment no. 1, is reasonable and should
provide for the listing of CVRs with baseline investor protection and
other standards. The Commission believes, as discussed above, that the
Exchange has developed sufficient standards to allow the listing of
both Price-Based CVRs and Event Based CVRs on the Exchange and finds
the proposal consistent with the requirements set forth under the Act,
and in particular, Section 6(b)(5).
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 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-2022-057 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-2022-057. 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-2022-057, and should be submitted
on or before February 27, 2023.
V. Accelerated Approval of 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. As discussed above, in Amendment No. 1, the
Exchange revised the proposal to clarify that: (1) the Exchange will
require the public
[[Page 7771]]
disclosure of all the material terms of the CVR before listing the CVR;
(2) under the CVR Continued Listing Standards of Proposed Rule
5732(d)(3), the $1 million market value threshold requirement refers to
Publicly Held Shares; (3) to initially list a CVR under Proposed Rule
5732(a)(4), the issuer's common stock must be compliant with the
listing standards of the national securities exchange upon which the
common stock is listed, irrespective of whether listing a Price-Based
or Event-Based CVR; and (4) in Proposed Rule 5732(d)(4), for Event-
Based CVRs, the primary equity security to which the Event-Based CVR is
linked and the issuer's common stock must remain listed.
The Commission believes that Amendment No. 1 does not raise any
novel regulatory issues from the original proposal, which was subject
to a full notice and comment period during which no comments were
received. Rather, Amendment No. 1 strengthens the original proposal by
requiring the material terms of the CVR to be publicly disclosed prior
to the Exchange listing of a CVR which will increase transparency to
investors in CVRs and potential investors seeking to make an informed
investment decision. In addition, the change to the continued listing
standards to require the market value standard to include only Publicly
Held Shares strengthens the requirements for continued listing in the
original proposal and can help in ensuring adequate liquidity for
continued listing of CVRs. Finally, the changes in Amendment No. 1
applicable to Nasdaq Proposed Rules 5732(a)(4) and (d)(4) provide
additional specificity and clarity regarding the circumstances in which
the Exchange would list and delist a CVR, which will provide additional
protections for potential investors and current investors in CVRs.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\53\ to approve the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
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\53\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with the Act
and the rules and regulations thereunder applicable to a national
securities exchange.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\54\ that the proposed rule change (SR-NASDAQ-2022-57), as modified
by Amendment No. 1, be, and hereby is, approved.
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\54\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\55\
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\55\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-02357 Filed 2-3-23; 8:45 am]
BILLING CODE 8011-01-P
